UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2024
Or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 000-41218
Zapata Quantum, Inc.
(Exact name of registrant as specified in charter)
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)
of the Act: None
Securities registered pursuant to Section 12(g)
of the Act: Common stock, par value $0.0001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐No☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes☒No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes☒No
☐
Indicate by checkmark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No☒
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant, as of December 29, 2024, the last business day of the registrant’s most
recently completed second fiscal quarter, was approximately $6,696,894 based upon the last sales price of the common stock as of such
date. Solely for purposes of this disclosure, shares of common stock held by executive officers, directors and beneficial holders of 10%
or more of the outstanding common stock of the registrant as of such date have been excluded because such persons may be deemed to be
affiliates.
As of November 30, 2025, the registrant had 162,580,506
shares of its common stock, $0.0001 par value per share, outstanding.
Audit Firm Id Auditor Name: Auditor Location:
572 Weinberg & Company, P.A. Los Angeles, CA
TABLE OF CONTENTS
PAGE
PART I
Item 1 Business 1
Item 1A Risk Factors 7
Item 1B Unresolved Staff Comments 33
Item 1C Cybersecurity 34
Item 2 Properties 34
Item 3 Legal Proceedings 34
Item 4 Mine Safety Disclosures 34
PART II
Item 6 [Reserved] 35
Item 7A Quantitative and Qualitative Disclosures About Market Risk 53
Item 8 Financial Statements and Supplementary Data F-1
Item 9A Controls and Procedures 54
Item 9B Other Information 55
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 55
PART III
Item 10 Directors, Executive Officers and Corporate Governance 56
Item 11 Executive Compensation 60
Item 14 Principal Accounting Fees and Services 67
PART IV
Item 15 Exhibits, Financial Statement Schedules 68
i
Unless we state otherwise or the context otherwise
requires, the terms the “Company” “Zapata,” “Zapata Quantum,” “we,” “us,”
“our” and the “Company” refer to Zapata Quantum, Inc., a Delaware corporation. Solely for convenience, the trademarks
and trade names in this report may be referred to without the ® and TM symbols, but such references should not be construed as
any indicator that their respective owners will not assert their rights thereto.
Unless otherwise noted, the description of our
business and the discussion of related risk factors reflects Zapata Quantum’s operations and strategic direction as of 2025. The
Company underwent significant changes after December 31, 2024, including a restructuring, rebranding, and renewed focus on quantum computing
application development.
Cautionary Note Regarding Forward-Looking Statements
This Report contains forward-looking statements,
including statements regarding our expectations for prospective future growth, operating results and financial condition, potential future
trends and developments within our industry and the U.S. and global economies generally, plans and expectations for our future business
plan and capital raising efforts, expectations and plans with respect to our products and services including the potential market for,
timing, features, and demand for such products and services, and liquidity and sources of capital. Forward-looking statements are prefaced
by words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,”
“should,” “would,” “intend,” “seem,” “potential,” “appear,” “continue,”
“future,” believe,” “estimate,” “forecast,” “project,” and similar words. We have
based these forward-looking statements largely on our current expectations and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes
in circumstances that are difficult to predict. We caution you, therefore, against relying on any of these forward-looking statements.
Our actual results may differ materially from those
contemplated by the forward-looking statements for a variety of reasons, including, without limitation, the possibility that estimates,
projections and assumptions on which the forward-looking statements are based prove to be incorrect, our ability to raise the necessary
capital to re-establish material operations and generate revenue and the terms and timing of any related transactions, central bank interest
rates and future interest rate changes, the risks arising from the impact of inflation, tariffs, the deterioration of the labor market
of the United States, a recession which may result on the Company’s business, prospective customers, and on the national and global
economy, our ability to attract homeowners to our products and services, the potential for regulatory changes impacting quantum computing,
artificial intelligence, data privacy and other areas that impact the Company’s business, and the ability of us and third parties
on which we depend to comply with applicable regulatory requirements, the risk that software and technology infrastructure on which we
depend fail to perform as designed or intended, and the risks and uncertainties disclosed under Item 1A – Risk Factors contained
in this Report. Any forward-looking statement made by us in this presentation speaks only as of the date on which it is made. Factors
or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of
them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments
or otherwise, except as may be required by law.
ii
Frequently Used Terms
In this document:
“AI” means artificial intelligence”
“Business Combination Agreement” means the Business Combination
Agreement, dated as of September 6, 2023, by and among the Company, Merger Sub and Legacy Zapata, as may be amended from time to time.
“Code” means the Internal Revenue Code of 1986.
“Common Stock” means the common stock of the Company, par
value $0.0001 per share.
