UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 FORM 10-K

 (Mark One)

 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 001-40615

 (Exact name of registrant as specified in its charter)

 Delaware

 82-4533053

 (State or other jurisdiction of

incorporation or organization)

 (I.R.S Employer

Identification No.)

 5 Marine View Plaza, Suite 214, Hoboken, NJ

 07030

 (Address of principal executive offices)

 (Zip Code)

 Registrant's telephone number, including area code (703) 436-2121

 Securities registered pursuant to Section 12(b) of the Act:

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock, par value $.0001

 QUBT

 The Nasdaq Stock Market LLC

 Securities registered pursuant to Section 12(g)
of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

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

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 registrant was
required to submit and post such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 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 standards provided pursuant to Section 13(a) of the Exchange Act.

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.

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).

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 stock held by non-affiliates of the registrant as of June 30, 2024 was $ 34,743,396
based on the closing price of $0.50 per share of Quantum Computing Inc. common stock on the Nasdaq Stock Market LLC on that date.

 As
of March 18, 2025, there were 137,244,545 shares of the registrant's common stock issued and outstanding.

 DOCUMENTS
INCORPORATED BY REFERENCE

 None

 ITEM 1.

 BUSINESS.

 ITEM 1A.

 RISK FACTORS.

 ITEM 1B.

 UNRESOLVED STAFF COMMENTS.

 ITEM 1C.

 CYBERSECURITY.

 ITEM 2.

 PROPERTIES.

 ITEM 3.

 LEGAL PROCEEDINGS.

 ITEM 4.

 MINE SAFETY DISCLOSURES.

 ITEM 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 ITEM 6.

 [RESERVED]

 ITEM 7.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 ITEM 7A.

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 ITEM 8.

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 ITEM 9.

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 ITEM 9A.

 CONTROLS AND PROCEDURES.

 ITEM 9B.

 OTHER INFORMATION.

 ITEM 9C

 DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

 ITEM 10.

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 ITEM 11.

 EXECUTIVE COMPENSATION.

 ITEM 12.

 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 ITEM 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 ITEM 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

 ITEM 15.

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 Introductory Comments

 Throughout this Annual Report on Form 10-K, the
terms "we," "us," "our," "the Company," "our Company," "QCi" and
"QUBT," refer to Quantum Computing Inc., a Delaware corporation, and unless the context indicates otherwise, also includes
our wholly-owned subsidiaries.

 i

 FORWARD-LOOKING STATEMENTS

 This Annual Report on Form 10-K contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, forward-looking statements are
identified by terms such as "may," "will," "should," "could," "would," "expects,"
"plans," "anticipates," "believes," "estimates," "projects," "predicts,"
"potential" and similar expressions intended to identify forward-looking statements.

 These forward-looking statements are only predictions
and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied
by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date
of this Annual Report on Form 10-K. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K to reflect any change
in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors
that could cause or contribute to differences in our future financial and other results include those discussed in the risk factors set
forth in Part I, Item 1A of this Annual Report on Form 10-K as well as those discussed elsewhere in this Annual Report on Form 10-K. We
qualify all of our forward-looking statements by these cautionary statements.

 ITEM 1. BUSINESS.

 The High-Performance Computing Landscape

 There is a large and growing demand for ever-increasing
computational performance in information processing and data storage. The recent emergence of artificial intelligence, large language
models, and machine learning algorithms has added to the need for efficient processing of vast volumes of data. Classical computers that
use silicon microprocessors are understood to have performance limitations in solving certain classes of computational problems, in particular,
optimization problems. Solving large optimization problems requires complex calculations that cannot currently be performed in a reasonable
amount of time using classical computing systems for problem sizes relevant to many industrial and real-world applications.

 There is a growing belief among computer science experts that quantum
computing, which uses quantum mechanics to solve problems faster than traditional computers, may offer a potential solution to the hard
limits now being approached by classical computers. In addition to new computational methodologies using quantum mechanics, there is a
corresponding emergence of new materials in microprocessors that may be able to overcome some of the limitations of the silicon based
processors used in classical computers. One promising area is in the use of photonics, which uses particles of light for computation.
We believe that these emerging approaches will create an opportunity for new materials and methods that can meet the growing demand for
scalable performance and power efficiency. While it is difficult to determine the date that quantum computers will begin to have practical
relevance, we believe that quantum computers with gradually increasing performance will be introduced by multiple vendors over the next
five years.

 The Company

 Quantum Computing Inc. is an American company
utilizing integrated photonics and non-linear quantum optics to develop and deliver machines for quantum computing, reservoir computing,
and remote sensing, imaging and cybersecurity applications. Our vision is to lead the revolution in photonics and quantum computing with
scalable, accessible, and affordable solutions for real-world problems. QCi's products are designed to operate at room temperature
and at very low power levels compared to other quantum systems currently available in the market, such as superconducting, ion-trap, or
annealing architectures. Our acquisition of QPhoton, Inc. (the "QPhoton Merger") in June 2022, enabled us to offer the aforementioned
products, integrated with the Company's software platform, Qatalyst, that existed before the QPhoton Merger.

 QCi's proprietary core technology rests in our ability to condition,
manipulate, and measure single photons (particles of light). Specifically, our integrated photonics approach exploits the non-linear capabilities
of photons (our "Core Photonics Technology"). Our Entropy Quantum Computer ("EQC") is a quantum application of
our Core Photonics Technology, designed to solve complex optimization problems. EQC is based on a patent-pending methodology that utilizes
the energy in the environment to drive controlled feedback through energy loss in a photonic circuit architecture. The EQC's use
of the environment as an integral part of the system is in sharp contrast to competing quantum approaches, including the aforementioned
superconducting, trapped-ion, and annealing architectures, which seek to establish stable quantum states by the complete elimination of
environmental effects. As a result, the EQC consumes less power than these competing methods and operates at room temperature making it
compatible with an ordinary server room environment. We anticipate that our EQC will enable us to develop and produce multiple generations
of quantum machines with increasing computational power, scalability, and speed.

 Our longer-term product development plan is to
migrate product designs based on discrete components, including EQC's current design, to a set of optical integrated circuits built
on wafers using a crystalline material called lithium niobate ("Thin Film Lithium Niobate" or "TFLN"). The Company
believes that TFLN is an excellent material for optical integrated circuit design, given its advantageous optical properties (both linear
and non-linear) and its compatibility with silicon-based semiconductor fabrication methods. The Company is completing the buildout of
a state-of-the-art TFLN chip manufacturing facility in a leased space within Arizona State University's Research Park in Tempe,
Arizona (the "AZ Chips Facility").

 In addition to our EQC technology, we have leveraged
QCi's core photonics technology to demonstrate powerful quantum sensing use cases in LIDAR (light detection and ranging) (a technology
that uses pulsed laser light to measure distances to objects by calculating the time it takes for the reflected light to return), reservoir
computing (a form of neural network that can be used in machine learning applications and quantum cyber authentication (a method for highly
secure communication within a network). Several of these technologies are in the early stages of commercialization and several are available
to customers through our research & development offerings.

 Our Strategy

 QCi's strategy is to provide a range of
accessible and affordable quantum machines to commercial and government markets, supported by professional services through our "Quantum
Solutions" offering. Our proprietary technology is central to our strategy because we believe that it enables us to leverage the
advantages of size, weight, power, and cost over competing cryogenic products. We further differentiate ourselves in the market by offering,
in addition to cloud-based access to our quantum computers, on-premises installation of our EQC product, which is rack-mountable and compatible
with standard server room infrastructure and requires no special cooling, shielding, or power considerations.

 Further, our EQC development plan to gradually
replace discrete optical components with photonic integrated circuits will provide us the ability to fabricate and sell a range of custom
lithium niobate chips for use in our own product lines as well as TFLN Optical Chips, as defined below, for sale into existing commercial
markets for optical devices.

 Market Opportunity

 The Company believes that quantum solutions have
the potential to bring significant and increasing advances in the fields of medicine, engineering, autonomous vehicles, energy management,
and cybersecurity and that the demand for quantum computing in these market sectors will likely outpace and outperform the general-purpose
universal computing market in the near- to mid-term and into the foreseeable future. We believe that our core photonics technology applications
offer practical, cost-effective solutions that can materially advance the adoption of quantum machines across several market segments
including:

 1.
 Quantum
computing, including quantum optimization computing

 2.
 Reservoir
computing, including edge hardware devices

 3.
 Remote
sensing and imaging, including LiDAR and quantum photonic vibrometry

 4.
 Cybersecurity,
including authentication

 While the current quantum computing market comprises
a fraction of the broader high-performance computing market, we anticipate that quantum computers will unlock new applications that are
unlikely to be addressable by existing high-performance computers comprised of leveraging classical processing units. Estimates of the
size of the global high-performance computing industry vary, but according to Grand View Research, the high-performance computing market
was valued at $39.1 billion in 2019 and is expected to reach a value of $53.6 billion by 2027, see Grand View Research - High Performance
Computing Market Size Worth $53.6 Billion By 2027,
According to a report from Allied Market Research, the global enterprise quantum computing market size was valued at $1.3 billion in 2020
and is projected to reach $18.3 billion by 2030, growing at a compound annual growth rate of 29.7% from 2021 to 2030, according to a published
report on the enterprise quantum computing market at  (Information
contained on, or that can be accessed through, these websites is not incorporated by reference in this Annual Report, and you should not
consider information on these websites to be part of this Annual Report).

 As an early participant in this rapidly growing
market, we believe we are well-positioned to capture a meaningful amount of this growth. We also believe that there is further potential
upside from quantum computing and technology more broadly opening new markets not included in traditional high-performance computing market
size estimates.

 Additionally, we believe that our foundry services offering will address
the growing TFLN market and photonic integrated circuit markets. A recent Market Research Reports: Document ID: LPI08232779;
Published August 8, 2023 " Thin Film Lithium Niobate Market Forecast 2023 – 2029," indicates a significant
potential market growth for TFLN devices. The study covers use applications and segments that forecast the global TFLN electro-optical
modulator market, valued at $190.4 million in 2022, to grow an estimated $1,931.3 million by 2029 - a compound annual growth rate of 39
percent. The report further describes how such increase in demand is expected to be principally driven by the material advantages described
above. Specifically, TFLN electro-optical modulators have the advantages of large bandwidth, low power consumption, and small size. Further,
Mordor Intelligence published a market report, " Photonic Integrated Circuit Market Size & Share Analysis - Growth Trends
& Forecasts (2024 - 2029)" forecasts that the photonic integrated circuit (PIC) market, currently valued at $15.1 billion,
will grow at a compound annual growth rate of 20.5% to $38.4 billion in 2029. We believe that this suggests significant potential demand
for QCi's products and services.

 Products and Products in Development

 The Company believes it is well-positioned in
the marketplace due to its Core Photonics Technology in integrated photonics that allows QCi to offer a suite of quantum machines to the
market today with a robust technology roadmap for the future. The QPhoton Merger substantially broadened the Company's technology
portfolio and enabled us to develop a group of closely related products to EQC, based on our underlying Core Photonics Technology.

 TFLN Optical Chips

 We believe that TFLN optical integrated circuits
("TFLN Optical Chips") will ultimately provide the greatest scalability and performance advantages for quantum information
processing, sensing, and imaging applications. While the Company is developing proprietary chip designs to for TFLN Optical Chips for
exclusive use in our products for the aforementioned applications, the Company's foundry services offering at our AZ Chips Facility
will make available a range of custom TFLN chips (custom single photon detectors) for sale into existing commercial markets, including
optical devices such as electro-optical modulators, periodically poled devices for frequency conversion and micro ring resonator cavities.

