Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes and the other financial information appearing elsewhere in this report, as well as the other financial information we file with the SEC from time to time. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties relating to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements.

As a result of many factors, including those factors set forth in the "Risk Factors" section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We were formed to address the central challenge of realizing the significant commercial potential of quantum computing: building scalable systems capable of fault-tolerant operation. Our chip-based solutions represent a digital infrastructure layer within the quantum computing value chain, designed to enable hardware developers and integrators across multiple qubit modalities to advance their systems toward scalable, fault-tolerant architectures. Our technology tightly integrates quantum and classical computing environments. We are headquartered in Elmsford, New York, and have subsidiaries located in the United Kingdom and Italy.

We were incorporated in 2018 by Hypres, Inc. ("Hypres" or the "Former Parent"), a leading developer of superconductor electronics. On April 22, 2019 (the "Effective Date"), we entered into an asset transfer agreement (or the "ATA Agreement") with Hypres, pursuant to which to which Hypres agreed to transfer and assign to us certain intellectual property and other related assets in connection with the issuance of 6,400,000 shares of our common stock, par value $0.0001 per share, which was distributed to Hypres stockholders and warrant holders on a pro rata basis according to the fair value of the equity held in Hypres (the "Asset Transfer"). We determined that the Asset Transfer represented a transaction between entities under common control. As a result, the assets and liabilities were transferred from Hypres to us at Hypres' carrying amounts on the Effective Date. As part of the ATA Agreement, we acquired $0.3 million of fixed assets and assumed a liability of $0.4 million due to Hypres for organizational expenses incurred as part of the formation of the Company.

Since our inception, we have devoted substantially all of our efforts to organizing and staffing our company, research and development activities related to our quantum computing technologies, raising capital and providing general and administrative support for these operations. To date, we have funded our operations primarily through the issuance and sale of our convertible preferred stock, convertible notes, and common stock, receiving gross proceeds of $80.8 million.

We have incurred significant operating losses since inception. Our net loss was $12.2 million for the year ended December 31, 2025, and $9.6 million for the six months ended June 30, 2026. As of June 30, 2026 and December 31, 2025, we had an accumulated deficit of $65.3 million and $55.7 million, respectively. As a result, we will need substantial additional funding to support our continuing operations, fund our product development plans, and fund our capital expenditure requirements. Until such time as we can achieve profitability, we expect to finance our operations through the sale of equity, debt financings, other capital sources, or a combination thereof.

On August 25, 2026, we entered into the Settlement Agreement with Allegro, SEEQC Merger Sub, Inc. and certain stockholders of Allegro pursuant to which we terminated the Merger Agreement. Pursuant to the Settlement Agreement, if the Company consummates a "Trigger Event" (as defined in the Settlement Agreement, and generally covering certain equity financing and business combination transactions), the Company has agreed to (i) remit to Allegro up to $2.0 million for documented, reasonable third-party transaction expenses actually incurred by Allegro and (ii) issue shares of our common stock equal to $6.0 million in the aggregate based on a $1.3 billion pre-money valuation of the Company following the expiration of the lock-up restrictions applicable to our stockholders in connection with our proposed initial public offering.

Immediately prior to the closing of our proposed initial public offering, all outstanding shares of our preferred stock, par value $0.0001 per share ("preferred stock"), will be mandatorily converted into shares of our common stock, in accordance with our Certificate of Incorporation in effect immediately before such closing (the "Preferred Stock Conversion"). In addition, prior to such closing and pursuant to our Certificate of Incorporation, the outstanding shares of common stock will be split, such that the holders of common stock, as determined immediately following the Preferred Stock Conversion but prior to such closing, will hold, in the aggregate, shares of common stock (the "Stock Split"), less the number of shares of common stock issuable upon exercise, exchange or conversion of our options (the "Options") (after taking into account any adjustments to such securities as a result of the Preferred Stock Conversion or the Stock Split).

As of June 30, 2026, we had cash and cash equivalents of $18.1 million. See "- Liquidity and Capital Resources."