“DGCL” means the General Corporation Law of the State of
Delaware.
“Exchange Act” means the U.S. Securities Exchange Act of
1934.
“IP” means intellectual property.
“Legacy Zapata” means Zapata Computing, Inc., a Delaware
corporation.
“Merger” means the merger of Merger Sub with and into Legacy
Zapata with Legacy Zapata that occurred on March 28, 2024 with Legacy Zapata surviving the Merger as a wholly owned subsidiary of the
Company as contemplated by the Business Combination Agreement.
“Merger Sub” means Tigre Merger Sub, Inc., a Delaware corporation
and wholly owned direct subsidiary of the Company prior to the closing of the Merger.
“Nasdaq” means the Nasdaq Stock Market.
“Preferred Stock” means the preferred stock of the Company,
par value $0.0001 per share.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933.
“Senior Secured Notes” means the senior secured promissory
notes issued by Zapata and its subsidiary, the obligations of which are secured by the assets thereof.
iii
PART I
Item 1. Business
Overview
Zapata Quantum is a leading pure-play hardware-agnostic
quantum software company. Following a strategic realignment in 2025, the Company will deliver solutions to efficiently deploy and accelerate
the development of quantum and hybrid quantum-classical computing applications. Founded in 2017 by researchers from a Harvard University
Quantum Computing Lab, Zapata has built one of the industry’s most robust intellectual property portfolios in quantum and hybrid
quantum-classical computing and algorithmic methods, with over 60 patents granted and pending developed over eight years.
Zapata’s software platform for quantum computing
applications is based on our patented technology and supports a wide range of use cases in cryptography, pharmaceuticals, manufacturing,
materials discovery and defense. The Company is the only organization to have participated across all technical areas of the Defense Advanced
Research Projects Agency’s (“DARPA”)’s Quantum Benchmarking program and has worked with Fortune 500 enterprises
and government agencies to unlock the potential of quantum computing.
On March 28, 2024, we consummated the business
combination contemplated by the Business Combination Agreement, dated September 6, 2023, by and among the Company, Merger Sub and Legacy
Zapata. Pursuant to the Business Combination Agreement, the Merger took place pursuant to which Merger Sub merged with and into Legacy
Zapata resulting in Legacy Zapata becoming a wholly owned subsidiary of the Company.
In late 2024 the Company voluntarily elected to
temporarily suspend its operations due to its limited capital resources and inability to access adequate liquidity to continue to fund
its operations and meet its outstanding debt obligations. In June 2025, the Company commenced debt restructuring and capital raising transactions
and the reinstatement of operations by (1) entering into exchange agreements with unsecured creditors pursuant to which such creditors
agreed to exchange outstanding obligations payable to them for common stock and certain rights related thereto, and (2) the Company sold
convertible notes and warrants for gross proceeds of $3 million. The Company has since been continuing efforts to negotiate and restructure
outstanding obligations and raise capital. In the furtherance of recommencing operations, the Company has also entered into advisory agreements
with third parties and agreed to compensate such parties in the form of equity and/or cash compensation. See Note 20, Subsequent Events,
in the notes to the consolidated financial statements contained in this Annual Report.
Following a period of broader AI exploration, the
Company undertook, in 2024 and 2025, a strategic realignment to refocus on its core quantum mission: developing the software and tooling
layer that enables enterprises, governments, and researchers to harness quantum computing for economically meaningful outcomes.
Zapata’s hardware-agnostic approach and proprietary
technology address the “software bottleneck” that limits quantum adoption. The Company’s products - Orquestra, Bench-Q,
Quantum Graph, and Quantum Pilot - provide the infrastructure and workflow tools that connect problem discovery, algorithm design, and
hardware execution. These tools are supported by professional services, partnerships, and licensing programs that collectively form the
Company’s business model.
The Company’s business plans and operations
described herein, and our ability to execute and continue with such efforts, will depend on our ability to raise capital needed to repay
vendors and creditors, rehire various personnel and fund our working capital and growth needs. Further, our capital raising efforts and
business and operation generally are subject to numerous risks and uncertainties, as described under “Item 1A – Risk Factors.”
Introduction to Quantum Computing
Quantum computing exploits the principles of quantum
mechanics - superposition, entanglement, and interference - to process information in fundamentally new ways. Whereas classical computers
operate on bits that are either 0 or 1, quantum computers use quantum bits, or “qubits” that can exist in multiple states
simultaneously. This enables exponential scaling of computational possibilities and the potential to solve certain classes of problems
- such as molecular simulation, combinatorial optimization, and cryptographic analysis - that are intractable on classical machines.
