10-Q: Zapata Quantum Faces Going Concern, Restructures After Nasdaq Delisting

Sentiment:

Quarterly Report 9 December 2025 4:49 PM

📋All filings for Zapata Computing Holdings INC

Zapata Quantum, Inc. reported significant losses and a cessation of operations in late 2024, leading to a Nasdaq delisting, but is undertaking restructuring and capital raising efforts in 2025 to restart its core quantum computing business.

Delay expectedThe payment terms for advisory services were amended in March 2024, deferring a $1.0 million fee to be paid by issuance of a Senior Secured Note and the remaining $0.3 million in six monthly installments starting May 15, 2024. The company ceased making these payments in Q4 2024 due to operational cessation, with the remaining balance converted into common stock in Q2 2025.An engagement letter with a third party for capital markets advisory services had a non-refundable cash fee of $1.8 million, payable in monthly installments. The company ceased making these payments in Q4 2024 due to operational cessation, with the remaining balance converted into common stock in Q2 and Q4 2025.The Forward Purchase Agreement's Valuation Date was accelerated to October 8, 2024, by Sandia due to a VWAP Trigger Event, leading to an obligation of $2.436 million which was settled in June 2025 through common stock issuance, indicating a forced early settlement due to poor stock performance.

Capital raiseIn 2025, the company raised an aggregate of $3.0 million through the issuance of Convertible Promissory Notes and Warrants.In 2025, the company raised $1.5 million through the sale of Series A Convertible Preferred Stock.The company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC in December 2023 to purchase up to $75.0 million of common stock over 36 months, and a 2024 Purchase Agreement in August 2024 for up to $10.0 million over 24 months.The company is pursuing all available options for funding, including seeking public or private investments and funding through the sale of equity or debt securities.

Worse than expectedThe company reported a net loss of $34.414 million for the nine months ended September 30, 2024, a significant increase from the $15.139 million loss in the prior year, indicating a worsening financial performance.Revenue decreased by 11% for the nine months ended September 30, 2024, compared to the prior year, showing a decline in core business activity.The company ceased operations in October 2024 and was delisted from Nasdaq, which are severe negative operational and market events.The company explicitly states 'substantial doubt about the Company’s ability to continue as a going concern' and 'does not have sufficient capital to meet its working capital needs for the 12 months following the date we file this Report'.

Summary

Zapata Quantum, Inc. (formerly Zapata Computing Holdings Inc.) completed a business combination with Andretti Acquisition Corp. (AAC) on March 28, 2024, becoming a Delaware corporation and listing on Nasdaq under ZPTA.
The company approved a cessation of operations on October 7, 2024, due to insufficient financial resources, leading to the termination of most employees and the suspension of trading from Nasdaq on October 25, 2024.
Management has since focused on restructuring activities and capital raising to restart certain aspects of its core quantum computing application development business.
For the nine months ended September 30, 2024, the company reported a net loss of $34.414 million, a significant increase from the $15.139 million net loss for the same period in 2023.
Revenue for the nine months ended September 30, 2024, decreased to $3.876 million from $4.354 million in the prior year period, primarily due to a related-party revenue reversal and completion of legacy contracts.
Operating expenses increased by 40% to $20.703 million for the nine months ended September 30, 2024, driven by higher sales and marketing and general and administrative costs associated with the public company transition.
As of September 30, 2024, the company had cash and cash equivalents of $3.102 million and an accumulated deficit of $123.940 million.
In 2025, the company raised $3.0 million through Convertible Promissory Notes and $1.5 million through Series A Convertible Preferred Stock, and settled approximately $11.8 million of liabilities by issuing common stock.
The company identified material weaknesses in its internal controls over financial reporting, including insufficient segregation of duties, lack of written documentation, and reliance on outside accounting firms.
An event of default occurred under the Senior Secured Promissory Notes in Q4 2024, but the company has since repaid approximately $1 million of principal and accrued interest, curing the default as of November 30, 2025.

Sentiment

Score: 2

Explanation: The company is in severe financial distress, having ceased operations, been delisted from Nasdaq, and facing substantial doubt about its going concern. While restructuring and capital raising efforts are underway, their success is uncertain, and the company continues to incur significant losses and negative cash flows. The positive net income in Q3 2024 was due to a non-recurring fair value adjustment, not operational improvement.

