10-K: Zapata Quantum: 2024 Losses, 2025 Quantum Pivot & Capital Needs

Zapata Quantum reports significant 2024 losses, temporary operational suspension, and a strategic pivot in 2025 to refocus on its core hardware-agnostic quantum software mission, alongside ongoing debt restructuring and capital raising efforts.

Summary

• The company consummated a business combination with Andretti Acquisition Corp. (AAC) on March 28, 2024, with Legacy Zapata becoming a wholly-owned subsidiary.
• Operations were temporarily suspended in late 2024 due to limited capital resources and inability to access adequate liquidity to fund operations and meet debt obligations.
• A strategic realignment was undertaken in 2025 to refocus on the core quantum mission: developing software and tooling for quantum and hybrid quantum-classical computing applications.
• Debt restructuring and capital raising transactions commenced in June 2025, including exchange agreements with unsecured creditors for common stock and the sale of convertible notes and warrants for gross proceeds of $3 million.
• The company incurred net losses of $38.2 million for the year ended December 31, 2024, compared to $29.8 million in 2023.
• A cumulative deficit of approximately $127.7 million was reported as of December 31, 2024.
• Revenue decreased by 32% to $3.9 million in 2024 from $5.7 million in 2023, primarily due to the operational cessation and completion of legacy contracts.
• Material weaknesses in internal control over financial reporting were identified, including insufficient segregation of duties and lack of complete written documentation.
• Management estimates needing to raise at least an additional $5 million to establish and continue operations over the next 12 months.
• Trading of the company's common stock and warrants was suspended and removed from Nasdaq on October 25, 2024, and is now quoted on the OTC Expert Market under the symbol ZPTA.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, including significant losses, operational suspension, and delisting from Nasdaq. While a strategic pivot to quantum computing and initial restructuring efforts are underway, the explicit 'going concern' doubt and the need for substantial additional capital indicate a highly precarious financial position. The potential for significant future dilution further adds to the negative outlook.

Positives

• Possesses a robust intellectual property portfolio with over 60 granted and pending patents in quantum and hybrid quantum-classical computing and algorithmic methods.
• Demonstrated leadership in DARPA's Quantum Benchmarking program, participating across all technical areas (TA-1, TA-1.5, TA-2).
• Employs a hardware-agnostic approach to quantum software, supporting a wide range of use cases and hardware architectures.
• Strategic realignment in 2025 to refocus on its core quantum mission, developing software and tooling for economically meaningful outcomes.
• Products like Orquestra, Bench-Q, Quantum Graph, and Quantum Pilot provide comprehensive infrastructure and workflow tools for quantum application development.
• Successfully commenced debt restructuring and initial capital raising efforts in June 2025, securing $3 million in gross proceeds from convertible notes and warrants.
• Maintains scientific leadership with a team of world-class researchers and deep roots in academic quantum computing.
• Integrating AI and agent-based methods to augment and automate the creation of quantum algorithms, aiming for order-of-magnitude efficiency gains.

Negatives

• Incurred significant operating losses of $38.2 million in 2024 and $29.8 million in 2023, with a cumulative deficit of $127.7 million as of December 31, 2024.
• Experienced a temporary suspension of operations in late 2024 due to insufficient financial resources and inability to access adequate liquidity.
• Revenue decreased by 32% in 2024 to $3.9 million, primarily attributable to the operational cessation.
• Identified material weaknesses in internal control over financial reporting, which could lead to misstatements or failure to meet reporting obligations.
• Requires at least $5 million in additional capital to continue as a going concern for the next 12 months, with no assurance of availability on acceptable terms.
• Common stock was suspended and removed from Nasdaq on October 25, 2024, and now trades on the less liquid OTC Expert Market.
• Highly dependent on key employees, many of whom left during the operational suspension, requiring significant re-hiring efforts.
• Substantial future dilution is expected from the conversion and exercise of outstanding securities, including 75 million shares from convertible notes, 63.7 million from warrants, 26 million from preferred stock, and 38.5 million from stock options.
• All company assets are pledged to the holders of Secured Notes, and failure to repay obligations could result in foreclosure.
• Sales cycles for enterprise customers are expected to be long and unpredictable, requiring considerable time and expense.
• Reliance on public clouds and specialized hardware (QPUs, GPUs) from third-party providers, with no guarantee of access on reasonable terms.
• As a former shell company, it faces certain disadvantages and restrictions under SEC rules for extended periods.
• The company has a limited management team with limited experience in operating a public company, potentially hindering effective management and growth.