Key Components of Results of Operations

Revenue

We derive revenue from contracts associated with quantum computing research and development projects and custom chip fabrication projects for commercial entities and the U.S. government and its various agencies (either directly or as a sub-contractor). Our contracts are under fixed-price or cost-reimbursable-plus-fee contractual arrangements. A performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer and is the unit of accounting under ASC 606. Each contract is evaluated to identify performance obligations and the contract's transaction price is allocated to each distinct performance obligation. Generally our contracts contain a single performance obligation. If there are multiple performance obligations in a contract, the transaction price is allocated to each performance obligation based on its stand-alone selling price. Revenue is recognized when, or as, the performance obligation is satisfied and control of the goods and services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods and services. Our revenue from custom chip fabrication is generally recognized at a point in time upon delivery to and acceptance from the customer and revenue from our research and development contracts is generally recognized over time as the services are performed.

Revenue derived from the U.S. government and its various agencies was $0.9 million for the three months ended June 30, 2026, and $0.5 million for the three months ended June 30, 2025. Revenue derived from the United Kingdom governments and its various agencies was zero for the three months ended June 30, 2026 and 2025. Revenue derived from the U.S. government and its various agencies was $1.8 million for the six months ended June 30, 2026, and $1.1 million for the six months ended June 30, 2025. Revenue derived from the United Kingdom governments and its various agencies was zero for the six months ended June 30, 2026, and $0.3 million for the six months ended June 30, 2025.

Operating Costs and Expenses

Cost of Revenue

Cost of revenue primarily consists of all direct and indirect costs associated with our chip foundry and fabrication services, as well as our research and development revenue contracts. Direct costs include materials, employee costs for labor and expenses associated with the delivery of goods and services to customers, and sub-contractor and consulting costs for work performed by third parties associated with fulfilling customer contracts. Cost of revenue also includes indirect costs associated with an allocation of facility costs, utilities expense, and depreciation expense associated with the use of our fabrication lab and equipment, and other employee costs that relate to the delivery of goods and services to customers.

Research and Development

Costs incurred for our independent research and development ("IRD") to develop our digital quantum computing system on a chip, are expensed as incurred, pursuant to ASC 730, Research and Development. IRD costs include direct expenses such as materials, employee cost for labor and expenses associated with our IRD projects, and sub-contractor and consulting costs for work performed by third parties associated with our IRD projects. IRD costs also include indirect costs associated with employee stock-based compensation, allocation of facility costs, utilities expense, and depreciation expense associated with the use of our fabrication lab and equipment for our IRD projects, and other employee costs associated with our IRD projects.

Selling, General, and Administrative

Selling, general, and administrative expenses include employee salaries and employee related costs, including stock-based compensation, legal fees, professional service fees, and an allocation of facility costs, utilities expense, and depreciation expense to support our selling, general and administrative activities. We expect selling, general and administrative expenses to increase as we grow our business, particularly to the extent we are able to successfully commercialize our quantum computing system on a chip, expand our service offerings and customer base, and implement new marketing strategies.

Grant Income

Grant income is derived primarily from an arrangement with a United Kingdom government agency and an arrangement with a European Union government agency. The grants provide payments for certain types of expenditures in return for research and development activities over a contractually defined period. Grants awarded to us for research and development are outside the scope of ASC 606 and are accounted for under ASC 832, Government Assistance. We recognize grant income as reimbursable grant costs are incurred up to pre-approved award limits within a given budget period. The costs associated with these reimbursements are reflected as a component of research and development expense in the accompanying consolidated statements of operations and comprehensive loss.

Other Expense (Income)

Other expense (income) consists of interest income earned on our cash balances held in interest bearing accounts, interest expense associated with our finance leases, and other expense and income, primarily associated with foreign currency gains and losses.

Income tax expense

Income tax expense consists of United States federal and state income taxes in jurisdictions in which we conduct business and foreign income taxes related to our United Kingdom and Italy subsidiaries. The provision for income taxes is based on our taxable income. We recorded a full valuation allowance of our deferred tax asset position as of June 30, 2026, as we believe it was more likely than not that we would not be able to utilize our deferred tax assets.