 Entropy Quantum Computer

 QCi launched a new EQC device during the first
quarter of 2024 (Dirac-3) and plans to release a series of additional EQC products in the coming years that build and expand upon the
same analog architecture. This planned evolution of technology and product enhancements will involve improving the size and capacity of
the EQC machines, as well as speed, scalability, and performance fidelity. The EQC is available both as a cloud-based subscription service,
similar to other quantum machines, as well as an affordable on-premises solution.

 EQC is a full-stack system, incorporating QCi's
custom user interface software Qatalyst, which allows users to avoid the complexity of software development kits ("SDKs")
at the circuit level and has evolved from QCi's primary SaaS offering to the software that powers our offerings. Operating on EQC,
Qatalyst enables developers to create and execute quantum-ready applications using application programming interfaces. Users can then
use these same interfaces on conventional computers to achieve optimization performance advantages using our cloud-based solution.

 Reservoir Computer

 Launched in June 2023, QCi's first reservoir
computing product is an edge device that used an integrated circuit that can be reprogrammed after manufacturing and optimized for recurrent
neural network applications. An "edge device" allows the user to process, measure, and analyze data locally (at the user's
device) as opposed to over a network where data must be sent over the internet or through some cloud service. QCi's Reservoir Computer
("RC") is a standalone device that can be plugged into a local computer or server without having to connect over the internet.
We believe that the RC's hardware-based approach to reservoir computing has advantages over more traditional software approaches,
including significantly faster processing speeds, 80% - 95% less energy consumption, portability (size of power bank), affordability,
and requiring significantly shorter training time. Our benchmarking analyses further show that the RC is capable of delivering superior
performance in time-dependent tasks, such as chaotic time series prediction, unstructured financial model prediction, natural language
processing, and weather forecasting. To date, the market for reservoir computing has been limited due to computing cost and technical
implementation complexities, which we designed the RC to address. We anticipate that future generations of the RC will introduce greater
speed of performance and scalability, which will enable the RC to participate in large language model training and other applications.
While technology challenges remain in scaling this technology, this is one of our focus areas to gain a significant share in the artificial
intelligence / machine learning hardware market.

 LiDAR and Quantum Photonic Vibrometer

 QCi's LiDAR uses patented methodologies
that leverage the selective use of spatial-temporal modes to maximize the signal-to-noise ratio of weak information signals in a high-noise
background. This technology allows QCi machines to see through dense fog and provide image fidelity at great distances with very high
resolution in difficult environments such as snow, ice, and water. The practical benefits on payload and signal-to-noise enhancement can
be used to produce LiDAR machines that are greatly enhanced in their ability to measure at improved resolution and distances from aircraft,
drones, and even satellites.

 Launched July 2023, QCi's
Quantum Photonic Vibrometer is a proprietary, powerful instrument for remote vibration detection, sensing, and inspection.
We believe that this device offers significant advancements in sensitivity, speed, and resolution, capable of discerning for the first
time, highly obscured and non-line-of-sight objects. The Quantum Photonic Vibrometer measures the vibration frequency of a remote
target by utilizing fast-gated single photon counting to directly detect returning photons whose wavefunctions are dynamically modulated
as they are reflected off the target. By counting photons at a megahertz rate, important properties such as material composition and mechanical
integrity can be determined within seconds and, depending on detection distance, with microwatt to milliwatt optical power. Working
at an eye-safe wavelength, the system can accurately characterize the vibration spectra of solid or liquid targets with vibration amplitude
as small as 100 nanometers.

 Quantum Networks and Quantum Authentication

 QCi has developed a prototype system to address
one of the major challenges in cybersecurity, the authentication of users on a network, which is currently facilitated by the distribution
of "private keys" by a trusted third party. This approach is inherently insecure as keys are bundled and travel with the encrypted
data, making it susceptible to harvest-and-decrypt-later vulnerability. QCi has developed a quantum authentication technology and methodology
that eliminates the need for trust in third-party involvement in key distribution. Our approach uses a combination of a high-powered laser,
and a patented detection methodology deeply rooted in the fundamental principles of quantum mechanics, resulting in what we believe will
be an unbreakable basis for private network communication.

 Competition

 The quantum computing industry is highly competitive
and rapidly evolving and will likely remain so for the foreseeable future. As this industry continues to grow and mature, we expect a
continued influx of new competitors, products, hardware advances, and concepts to emerge that can dramatically transform the industry
and our business. Due to the high price point of quantum computing hardware today, novel business models may emerge to adapt to customer
preferences in the high-performance computing industry. Our ability to evolve and adapt rapidly over an extended period of time will be
critical in remaining competitive. We perform a broad range of research and development efforts to identify and position for the changing
demands of future customers and users, industry trends, and competitive forces.

 According to research conducted by The Quantum
Insider, there are over 700 companies and approximately 400 university academic groups working in various aspects of quantum technology,
with approximately 400 of these having a pure-play focus on quantum computing.

 These entities range in size from diversified
global companies with significant research and development resources such as IBM, Google, Intel, Microsoft, Quantinuum (formerly Honeywell)
and Amazon to recent market entrants such as D-Wave Quantum, Rigetti Computing, IonQ, PsiQuantum, Xanadu and Infleqtion (formerly ColdQuanta),
as well as smaller privately funded development stage companies whose narrower product focuses may allow them to be more effective in
deploying resources towards a specific industry demand. In addition, we face competition from large research organizations funded by sovereign
nations such as China, Russia, Canada, Australia, and the United Kingdom, as well as the European Union, and we believe that additional
countries will invest in quantum computing in the future. We will continue to face competition from the existing high-performance computing
industry using classical (non-quantum) computers.

 We believe that competition in this market segment
will intensify. Many of our competitors may have longer operating histories, significantly greater financial, technical, product
development, and marketing resources, and greater name recognition than we do. Our competitors could use these resources to market
or develop products or services that are more effective or less costly than any or all of our products or services.

 Intellectual Property

 Our intellectual property consists of patents,
trademarks, and trade secrets. Our trade secrets consist of product formulas, research and development, and unpatentable know-how, all
of which we seek to protect, in part, by confidentiality agreements. To protect our intellectual property, we rely on a combination of
laws and regulations, as well as contractual restrictions. Federal trademark law protects our registered trademarks. We also rely on the
protection of laws regarding unregistered copyrights for certain content we create and trade secret laws to protect our proprietary technology.
To further protect our intellectual property, we enter into confidentiality agreements with our executive officers, employees, consultants
and directors.

 1 Seskir, Z.C., Korkmaz,
R. & Aydinoglu, A.U., The landscape of the quantum start-up ecosystem, EPJ Quantum Technol. 9, 27 (2022), at

 Trademarks

 The Company has three registered trademarks, "QPhoton,"
"QGraph" and "Qatalyst." The Company has no pending trademark applications.

 Patents

 The Company has two granted United States patents.

 Country

 Serial
 No.

 Filing
 Date

 Patent
 No.

 Issue
 Date

 Title

 Status

 Anticipated
 Expiration
 Date

 USA

 17/560,816

 12/23/2021

 11,436,519

 09/06/2022

 Machine Learning Mapping for Quantum Processing Units

 12/23/2041

 USA

 17/810,198

 06/30/2022

 12,008,436

 06/11/2024

 Machine Learning Mapping for Quantum Processing Units

 06/30/2042

 Exclusive License Agreement

 QCi has an exclusive license to seven patents
issued to the Stevens Institute of Technology, pursuant to the license agreement dated December 17, 2020 by and among QPhoton and The
Trustees of The Stevens Institute of Technology (the "Licensor"). QPhoton agreed to reimburse the Licensor for patent prosecution
expenses in the amount of $125,041 and deliver to the Licensor an annual report and quarterly report pursuant to the terms of the license
agreement. As consideration for the license and other rights granted under the license agreement, QPhoton agreed to pay the Licensor (i)
$35,000 upon full execution of the license agreement, (ii) $28,000 each annual anniversary of the effective date of the license agreement,
(iii) 9% of the membership units of QPhoton and (iv) a royalty of 3.5% of the net sales price of each licensed product sold or license
by QPhoton and any affiliate and sublicensee. On June 15, 2022, the Licensor agreed to assign the license agreement to QCi upon consummation
of the QPhoton Merger.

 Government Regulation and Incentives

 Export Regulation

 The U.S. government issued regulations in 2024
placing some restrictions on exporting quantum computing products under the Export Administration Act. Those exports will now require
a license. We are reviewing the new regulations but do not believe they will have a substantial adverse impact on the Company. The U.S.
government has also placed some export restrictions on certain types of cryogenic quantum computing equipment as well as some optical
materials. At this time, however, we do not expect there to be significant export limitations on the Company's products.

 Incentives

 The Creating Helpful Incentives to Produce Semiconductors
Act of 2022 (the "CHIPS Act") was designed to address the global computer chip shortage and attract chip manufacturing,
and innovation to the United States. The CHIPS Act is a $280 billion spending package aimed at encouraging the growth of the US-based
semiconductor industry. To assist in securing the domestic chip supply, the CHIPS Act provides $52.7 billion for American semiconductor
research, development, manufacturing, and workforce development. The Company is pursuing opportunities under the CHIPS Act but there is
no guarantee that it will actually receive any funding thereunder.

 Corporate Information

 Our executive offices are located at 5 Marine
View Plaza, Suite 214, Hoboken, NJ 07030, and our telephone number is (703) 436-2121. Our corporate website is www.quantumcomputinginc.com.
Information appearing on our website is not part of this Annual Report.

 Employees

 As of December 31, 2024, the Company had 41 full-time
employees and nine part-time contract staff, 34 of whom are focused on product development. Our employees are not part of a collective
bargaining agreement and we believe that our relationships with our employees and contract workers are good. The Company offers a health
and welfare benefit plan to current full-time employees that provides medical, dental, vision, life, and disability benefits. The Company
also offers a 401(k) retirement savings plan and participation in the stock option plan to all full-time employees. There are no unpaid
liabilities under the Company's benefit plans, and the Company has no obligation to pay for post-retirement health and medical costs
of retired employees.

 ITEM 1A. RISK FACTORS.

 This Annual Report on Form 10-K contains forward-looking
statements that involve risks and uncertainties, such as statements of our objectives, expectations and intentions. The cautionary statements
made in this Annual Report on Form 10-K should be read as applicable to all forward-looking statements wherever they appear in this report.
Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include
those discussed below, as well as those discussed elsewhere in this Annual Report on Form 10-K.

 Risks Related to Our Financial Condition and
Status as an Early-Stage Company

 We are in our early stages and have a limited
operating history, which makes it difficult to forecast the future results of our operations.

 QCi was formed in 2018 and merged with QPhoton
in June 2022. As a result of our limited operating history, our ability to accurately forecast our future results of operations is limited
and subject to a number of uncertainties, including our ability to plan for and model future growth. Our ability to generate revenues
will largely be dependent on our ability to develop and produce a suite of products based on quantum photonic technologies, with steadily
increasing capabilities. Our technical roadmap may not be realized as quickly as hoped, or even at all. As a result, our historical results
should not be considered indicative of our future performance. Further, in future periods, our growth could slow or decline for a number
of reasons, including but not limited to slowing demand for our quantum products and services, increased competition, changes to technology,
our inability to scale up our technology, a decrease in the growth of the market, or our failure, for any reason, to continue to take
advantage of growth opportunities. Furthermore, the accompanying consolidated financial statements have been prepared assuming that we
will continue as a going concern. We have not emerged from the development stage and may be unable to raise further equity. These factors,
among others, that raise substantial doubt about our ability to continue as a going concern may be partially or fully mitigated by the
net proceeds received by the Company in conjunction with the sale of 8,163,266 shares of Common Stock (the "PIPE Shares")
issued to the investors pursuant to certain Securities Purchase Agreements dated January 7, 2025. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty or from the sale of the PIPE Shares.