Risks

• The company will need additional capital to continue as a going concern, implement its business plan, or respond to business opportunities or unforeseen circumstances, and such financing may not be available.
• A history of operating losses is expected to continue for the foreseeable future.
• As an early-stage company in a nascent industry, it is difficult to forecast future results, and there is no assurance of meeting challenges or achieving rapid growth.
• Inability to scale the business and quantum computing application development solutions quickly enough to meet customer and market demand.
• Assets are pledged to the holders of Secured Notes, and failure to repay obligations or any other default events could result in foreclosure on these assets.
• Material weaknesses in internal control over financial reporting have been identified, which may result in misstatements or failure to meet periodic reporting obligations.
• The ability to use existing or future net operating loss carryforwards and other tax attributes may be limited by Section 382 of the Code.
• The business plan could suffer if the company is unable to establish and grow contractual relationships with third parties or enter into important strategic partnerships.
• High dependence on key employees and the potential failure to attract and retain additional qualified personnel or maintain company culture.
• Estimates of market opportunities may prove to be inaccurate, and quantum computing application development solutions may not be widely accepted.
• Failure to respond to rapid technological changes, extend solutions, or develop new features and functionality could impair competitiveness.
• Delays in the development of the software platform could negatively impact the business.
• Problems with or defects in the Orquestra platform or other software offerings could materially affect the business.
• The pursuit of inorganic growth opportunities could be expensive, distracting, and may not succeed.
• Competitors may develop products and technologies superior to the company's solutions in a highly competitive industry.
• Dependence on access to public clouds through major cloud providers and specialized hardware (QPUs, high-performance classical compute resources) with no guarantee of reasonable terms.
• Patent applications may not result in issued patents, or patent rights may be contested, circumvented, invalidated, or limited in scope.
• No guarantee that intellectual property will provide the desired competitive advantage.
• Potential for patent infringement and other intellectual property claims that could be costly to defend or result in injunctions.
• Use of third-party open source software could negatively affect the ability to offer and sell subscriptions and subject the company to litigation.
• Fewer technology barriers to entry by new competitors due to the characteristics of open source software.
• Failure to comply with United States and foreign laws related to privacy, data security, and data protection could adversely affect operating results and financial condition.
• Subject to governmental export and import control laws that could negatively impact the business.
• Subject to U.S. and foreign anti-corruption, anti-bribery, and similar laws, the violation of which can lead to substantial harm.
• Exposure to risks associated with litigation, investigations, and regulatory proceedings.
• Business relies on computer systems vulnerable to attack and/or failure (cybersecurity threats).
• Widespread damage to the U.S. or global economy would likely adversely affect the business.
• Substantial future dilution and downward price pressure on common stock due to the number of shares issuable upon conversion and exercise of outstanding securities.
• The market price of common stock is subject to volatility, and there is currently a limited trading market (OTC Expert Market).
• Common stock is a penny stock, subject to additional sale and trading regulations that may depress its price.
• As a former shell company, it faces certain disadvantages relative to other companies, including ineligibility for certain forms and rules for extended periods.
• Significant increased costs as a result of being a public company, requiring substantial management time to new compliance initiatives.
• A limited management team with limited experience in operating a public company.
• No current intention to pay cash dividends on common stock, limiting returns to stock value.
• Delaware law and provisions in the Certificate of Incorporation and Bylaws might discourage, delay, or prevent a change in control.
• As an emerging growth company and a smaller reporting company, taking advantage of certain exemptions from disclosure requirements could make securities less attractive to investors.

Future Outlook

The company plans to deliver subscription-based solutions for quantum and hybrid quantum-classical computing applications, expanding its scientific, software engineering, and product design teams. It expects to continue incurring operating and net losses for the foreseeable future, and its ability to execute its business plan is dependent on raising substantial additional capital. The market for quantum computing is described as entering its 'readiness phase' with significant growth potential, but the commercial utility of quantum computing remains largely unproven, and techniques could quickly become obsolete.

Management Comments

• "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."
• "Management has since concentrated its efforts on restructuring activities aimed at restarting certain aspects of its core business, including capital-raising activities to improve our capital structure and to support the anticipated recommencement of business operations."
• "Although Management believes that it will be able to continue to raise funds by sale of its securities to provide the additional cash needed to meet the Companys obligations, the restructuring activities aimed at restarting certain aspects of its core business require substantial funds to implement and there is no assurance that the Company will be able to continue raising the additional capital necessary to continue operations and execute on the Companys business plan."

Industry Context

The quantum computing market is entering what many observers describe as its 'readiness phase,' supported by significant broad-based investment from global governments and venture capital. A 2024 Boston Consulting Group analysis estimates 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. McKinsey & Co. estimated annual global spend on quantum computing technologies of approximately $2 billion in 2024, growing at 35% per year, with about $400 million directed to software and services. Despite hardware improvements, the limiting factor to adoption is the absence of a robust, reusable software infrastructure. The company aims to occupy this enabling software layer, bridging scientific discovery and commercial deployment.

Comparison to Industry Standards

• The company is the only organization to have participated across all technical areas of the Defense Advanced Research Projects Agency's (DARPA) Quantum Benchmarking program.
• It is positioned as the only hardware-agnostic quantum software company to have demonstrated leadership across all three layers of the Generalized Quantum Stack (Use-Case and Utility Benchmark Evaluation, Algorithm Development and Benchmarking, Resource Estimation and Execution).
• The company's differentiation is stated to derive from hardware agnosticism, comprehensive stack coverage, a proprietary IP portfolio of over 60 patents, scientific leadership, and AI integration, positioning it as a leading pure-play publicly traded quantum software company.

Management Changes

Corporate Governance

Legal Proceedings

• 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.