Results of Operations

Comparison of the three and six months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025 (in thousands):

		Three Months Ended June 30,
		2026				2025				$ Change
Revenue		$	937			$	472			$	465
Operating costs and expenses:
Cost of revenue			609				426				183
Research and development			2,595				2,845				(250	)
Selling, general and administrative			3,108				1,512				1,596
Grant income			(574	)			(683	)			(109	)
Total operating costs and expenses			5,738				4,100				1,638
Loss from operations		$	(4,801	)		$	(3,628	)		$	(1,173	)
Other expenses (income):
Interest income			(126	)			(108	)			18
Finance leases interest expense			12				28				(16	)
Other expense (income), net			-				22				(22	)
Loss before income tax expense		$	(4,687	)		$	(3,570	)		$	(1,117	)
Income tax expense			50				-				50
Net loss		$	(4,737	)		$	(3,570	)		$	(1,167	)

The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025 (in thousands):

		Six Months Ended June 30,
		2026				2025				$ Change
Revenue		$	1,793			$	1,450			$	343
Operating costs and expenses:
Cost of revenue			1,207				1,288				(81	)
Research and development			4,837				4,678				159
Selling, general and administrative			6,175				2,369				3,806
Grant income			(648	)			(1,100	)			(452	)
Total operating costs and expenses			11,572				7,234				4,338
Loss from operations		$	(9,778	)		$	(5,785	)		$	(3,994	)
Other expenses (income):
Interest income			(282	)			(213	)			69
Finance leases interest expense			35				57				(22	)
Other expense (income), net			-				16				(16	)
Loss before income tax expense		$	(9,531	)		$	(5,645	)			(3,886	)
Income tax expense			79				-				79
Net loss		$	(9,610	)		$	(5,645	)		$	(3,965	)

Revenue

Revenue from contracts with customers increased by $0.4 million from $0.5 million for the three months ended June 30, 2025 to $0.9 million for the three months ended June 30, 2026. Revenue from contracts with customers increased by $0.3 million from $1.5 million for the six months ended June 30, 2025 to $1.8 million for the six months ended June 30, 2026. The increase is primarily driven by reflecting timing differences in milestone achievement across proof-of-concept and foundry programs, rather than a change in the underlying project portfolio.

Cost of Revenue

Cost of revenue increased by $0.2 million between the three months ended June 30, 2025 and 2026. Cost of revenue decreased by $0.1 million between the six months ended June 30, 2025 and 2026. Both the increase in cost of revenue in 2026 and decrease in cost of revenues in 2025 is not considered to be a significant change, and is driven by the labor and materials cost associated with milestone achievement.

Research and Development Expenses

Research and development expenses decreased by $0.3 million from $2.8 million for the three months ended June 30, 2025 to $2.6 million for the three months ended June 30, 2026. The decrease of $0.3 million in research and development expense was primarily attributable to lower share-based compensation costs in the second quarter of 2026 as compared to 2025.

Research and development expenses increased by $0.2 million from $4.7 million for the six months ended June 30, 2025 to $4.8 million for the six months ended June 30, 2026. The increase of $0.2 million in research and development expense was primarily attributable to increased internal development activity, including higher personnel costs and continued investment in core technology programs, offset by lower stock-based compensation expense.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses increased by $1.6 million from $1.5 million for the three months ended June 30, 2025 to $3.1 million for the three months ended June 30, 2026. Selling, general and administrative expenses increased by $3.8 million from $2.4 million for the six months ended June 30, 2025 to $6.2 million for the six months ended June 30, 2026. The increases for the three and six months ended June 30, 2026 were primarily attributable to increased professional fees of $0.8 million and $1.4 million, respectively, due to increased consulting, legal, and audit and accounting costs incurred in connection with the planned initial public offering/qualified financing, as well as an increase in stock-based compensation expense of $0.3 million and $0.5 million, for the three and six months ended June 30, 2026, primarily related to the vesting of certain restricted stock awards. An additional $0.3 million and $0.6 million of the increase relates to allocations associated with miscellaneous payroll type expenses, depreciation, and other facilities charges for the three and six months ended June 30, 2026, respectively.

Grant Income

Grant income decreased from $0.7 million for the three months ended June 30, 2025 to $0.6 million for the three months ended June 30, 2026. Grant income decreased from $1.1 million for the six months ended June 30, 2025 to $0.6 million for the six months ended June 30, 2026. The timing and amounts of grant income recognized in any given period will vary based on the number of projects which the Company has applied and been awarded grant funding for.