 We have also encountered, and will continue to
encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding
these risks and uncertainties and our future growth are incorrect or change, or if we do not address these risks successfully, our operating
and financial results could differ materially from our expectations, and our business could suffer. Our success as a business ultimately
relies upon fundamental research and development breakthroughs in the coming years. There is no certainty these research and development
milestones will be achieved as quickly as hoped, or even at all.

 We have a history of operating losses and
expect to incur significant expenses and continuing losses for the foreseeable future.

 We incurred net losses each year since 2018 and
we believe that we will continue to incur operating and net losses each quarter until at least the time we begin generating significant
revenue from our products and services, which may never occur. Even with significant production, we may never become profitable from the
sale of our products and services.

 We expect to incur significantly higher losses
in future periods as we continue to incur significant expenses in connection with the design, development and manufacturing of our quantum
computers and other products and services, and as we expand our research and development activities, invest in manufacturing capabilities,
build up inventories of components for our quantum computers and other products, increase our sales and marketing activities, develop
our infrastructure, and increase our general and administrative functions to support our growing operations. We may find that these efforts
are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
If we are unable to achieve and/or sustain profitability, or if we are unable to achieve the growth that we expect from these investments,
it could have a material adverse effect on our business, financial condition or results of operations. Our business model is unproven
and may never allow us to cover our costs.

 We have a history
of accumulated deficits, recurring losses and negative cash flows from operating activities. We may be unable to achieve or sustain profitability
or remain a going concern.

 We are an early-stage
company and we have not generated any material revenues to offset our operating expenses. We incurred negative cash flows from operating
activities and recurring net losses in fiscal years 2024 and 2023. As of December 31, 2024 and 2023, our accumulated deficit was $200.5
million and $131.9 million, respectively. If we are unable to generate significant revenues in future periods, we will not be able to
achieve profitability, and if we should achieve, to maintain profitability. Beyond this, we may incur significant losses in the future
for a number of reasons including other risks described in this document, and we may encounter unforeseen expenses, difficulties, complications,
delays and other unknown events. Accordingly, we may not ever achieve profitability.

 We may not be able to scale our business
quickly enough to meet customer and market demand, which could adversely affect our financial condition and results of operations or cause
us to fail to execute on our business strategies.

 In order to grow our business, we will need to
continually evolve and scale our business and operations to meet customer and market demand. Quantum computing technology has never been
sold at large-scale commercial levels. Evolving and scaling our business and operations places increased demands on our management as
well as our financial and operational resources to:

 attract
 new customers and grow our customer base;

 maintain
 and increase the rates at which existing customers use our platform, sell additional products
 and services to our existing customers, and reduce customer churn;

 invest
 in our platform and product offerings;

 effectively
 manage organizational change;

 accelerate
 and/or refocus research and development activities;

 expand
 manufacturing and supply chain capacity;

 increase
 sales and marketing efforts;

 broaden
 customer support and services capabilities;

 maintain
 or increase operational efficiencies;

 implement
 appropriate operational and financial systems; and

 establish
 and maintain effective financial controls and procedures.

 Commercial traction of quantum computing technology
may never occur. We have no experience in producing large quantities of our products and are currently constructing advanced generations
of our products. There are significant technological challenges associated with developing, producing, marketing and selling products
and services in the high-performance computing industry, including our products and services, and we may not be able to resolve all of
the difficulties that may arise in a timely or cost-effective manner, or at all. We may not be able to cost effectively manage production
at a scale or quality consistent with customer demand in a timely or economical manner.

 Our ability to scale is dependent also upon components
that we must source from multiple countries, including China. Shortages or supply interruptions in any of these components will adversely
impact our ability to generate revenues. Recent tensions between the United States and China have resulted in the U.S.'s imposition
of a series of tariffs and other restrictions on imports from China [and sourcing from certain Chinese persons or entities, as well as
other business restrictions. Further, deterioration in the political relationship between the U.S. and China result in loss of access
to suppliers of key components with little or no warning, which would adversely affect our ability to develop and manufacture our products.
We are actively searching for alternative suppliers outside of China, but there is no assurance that we can locate comparable components
at reasonable prices within the desired timeframes.

 If we commence large-scale development of our
quantum computers and other products, they may contain defects in design and manufacture that may cause them to not perform as expected
or that may require repair and design changes. Our quantum computers are inherently complex and incorporate technology and components
that may note have been used for computing products and that may contain defects and errors, particularly when first introduced. We have
a limited frame of reference from which to evaluate the long-term performance of our computers. There can be no assurance that we will
be able to detect and fix any defects in our quantum computers in a timely manner that does not disrupt our services to our customers.
If our technology fails to perform as expected, customers may seek out a competitor or turn away from quantum computing entirely, each
of which could adversely affect our sales and brand and could adversely affect our business, prospects and results of operations. If defects
in our technology lead to erroneous outputs, third parties relying on those outputs may draw from them erroneous conclusions, creating
a risk that we will be liable to those third parties.

 If we cannot evolve and scale our business and
operations effectively, we may not be able to execute our business strategies in a cost-effective manner and our business, financial condition,
profitability and results of operations could be adversely affected.

 Even if the market in which we compete achieves
its anticipated growth levels, our business could fail to grow at similar rates, if at all.

 Our success will depend upon our ability to expand,
scale our operations, and increase our sales and support capability. Even if the market in which we compete meets the size estimates and
growth forecasted, our business could fail to grow at similar rates, if at all.

 Our growth is dependent upon our ability to successfully
expand our products and services, retain customers, bring in new customers and retain critical talent. Unforeseen issues associated with
scaling up and constructing quantum computing technology at commercially viable levels could negatively impact our business, financial
condition and results of operations.

 Our growth is dependent upon our ability to successfully
market and sell our quantum computers and quantum computing products and services. We do not have experience with the large-scale production
and sale of quantum computing technology. Our growth and long-term success will depend upon the development of our sales and production
capabilities.

 Moreover, because of our advanced technology,
our customers will require particular support and service functions, some of which are not currently available and may never be available.
If we experience delays in adding such support capacity or servicing our customers efficiently, or experience unforeseen issues with the
reliability of our technology, we could overburden our servicing and support capabilities. Similarly, increasing the number of our products
and services would require us to rapidly increase the availability of these services. Failure to adequately support and service our customers
may inhibit our growth and ability to expand.

 There is no assurance that we will be able to
ramp our business to meet our sales, manufacturing, installation, servicing and quantum computing targets, that expected growth levels
will prove accurate or that the pace of growth will continue at the current rate. Failure of QCi to grow at rates similar to that of the
broader quantum computing industry may adversely affect our operating results and ability to effectively compete within the industry.

 We may not manage growth effectively.

 Our failure to manage growth effectively could
harm our business, results of operations and financial condition. We anticipate that a period of significant expansion will be required
to address potential growth. This expansion will place a significant strain on our management, operational and financial resources. Expansion
will require significant cash investments and management resources and there is no guarantee that they will generate additional sales
of our products or services, or that we will be able to avoid cost overruns or be able to hire additional personnel to support us. In
addition, we will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation
and servicing of our products. To manage the growth of our operations and personnel, we must establish and maintain appropriate and scalable
operational and financial systems, procedures and controls and a qualified finance, administrative and operations staff. We may be unable
to acquire the necessary capabilities and personnel required to manage growth or to identify, manage and exploit potential strategic relationships
and market opportunities.

 We will require a significant amount of
cash for expenditures as we invest in ongoing research and development and business operations and may need additional capital sooner
than planned to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot
be sure that additional financing will be available. If we are unable to raise additional funding when needed, we may be required to delay,
limit or substantially reduce our development efforts.

 Our business and future plans for expansion are
capital-intensive, and we will require additional capital for equipment and facilities for hardware manufacturing and optical chip fabrication.
The specific timing of cash inflows and outflows may fluctuate substantially from period to period. We will require a significant amount
of cash for expenditures as we invest in ongoing research and development and business operations. Our operating plan may change because
of factors currently unknown, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings
or other sources. Such financings may result in dilution to stockholders, issuance of securities with priority as to liquidation and dividend
and other rights more favorable than those of our common stock, imposition of debt covenants and repayment obligations or other restrictions
that may adversely affect our business. Any funds we raise may not be sufficient to enable us to continue to implement our long-term business
strategy. Further, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and disruptions
to and volatility in the credit and financial markets in the United States and worldwide resulting from disruptions in access to bank
deposits or lending commitments due to bank failures, the ongoing war between Russia and Ukraine and the related sanctions imposed against
Russia, and the war between Israel and Hamas, the state of the military conflict between Israel and Hezbollah and the related risk of
a larger regional conflict. In addition, we may seek additional capital due to favorable market conditions or strategic considerations
even if we believe that we have sufficient funds for current or future operating plans.

 There can be no assurance that financing will
be available to us on favorable terms, or at all. The inability to obtain financing when needed may make it more difficult for us to operate
our business or implement our growth plans and we may be required to delay, limit or substantially reduce our quantum computing development
efforts. Our ability to raise additional capital through the sale of securities could be significantly impacted by the resale of our securities
by holders of our securities, which could result in a significant decline in the trading price of our securities and potentially hinder
our ability to raise capital on terms that are acceptable to us or at all.

 Failure to identify errors in the quantitative
models we utilize to manage our business could adversely impact product performance and client relationships.

 We employ various quantitative models to manage
our business. Any errors in the underlying models or model assumptions could have unanticipated and adverse consequences on our business
and reputation.

 Our ability to use net operating loss carryforwards
and other tax attributes may be limited in connection with the QPhoton Merger or other ownership changes.

 We have incurred losses during our history, do
not expect to become profitable in the near future and may never achieve profitability. To the extent that we continue to generate taxable
losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all.

 Under current law, U.S. federal net operating
loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility
of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income, or less.
It is uncertain if and to what extent various states will conform to the current law.

 In addition, our net operating loss carryforwards
are subject to review and possible adjustment by the IRS, and state tax authorities. Under Sections 382 and 383 of the Internal Revenue
Code of 1986, as amended (the "Code"), our federal net operating loss carryforwards and other tax attributes will become subject
to an annual limitation in the event of certain cumulative changes in the ownership of the Company. An "ownership change"
pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company's
stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
Similar rules apply under state tax laws. Our ability to utilize our federal net operating loss carryforwards and other tax attributes
to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection
with the QPhoton Merger or other transactions. Similar rules may apply under state tax laws.

 If we earn taxable income, such limitations could
result in increased future income tax liability and our future cash flows could be adversely affected. We have recorded a valuation allowance
related to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the
future benefits of those assets.

 Risks Related to Our Business and Industry

 We have not produced any of our products
at volume and we face significant barriers in our attempts to develop and manufacture our products, including the need to invent and develop
new technology. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail.

 Producing quantum computers, sensors and networks
is a difficult undertaking. There are significant manufacturing and engineering challenges that we must overcome. We face significant
challenges in completing development of our quantum computers and other products, and in producing quantum computers in sufficient volumes.
Even if we complete development and achieve volume production of our products, if the cost, accuracy, performance characteristics or other
specifications fall short of our expectations, our business, financial condition and results of operations would be adversely affected.

 The performance capabilities of our products will
depend on the development and production of TFLN Optical Chips to achieve scale, performance and cost. There is significant development
and intellectual property risk in the specification, design and development of TFLN Optical Chips and our plans could be impacted by lack
of funding, competition or even unknown core technology factors intrinsic to the work. This would limit the ability of QCi to scale its
growth to expected levels over the longer term and the Company could lose momentum.

 We may be unable
to reduce the production cost sufficiently, which may prevent us from pricing our quantum systems competitively.

 Our revenue projections are dependent on the cost
per manufactured system decreasing over the next several years as our quantum computers advance. These cost projections are based on economies
of scale due to demand for our products and services, technological innovation and negotiations with third-party parts suppliers. If these
cost savings do not materialize, the production cost may be higher than projected, making our quantum computing products and services
less competitive than those offered by our competitors, which could have a material adverse effect on our business, financial condition
or results of operations.