The field of quantum computing is advancing rapidly, supported by significant
broad-based investment. Global governments have announced multibillion-dollar quantum initiatives, venture and public-market investment
have accelerated considerably, and major cloud computing providers now offer access to quantum processors. A 2024 Boston Consulting Group
analysis estimates that quantum technologies will create $450 billion to $850 billion of economic value globally, sustaining a $90 billion
to $170 billion market for hardware and software providers by 2040.
Phases of Quantum Computing Technology Development
The first phase of quantum computing has been the
arrival of Noisy Intermediate-Scale Quantum (NISQ) devices, characterized by limited qubit counts and the absence of full error correction.
Despite these constraints, NISQ computing can still deliver tangible value especially in areas such as materials, chemical simulations
and optimization.
Zapata has contributed significantly to the advancement
of NISQ approaches including pioneering the Variational Quantum Eigensolver (VQE), a foundational hybrid quantum-classical algorithm that
combines quantum state preparation with classical optimization to estimate molecular and materials properties, with applications to other
domains as well.
VQE demonstrated one of the first practical uses
of quantum hardware and helped establish the hybrid quantum-classical paradigm that continues to define much of the industry’s progress.
Building on this foundation, Zapata develops software and tools that extend hybrid approaches to broader classes of scientific and industrial
problems, creating an adaptable framework that evolves with each generation of hardware.
Rapid progress is now being made toward the second
phase of quantum computing, known as Fault-Tolerant Quantum Computing (FTQC), where error-corrected qubits enable deep, large-scale algorithms
with transformative performance. As these systems come online, the race is underway to display what is known as “quantum advantage”
or “quantum supremacy” in an increasing number of key problem areas.
The number of announcements by leading FTQC hardware
providers has accelerated considerably in recent months - including improvement in qubit coherence times, falling error rates, the demonstration
of prototype logical qubits, and the announcement of quantum advantage for some problems. As these breakthroughs accumulate, the focus
of progress is shifting toward the application and software layer - where practical utility will first emerge. This is the domain where
Zapata Quantum operates.
Unlocking the full potential of FTQC will depend
not only on better hardware, but also a mature software stack which will enhance the development of algorithms, compilers, and workflows
that translate real-world problems into quantum form. Zapata has proven itself as a leader in this space, with pioneering work across
a variety of domains - including chemistry, materials science, optimization, cryptography and machine learning.
By advancing the software infrastructure and application
frameworks that will define the next generation of quantum computing, Zapata plays a critical role in enabling the industry’s evolution
toward large-scale, fault-tolerant quantum advantage.
Market Opportunity
The quantum computing market is entering what many
observers describe as its “readiness phase,” evidenced by Microsoft’s declaration of 2025 as the year of quantum readiness.
In 2024, McKinsey & Co. estimated annual global spend on quantum computing technologies of approximately $2 billion, growing at 35%
per year, including about $400 million directed to software and services.
While hardware improvements draw attention, the
limiting factor to adoption is the absence of a robust, reusable software infrastructure. Enterprises seeking to explore quantum advantage
face steep learning curves, fragmented hardware ecosystems, and scarce talent. Zapata addresses these pain points by providing a coherent,
hardware-agnostic software stack and associated technical services.
The potential impact of quantum computing technology
spans nearly every high-value computational domain:
We believe the software layer will capture a high
share of the value created by these solutions to our planet’s most intractable problems. Zapata’s strategy is to occupy this
enabling layer - bridging scientific discovery and commercial deployment.
Products
Zapata’s products are organized around what
it refers to as the Generalized Quantum Stack - a three-layer model that defines the end-to-end process of quantum application development
and execution. This framework, validated through Zapata’s multi-year leadership across all technical areas of DARPA’s Quantum
Benchmarking program, provides the blueprint for accelerating progress from use case identification to implementation on physical hardware.
Zapata Generalized Quantum Stack
Layer 1: WHY - Use-Case and Utility Benchmark
Evaluation
Defines the purpose of quantum computing by assessing
quantum-amenable problems and related utility benchmarks across domains such as chemistry, optimization, cryptography, and materials science.
This layer involves curating high-utility, domain-driven benchmarks that connect abstract industry challenges to well-defined computational
instances. Zapata’s work here includes building repositories of potential applications and developing workflows for systematic problem
formulation, addressing a critical gap in how enterprises and researchers determine where quantum advantage will emerge.
Layer 2: WHAT - Algorithm Development and Benchmarking
Focuses on the design of quantum applications and
algorithms. Zapata’s tools enable modular algorithm composition, evaluation, and benchmarking to translate domain problems into
executable quantum circuits. This layer bridges academic innovation with industrial relevance by combining Zapata’s curated algorithm
library and benchmarking datasets with methods for performance comparison across algorithms and hardware types.