Other Expense (income)

Other expense (income) remained consistent at less than $0.1 million from the three and six months ended June 30, 2025 and de minimis for the three and six months ended June 30, 2026, and constitutes interest earned in interest-bearing cash accounts.

Income tax provision

Income tax provision was $0.1 million for the three and six months ended June 30, 2026 and de minimis for the three and six months ended June 30, 2025, and relates to income tax expense associated with uncertain tax positions for our U.K. foreign subsidiary.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred net operating losses and negative cash flows from operations. During the six months ended June 30, 2026 and 2025, we incurred net losses of $9.6 million and $5.6 million, respectively. As of June 30, 2026, we had cash and cash equivalents of $18.1 million and an accumulated deficit of $65.3 million.

The accompanying unaudited condensed consolidated financial statements for the six months ended June 30, 2026 have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

We have incurred net losses and negative operating cash flows for the year ended December 31, 2025 and the six months ended June 30, 2026. We currently do not have sufficient resources to meet obligations and sustain operations for the twelve month period following the issuance of these unaudited condensed consolidated financial statements, which raises substantial doubt about our ability to continue as a going concern.

Our plans include obtaining additional equity financing from new investors, such as an initial public offering, to meet our ongoing business objectives and our working capital and capital expenditure needs for at least the next twelve months from the date of issuance of the unaudited condensed consolidated financial statements. We will ultimately need to obtain additional equity financing to support our operations. However, additional funds may not be available on terms favorable to us or at all. Should we be unable to obtain adequate financing in the near term, our business, results of operations, liquidity and financial condition would be materially and negatively affected. There is no assurance that additional financing will be available when needed or that our management will be able to obtain financing on terms acceptable to us.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

Comparison of the six months ended June 30, 2026 and 2025

The following table summarizes our cash flow for the six months ended June 30, 2026 and 2025 (in thousands)

		Six Months Ended June 30,
		2026				2025
Net cash used in operating activities		$	(7,646	)		$	(3,805	)
Net cash used in investing activities			(1,410	)			(359	)
Net cash (used in) provided by financing activities			(1,223	)			9,916
Effect of exchange rate changes on cash			428				104
Net (decrease) increase in cash and cash equivalents		$	(9,851	)		$	5,856

Cash Flows Used in Operating Activities

Net cash used in operating activities was $7.6 million for the six months ended June 30, 2026, consisting primarily of our net loss of $9.6 million. This was partially offset by adjustments to reconcile net loss to net cash used in operating activities of $1.7 million, which primarily consisted of $1.1 million of stock-based compensation expense and $0.7 million of depreciation expense. The net loss was also partially offset by changes in operating assets and liabilities, primarily as related to changes in accrued expenses and other current liabilities and accounts payable.

Net cash used in operating activities was $3.8 million for the six months ended June 30, 2025, consisting primarily of our net loss of $5.6 million. This was partially offset by adjustments to reconcile net loss to net cash used in operating activities totaling $1.9 million, primarily consisting of $1.2 million of stock-based compensation expense and $0.5 million of depreciation expense. The net loss was also partially offset by changes in operating assets and liabilities, primarily as related to changes in accounts receivable and prepaid expenses and other current assets.

Cash Flows from Investing Activities

Net cash used in investing activities was $1.4 million and $0.4 million for the six months ended June 30, 2026 and 2025, respectively, consisting of purchases of property and equipment. The increase in 2026 reflects higher capital expenditures to support the growth of our operations, including investments in equipment for our new leased facility that commenced in 2025.

Cash Flows from Financing Activities

Net cash used in financing activities was $1.2 million for the six months ended June 30, 2026, consisting primarily of payment of deferred offering costs of $1.2 million and payments on finance leases of $0.3 million, partially offset by proceeds received from the issuance of our Series X preferred stock of $0.3 million.

Net cash provided by financing activities was $9.9 million for the six months ended June 30, 2025, consisting primarily of proceeds received from the issuance of our Series A-2 preferred stock.

Future Funding Requirements

Our primary use of cash is to fund our research and development activities and business operations, which consist primarily of employee-related costs such as salaries and benefits; materials and components for our quantum computing customer contracts and research and development; working capital requirements; capital expenditures and lease obligations for our fabrication, testing and lab facilities and equipment; and anticipated costs to scale our operations in the future and operate as a public company. We will require significant cash for expenditures as we invest in our ongoing quantum research and development and business operations.