Positives

The company generated a net income of $3.482 million for the three months ended September 30, 2024, primarily due to a gain from the change in fair value of the forward purchase agreement derivative liability.
Successful completion of debt restructuring and capital raising activities in 2025, including $3.0 million from Convertible Notes and $1.5 million from Series A Convertible Preferred Stock.
Settled approximately $11.8 million of accounts payable, accrued expenses, and notes payable to related parties through the issuance of common stock in 2025, improving the capital structure.
Repaid a Senior Secured Note of $1.343 million in June 2025, reducing outstanding debt.
Cured the event of default on Senior Secured Promissory Notes as of November 30, 2025, by repaying approximately $1 million of principal and accrued interest.

Negatives

The company incurred a significant net loss of $34.414 million for the nine months ended September 30, 2024, a 127% increase compared to the $15.139 million loss in the prior year period.
Revenue decreased by 11% to $3.876 million for the nine months ended September 30, 2024, primarily due to a related-party revenue reversal and completion of legacy contracts.
Gross profit declined by 6% to $635 thousand for the nine months ended September 30, 2024.
Operating expenses increased substantially, with general and administrative expenses rising 108% to $10.415 million and sales and marketing expenses increasing 27% to $5.910 million for the nine months ended September 30, 2024.
The company had an accumulated deficit of $123.940 million as of September 30, 2024, indicating a history of losses.
Net cash used in operating activities was $15.099 million for the nine months ended September 30, 2024, reflecting continued negative cash flow from operations.
The company approved a cessation of operations on October 7, 2024, due to insufficient financial resources, leading to the termination of most employees.
Trading of the company's common stock and warrants was suspended and removed from Nasdaq on October 25, 2024.
The company does not have sufficient capital to meet its working capital needs for the 12 months following the filing date (December 9, 2025).
A related-party revenue of $302 thousand was reversed in Q3 2024, as it was determined to be uncollectible.

Risks

Substantial doubt about the company's ability to continue as a going concern due to significant losses, negative cash flows, and the need for additional capital.
Dependence on the ability to raise capital through future equity or debt financing and generate profits from operations.
No assurance that the company will be able to continue raising the additional capital necessary to continue operations and execute on its business plan, especially for restarting core business activities.
Risks associated with the successful development and scaling of quantum computing application development solutions.
Competition from substitute products and services from larger companies.
Challenges in protecting proprietary technology and potential patent litigation.
Dependence on key individuals for the success of the business.
Risks associated with changes in information technology.
Potential for regulatory changes impacting quantum computing, artificial intelligence, and data privacy.
Risk that software and technology infrastructure on which the company depends fail to perform as designed or intended.
Material weaknesses in internal control over financial reporting, including insufficient segregation of duties, lack of written documentation, and reliance on outside accounting firms, which could lead to material misstatements.
The company's common stock and warrants were suspended and removed from Nasdaq, impacting liquidity and investor confidence.
The company's long-term lease agreements expired prior to and as of September 30, 2024, and a month-to-month lease in Canada was terminated due to operational cessation, indicating potential instability in physical operations.

Future Outlook

Following a strategic realignment in 2025, the company plans to refocus on its core quantum mission, delivering subscription-based solutions for quantum and hybrid quantum-classical computing applications. These planned operations are contingent on raising sufficient capital. The company expects to continue incurring losses and negative cash flows for the foreseeable future as it expands its penetration of the quantum computing application development market. Management believes it will be able to raise additional funds through equity or debt financing, but there is no assurance of this, which raises substantial doubt about its ability to continue as a going concern.

Management Comments

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 Company’s 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 Company’s business plan.
We have incurred significant losses and negative cash flows from operations since the inception of Legacy Zapata in November 2017 and expects to continue to incur losses and negative cash flows for the foreseeable future as we expand our penetration of the quantum computing application development solutions market.

Industry Context

Zapata Quantum operates in the nascent but rapidly evolving quantum computing industry, aiming to address the software bottleneck limiting quantum adoption. Its strategic realignment to focus on core quantum software solutions (Orquestra, Bench-Q, Quantum Graph, Quantum Pilot) positions it as a pure-play hardware-agnostic provider. The company's prior exploration into generative AI solutions, inspired by quantum physics, indicates an attempt to leverage broader AI trends, but the recent refocus suggests a more concentrated effort on its foundational quantum mission. The industry is characterized by high R&D costs, significant capital requirements, and competition from larger companies, which Zapata Quantum's financial struggles and operational cessation underscore.