Layer 3: HOW - Resource Estimation and Execution
Represents the implementation phase, encompassing
resource estimation, compilation, and hybrid execution across quantum and classical backends. Zapata’s platform, Orquestra, provides
an environment for orchestrating these workflows, allowing developers to simulate, optimize, and run algorithms on real quantum hardware
or high-performance classical infrastructure. This layer ensures forward compatibility as the industry transitions from NISQ systems to
FTQC architectures.
Together, these layers define the roadmap for scalable
quantum application development. Zapata is the only hardware-agnostic quantum software company to have demonstrated leadership across
all three layers of this stack - uniquely positioned to lead the acceleration of the field from theoretical research to practical implementation.
Specific Zapata products within these layers include:
Orquestra
Orquestra is Zapata’s software platform for
developing, orchestrating, and executing quantum and hybrid classical/quantum applications. It provides a unified environment for constructing
computational workflows that combine classical and quantum resources. Orquestra manages the end-to-end lifecycle: from problem definition
through algorithm selection, circuit compilation, resource estimation, execution, and results analysis. The platform has been used in
commercial and research settings including with BP, BASF, BBVA, and DARPA.
Bench-Q
Bench-Q was developed under the U.S. Defense Advanced
Research Projects Agency’s Quantum Benchmarking program, where Zapata uniquely participated across all technical areas (TA-1, TA-1.5
and TA-2). Bench-Q provides a standardized framework and software toolkit for evaluating quantum algorithms and hardware performance against
utility-driven benchmarks. It defines metrics and workflows that allow researchers to trace the progression from abstract problem instances
to executable circuits. The methods and data models produced in Bench-Q are core to Zapata’s commercial products.
Quantum Graph
Quantum Graph (QG) is a structured knowledge base
that catalogs quantum use cases, algorithms, and application instances in a graph-based format. It provides a searchable, modular representation
of how problems, algorithms, and hardware resources connect, forming a foundation for composable quantum application development. QG is
currently in development.
Quantum Pilot
Quantum Pilot (QP) builds upon Quantum Graph by
introducing an AI-assisted development environment that helps users compose, test, and refine hybrid quantum-classical workflows. By leveraging
machine-learning models to suggest algorithmic building blocks and resource optimizations, Quantum Pilot aims to accelerate the design
of viable quantum applications by orders of magnitude relative to manual methods. QP is currently in development.
Services
In-line with our historical activities prior to
the cessation of operations in June 2024, we intend to complement our software offerings with high-value technical services to help customers
unlock value using Zapata’s software products. Zapata’s service engagements will be performed by teams of quantum scientists,
engineers, and domain experts. We expect that certain projects may evolve into longer-term subscriptions to our products, recurring research
programs, or joint development agreements that involve co-created or licensed intellectual property.
These services will be strategically important
both in the current noisy intermediate-scale quantum (NISQ) era and as fault-tolerant quantum computers (FTQC) become commercially available.
By embedding its software and expertise in customer workflows today, Zapata intends to position itself as a long-term partner through
the industry’s transition from research to scalable deployment.
Customer Value Proposition
Zapata’s quantum application development
gives enterprises the confidence to invest in quantum computing with clarity and measurable results. It empowers customers to identify
where quantum will create real value, validate that potential through data-driven modeling and benchmarking, and prove performance on
real hardware before making costly commitments. By uniting discovery, design, and execution in one hardware-agnostic workflow, Zapata
delivers readiness by reducing uncertainty, accelerating time-to-insight, and future-proofing quantum adoption. The result is faster innovation,
smarter resource allocation, and tangible evidence of competitive advantage, turning quantum ambition into validated business outcomes.
Customers and Go-To-Market Strategy
The Company has previously executed multi-year
contracts and collaborative engagements with leading organizations such as BP, BASF, BBVA, Mitsubishi Chemical, BMW, and Andretti Global,
spanning industries including energy, chemicals, financial services, and advanced manufacturing.
In the public sector, Zapata has served as a prime
contractor and collaborator under the Defense Advanced Research Projects Agency (DARPA) Quantum Benchmarking (QB) program. It was the
only provider chosen to contribute to all technical areas - TA1 (use-case identification and benchmark definition), TA1.5 (algorithm design
and implementation), and TA2 (hardware resource estimation and execution) - covering the full spectrum from problem formulation through
algorithm development to hardware realization.
Through this work, Zapata developed the foundational
methodologies and tooling that now underpin its commercial platforms, including Bench-Q, Orquestra, Quantum Graph and Quantum Pilot, in
collaboration with leading universities, government research agencies, and hardware partners.