 If our products and services fail to deliver
customer value to a broader range of customers than classical approaches, our business, financial condition and future prospects may be
harmed.

 "Quantum advantage" refers to the
moment when a quantum computer can compute faster than existing classical computers, while quantum supremacy is achieved once quantum
computers are powerful enough to complete calculations that traditional supercomputers cannot perform at all. Broad quantum advantage
is when quantum advantage is seen in many applications and developers prefer quantum computers to a traditional computer. No current quantum
computers have reached a broad quantum advantage and they may never reach such advantage. While achieving a broad quantum advantage will
be critical to the success of any quantum computing company, including us, it would not necessarily lead to commercial viability of the
technology that accomplished such advantage, nor would it mean that such system could outperform classical computers in tasks other than
the one used to determine a quantum advantage. As quantum computing technology continues to mature, broad quantum advantage, and quantum
supremacy, may take years or decades to be realized, if it ever is. If we cannot develop quantum computers that have quantum advantage,
customers may not continue to purchase our products and services. If other companies' quantum computers reach a broad quantum advantage
prior to the time we reach such capabilities, it could lead to a loss of customers and the inability to secure new customers. If any of
these events occur, it could have a material adverse effect on our business, prospects, financial condition or results of operations.

 The quantum computing industry is competitive
and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects
among current and future partners and customers.

 Since the QPhoton Merger, our business strategy
has broadened to include the manufacture of several lines of hardware in addition to the underlying software. As a result, we now operate
in markets that are rapidly evolving and highly competitive. We expect competition to intensify as the marketplace continues to mature
and new technologies and competitors enter. Our current competitors include:

 large,
 well-established technology companies that generally compete across our products, including
 IBM, Quantinuum, Google, Microsoft and Amazon;

 large
 research organizations funded by sovereign nations such as China, Russia, Canada, Australia and the United Kingdom, and those in
 the European Union; additional countries may decide to fund quantum computing programs in the future;

 less-established
 public and private companies with competing technology, including IonQ, Rigetti Computing, PsiQuantum, Xanadu and D-Wave Quantum,
 and companies located outside the United States; and

 new
 or emerging entrants seeking to develop competing technologies.

 We compete based on various factors, including
technology, price, performance, multi-cloud availability, brand recognition and reputation, customer support and differentiated capabilities,
including ease of administration and use, scalability and reliability, data governance and security. Many of our competitors have substantially
greater brand recognition, customer relationships, and financial, technical and other resources than we do, including an experienced sales
force and sophisticated supply chain management. They may be able to respond more effectively than us to new or changing opportunities,
technologies, standards, customer requirements and buying practices. In addition, many countries are focused on developing quantum computing
solutions either in the private or public sector and may subsidize quantum computers, which may make it difficult for us to compete. Many
of these competitors do not face the same challenges we do in growing our business. In addition, other competitors might be able to compete
with us by bundling their other products in a way that does not allow us to offer a competitive solution.

 Further, the industry might recognize the intrinsic
advantages of optical integrated circuits in information processing applications and our competitors could shift to a more direct competitive
approach using similar technologies, even with strong intellectual property protection.

 Additionally, we must be able to achieve our objectives
in a timely manner such that we don't lose ground to competitors, including competing technologies. Because there are a large number
of market participants, including certain sovereign nations, focused on developing quantum computing technology, we must dedicate significant
resources to achieving any technical objectives on the timelines established by our management team. Any failure to achieve objectives
in a timely manner could adversely affect our business, operating results and financial condition.

 For all of these reasons, competition may negatively
impact our ability to maintain and grow consumption of our platform or put downward pressure on our prices and gross margins, any of which
could materially harm our reputation, business, results of operations, and financial condition.

 We rely on access to high-performance third-party
classical computing through public clouds and high-performance computing centers to deliver quantum products and services to customers.
We may not be able to maintain connectivity with these resources, which could make it harder for us to reach customers or deliver products
and services in a cost-effective manner.

 Our products and services may from time to time
incorporate high-performance classical computing through public clouds to provide services to end users and our partners. These public
cloud services are predominantly on Amazon Web Services at the present time.

 Any material change in our contractual and other
business relationships with Amazon Web Services or other cloud providers could result in reduced use of our products and services, increased
expenses, including service credit obligations, and harm our brand and reputation, any of which could have a material adverse effect on
our business, financial condition and results of operations.

 Further, if our contractual and other business
relationships with our partners are terminated or suspended, either by our partner or by us, or suffer a material change to which we are
unable to adapt, such as the elimination of services or features on which we depend, we would be unable to provide our quantum computing
products and services business at the same scale and would experience significant delays and incur additional expense in transitioning
customers to a different public cloud provider.

 We depend on certain suppliers to source
products. Failure to maintain our relationship with any of these suppliers, or a failure to replace any of these suppliers, could have
a material adverse effect on our business, financial position, results of operations and cash flows.

 We buy our products and supplies from companies
that manufacture and source products from the United States and abroad. Our ability to develop and maintain relationships with qualified
suppliers who can satisfy our standards for quality and delivery in a timely and efficient manner is a significant challenge. Any failure
to maintain our relationship with any of our key suppliers, or a failure to replace any such supplier that is lost, could have a material
adverse effect on our business, financial position, results of operations and cash flows.

 We may be required to replace a supplier if their
products do not meet our quality or safety standards, or if the United States government imposes restrictions on trade with certain countries,
such as China. In addition, our suppliers could discontinue selling products at any time for reasons that may or may not be in our control
or the suppliers' control, including shortages of raw materials, environmental and social supply chain issues, public health emergencies,
labor disputes or weather conditions. Disruptions in transportation lines or geopolitical conditions including the ongoing war between
Russia and Ukraine, the war between Israel and Hamas, the state of the military conflict between Israel and Hezbollah or an invasion of
Taiwan by China, may also cause global supply chain issues that affect us or our suppliers. While we generally have multiple sources of
supply, we do rely on a single supplier for materials in some cases. The loss of, or substantial decrease in the availability of, products
from our suppliers, or the loss of a key supplier, temporarily or permanently, could result in a material shortage of products, which
could lead to price escalations that we may be unable to offset by our prices to our customers. When supply chain issues are later resolved
and prices return to normal levels, we may be required to reduce the prices at which we sell our products to our customers in order to
remain competitive. In addition, even where these risks do not materialize, we may incur costs as we prepare contingency plans to address
such risks. Our operating results and inventory levels could suffer if we are unable to promptly replace a supplier who is unwilling or
unable to satisfy our requirements with a supplier providing similar products. In addition, our suppliers' ability to deliver products
may also be affected by raw material and commodity cost volatility or financing constraints caused by credit market conditions, which
could materially and negatively impact our net sales and operating costs, at least until alternate sources of supply are arranged. Any
delay or unavailability of key products required for our development activities in a timely or cost-effective manner could delay or prevent
us from further developing our products and services on our expected timelines or at all and could materially harm our business.

 TFLN Optical Chips manufacturers and distributors
are concentrated primarily in China and other parts of East Asia, which is an area that is or may be subject to geopolitical uncertainty,
trade disputes and restrictions, environmental disasters, and other risks. Any disruption to the operations of these manufacturers or
distributors could cause significant delays in the production or shipment of our products and impact our financial condition.

 Our success also depends in part on the manufacturing
of TFLN Optical Chips. Unforeseen disruption of the manufacture of TFLN Optical Chips could be caused by a number of events, including
a maintenance outage, systems outage or other disruption, power or equipment failure, fires, floods, earthquakes or other natural disasters,
social unrest or terrorist activity, work stoppages, public health concerns (including pandemics), regulatory measures, or other operational
problems. Any disruption in the manufacture of TFLN Optical Chips resulting from such events could cause significant delays in the development
and production of our products.

 In addition, we may depend on third-party TFLN
Optical Chips manufacturing partners or distributors who may be affected by changes in governmental policies, taxation, rising inflation
or interest rates, social instability, geopolitical conflicts and tensions, and diplomatic and social developments which are outside of
our control.

 Furthermore, our industry generally relies on
a limited number of TFLN Optical Chips manufacturers whose operations tend to be concentrated in China and other parts of East Asia, which
makes us especially susceptible to adverse developments in these regions' economic and political conditions, particularly to the
extent that such developments create an unfavorable business environment that significantly affects our operations. Although the governments
of certain countries, including the United States, have taken actions to make their countries more attractive for chip manufacturing operations,
there can be no assurances that the current geographic concentration of chip manufacturing will be meaningfully changed in the near term
or at all.

 If any of these events, or other macroeconomic
trends, should cause a prolonged disruption of operations that impact our third-party TFLN Optical Chips manufacturing partners, they
may experience operational downtimes or have to operate at reduced capacities, which could have a material adverse effect on our business,
financial condition, and results of operations.

 In order to compete, we must attract, retain
and motivate key associates, and the failure to do so could have an adverse effect on our business, financial condition and results of
operations.

 We depend on our executive officers and management
team to run our business. As we develop new business models and new ways of working, we will need to develop suitable skill sets within
our organization. In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified
and skilled employees that have highly technical set of skills. The current market for such positions is highly competitive. Qualified
individuals are in high demand and we may incur significant costs to attract and retain them. Moreover, the loss of any of our senior
management or other key employees or our inability to recruit and develop capable managers could adversely affect our ability to execute
our business plan and we may be unable to find adequate replacements.

 Even if we are successful in developing
our products and executing our strategy, competitors in the industry may achieve technological breakthroughs that render our quantum computing
systems obsolete or inferior to other products.

 Our continued growth and success depend on our
ability to innovate and develop quantum computing technology in a timely manner and effectively market these products. Without timely
innovation and development, our quantum computing products and services could be rendered obsolete or less competitive by changing customer
preferences or because of the introduction of a competitor's newer technologies. We believe that many competing technologies will
require a technological breakthrough in one or more problems related to science, fundamental physics or manufacturing. While it is uncertain
whether such technological breakthroughs will occur in the next several years, that does not preclude the possibility that such technological
breakthroughs could eventually occur. Any technological breakthroughs that render our technology obsolete or inferior to other products
could have a material adverse effect on our business, financial condition or results of operations.

 The quantum computing industry is in its
early stages and volatile, and if it does not develop, if it develops slower than we anticipate, if it encounters negative publicity or
if our quantum computing products and services do not achieve commercial adoption, the growth of our business will be harmed.

 The nascent market for quantum computers is still
rapidly evolving, characterized by rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation
and industry standards, and changing customer demands and behaviors. Our success will depend to a substantial extent on the willingness
of our potential customers to use, and increase their utilization of, our products and services, as well as on our ability to demonstrate
the value of quantum computing to their respective organization, government agencies, and other purchasers of quantum computing offerings.
Negative publicity concerning our products and services or the quantum computing industry as a whole could limit market acceptance of
our offerings. If our clients and partners do not perceive the benefits of our products and services, or if they do not drive customer
engagement, then our market may not develop at all, or it may develop more slowly than we expect. Similarly, individual and industry concerns
or negative publicity regarding technophobic views in the context of quantum computing could limit market acceptance of our quantum computing
products and services. If any of these events occur, our business, prospects, financial condition and operating results could be harmed.

 In addition, our growth and future demand for
our products is highly dependent upon the adoption by developers and customers of quantum computers, as well as on our ability to demonstrate
the value of quantum computing to our customers. Delays in future generations of our quantum computers or technical failures at other
quantum computing companies could limit acceptance of our products and services. Negative publicity concerning our products and services
or the quantum computing industry as a whole could limit acceptance of our products and services. While we believe that quantum computing
will solve many large-scale problems, it is possible that such problems may never be solvable by quantum computing technology. If our
customers and partners do not see the benefits of our products and services, or if our products and services do not drive commercial sales,
then demand for our products and services may not develop at all, or it may develop slower than we expect. If any of these events occur,
it could have a material adverse effect on our business, financial condition and results of operations.