Because of the numerous risks and uncertainties associated with research, development and commercialization of our business and our limited operation history, we are unable to estimate the exact amount of our working capital requirements. Our operating plan may change because of factors currently unknown, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations or other transactions. In addition, we may seek additional capital even if we believe that we have sufficient funds for current or future operating plans. Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation and dividend and other rights more favorable than common stock, imposition of debt covenants and repayment obligations or other restrictions that may adversely affect our business. 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 quantum computing development efforts. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

Lease Obligations

We lease facilities for our fabrication, lab and office space, and we also lease equipment for use in our operations. We have both operating and financing leases. Our leases include fixed lease payments which may include escalation terms based on a fixed percentage or may vary based on an inflation index or other market adjustments. As of June 30, 2026, future minimum payments under our operating leases are $3.8 million and future minimum payments under our finance leases are $0.4 million. Additionally, as of June 30, 2026 we have total estimated lease payments of $1.3 million under a 3-year lease of equipment which has not yet commenced.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Areas of the consolidated financial statements where estimates may have the most significant effect include, but are not limited to, determination of the fair value of stock-based compensation.

We evaluate estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and adjust when facts and circumstances dictate. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.

We define our critical accounting policies as those accounting principles that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific way we apply those principles. While our significant accounting policies are more fully described in Note 2 to our audited consolidated financial statements for the year ended December 31, 2025 included in the Prospectus, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

Stock-Based Compensation

We account for stock-based compensation to employees and non-employees in accordance with Financial Accounting Standards Board ("FASB") ASC 718, Compensation - Stock Compensation ("ASC 718"). Stock-based compensation expense relates to equity awards issued to our employees and non-employees under our 2019 Equity Incentive Plan, including stock options and restricted stock awards with both service and performance-based vesting conditions.

We measure and record compensation expense related to stock-based awards based on the fair value of those awards as determined on the date of grant. We recognize stock-based compensation expense over the requisite service period, which generally represents the vesting period during which an employee provides service in exchange for the award. Compensation expense for awards to non-employees is recognized in the same manner as if we had paid cash in exchange for the goods or services, which is generally over the vesting period of the award. Stock-based compensation expense for service-only based awards is recognized on a straight-line basis. Stock-based compensation expense for awards with both performance and service-based vesting conditions is recognized over the requisite service period using an accelerated attribution method, once the performance conditions are considered probable of being achieved, using our best estimates. We account for forfeitures as they occur. For awards forfeited before completion of the requisite service period, previously recognized compensation expense is reversed in the period the award is forfeited.

The fair value of each restricted stock award granted is measured on the date of grant at the estimated fair value of the common stock. The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes-Merton option-pricing model, which requires the use of subjective assumptions. We calculate the fair value using the following assumptions:

Expected Volatility - We estimate volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options' expected term.

Expected Term - The expected term of our options represents the period the stock-based awards are expected to be outstanding. As we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, we have elected to estimate its expected term by using the midpoint between the requisite service period and the contractual term.

Risk-Free Interest Rate - The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is approximately equal to the options' expected term at grant date.

Dividend Yield - We have not declared or paid dividends to date and do not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero.

Because we are privately held and there has historically been no public market for our stock, the fair value of our equity is determined by the Board of Directors, with inputs from management, considering third-party valuations of our common stock as well as the Board of Directors' assessment of additional objective and subjective factors that it believes are relevant. These third-party valuations are performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation. The fair value of our common stock has historically been determined using a market approach to calculate our enterprise equity value. This value was then allocated towards our various securities of its capital structure using an option pricing method, or OPM, based on the order of the superiority of the rights and preferences of the various securities relative to one another. Significant assumptions used in the OPM to determine the fair value of common stocks include volatility, discount for lack of marketability, and the expected timing of a future liquidity event such as an initial public offering, or sale of our Company in light of prevailing market conditions. In the course of preparing our financial statements for the three and six months ended June 30, 2026 and 2025 and years ended December 31, 2025 and 2024, we performed fair value assessments of equity awards granted during the period, solely for accounting purposes. We used the fair values of our common stock from our retrospective fair value assessments to determine the fair value of the equity awards granted and to calculate our stock-based compensation expense recorded in our financial statements. These reassessed values were based, in part, upon third-party valuations of our common stock that were prepared on a retrospective basis, and used a market approach to estimate our enterprise value. In order to allocate value to the common stock the hybrid method was used. The hybrid method is a probability-weighted expected return method, or PWERM, where the equity value in one or more of the scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of the future value of our common stock, assuming various outcomes. The value of a share of common stock is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. In each case, a discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.