The Company’s go-to-market strategy combines
direct enterprise sales, channel partnerships, and ecosystem collaborations. It also partners with strategy consultancies that serve enterprise
clients exploring quantum readiness. This partnership-driven approach amplifies reach while keeping the Company focused on its core software
and IP development.
Business Model
Our business model is to provide subscription-based
offerings that combine Zapata Quantum software—specifically the Orquestra platform and any modules such as Bench-Q, Quantum Pilot
or Quantum Graph which are delivered on top of it—as well as related services to develop and efficiently deploy custom quantum or
hybrid quantum-classical computing applications designed to resolve our enterprise customers’ specific problems.
Our primary revenue model is based on subscription
payments for our offerings which are utilized to develop and efficiently deploy quantum or hybrid quantum-classical computing applications.
Based on our prior operating experience, these engagements typically span use case discovery to prototyping, benchmarking, and ultimately
production as quantum hardware advances. We will also, consistent with our historical activity, selectively pursue government contracts
related to the advancement of quantum computing applications as a complementary revenue source.
Competition
The quantum computing industry remains early and
fragmented. Competition arises from (a) hardware manufacturers developing vertically integrated stacks (e.g., IBM, IonQ, Rigetti), (b)
software-focused startups (e.g., Classiq, QC Ware, Horizon Quantum), and (c) internal R&D groups within large enterprises.
Management believes that Zapata’s differentiation
derives from several advantages:
These factors position Zapata as the leading pure-play
publicly traded quantum software company.
Human Capital
As of October 31, 2025, Zapata had six employees,
two of whom are full-time including its Chief Executive Officer. The Company intends to expand its headcount considerably upon raising
future financing including the re-hiring of certain employees who were with the Company prior to its restructuring.
To date, Zapata has not experienced any work stoppages
and maintains good working relationships with its employees. None of our employees are subject to a collective bargaining agreement or
are represented by labor unions at this time.
Culture
Zapata’s culture is built around its people
and network: a global cohort of accomplished scientists, engineers and business professionals. Zapata has, since its founding, demonstrated
a commitment to hiring people from diverse backgrounds and locations.
One of Zapata’s core strengths is innovation,
not only in its offerings, but also with the mindset of its people. Over the course of Zapata’s eight years in business, employees
have, and continue to, organically collaborate in open forums with varying degrees of organization. Examples include, but are not limited
to:
• Weekly science meetings where employees present their work;
Core Values
The company adheres to five core values:
Intellectual Property
Zapata Quantum’s platform is grounded in
a broad and growing portfolio of intellectual property that secures its position as a leader in quantum software. The Company’s
intellectual property (IP) strategy focuses on protecting core technologies that enable the efficient development, benchmarking, and deployment
of quantum and hybrid applications across multiple hardware platforms.
As of October 31, 2025, Zapata Quantum held or
had pending more than 60 patents worldwide, spanning the United States, Europe, Canada, Australia, and Israel. These patents and applications
cover critical methods and systems that define the key control points in quantum software - including program compilation, optimization
methods, and information retrieval between classical and quantum computing systems.
Representative Patents
The Company’s early and sustained investment
in these domains established Zapata as one of the first companies to secure foundational intellectual property for hybrid quantum-classical
computing. The Company believes its intellectual property represents a durable competitive advantage that will be increasingly difficult
for competitors to replicate. Zapata continues to evaluate opportunities to assert, license, and expand its IP rights globally to maximize
shareholder value and maintain leadership in quantum software innovation.
Research and Development
Research and development (“R&D”)
are central to Zapata Quantum’s mission of advancing practical quantum computing. The Company’s R&D program focuses on
the creation of scalable algorithmic frameworks, benchmarking methodologies, and AI-assisted development tools that enhance the performance
and usability of its software platforms. These initiatives support both near-term hybrid computing and the transition to future fault-tolerant
quantum systems.
Zapata’s R&D activities are carried out
through close collaboration with government agencies, research consortia, leading universities, and quantum hardware providers. The Company
has partnered with multiple academic and national research institutions worldwide, engaging in joint projects that span algorithm design,
benchmarking, and system integration. These collaborations help validate Zapata’s technologies in real-world settings and ensure
alignment with global scientific and industrial standards.
The Company is also supported by a Scientific Advisory
Board composed of prominent researchers and technical leaders from across the globe who are recognized authorities in quantum information
science, applied mathematics, and computational physics. This board provides guidance on long-term research directions, peer review of
core technologies, and input on emerging scientific and policy trends affecting the quantum ecosystem.
Through these efforts, Zapata seeks to accelerate
the development of useful quantum applications while deepening its intellectual-property base. The Company’s integrated research
program - combining internal innovation, academic collaboration, and global scientific advisory oversight - positions it to contribute
meaningfully to the advancement and commercialization of quantum computing technologies.