 We have experienced in the past and could
also suffer future disruptions, outages, defects and other performance and quality problems with our quantum computing products and services,
our production technology partners or with the public cloud, data centers and internet infrastructure on which we rely.

 Our business depends on our quantum computing
systems being available through the cloud with a high level of reliability. We have experienced, and may in the future further experience,
disruptions, outages, defects and other performance and quality problems with our systems. We have also experienced, and may in the future
experience, disruptions, outages, defects and other performance and quality problems with the public cloud and internet infrastructure
on which our systems rely. These problems can be caused by a variety of factors, including failed introductions of new functionality,
vulnerabilities and defects in proprietary and open- source software, hardware components, human error or misconduct, capacity constraints,
design limitations, denial of service attacks or other security-related incidents, foreign objects or debris, weather, construction, supply
chain events, or accidents and other force majeure. We do not have a contractual right with our public cloud providers that compensates
us for any losses due to availability interruptions in the public cloud.

 Any disruptions, outages, defects and other performance
and quality problems with our quantum computing system or with the public cloud, internet, and other infrastructure on which they rely
could result in reduced use of our systems, increased expenses, including service credit obligations, and harm to our brand and reputation,
any of which could have a material adverse effect on our business, financial condition and results of operations.

 Our future growth and success depend on
our ability to sell effectively to government entities and large enterprises.

 Our potential customers are likely to include
government agencies and large commercial enterprises. Therefore, our future success will depend on our ability to effectively sell our
products to such customers. Sales to these end-customers involve risks that may not be present (or that are present to a lesser extent)
with sales to non-governmental agencies or smaller customers. These risks include, but are not limited to, (i) increased purchasing power
and leverage held by such customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated risk
that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions. In addition, government
contracts generally include the ability of government agencies to terminate early which, if exercised, would result in a lower contract
value and lower than anticipated revenues. Such government contracts also may limit our ability to do business with foreign governments
or prevent us from selling our products in certain countries.

 Government agencies and large organizations often
undertake a significant evaluation process that results in a lengthy sales cycle. Our contracts with government agencies are typically
structured in phases, with each phase subject to satisfaction of certain conditions. As a result, the actual scope of work performed pursuant
to any such contracts, in addition to related contract revenue, could be less than total contract value. In addition, product purchases
by such organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and
other delays. Finally, these organizations typically have longer implementation cycles, require greater product functionality and scalability,
require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead
to a delay in revenue recognition and expect greater payment flexibility. All of these factors can add further risk to business conducted
with these potential customers and could lead to lower revenue results than originally anticipated.

 Additionally, changes in government spending could
negatively impact us. Our anticipated future revenues from the U.S. government are expected to result from contracts awarded under various
U.S. government programs. Cost cutting, including through consolidation and elimination of duplicative organizations, has become a major
initiative for within the U.S. government. Significant reduction in U.S. government spending could have adverse consequences on our prospects,
financial position, results of operations and business.

 Our quantum computing systems may not be
compatible with some or all industry-standard software and hardware in the future, which could harm our business.

 Since the QPhoton Merger, we have been focusing
more of our efforts on creating quantum computing hardware, in addition to refining the software development platform to access our hardware,
and application programing interfaces to access our systems. The industry is rapidly evolving, and customers have many choices for programming
languages, some of which may not be compatible with our own application programming interfaces. Our quantum computing development platform
is designed to be compatible with most major software languages. If a proprietary (not open source) software toolset became the standard
for quantum application development in the future by a competitor, however, usage of our hardware might be limited, which would have a
negative impact on the Company. Similarly, if a piece of hardware that we could not integrate with became a necessary component for quantum
computing (for instance, quantum networking), the result might have a negative impact on the Company.

 Cybersecurity risks and the failure to maintain
the integrity of data belonging to the Company could expose us to data loss, litigation and liability, and our reputation could be significantly
harmed.

 We may from time to time collect and retain large
volumes of data relating to our business and from our customers for business purposes, including for transactional and promotional purposes,
and our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data
is critical to our business. Maintaining compliance with the evolving regulations and requirements applicable to data security and information
privacy protection could be difficult and may increase our expenses. In addition, a penetrated or compromised data system or the intentional,
inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of data relating to our
company or our employees, independent distributors or preferred customers, which could harm our reputation, disrupt our operations, or
result in remedial and other costs, fines or lawsuits.

 Remote work has become
more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections,
computers and devices outside our premises or network, including working at home, while in transit and in public locations. In addition,
future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities' systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it
may be difficult to integrate companies into our information technology environment and security program.

 Computer malware, viruses, hacking, phishing
attacks and spamming could harm our business and results of operations.

 Computer malware, viruses, physical or electronic
break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data.
Computer malware, viruses, computer hacking and phishing attacks against business networks have become more prevalent and may occur on
our systems in the future.

 Any attempts by hackers to disrupt our internal
systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand. We could incur significant
expenses and losses related to direct attacks on our website or internal systems. Efforts to prevent hackers from entering our computer
systems are expensive to implement and may limit the functionality of our services. Though it is difficult to determine what, if any,
harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability
of our products and services and technical infrastructure may harm our reputation, brand and our ability to attract customers. Any significant
disruption to our website or internal computer systems could result in a loss of customers and could adversely affect our business and
results of operations.

 We have previously experienced, and may in the
future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes,
third-party service providers, human or software errors and capacity constraints. If our software application is unavailable when customers
attempt to access it or it does not load as quickly as they expect, customers may seek other services.

 Our quantum computer products rely on software
that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in
our software code may only be discovered after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code
after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time or difficultly
maintaining and improving the performance of our platform, particularly during peak usage times, could result in damage to our reputation
or brand, loss of revenues, or liability for damages, any of which could adversely affect our business and financial results.

 We expect to continue to make significant investments
to maintain and improve the availability of our cloud- based products and services and to enable rapid releases of new features and products.
To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology
and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.

 Unfavorable conditions in our industry or
the global economy could limit our ability to grow our business and negatively affect our results of operations.

 Our results of operations may vary based on the
impact of changes in our industry or the global economy on us or our customers and potential customers. Negative conditions in the general
economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial
and credit market fluctuations, inflation, international trade relations, tariffs, public health emergencies (such as the recent COVID-19
pandemic), political turmoil, natural catastrophes, warfare, and terrorist attacks on the United States or elsewhere, could cause a decrease
in business investments, including the progress on development of quantum technologies, and negatively affect the growth of our business.
In addition, in challenging economic times, our current or potential future customers may experience cash flow problems and as a result
may modify, delay or cancel plans to purchase our products and services. Additionally, if our customers are not successful in generating
sufficient revenue or are unable to secure financing, they may not be able to pay, or may delay payment of, amounts they owe. Moreover,
our key suppliers may reduce their output or become insolvent, thereby adversely impacting our ability to continue our research and development
activities or manufacture our products.

 Furthermore, uncertain economic conditions may
make it more difficult for us to raise funds through borrowings or sales of debt or equity securities. We cannot predict the timing, location,
strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.

 Government actions and regulations, such
as tariffs and trade protection measures, especially in China and the United States, may adversely impact our business, including our
ability to obtain products from our suppliers

 Government actions and regulations, such as tariffs
and trade protection measures, may limit our ability to obtain products from our suppliers or sell our products and services to customers.
Political challenges between the United States and countries in which our suppliers are located and changes to trade policies, including
tariff rates and customs duties, trade relations between the United States and those countries and other macroeconomic issues could adversely
impact our business. During the last few years, including under the new Presidential administration, the United States has imposed tariffs
on certain products imported into the United States from China and some other countries, and China and some other countries have imposed
tariffs on U.S. imports in response. The U.S. government continues to add additional entities, in China and elsewhere, to restricted party
lists impacting the ability of U.S. companies to provide products and technology and, in certain cases, services, to these entities and,
in some cases, to receive products, technology or services from these entities. The U.S. government also continues to increase end-use
restrictions on the provision of products, technology and services to China and other countries including end-uses related to advanced
computing. The new U.S. presidential administration has signaled its intention to use U.S. trade policy, including tariffs and other trade
restrictions, as an important foreign policy tool presenting uncertainty regarding the impact of future trade policies on our business.
As such, there is also a possibility of future tariffs, trade protection measures or other restrictions imposed on our products or on
our customers by the United States, China or other countries that could have a material adverse effect on our business. Our technology
could be deemed a matter of national security and, as such, our customer base could be tightly restricted. We also may accept government
grants that place restrictions on the business' ability to operate. Any such actions could impact our business operations and have
a material adverse effect on our business prospectus, financial condition and results of operations.

 In addition, the Chinese
government exercises significant control over China's economy through the allocation of resources, control of the incurrence and
payment of foreign currency-denominated obligations, setting of monetary policy and provision of preferential treatment to particular
industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or
our Chinese suppliers, which could harm our business through higher supply costs, reduced availability or both.

 Also, due to concerns
with the security of products and services from certain telecommunications equipment and services companies based in China, U.S. Congress
has enacted bans on the use of certain Chinese-origin components or systems either in items sold to the U.S. government or in the internal
networks of government contractors and subcontractors (even if those networks are not used for government-related projects). Further,
the Chinese government has responded to these U.S. actions by developing an unreliable entity list, which may limit the ability of companies
on the list to engage in business with Chinese counterparties.

 In June 2022, the import
restrictions contained in the Uyghur Forced Labor Prevention Act ("UFLPA") became effective. The UFLPA creates a rebuttable
presumption that any goods mined, produced or manufactured, wholly or in part, in the Xinjiang Uyghur Autonomous Region ("XUAR")
of China, or produced by a listed entity, were made with forced labor and would therefore not be entitled to entry at any U.S. port. Importers
may be required to present clear and convincing evidence that such goods are not made with forced labor. While we do not source items
from the XUAR or from listed parties, and we have increased our supply chain diligence, there is risk that our ability to import components
and products may be adversely affected by the UFLPA.

 Given the relatively
fluid regulatory environment in China and the United States and uncertainty regarding how the U.S. government or Chinese and other foreign
governments will act with respect to tariffs and international trade agreements and policies, a trade war, further governmental action
related to tariffs or international trade policies, or additional tax or other regulatory changes in the future could directly and adversely
impact our financial results and results of operations. We cannot predict what actions may ultimately be taken with respect to trade relations
between the United States and China or other countries, what products may be subject to such actions or what actions may be taken by the
other countries in retaliation. If we are unable to obtain or use components for inclusion in our products, if component prices increase
significantly or if we are unable to export or sell our products to any of our customers, our business, liquidity, financial condition
and/or results of operations would be materially and adversely affected.

 We may become subject to legal proceedings
that could have a material adverse impact on our financial position and results of operations.

 From time to time and in the ordinary course of
our business, we and certain of our subsidiaries may become involved in various legal proceedings. All such legal proceedings are inherently
unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming and disruptive to our operations
and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or
other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how
we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may
increase our exposure to litigation and regulatory investigations. In some cases, substantial noneconomic remedies or punitive damages
may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular
verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will
continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not
within the scope of the coverage in legal proceedings brought against us, it could have an adverse effect on our business, financial condition
and results of operations.

 We intend to continue exploring strategic
business acquisitions and other business combinations and transactions, which are subject to inherent risks.