These third-party valuations were performed at various dates, resulting in a fair value of our common stock of $3.83 per share as of April 2, 2025, $12.69 per share as of December 8, 2025, $19.49 as of January 16, 2026, and $35.33 as of May 26, 2026. Given the absence of a public trading market, our Board, with input from management, considered the results of these third-party valuations in addition to numerous objective and subjective factors to determine the fair value of common stock.

The factors included, but were not limited to:

●

the prices at which we sold our Series A-2 and Series X convertible preferred stock to new and existing investors during the year ended December 31, 2025 and the six months ended June 30, 2026, and the rights and preferences of the convertible preferred stock relative to our common stock at the time of each grant;

●

the terms of the previously contemplated Merger Agreement, including the price per share at which shares would have been issued and sold in the contemplated PIPE financing, and the likelihood at such time of completing the Merger;

●

our ability to raise future financings and the lack of liquidity of our equity as a private company;

●

our stage of development and business strategy and the material risks related to our business and industry;

●

the valuation of publicly traded companies in the quantum industry, as well as recently completed mergers and acquisitions of peer companies and the analysis of initial public offerings and the market performance of similar companies in the quantum industry;

●

any external market conditions affecting the quantum industry and trends within the quantum industry; and

●

the likelihood of achieving a liquidity event for the holders of our convertible preferred stock and holders of our common stock, such as an initial public offering, or a sale of our company, given prevailing market conditions.

The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment and these valuations are sensitive to changes in the unobservable inputs. As a result, if we had used different assumptions or estimates, or if there are changes to the unobservable inputs, the fair value of our common stock and stock-based compensation expense could have been materially different

Our stock-based compensation expense is recorded in general and administrative and research and development expenses in our consolidated statements of operations and comprehensive loss.

The following table summarizes by grant date the number of shares subject to awards granted under our equity incentive plan through June 30, 2026, the per share exercise price of the awards or purchase price of the common stock awards and weighted average grant date fair value on each grant date:

Grant Date		Number of Common Shares Subject to Grant				Weighted Average Exercise Price Per Share				Estimated Fair Value per Common Share at Grant Date				Weighted Average Grant Date Fair Value				Award Type
April 9, 2025			1,869,600			$	1.72			$	3.83			$	2.84			Option
July 15, 2025			79,686			$	1.19			$	3.83			$	3.08			Option
October 10, 2025			329,104				N/A			$	10.60			$	10.60			Restricted Stock
January 14, 2026			278,000				N/A			$	12.69			$	12.69			Restricted Stock	*
February 20, 2026			114,488				N/A			$	19.49			$	19.49			Restricted Stock	*
May 26, 2026			151,000				N/A			$	35.33			$	35.33			Restricted Stock	*

*

The restricted stock awards granted in 2026 are subject to a performance condition prior to commencement of service-based vesting, whereby the service-based vesting of the award does not begin until a qualifying exit event, which is the expiration of the lockup period following the effectiveness of the initial public offering.

Recently Adopted Accounting Pronouncements

We have reviewed all recently issued accounting pronouncements and have determined that, other than as disclosed in Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and disclosed above, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.

Emerging Growth Company Status

We are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are otherwise applicable to other public companies. These provisions include: (i) being permitted to provide only two years of audited financial statements in addition to any required unaudited interim financial statements and a correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure; (ii) not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; (iii) reduced disclosure obligations regarding executive compensation; (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved; and (v) exemptions from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on the financial statements.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We may adopt the new or revised standard whenever such early adoption is permitted for certain standards. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (b) the last date of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion, (c) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii)(a) our annual revenue is less than $100.0 million during the most recently completed fiscal year, and (b) the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.