Legal Proceedings
From time to time, Zapata Quantum may be involved
in legal proceedings and claims that arise in the ordinary course of business, including matters relating to intellectual-property protection,
contracts, employment, or regulatory compliance. As of the filing of this report, the Company is not a party to any material pending legal
proceeding that, if adversely determined, would have a material adverse effect on its financial position or results of operations.
Government Regulation
We may receive, store, and otherwise process personal
information and other data from and about our customers, employees, and from other stakeholders like our vendors. There are numerous federal,
state, provincial, local, and international laws and regulations regarding privacy, data protection, information security, and the storing,
sharing, use, processing, transfer, disclosure, retention, and protection of personal information and other content, the scope of which
is rapidly changing, subject to differing interpretations and may be inconsistent among regions, countries and states, or conflict with
other legal requirements. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy,
data protection, and information security.
In addition, to the extent we operate in foreign
markets, we will be subject to additional laws and regulations relating to those operations and the applicable jurisdictions, in addition
to U.S. laws and regulations applicable to the conduct of business in foreign jurisdictions.
For a discussion of certain of the government
regulations we currently or may in the future face in conducting our business and the risks and uncertainties relating thereto, see Item
1A – Risk Factors contained in this Report.
Item 1A. Risk Factors
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that you
should consider before investing in our common stock. Some of the principal risk factors that make an investment in the Company speculative
or risky are summarized as follows:
Risks Related to our Financial Condition and Status as an Early
Stage Company
• We will need additional capital to continue as a going concern.
• We may not be able to scale our business quickly enough to meet demand.
Risks Related to our Business and Industry
• We are highly dependent on our key employees.
• Our business is dependent on growing and retaining qualified personnel.
• Our estimate of market opportunities may prove to be inaccurate.
• We could fail to respond to rapid technological changes.
Risks Related to Competition
• Competitors may develop products and technologies that are superior to ours.
Risks Related to Intellectual Property
• We may face patent infringement and other intellectual property claims.
Risks Related to Government Regulation and Litigation
• We are potentially subject to governmental export and import control laws.
• We are exposed to risks associated with litigation and regulatory proceedings.
Risks Outside Our Specific Business
• Risks Relating to Ownership of our Common Stock
• The market price of our shares of Common Stock is subject to volatility.
• There is currently a limited trading market for the Company’s Common Stock.
• Due to our size, we have a limited management team.
• We do not currently intend to pay cash dividends on our Common Stock.
Investing in our Common Stock involves a high degree of risk. Investors
should carefully consider the following Risk Factors before deciding whether to invest in the Company. Additional risks and uncertainties
not presently known to us, or that we currently deem immaterial, may also impair our business operations or our financial condition. If
any of the events discussed in the Risk Factors below occur, our business, consolidated financial condition, results of operations or
prospects could be materially and adversely affected. In such case, the value and marketability of our securities could decline.
Risks Related to Zapata’s Financial Condition and Status as
an early-stage Company
We will need additional capital to continue as a going concern,
implement our business plan or respond to business opportunities or unforeseen circumstances and such financing may not be available.
Through October 31, 2025, we have funded our operations
primarily with proceeds from sales of preferred stock, promissory notes and warrants. Our continuation as a going concern is dependent
upon our ability to effect or continue to identify future debt or equity financing and generate profitable operations from our operations.
Management estimates needing to raise at least an additional $5 million to establish and continue operations over the next 12 months under
our current business plan. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable
to us. Further, the Company has not generated any revenue since September 2024, and does not expect to generate any revenue unless and
until it can re-commence material operations which will be dependent on our ability to raise sufficient capital. These factors raise substantial
doubt about our ability to continue as a going concern.
Our business plan also contemplates a substantial
scaling of Zapata across all departments, including science, software engineering, and product design, in order to launch multiple products
and/or offerings in a timely manner to obtain and preserve a competitive advantage. This scaling will require substantial capital at a
time when we project we will be operating at a loss and in which we have limited capital and other resources with which to execute our
business plan, and this process may take longer than we anticipate. Consequently, our expansion is limited in proportion to our growth
in revenue and available capital, as well as by our limited personnel and infrastructure. The capital required to sustain our business
during this period may be greater than anticipated. In addition, presently unforeseen opportunities or circumstances may require capital
beyond what we currently project. The period during which we expect to operate at a loss may be extended by circumstances beyond our control.