 In order to expand our products and services and
grow our market and client base, we may continue to seek and complete strategic business acquisitions and other combinations, investments,
or partnerships that we believe are complementary to our business. The identification of suitable acquisition, strategic investment or
strategic partnership candidates can be costly and time consuming and can distract our management team from our current operations. The
completion of such transactions also have inherent risks that may have a material adverse effect on our business, financial condition,
operating results or prospects, including, but not limited to: (i) failure to successfully integrate the business and financial operations,
services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies and
procedures; (ii) diversion of management's attention from other business concerns; (iii) entry into markets in which we have little
or no direct prior experience; (iv)) failure to achieve projected synergies and performance targets; (v) loss of clients or key personnel;
(vi) incurrence of debt or assumption of known and unknown liabilities; (vii)) write-off of software development costs, goodwill, client
lists and amortization of expenses related to intangible assets; (viii) dilutive issuances of equity securities; and (ix) accounting deficiencies
that could arise in connection with, or as a result of, such transactions, including issues related to internal control over financial
reporting and the time and cost associated with remedying such deficiencies. Even if we successfully complete a strategic transaction,
we may not be able to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations
into our business or not be able to achieve projected results or support the amount of consideration paid for such acquired businesses
or invested in such transactions. In addition, we may incur unexpected costs, claims or liabilities during the strategic transaction or
that we assume from the acquired company, or we may discover adverse conditions post- acquisition for which we have limited or no recourse,
and we may not achieve the anticipated benefits of any strategic transaction.

 If we fail to establish and maintain an
effective system of internal control, we may not be able to report our financial results accurately or prevent fraud. Any inability to
report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common
stock.

 Effective internal control is necessary for us
to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not
be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation
with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial
condition, results of operations and access to capital.

 Unstable market and economic conditions
may have serious adverse consequences on our business, financial condition and share price.

 From time to time the global economy, including
credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, inflation rates higher than historical norms, higher interest rates, bank
failures and uncertainty about economic stability. Any volatility or disruptions in market and economic conditions may have adverse consequences
on us or the third parties on whom we rely. If the equity and credit markets were to deteriorate, including as a result of political unrest
or war, it may make any necessary financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.
While inflation rates have during the last 18 months or so have been more in line with historical levels, the higher than anticipated
inflation rates experienced in the wake of the COVID-19 pandemic did, and any similar higher than normal and/or unexpectedly high inflation
rates in the future, may adversely affect us by increasing our costs, including labor and employee benefit costs, and costs for equipment
and system components associated with system development. In addition, higher inflation could also increase our customers' operating
costs, which could result in reduced budgets for our customers and potentially less demand for our products and services. Any significant
increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations
and financial condition. Further, subsequent decreases in inflation and interest rates may not result in a reduction of costs.

 We are subject to governmental export and
import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability
if we are not in compliance with applicable laws.

 Our products, technology and services are subject
to U.S. export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations,
and various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Control.
U.S. export control and economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products, technologies,
and services to U.S. Government embargoed or sanctioned countries, governments, persons and entities. In addition, certain products and
technology may be subject to export licensing or approval requirements. Exports of our products and technology must be made in compliance
with export control and sanctions laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees
could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines that may
be imposed on us and responsible employees or managers and, in extreme cases, the incarceration of responsible employees or managers.

 In addition, various countries regulate the import
of certain encryption technology, including through import permit and license requirements and have enacted laws that could limit our
ability to distribute our products and technologies or could limit our end customers' ability to implement our services in those
countries. Changes in our products or technologies or changes in applicable export or import laws and regulations also may create delays
in the introduction and sale of our products and technologies in international markets or, in some cases, prevent the export or import
of our products and technologies to certain countries, governments or persons altogether. Any change in export or import laws and regulations,
shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted
by such laws and regulations could also result in decreased use of our products and services or in our decreased ability to export or
sell our products and services to existing or potential customers. Any decreased use of our products and services or limitation on our
ability to export or sell our products and services would likely adversely affect our business, financial condition and results of operations.

 We expect to incur significant costs in complying
with these regulations. Regulations related to quantum computing are currently evolving and we face risks associated with changes to these
regulations.

 We may become subject to product liability
claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

 We may become subject to product liability claims,
even those without merit, which could harm our business prospects, operating results, and financial condition. We may face inherent risk
of exposure to claims in the event that our products do not perform as expected or malfunction. A successful product liability claim against
us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity
about our quantum computers and business and inhibit or prevent commercialization of other future quantum computers, which would have
material adverse effects on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover
all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside
of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure
additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we
do face liability for our products and are forced to make a claim under our policy.

 Risks Related to Intellectual Property

 Any failure to obtain, maintain and protect
our intellectual property rights could impair our ability to protect and commercialize our proprietary products and technology and cause
us to lose our competitive advantage.

 Our success depends, in significant part, on our
ability to obtain, maintain, enforce and defend our intellectual property rights, including patents and trade secrets. We rely upon a
combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States
and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in
our proprietary technologies. In addition, we seek to protect our intellectual property rights through nondisclosure and invention assignment
agreements with our employees and consultants and through non-disclosure agreements with business partners and other third parties.

 However, we may not be able to prevent unauthorized
use of our intellectual property. Our trade secrets may also be compromised, which could cause us to lose our competitive advantage. Third
parties may attempt to copy or otherwise obtain, use or infringe our intellectual property.

 Monitoring and detecting unauthorized use of our
intellectual property is difficult and costly, and the steps we have taken or take in the future to prevent infringement or misappropriation
may not be sufficient. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert
management's attention, which could harm our business, results of operations, and financial condition. In addition, existing intellectual
property laws and contractual remedies may afford less protection than needed to safeguard our intellectual property portfolio, and third
parties may develop competitive offerings in a manner that leaves us with limited means to enforce our intellectual property rights against
them.

 Patent, copyright, trademark and trade secret
laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent
as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of
the United States and efforts to protect against the unauthorized use of our intellectual property rights, technology and other proprietary
rights may be more expensive and difficult outside of the United States.

 Failure to adequately protect our intellectual
property rights could result in our competitors using our intellectual property to offer products, potentially resulting in the loss of
some of our competitive advantage and a decrease in our revenue, which would adversely affect our business, financial condition and operating
results.

 Our inability to secure patent protection
or enforce our patent rights could have a material adverse effect on our ability to prevent others from commercializing similar products
or technology.

 The application and registration of patents involves
complex legal and factual questions. As a result, we cannot be certain that the patent applications that we file will result in patents
being issued or that our patents (including licensed patents) and any future patents that do issue will afford protection against competitors
with similar technology. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed
and are developing our products and services, and this may make it difficult for us to obtain certain patent coverage on our own. Any
of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable. Furthermore,
patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States,
and thus we cannot be certain that foreign patent applications related to issued U.S. patents will be issued.

 Even if our patent applications succeed, it is
still uncertain whether these patents (or any of the issued patents exclusively licensed to us) will be contested, circumvented, invalidated,
found to be unenforceable or limited in scope in the future. The rights granted under any issued patents may not provide us with meaningful
protection or competitive advantages. The intellectual property rights of others could bar us from licensing and exploiting any patents
that issue from our pending applications, and the claims under any patents that issue from our patent applications may not be broad enough
to prevent others from developing technologies that are similar or that achieve results similar to ours. In addition, patents issued to
us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of
which would increase costs and may adversely affect our business, prospects, financial condition and operating results.

 We may face patent infringement and other
intellectual property claims that could be costly to defend, result in injunctions and significant damage awards, or limit our ability
to use certain key technologies in the future, all of which could harm our business.

 Our success depends, in part, on our ability to
develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property
rights of third parties. However, we may not be aware that our products, services or technologies are infringing, misappropriating or
otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation
or violation.

 For example, there may be issued patents of which
we are unaware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future
products, services or technologies. Also, because patent applications can take years to issue and are often afforded confidentiality for
some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover
our current or future products, services or technologies. The strength of our defenses will depend on the rights asserted, the interpretation
of these rights, and our ability to invalidate the asserted rights. However, we could be unsuccessful in advancing non-infringement and/or
invalidity arguments in our defense.

 Although we carry general liability insurance,
our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.
We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our
business, financial condition or results of operations. Even if the claims do not result in litigation or are resolved in our favor, these
claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating
results. Further, there could be public announcements of the intellectual property litigation, and if securities analysts, investors or
others perceive the potential impact to be negative or risks to be substantial, it could have an adverse effect on the price of our common
stock. The occurrence of infringement claims may grow as the market for our products, services and technologies grows. Accordingly, our
exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

 Growing our customer base depends upon the
effective operation of our applications with operating systems, networks and standards that we do not control.

 We will be dependent on the interoperability of
our applications with operating systems that we do not control, and any changes in such systems that degrade our potential products'
functionality or give preferential treatment to competitive products could adversely affect the usage of our applications on quantum processing
units. Additionally, in order to deliver high quality products, it is important that our products work well with a range of quantum computers,
conventional computers, systems, networks and standards that we do not control. We may not be successful in developing relationships with
key participants in the quantum computing industry or in developing products that operate effectively with these technologies, systems,
networks or standards.

 We may not be able to protect our source
code from copying if there is an unauthorized disclosure of source code.

 Source code, the detailed program commands for
our operating systems and other software programs, is critical to our business. While, from time to time, we may license portions of our
application and operating system source code to one or more licensees, we take significant measures to protect the secrecy of large portions
of our source code. If a significant portion of our source code leaks, however, we might lose future trade secret protection for that
source code. It may become easier for third parties to compete with our products by copying functionality, which could adversely affect
our revenue and operating margins.

 Risks Related to Our Common Stock

 Our stock price has been and may continue
to be volatile or may decline regardless of our operating performance, and you may lose part or all of your investment.

 The market price of our common stock has in the
past and may going forward fluctuate widely in response to various factors, some of which are beyond our control, including:

 actions
 by competitors;

 actual
 or anticipated growth rates relative to our competitors;

 the
 public's response to press releases or other public announcements by us or third parties, including our filings with the Securities
 and Exchange Commission (the "SEC");

 economic,
 legal and regulatory factors unrelated to our performance;

 any
 future guidance that we may provide to the public, any changes in such guidance or any difference between our guidance and actual
 results;

 changes
 in financial estimates or recommendations by any securities analysts who follow our common stock;

 speculation
 by the press or investment community regarding our business;

 litigation;

 changes
 in key personnel; and

 future
 sales of our common stock by our officers, directors and significant stockholders.

 In addition, the stock markets, including the
Nasdaq Stock Market LLC ("Nasdaq") on which our common stock is listed, have experienced extreme price and volume fluctuations
that have affected and continue to affect the market prices of equity securities of many companies. These broad market fluctuations may
materially affect our stock price, regardless of our operating results. Furthermore, the market for our common stock historically has
been limited and we cannot assure you that an active trading market will ever be developed or maintained. The price at which investors
purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Market fluctuations and
volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may
make it more difficult or impossible for you to sell your shares of our common stock for a positive return on your investment. In the
past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities
litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

 Future sales of shares of our common stock,
or the perception in the public markets that these sales may occur, may depress our stock price.

 The market price of our common stock could decline
significantly as a result of sales of a large number of shares of our common stock. In addition, if our significant stockholders sell
a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Any issuance of additional
common stock by us in the future, or warrants or options to purchase our common stock, if exercised, would result in dilution to our existing
stockholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common
stock. Moreover, the perception in the public market that stockholders might sell shares of our stock or that we could make a significant
issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales
might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future
at a time and at a price that we deem appropriate.

 Delays in filing financial reports, internal
control weaknesses, and restatements could hinder our ability to regain Form S-3 eligibility and adversely affect our business and stock
price.

 Subsequent to the issuance of our Annual Report
on Form 10-K for the year ended December 31, 2023, and our subsequent retention of BPM LLP to replace BF Borgers CPA PC as our independent
registered public accounting firm, management became aware of various adjustments to be recorded to our consolidated financial statements.
On September 11, 2024, we filed Amendment 1 to our Annual Report on Form 10-K for the year ended December 31, 2023, restating our financial
statements for the years ended December 31, 2023 and 2022 to correct errors primarily related to purchase accounting for the QPhoton Merger,
stock-based compensation, and financing costs. We also amended our financial statements for the nine months ended September 30, 2023,
in line with the restatement of our annual financial statements. These corrections impacted net loss, goodwill, intangible assets, liabilities,
and stockholders' equity.