Comparison to Industry Standards

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
President and Chief Executive Officer, Board Member	Christopher Savoie	NA	2024-10-07	Resigned with immediate effect.
Chief Executive Officer, Principal Executive Officer	NA	Sumit Kapur	2024-10-07	Appointed by the board of directors.
Chief Technology Officer	Yudong Cao	NA	2024-10-16	Continued to serve through October 16, 2024, then assisted on a part-time basis.
Board Members	William M. Brown, Dana Jones, Jeffrey Huber, William Klitgaard, Raj Ratnakar	NA	2024-10-15	Resigned from their positions and all committees.
Board Member, Chair of the Audit Committee	NA	William Klitgaard	2025-10-08	Appointed to the Board and named sole member of the Audit Committee.
Chairman of the Board of Directors	NA	Clark Golestani	2025-10-09	Appointed by the company.
Board Member	NA	Sumit Kapur	2025-10-09	Appointed to the Board of Directors.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Internal Control Weaknesses	Identified material weaknesses in internal control over financial reporting, including insufficient segregation of duties, lack of sufficient written documentation of internal controls, and substantial reliance on an outside accounting firm for financial reporting. Human resources, processes, and systems are not sufficient for timely and accurate financial statements.	2024-09-30	These weaknesses raise a reasonable possibility that a material misstatement of financial statements will not be prevented or detected on a timely basis, impacting financial reporting reliability.
Auditor Appointment	The Board of Directors appointed Weinberg & Company, P.A. as its independent registered public accounting firm.	2025-07-17	A change in auditors can signal a fresh start or a need for different expertise, potentially improving financial oversight and compliance.
Board Committee Structure	William Klitgaard was appointed as the sole member of the Audit Committee.	2025-10-08	Having a sole member on the Audit Committee may raise concerns about the breadth of oversight and independence, though it could be a temporary measure during restructuring.

Legal Proceedings

No material legal proceedings are currently known to be pending or threatened against the company or its subsidiaries.

Related Party Transactions

Legacy Zapata had a sponsorship agreement and an enterprise solution subscription agreement with Andretti Global (an AAC affiliate) since February 2022, expiring December 31, 2024. For the nine months ended September 30, 2024, $1.300 million in revenue was recorded from the enterprise solution agreement, and $2.087 million in sales and marketing expense was recorded for the sponsorship agreement. A $302 thousand related-party revenue reversal occurred in Q3 2024 due to uncollectibility.
Legacy Zapata had a managed service agreement with Andretti Global from October 2022, which expired January 3, 2024. No revenue was recorded for this agreement in the nine months ended September 30, 2024.
As of September 30, 2024, $1.567 million was due from related parties (Andretti Global affiliates) and $5.170 million was payable to related parties (Andretti Global affiliates) in connection with these agreements.
On March 28, 2024, Legacy Zapata entered into an additional sponsorship agreement with Andretti Autosport 1, LLC (an Andretti Global affiliate) for $1.0 million, expiring December 31, 2024.
On March 28, 2024, an Order Form was entered under the February 2022 enterprise solution subscription agreement with Andretti Global, where Andretti Global agreed to pay $1.0 million, subject to Zapata's payment of the sponsorship fee to Andretti Autosport 1, LLC.
Notes Payable Related Parties totaling $1.9 million were outstanding as of September 30, 2024, bearing interest at 4.5% per annum. These notes were amended on March 28, 2024, to defer payment and become due in monthly installments over twelve months.
A former member of Legacy Zapata's Board of Directors provided consulting services, with fees of $46 thousand remitted for the nine months ended September 30, 2024 and 2023.

Stakeholder Impact

**Shareholders:** Significant dilution from recent capital raises and debt conversions into common stock. The operational cessation and Nasdaq delisting have severely impacted share value and liquidity. Future value is highly dependent on successful restructuring and capital raising.
**Employees:** Most employees were terminated on October 9, 2024, due to the operational cessation, indicating a severe negative impact on employment.
**Creditors:** Some creditors have converted liabilities into common stock, while others have entered into forbearance agreements, indicating a mixed impact with some debt being restructured or extinguished, but also potential for delayed payments.
**Customers:** The operational cessation and subsequent restructuring may lead to disruptions in service or product delivery, potentially impacting customer relationships and future revenue generation.
**Suppliers:** The company ceased making payments on certain advisory and other agreements in Q4 2024, indicating negative impacts on suppliers, though some balances were later converted to equity.