We may obtain additional financing through public
or private equity or debt financings (subject to the limitations under our outstanding agreements and debt instruments) that may result
in dilution to stockholders, the issuance of securities with priority as to liquidation and/or dividend and other rights more favorable
than the Common Stock, or the imposition of debt covenants and repayment obligations or other restrictions that may adversely affect our
business. For example, as of October 31, 2025, we have outstanding an aggregate principal amount of $4 million in secured promissory notes
(collectively, the “Secured Notes”). Included in the Secured Notes is a senior secured promissory note (in the aggregate principal
amount of $1 million the “Senior Secured Note”). This Senior Secured Note, among other things, converts at the option of the
holder at $8.50 per share of Common Stock and prohibits Legacy Zapata from issuing additional indebtedness and undertaking certain other
actions, subject to limited exceptions, which may prevent or limit us from raising further capital or engaging in strategic transactions
in the future. In addition, the other Secured Notes (the “2025 Notes”) have a total outstanding principal amount of $3 million,
mature on June 12, 2026 (subject to acceleration upon the occurrence of certain customary events of default or a change of control), and
bear 10% per annum interest. These 2025 Notes are convertible into shares of Common Stock at the option of the holder based on a conversion
price of $0.04 per share, subject to certain adjustments. These 2025 Notes convert automatically upon the Company’s completion of
a securities offering resulting in gross proceeds of at least $5 million. The Company also issued warrants to purchase a total of 37,500,000
shares of Common Stock to the investors of the 2025 Notes.
There is no guarantee that future financing will
be at financial terms equal to or more favorable than those described above or that our existing indebtedness will not limit or prevent
us from raising capital in the future, and we may need to enter into future equity or, if available, debt financing at significantly less
favorable terms. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability
to pursue our business strategy.
We may also seek additional financing even if in
our view such additional financing is not required in order to take advantage of favorable market conditions or for strategic considerations.
There can be no assurance that additional financing will be available on favorable terms, or at all. The inability to obtain such additional
financing if needed may adversely affect our ability to operate at the levels necessary to execute our business plan or may force us into
bankruptcy.
We have a history of operating losses, which are expected to
continue for the foreseeable future.
We have incurred significant operating losses since
our inception. We incurred net losses of $38.2 million and $29.8 million during the years ended December 31, 2024 and 2023, respectively,
and we have a cumulative deficit since the formation of Legacy Zapata in November 2017 through December 31, 2024 of approximately $127.7
million. Since 2024, we have continued to incur net losses. We believe that we will continue to incur operating and net losses each quarter
at least for the foreseeable future. The size of future losses will depend on several factors, including the degree to which we seek to
establish and expand our scientific, product, software engineering, sales and other teams, and the revenue that we can generate from sales
of our quantum computing application development solutions. Our operating expenses have increased as a result of becoming a public company
and we expect that our expenses will continue to increase as we grow our business, including hiring and re-hiring personnel as we seek
to re-establish material operations as part of our ongoing restructuring efforts in 2025.
We are an early stage company with a limited operating history,
in a nascent industry, making it difficult to forecast future results.
We were founded in 2017 to develop and provide
software with related services and proprietary IP to utilize quantum math on classical and future quantum hardware. In late 2024, due
to financial difficulties we temporarily suspended our operations. In June 2025, following restructuring efforts and conversion of certain
outstanding indebtedness into equity, we shifted our business focus from artificial intelligence (AI) to quantum computing software and
solutions. Our ability to re-establish material operations and generate revenue will be dependent upon our ability to access sufficient
capital for such purpose. The market focus for our quantum computing application development solutions and the use of quantum math and
algorithms are nascent fields with uncertainty on future market uptake and in technological progress in the field.
There can be no assurance that we can or will meet
the challenges commonly faced by early stage companies, including the need to scale operations and to achieve and manage rapid growth.
A number of factors could cause our efforts to be adversely impacted, including any inability to raise the necessary capital needed to
re-establish material operations and pursue our business objectives, increased competition, lesser-than-expected growth or contraction
of our overall market, our inability to accurately forecast demand for our customer offerings, our inability to establish sales or other
partnerships with service firms, an inability to develop repeatable solutions, an inability to grow our team, or our failure, for any
reason, to capitalize on growth opportunities. We have encountered and will encounter risks and uncertainties frequently experienced by
early stage companies in rapidly changing industries, such as the risks and uncertainties described herein. We cannot provide assurance
that we can meet the challenges faced by all companies, including established companies, in rapidly changing or nascent industries. The
failure to address these challenges successfully or promptly could have a material adverse effect on our future operating results and
financial condition.
We may not be able to scale our business and quantum computing
application development solutions quickly enough to meet customer and market demand and to remain competitive in the market for quantum
computing application development solutions.