 These restatements were necessitated in part by
deficiencies in our internal control over financial reporting, which management concluded was not effective as of September 30, 2024.
Material weaknesses in our controls, including those related to the timely detection and correction of financial reporting errors, coupled
with the replacement of our independent auditor, resulted in delayed filings of our Quarterly Reports on Form 10-Q for the periods ended
March 31, 2024, and June 30, 2024.

 As a result of the failure to timely file our
Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, we are currently ineligible to register the offer
and sale of our securities using a newly filed registration statement on Form S-3. As of December 31, 2024, we have fully utilized the
$100 million "shelf" registration statement on Form S-3 that the SEC declared effective on November 8, 2022.

 To regain eligibility to use Form S-3, we must
be timely and current in our public reporting for a period of 12 months preceding our intended S-3 filing. While we expect to regain eligibility
to use Form S-3 as of September 1, 2025, there can be no guarantees that we will remain timely and current in our public reporting through
such date. Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form
S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to
execute any such transaction successfully and potentially harming our financial condition.

 While we continue to evaluate steps to remediate
the material weaknesses in our internal control over financial reporting, as effective internal controls are necessary for us to provide
reliable financial reports and prevent fraud, we can give no assurance that the measures we have taken and plan to take in the future
will remediate the material weaknesses or that any additional material weaknesses or restatements of financial results will not arise
in the future due to a failure to implement and maintain adequate internal control over financial reporting, circumvention of these controls,
or otherwise. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately
have the intended effects. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls
and procedures may not be adequate to prevent or identify errors or to facilitate the fair presentation of our consolidated financial
statements. Failure to address and remediate any internal control weaknesses could further delay our ability to regain Form S-3 eligibility
and adversely affect our business, operations, and stock price.

 "Penny stock" rules may make
buying or selling our common stock difficult, which may make our stock less liquid and make it harder for investors to buy and sell our
securities.

 Trading in our common stock has from time to time
been and may continue to be subject to the SEC's "penny stock" rules. The SEC has adopted regulations that generally
define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These
rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors must,
prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement
to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving
a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market.
In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers
from effecting transactions in our common stock, which could severely limit the liquidity of, and consequently adversely affect the market
price for, our common stock.

 Shares of our currently issued and outstanding
stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price
of the shares of our common stock.

 A substantial minority of our outstanding shares
of common stock are "restricted securities" within the meaning of Rule 144 under the Securities Act. In addition, we have
issued or obligated to issue options to purchase common stock pursuant to certain employment, director and consultant agreements which
shares of common stock, when purchased pursuant to the exercise of such options, would also be considered "restricted securities."
As restricted securities, these shares may be resold only pursuant to an effective registration statement or in accordance with the requirements
of Rule 144 or other applicable exemptions from registration under the Securities Act and applicable state securities laws. Rule 144 provides
in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period
of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does
not exceed the greater of 1% of the issuer's outstanding shares of common stock or the average weekly trading volume during the
four calendar weeks prior to the sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation,
by a person who is not an Affiliate of the issuer and who has satisfied a one-year holding period. The resale of significant amounts of
our common stock under Rule 144 or under any other exemption from the registration requirements of the Securities Act, if available, or
pursuant to subsequent registrations of shares of our common stock, could cause the market price of our shares of common stock to decline
significantly.

 We currently do not intend to pay dividends
on our common stock. As a result, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

 We currently do not expect to declare or pay dividends
on our common stock. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare or pay dividends
on our common stock. As a result, your only opportunity to achieve a return on your investment will be if the market price of our common
stock appreciates and you sell your shares at a profit.

 You may experience dilution of your ownership
interest due to the future issuance of additional shares of our common stock.

 We are in a capital-intensive business and we
do not have sufficient funds to finance the growth of our business or the costs of our development projects or to support our projected
capital expenditures indefinitely. As a result, we will very likely require additional funds from future equity or debt financings, which
may include the issuance of shares of preferred stock, convertible debt, or warrants to purchase shares of common stock, to purchase capital
equipment, complete the development of new products and pay the general and administrative costs of our business. We may in the future
issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common
stock. We are currently authorized to issue 250,000,000 shares of common stock. The potential issuance of additional shares of common
stock or of preferred stock or convertible debt may create downward pressure on the market price of our common stock. We may also issue
additional shares of common stock or other securities that are convertible into or exercisable for common stock in the future for capital
raising purposes or for other business purposes. Our future issuance of a substantial number of shares of common stock or the sale of
a substantial number of shares in the public market, or the perception that such issuances or sales could occur, could adversely affect
the prevailing market price of our common stock. A decline in the market price of our common stock could make it more difficult to raise
funds through future offerings of our common stock or securities convertible into common stock.

 In addition, these new securities could contain
provisions, such as priorities on distributions and voting rights, that could affect the value of our existing shares of common stock.

 Our executive officers and directors possess
significant voting power with respect to our common stock, which will limit your influence on corporate matters.

 As of March 18, 2025, our directors and executive
officers collectively beneficially own approximately 20.1% of the shares of our common stock including the beneficial ownership of Dr.
Yuping Huang of 17.2% of the shares of our common stock.

 As a result, our insiders have the ability to
significantly influence our management and affairs through the election and removal of the members of our board of directors (the "Board")
and all other matters requiring stockholder approval, including any future merger, consolidation or sale of all or substantially all of
our assets. This concentrated voting power could discourage others from initiating any potential merger, takeover or other change-of-control
transaction that may otherwise be beneficial to our stockholders. Furthermore, this concentrated control will limit the practical effect
of your influence over our business and affairs, through any stockholder vote or otherwise. Any of these effects could depress the market
price of our common stock.

 Our articles of incorporation grant the
Board the power to issue additional shares of common and preferred shares and to designate other classes of preferred shares, all without
stockholder approval.

 Our authorized capital consists of 260,000,000
shares of capital stock of which 10,000,000 shares are authorized as preferred stock. The Board, without any action by our stockholders,
may designate and issue shares of preferred stock in such series as it deems appropriate and establish the rights, preferences and privileges
of such shares, including dividends, liquidation and voting rights, provided it is consistent with Delaware law. To date the Board has
authorized two classes of Preferred, Series A and Series B, for a total of 4,630,000 authorized shares, leaving an additional 5,370,000
preferred shares to be authorized at the discretion of the Board.

 The rights of holders of our preferred stock that
may be issued could be superior to the rights of holders of our shares of common stock. The designation and issuance of shares of capital
stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances
of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital stock
and may dilute our book value per share.

 ITEM 1B. UNRESOLVED STAFF COMMENTS.

 Not applicable.

 ITEM 1C. CYBERSECURITY

 A robust and consistent
approach to cybersecurity is critical to achieving our strategic business objectives and protecting our intellectual property. As an advanced
technology company developing quantum photonic products, we face a wide range of cybersecurity threats such as ransomware and denial-of-service
attacks that affect most industry sectors, to attacks from highly sophisticated adversaries, including nation state actors, that target
dual-use advanced technologies such as quantum computing. Our customers, suppliers and other business partners face similar cybersecurity
threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance
and results of operations. We are continually evaluating best practices and methods to protect the Company from a wide range of potential
threats. Due to the risks that these cybersecurity threats pose to our business, we are investing in cyber defense systems and training
programs.

 The Board, through the
Risk Committee, oversees the Company's processes for identifying and mitigating risks, including cybersecurity risks. Company management
periodically briefs the Board on our cybersecurity and information security policies and plans, and the Board is apprised of cybersecurity
incidents deemed to have a moderate or higher business impact. In the event of an incident, the Company has developed an incident response
plan, which sets forth the steps to be followed from incident detection and assessment to mitigation, recovery and notification and reporting,
including notifying functional areas (e.g. legal), as well as senior leadership and the Board, as appropriate.

 We continue to evaluate
our cybersecurity requirements to address the evolving cybersecurity risks that the Company faces in an increasingly technically capable
environment. The Company has implemented policies for its personnel, including awareness programs, travel security programs and other
related cybersecurity best practices. The information technology team manages the Company's cybersecurity policies, including employee
training, with the ultimate goal of preventing cybersecurity incidents, if possible, while also maintaining IT system performance and
data integrity to minimize the business impact should an incident occur. The Company is coordinating closely with the Board's Risk
Committee to ensure that the Company will implement the appropriate cybersecurity technologies to protect the Company and its intellectual
property.

 Third parties play an
important role in our cybersecurity program. We engage third-party services to conduct evaluations of our security controls, including
penetration testing and consulting on best practices. The third-party services include testing both the design and operational effectiveness
of security controls.

 Although we take cybersecurity
risks seriously, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect
on the Company. While the Company maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not
be fully insured. See Item 1A. "Risk Factors" for a discussion of cybersecurity risks.

 ITEM 2. PROPERTIES.

 We maintain our principal office at 5 Marine View Plaza, Suite 214,
Hoboken, NJ 07030. The Company leases 7,503 square feet of laboratory and office space in a multistory, multi-tenant building in Hoboken,
NJ under a five-year lease ending September 30, 2027. Additionally, the Company leases 9,261 square feet of manufacturing (semiconductor
and photonic chip fabrication), laboratory, clean room, and office space in a multi-tenant building in Tempe, AZ for 51-months ending
November 30, 2028. The Company also has a short-term agreement for approximately 300 square feet in a multi-tenant facility in Arlington,
VA that provides 24/7 furnished co-working space, conference room space, and other services on an as-needed basis.

 ITEM 3. LEGAL PROCEEDINGS.

 Except as listed below, there is no action, suit,
or proceeding by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the
executive officers of the Company or our subsidiaries, threatened against or affecting the Company, our common stock, our subsidiaries,
or the Company's or its subsidiaries' officers or directors in their capacities as such, in which an adverse decision could
have a material adverse effect on the Company.

 BV Advisory v. QCi Appraisal Action

 BV Advisory Partners, LLC ("BV Advisory")
was purportedly a shareholder of QPhoton, Inc., the predecessor in interest to QPhoton (both referred to as "QPhoton" in this
Legal Proceedings discussion). On October 13, 2022, BV Advisory filed a petition in the Court of Chancery of the State of Delaware (the
"Delaware Chancery Court") seeking appraisal rights (the "Appraisal Petition") on the shares of common stock of
QPhoton it allegedly owns (which shares represented 10% of the shares of common stock of QPhoton outstanding immediately prior to the
Company's acquisition of QPhoton) pursuant to Section 262 of the Delaware General Corporation Law. The parties agreed to suspend
discovery pending resolution of outstanding motions in two related cases. The Company does not have sufficient information to assess the
potential impact of the Appraisal Petition at this time.

 BV Advisory v. QCi Breach of Contract Lawsuit

 On March 1, 2021, QPhoton entered into a Note
Purchase Agreement with BV Advisory (the "BV Note Purchase Agreement"). Pursuant to the BV Note Purchase Agreement, on March
1, 2021, March 23, 2021, and July 9, 2021, QPhoton and BV Advisory entered into convertible promissory notes for $200,592, $150,000, and
$150,000, respectively, for a total of $500,592 (the "BV Notes"). The BV Notes all bore interest at a rate of 6% per annum
and matured two years from the issuance date. On June 16, 2022, the effective date of our acquisition of QPhoton, QPhoton tendered a cashier's
check to BV Advisory in the amount of $535,684.24, representing the full principal balance of the BV Notes and accrued interest through
June 16, 2022. On July 14, 2022, BV Advisory returned the cashier's check and disputed the calculation of the amount paid to settle
the BV Notes.