Related Party Transactions

• Sumit Kapur (CEO) purchased a secured convertible promissory note ($100,000 principal) and warrants (1,250,000 shares) on June 12, 2025.
• Clark Golestani (Director) purchased a secured convertible promissory note ($100,000 principal) and warrants (1,250,000 shares) on June 12, 2025.
• William M. Brown (Director; Former President and CFO) converted $156,349.32 of notes into 34,744 shares of common stock.
• William E. Klitgaard (Director) converted $568,568.92 of notes into 126,348 shares of common stock.
• William J. Sandbrook (Former Co-CEO and Chairman) converted $1,095,159.13 of notes into 243,368 shares of common stock.
• Michael M. Andretti (Former Co-CEO and Director) converted $1,669,153.87 of notes into 370,923 shares of common stock.
• Gerald D. Putnam (Former Director) converted $259,452.06 of notes into 57,656 shares of common stock.
• Peter C. Brown (Brother of William M. Brown) converted $104,233.92 of notes into 23,163 shares of common stock.
• Comcast Ventures LP (5% Beneficial Owner) converted $573,994.74 of notes into 127,554 shares of common stock.
• Prelude Fund LP (5% Beneficial Owner) converted $573,994.74 of notes into 127,554 shares of common stock.
• Notes Payable Related Parties (Sponsor, William J. Sandbrook, Michael M. Andretti, William M. Brown) totaling approximately $2.5 million (principal and interest) were deferred and are due in monthly installments.
• Andretti Global (an affiliate of AAC) had enterprise solution subscription and sponsorship agreements with Legacy Zapata, generating $1.3 million in revenue in 2024 and $1.7 million in 2023. Sponsorship expense was $2.8 million in both 2024 and 2023, with $5.5 million in accounts payable as of December 31, 2024.
• A sponsorship agreement with Andretti Autosport 1, LLC (an affiliate of Andretti Global) for $1.0 million expired on December 31, 2024.
• An Order Form under the enterprise solution subscription agreement with Andretti Global for $1.0 million was terminated following the Operational Cessation.
• The sponsor paid $25,000 for 7,187,500 Class B ordinary shares on January 28, 2021.
• The sponsor and sponsor co-investor purchased 13,550,000 private placement warrants for $1.00 per warrant.
• An Administrative Services Agreement with an affiliate of the sponsor entails a payment of $15,000 per month for office space, administrative, and support services.

Stakeholder Impact

• Shareholders face significant dilution from the conversion and exercise of numerous outstanding derivative securities, potential stock price volatility, and the limited trading market on the OTC Expert Market. The 'going concern' doubt also poses a substantial risk to their investment.
• Employees experienced mass terminations in late 2024 due to operational cessation, with re-hiring plans contingent on future capital raises. The specialized nature of the industry creates intense competition for qualified talent.
• Creditors are impacted by debt restructuring, conversion of obligations into equity, and forbearance agreements. There is a risk of non-payment if the company fails to secure sufficient additional capital.
• Customers may experience delays or disruptions in service and solution delivery if the company's operations are not fully re-established and scaled. Their ability to achieve quantum advantage depends on the company's successful innovation and execution.
• Management and Directors face increased responsibilities and scrutiny as a public company, including the remediation of material weaknesses in internal controls. Their compensation is increasingly tied to equity, aligning their interests with shareholders but also exposing them to market volatility.

Next Steps

• Continue efforts to negotiate and restructure outstanding obligations with creditors.
• Continue efforts to raise additional capital to repay vendors and creditors, rehire various personnel, and fund working capital and growth needs.
• Expand headcount considerably upon raising future financing, including the re-hiring of certain employees who were with the Company prior to its restructuring.
• Continually enhance the functionality, performance, and usability of software and services to meet evolving customer demands.
• Formalize and communicate internal controls policies and procedures, and further develop and document necessary policies and procedures regarding internal control over financial reporting.
• Increase personnel resources and technical accounting expertise within the accounting function to replace outside service providers.

Key Dates

Recommendation

The company faces severe financial distress, evidenced by significant operating losses ($38.1 million in 2024), a substantial accumulated deficit ($127.7 million), and the temporary suspension of operations in late 2024 due to insufficient capital. Its common stock has been delisted from Nasdaq and now trades on the illiquid OTC Expert Market as a penny stock, indicating extreme risk and lack of investor confidence. While the strategic pivot to quantum computing and initial restructuring efforts are positive, the company explicitly states a 'going concern' doubt and requires at least $5 million in additional capital for the next 12 months, with no assurance of securing it on favorable terms. Furthermore, substantial future dilution is expected from the conversion of existing derivative securities (over 200 million shares). The identified material weaknesses in internal controls add to the operational risk. Given the high uncertainty, precarious financial position, and significant dilution risk, a seasoned investor would likely recommend selling or avoiding this stock.

Keywords

quantum computing, quantum software, hybrid quantum-classical, AI, generative AI, SEC filing, 10-K, financial reporting, debt restructuring, capital raise, operational suspension, Nasdaq delisting, OTC Expert Market, intellectual property, cybersecurity, risk management, corporate governance