In order to establish and grow our business, we
will need to re-establish and scale material operations in every area from our existing start-up capacity. These challenges will require
that we:
• expand our customer-support services;
• increase our sales and marketing teams and efforts;
If we cannot successfully overcome these challenges
and manage the organizational growth required to do so, then our business, including our ability to establish and maintain a competitive
place in the market, financial condition, and profitability, may be materially adversely affected.
Our assets are pledged to the holders of the Secured Notes and
failure to repay obligations to these noteholders when due, or any other default events, will have a material adverse effect on our business
and could result in foreclosure on these assets.
In connection with the issuance of Secured Notes,
the Company entered into Security Agreements and an Intercreditor Agreement with Acquiom Agency Services LLC as collateral agent on behalf
of the noteholders (collectively, the “Security Agreement”). The Security Agreement creates a security interest in all of
the property of Zapata and its subsidiaries, subject to certain exceptions specified in the Security Agreement (the “Collateral”).
Pursuant to the Security Agreement, each of Zapata Computing, Inc. and Zapata Government Services, Inc. has agreed to guarantee the obligations
of the Company under the Security Agreement and the Secured Notes.
Upon the occurrence of an Event of Default under
the Security Agreement, the collateral agent will have certain rights under the Security Agreement, including the right to take control
of the Collateral and, in certain circumstances, sell the Collateral to cover obligations owed to the holders of the Secured Notes pursuant
to its terms. “Event of Default” under the Security Agreement means (i) any default of the terms, conditions or covenants
of the Security Agreement (after giving effect to any applicable grace or cure period) and any event of default under the Secured Notes,
which includes any failure to pay any principal or interest payment on the due date or any other payments required under the terms of
the Secured Notes, a breach of any other covenant under the Secured Notes, and entering into any voluntary or involuntary bankruptcy or
insolvency proceedings. Any such default would have a material adverse effect on Legacy Zapata’s and, by extension, our, business
and our stockholders could lose their entire investment in us.
If we fail to maintain an effective system of disclosure controls
and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable
regulations could be impaired.
As a public company, we are subject to the reporting
requirements of the Exchange Act, the Sarbanes-Oxley Act, including regular attestations by management concerning its internal control
over financial reporting. Management may not be able to effectively and timely implement controls and procedures that adequately respond
to these increased regulatory compliance and reporting requirements. If we are not able to implement the additional requirements of Section
404 of the Sarbanes-Oxley Act (“Section 404”) in a timely manner or with adequate compliance, we may not be able to assess
whether our internal control over financial reporting is effective and may fail to provide timely and accurate financial information to
investors. This may subject us to adverse regulatory consequences and could harm investor confidence. We expect that the requirements
of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more
difficult, time consuming, and costly, and place significant strain on our personnel, systems, and resources. We will need to hire additional
accounting and financial personnel in order to achieve these goals.
The Sarbanes-Oxley Act requires, among other things,
that we maintain effective disclosure controls and procedures and internal control over financial reporting. The controls required are
not currently in place; however, we are working to develop and refine our disclosure controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized,
and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the
Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also working to design and maintain
our internal control over financial reporting.
Our current controls and any new controls that
we develop may be inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations
could also challenge our internal controls and require that we establish new business processes, systems, and controls to accommodate
such changes. We have limited experience with implementing the systems and controls that will be necessary to operate as a public company,
as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies. Additionally, if these
new systems, controls, or standards and the associated process changes do not give rise to the benefits that we expect or do not operate
as intended, it could adversely affect our financial reporting systems and processes, the effectiveness of internal control over financial
reporting, and/or our ability to produce timely and accurate financial reports. Moreover, our business may be harmed if we experience
problems with any new systems and controls, resulting in delayed implementation or increased costs to correct any issues.
Further, in addition to the material weaknesses
described in the Risk Factor which follows and elsewhere in this Report, weaknesses in our disclosure controls and internal control over
financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered
in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations. That failure could
result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control
over financial reporting could adversely affect the results of periodic management evaluations and annual independent registered public
accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting. Those reports will eventually
be included in our periodic reports filed with the SEC. Ineffective disclosure controls or internal control over financial reporting could
also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on
the trading price of our Common Stock.
Any failure to maintain effective disclosure controls
and internal control over financial reporting could harm our business and could cause a decline in the trading price of our Common Stock.
We have identified material weaknesses in our internal control
over financial reporting. If we are unable to remediate these weaknesses, identify additional material weaknesses in the future, or otherwise
fail to maintain an effective system of internal control over financial reporting, this may result in misstatements in our financial statements,
cause us to fail to meet periodic reporting obligations, or cause our access to capital markets to be impaired.
In connection with the preparation and audit of