Next Steps

Continue restructuring activities aimed at restarting certain aspects of its core business.
Continue efforts to raise additional capital through future equity or debt financing to fund operations and meet obligations.
Implement remediation plans for identified material weaknesses in internal controls over financial reporting, including engaging internal control consultants and increasing personnel resources.
File a registration statement covering shares issuable to Lincoln Park under the 2024 Purchase Agreement.
Recognize unrecognized compensation cost related to unvested stock options over a remaining weighted-average period of 2.9 years.
Recognize unrecognized compensation cost related to unvested restricted common stock over a remaining weighted-average period of 1.3 years.
Continue to make payments on the remaining obligations from advisory and other agreements, or convert them into common stock as planned in 2025.

Key Dates

Date	Description
2021-01-20	Andretti Acquisition Corp. (AAC) incorporated as a Cayman Islands exempted company.
2022-02-10	Legacy Zapata entered into a sponsorship agreement and an enterprise solution subscription agreement with Andretti Global.
2022-10-01	Legacy Zapata entered into a managed service agreement with Andretti Global.
2023-02-10	Company terminated its exclusive patent license agreement by written notice to the licensor.
2023-06-13	Legacy Zapata entered into a senior note purchase agreement and issued senior promissory notes to certain lenders.
2023-06-28	Legacy Zapata approved the appointment of a new member of its Board of Directors.
2023-07-02	Legacy Zapata issued a Senior Note with a principal amount of $500 to a new board member.
2023-09-06	Business Combination Agreement entered into by AAC, Tigre Merger Sub, Inc. and Legacy Zapata.
2023-09-13	Company entered into an agreement with a third party for advisory services in connection with the Merger.
2023-12-19	AAC and the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC.
2023-12-22	Aggregate principal amount of Senior Notes plus accrued interest exchanged for Senior Secured Notes.
2024-01-01	Company adopted ASU 2020-06, simplifying accounting for certain financial instruments.
2024-02-09	Company entered into an engagement letter with an additional third party for capital markets advisory services. AAC entered into a marketing services agreement with a third party.
2024-02-12	Company entered into a collaborative research agreement with a third party and a Quantum Cloud Service Agreement with another third party.
2024-03-01	Legacy Zapata issued additional Senior Secured Notes between January and March 2024.
2024-03-25	Company entered into a Forward Purchase Agreement with Sandia Investment Management LP.
2024-03-26	Company entered into a fee letter for legal services rendered in connection with the Merger.
2024-03-27	Company agreed to issue a Senior Secured Note to a third party for additional capital markets advisory services.
2024-03-28	AAC consummated a business combination with Legacy Zapata (the Merger). AAC domesticated to Delaware and changed its name to Zapata Computing Holdings Inc. Senior Secured Notes converted into common stock. Legacy Zapata entered into a sponsorship agreement with Andretti Autosport 1, LLC and an Order Form under the enterprise solution subscription agreement with Andretti Global.
2024-03-29	An employee exercised an option following the Merger, and the Company issued 30,822 shares of common stock.
2024-04-01	Company's common stock (ZPTA) and warrants (ZPTAW) commenced trading on the Nasdaq Global Market and Nasdaq Capital Market, respectively.
2024-04-11	Company issued 712,025 shares of common stock to Lincoln Park as Commitment Shares.
2024-04-12	Company filed the Lincoln Park Registration Statement.
2024-04-18	The Lincoln Park Registration Statement was declared effective.
2024-04-30	Sandia partially exercised the optional early termination right under the Forward Purchase Agreement, terminating 250,000 shares.
2024-05-01	Monthly payments for advisory services commenced.
2024-05-07	Company entered into a month-to-month lease in Canada.
2024-06-01	Canada month-to-month lease commenced.
2024-06-27	Quantum Cloud Service Agreement amended to extend services through November 2028.
2024-07-19	Company entered into a six-month lease for office space in the United States.
2024-08-13	Company entered into the 2024 Purchase Agreement with Lincoln Park and issued 500,000 shares of common stock as a Commitment Fee.
2024-09-03	Company filed the 2024 Lincoln Park Registration Statement.
2024-09-03	US office lease commenced.
2024-09-09	The 2024 Lincoln Park Registration Statement was declared effective.
2024-09-30	End of the quarterly reporting period. Company's lease expired.
2024-10-07	Christopher Savoie resigned as President, CEO, and director. Sumit Kapur appointed CEO. Board approved cessation of operations and termination of most employees.
2024-10-08	Sandia accelerated the Valuation Date for the Forward Purchase Agreement. William Klitgaard appointed to the Board of Directors and named sole member of the Audit Committee.
2024-10-09	Most employees terminated. Yudong Cao continued as CTO through October 16, 2024. Clark Golestani appointed Chairman of the Board. Sumit Kapur appointed to the Board of Directors.
2024-10-15	William M. Brown, Dana Jones, Jeffrey Huber, William Klitgaard and Raj Ratnakar resigned from the board of directors and all committees.
2024-10-16	Yudong Cao's role as CTO ended, continued to assist on a part-time basis.
2024-10-22	Company entered into a forbearance agreement with a third-party creditor related to outstanding invoices totaling approximately $3.168 million.
2024-10-23	Company filed the Certificate of Designations of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock.
2024-10-25	Restricted cash was released. Trading of common stock and warrants suspended and removed from Nasdaq.
2024-11-04	Company filed a Certificate of Amendment to increase authorized Series C Convertible Preferred Stock to 23,000 shares.
2024-11-30	As of this date, the issuer had 162,580,506 shares of common stock outstanding and approximately $2.1 million in cash.
2024-12-31	Andretti Global sponsorship agreement and Andretti Autosport 1, LLC sponsorship agreement expire.
2025-01-01	Annual increase in shares reserved under the 2024 Plan begins. Subsequent offerings under the 2024 ESPP generally begin.
2025-01-31	Senior secured note and related accrued interest assigned from its original note holder to a third-party.
2025-06-01	Company entered into securities purchase agreements for Convertible Promissory Notes and Warrants for total gross proceeds of $3.0 million. Company entered into conversion agreements with certain creditors to settle approximately $11.8 million of liabilities. Company used approximately $1.343 million of proceeds from Convertible Promissory Notes to repay a Senior Secured Note.
2025-06-12	Company entered into a consent agreement with one of its two Secured Senior Notes lenders.
2025-06-13	Board of Directors approved and granted restricted common stock to Sumit Kapur and Clark Golestani.
2025-07-17	Board of Directors appointed Weinberg & Company, P.A. as its independent registered public accounting firm.
2025-07-18	Company filed the Certificate of Designations of Preferences, Rights and Limitations of the Series C Convertible Preferred Stock.
2025-08-01	Company granted 8,000,000 options each to two advisors. Company entered into a warrant purchase agreement with an accredited investor for August 2025 Warrants.
2025-08-21	Company changed its name to Zapata Quantum, Inc.
2025-08-27	Company granted an additional 8,500,000 options to two other advisors.
2025-10-01	Company sold and issued 15,000 shares of Series A Convertible Preferred Stock for total gross proceeds of $1.5 million between October and November 2025.
2025-12-09	Date of filing of this quarterly report on Form 10-Q.
2026-03-28	Original Valuation Date for the Forward Purchase Agreement.
2026-12-15	Maturity date for the Senior Secured Notes.
2027-02-28	Original end date for payments under the Quantum Cloud Service Agreement.
2028-11-30	Extended end date for services under the Quantum Cloud Service Agreement.

Recommendation

strong sell

Zapata Quantum, Inc. is in a precarious financial position, evidenced by its operational cessation, Nasdaq delisting, and explicit 'substantial doubt about its ability to continue as a going concern.' While the company is attempting a restructuring and has raised some capital in 2025, these efforts are highly speculative and face significant execution risks. The company continues to incur substantial losses and negative cash flows, and its ability to secure sufficient future funding is uncertain. The identified material weaknesses in internal controls further compound the risk. For a seasoned investor, the current situation presents an extremely high-risk profile with a very low probability of recovery to previous market valuations. The delisting severely limits liquidity, and any future value is contingent on a successful, yet unassured, turnaround. Therefore, a 'strong sell' is warranted to minimize further potential losses.

Keywords

Quantum Computing, Software, AI, SEC Filing, 10-Q, Financial Results, Going Concern, Restructuring, Capital Raise, Nasdaq Delisting, Zapata Quantum, ZPTA, Financial Distress, Debt Restructuring, Operational Cessation

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