 On August 16, 2022, BV Advisory filed a complaint
in the Delaware Chancery Court naming the Company and certain of its directors and officers (among others) as defendants (the "Breach
Lawsuit"). BV Advisory Partners, LLC v. Quantum Computing Inc., et al., C.A. No. 2022-0719-VCG (Del. Ch.). BV Advisory sought,
among other relief, monetary damages from QPhoton for an alleged breach of the BV Note Purchase Agreement. After the Delaware Chancery
Court dismissed BV Advisory's other claims against the Company and QPhoton, on October 17, 2024, the Delaware Chancery Court entered
a Stipulation and Order dismissing BV Advisory's claim for breach of the BV Note Purchase Agreement, subject to BV Advisory's
right to elect to transfer the BV Note claim to the Superior Court of the state of Delaware (the "Delaware Superior Court").
BV Advisory elected to transfer the claim for breach of the BV Note Purchase Agreement to the Delaware Superior Court. On November 12,
2024, BV Advisory filed a new complaint in the Delaware Superior Court, asserting a claim for breach of the BV Note Purchase Agreement
and for breach of the implied covenant of good faith and fair dealing. The Company answered the complaint on December 16, 2024. The Company
believes that BV Advisory's BV Note claims have no merit and intends to defend itself vigorously, but does not have sufficient information
to assess the potential impact of the Breach Lawsuit at this time.

 QCi v. BV Advisory Injunction Lawsuit

 On January 31, 2025, the Company filed a complaint
in Delaware Chancery Court against BV Advisory and its principal Keith Barksdale (the "BV Defendants") asserting claims for
defamation, breach of contract, conversion, aiding and abetting conversion, and misappropriation of trade secrets based on the BV Defendants'
unauthorized possession and dissemination of certain of the Company's confidential and privileged documents. The Company seeks,
among other relief, injunctive relief and damages. On February 11, 2025, the Court granted the Company's motion for a temporary
restraining order and instructed the parties to negotiate an expedited case schedule. On February 13, 2025, the Court entered a stipulated
case schedule that set a trial for April 8 and 9, 2025 on the Company's claims for conversion, aiding and abetting conversion, and
misappropriation of trade secrets. The parties are currently engaged in discovery.

 Securities Class Action Lawsuit

 On February 25, 2025, a class action lawsuit was
filed against the Company and certain of its current and past officers in the United States District Court for the District of New Jersey,
by a plaintiff seeking to represent a class of all persons who purchased the Company's securities between March 30, 2020 and January
15, 2025, alleging violations of Section 10(b) and 20(a) of the Exchange Act. The complaint alleges that the Company made false and/or
misleading statements and/or failed to disclose material information about the Company's customers, contracts and business operations.
To date the New Jersey District Court has not certified a class or designated a lead plaintiff. The Company disputes the allegations in
the complaint and intends to vigorously defend against the asserted claims.

 Arbitration over Stock Options

 In February 2025, the Company entered into arbitrations
with two former consultants regarding forfeiture of stock options. The Company had issued stock options to the former consultants in 2020
and 2021 and terminated their agreements in March 2024, at which time the Company informed the former consultants that any vested options
had to be exercised within three months of the termination date, per the Company's equity compensation plans. The former consultants
did not exercise their vested options and the options were duly forfeited. In December 2024, the former consultants claimed that they
still retained the right to exercise the options, which the Company rejected. The Company believes that these claims are without merit
and intends to defend itself vigorously.

 Concluded Proceedings

 The Company previously disclosed two legal matters
which were concluded during 2024. The defamation action filed by the Company in New Jersey Superior Court in December 2022 against BV
Advisory and other parties was dismissed on procedural grounds in May 2024. The receivership petition filed by BV Advisory against the
Company in July 2023 in the Delaware Chancery Court was dismissed without prejudice in May 2024.

 ITEM 4. MINE SAFETY DISCLOSURES.

 Not applicable.

 ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 Market Information

 Our common stock is listed on the Nasdaq Capital
Market under the symbol "QUBT" and commenced trading on July 15, 2021.

 Authorized Capital

 The Company is authorized by its Certificate of
Incorporation to issue an aggregate of 250,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred
stock, of which 1,550,000 shares are designated as Series A Convertible Preferred Stock and 3,079,864 shares are designated as Series
B Preferred Stock. As of March 18, 2025, we had 137,244,545 shares of common stock issued and outstanding and no shares of preferred stock
issued and outstanding.

 Holders of Common Equity

 As of March 18, 2025, there were approximately
214 stockholders of record of our common stock. Because shares of our common stock are held by depositaries, brokers and other nominees,
the number of beneficial holders of our shares is substantially larger than the number of stockholders of record.

 Dividend Information

 We have not paid any cash dividends to our holders
of common stock. The declaration of any future cash dividends is at the discretion of the Board and depends upon our earnings, if any,
our capital requirements and financial position, our general economic condition, and other pertinent conditions. It is our present intention
not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

 Unregistered Sales of Equity Securities and
Use of Proceeds

 During the year ended December 31, 2024, we have
issued securities that were not registered under the Securities Act, all of which were previously disclosed in a Quarterly Report on Form
10-Q or a Current Report on Form 8-K.

 ITEM 6. [Reserved]

 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 The following discussion and analysis of the
results of operations and financial condition for the years ended December 31, 2024 and 2023 should be read in conjunction with our consolidated
financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. Our discussion
includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. See "Forward-Looking Statements."

 You should read the following discussion and
analysis of our financial condition and results of operations together with our audited consolidated financial statements and related
notes included elsewhere in this Annual Report on Form 10-K,

 Overview

 QCi is a development stage company with limited operations and revenue.
The Company is developing quantum and ancillary non-quantum products for high-performance computing applications based on proprietary
photonics technology. QCi's products are designed to operate at room temperature and low power at an affordable cost in the areas
of high-performance computing, sensing and imaging, and quantum cybersecurity. The Company has generated some revenue based on sales of
products and related services to date and is expanding its sales and marketing efforts. The Company's development team includes
optical engineers, mathematicians, physicists, and software developers.

 Results of Operations

 Our results of operations for the years ended
December 31, 2024 and 2023 is as follows (in thousands, except percentages):

 2024

 2023

 % Change

 Revenue:

 Total revenue

 $

 $

 %

 Gross profit

 (31
)%

 Gross profit margin

 %

 %

 Operating expenses:

 Research and development

 11,318

 8,891

 %

 Sales and marketing

 1,818

 1,806

 %

 General and administrative

 12,913

 15,708

 (18
)%

 Total operating expenses

 26,049

 26,405

 (1
)%

 Loss from operations

 (25,937
)

 (26,243
)

 (1
)%

 Non-operating income and (expense):

 Interest and other income

 %

 Interest expense, net

 (2,496
)

 (1,602
)

 %

 Change in fair value of warrant liabilities

 (40,532
)

 NM

 Total non-operating income (expense)

 (42,605
)

 (779
)

 NM

 $
 (68,542
)

 $
 (27,022
)

 %

 Revenues

 The Company's revenues during the years ended December 31, 2024
and 2023 consisted of (in thousands):

 2024

 2023

 % Change

 Services

 $

 $

 (2
)%

 Products

 %

 Total

 $

 $

 %

 Revenues for the year ended December 31, 2024
were $373 thousand compared to $358 thousand for the year ended December 31, 2023, an increase of $15 thousand, or 4%. Revenue was derived
from sales of hardware products and professional services in 2024 and 2023, in each case provided to multiple commercial and government
customers under multi-month contracts. The year-over-year change was driven by changes in the number of, size of and level of effort performed
on active customer proof of concept and research and development services and customer hardware contracts. In 2024, the Company continued
to execute its business strategy to provide quantum-ready solutions for solving real-world problems. While we have made significant progress
toward this overarching objective, the generation of revenue from customers has been slow to develop, in part due to the fact that quantum
computing is a cutting-edge technology for most potential customers, who are therefore proceeding cautiously with small, exploratory contracts
to better understand its applicability to their requirements. Accordingly, the Company has focused on providing professional services
and research and development offerings to introduce customers to quantum-based solutions to their operating needs as well as on customer
education and building customer awareness as a means to generating sales. We have developed and released multiple products, including
commercial and research and development offerings and foundry services for TFLN Optical Chips manufacturing that we are now in the process
of marketing. As a result, we expect product revenues to continue to increase going forward.

 Cost of Revenues

 Cost of revenues, which consists of direct labor
expenses, primarily salary costs for engineering and solutions staff delivering services, and other direct component costs for custom
hardware on research and development contracts, was $261 thousand for the year ended December 31, 2024, compared to $196 thousand for
the prior year, an increase of $65 thousand, or 33%. Cost of revenues for each of the years ended December 31, 2024 and 2023 consists
primarily of salary expense. The increase for 2024 was predominantly driven by the increases in direct labor expenses and other direct
costs required to perform on the contracts during 2024 compared to the prior year.

 Gross Margin

 Gross margin for the year ended December 31, 2024
was $112 thousand compared to $162 thousand for the prior year, a decrease of $50 thousand, or 31%. On a percentage basis, gross margin
was 30%, a decrease of 15% year-over-year. The change was the result of a new custom hardware contract that had lower margins due to its
cost of revenues being comprised of other direct component costs in addition to direct labor expenses. Our lack of a scaled and distributed
base of revenue generation by product and sales channel can result in significant differences in gross margin between reporting periods.

 Operating Expenses

 Operating expenses of approximately $26.0 million
in 2024 decreased as compared to approximately $26.4 million in 2023 primarily as a result of a decrease in general and administrative
expenses, partially offset by an increase in research and development expenses, as set forth in the below tables (in thousands, except
percentages).

 %

 2024

 2023

 Change

 General and administrative

 $
 12,913

 $
 15,708

 (18
)%

 General and administrative expenses consist primarily
of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other
consulting services.

 General and administrative expenses in 2024 decreased
$2.8 million or 27% compared with 2023 primarily due to lower employee- and advisor-related expenses, including stock-based compensation,
payroll, bonus and travel expenses, as well as lower legal fees and consulting services driven by changes made within and by the Company's
management team, offset by increased audit fees driven by the Company retaining a new independent registered public accounting firm in
May 2024and such firm's re-audit of the Company's consolidated financial statements for the years ended December 31, 2023
and 2022.

 %

 2024

 2023

 Change

 Research and development

 $
 11,318

 $
 8,891

 %

 Research and development expenses consist primarily
of compensation for employees that primarily engage in research and development efforts and fees for the development of hardware products
and supporting software. We focus the bulk of our research and development activities on the continued development of existing products
and the development of new offerings for emerging market opportunities.

 Research and development expenses in 2024 increased
$2.4 million or 27% compared with 2023 primarily due to higher employee-related expenses, primarily as a result of higher stock-based
compensation and bonus expenses to incentivize and retain key technologists, as well as higher depreciation for long-lived laboratory
equipment, offset partially by lower professional and hosting services.

 %

 2024

 2023

 Change

 Sales and marketing

 $
 1,818

 $
 1,806

 %

 Selling and marketing expenses consist primarily
of employee compensation as well as customer lead generation activities, tradeshow participation, advertising and other marketing and
selling costs.

 Net selling and marketing expenses in 2024 were
largely unchanged as compared with 2023, with increases primarily due to higher stock-based compensation, offset by lower outsourced professional
services costs, related marketing program costs, and lower trade show and travel-related costs in 2024.

 Non-operating Income (Expense)

 The following table summarizes our non-operating
income (expense) for the years ended December 31, 2024 and 2023 (in thousands, except percentages).

 Year Ended December 31

 %

 2024

 2023

 Change

 Interest and other income

 $

 $

 %

 Interest expense, net

 (2,496
)

 (1,602
)

 %

 Change in value of derivative and warrant liabilities

 (40,532
)

 NM

 Other income (expense)

 $
 (42,605
)

 $
 (779
)

 NM

 Non-operating expense increased to $42.6 million
for 2024 compared to $779 thousand for 2023, primarily as the result of a $40.5 million decrease in the change in fair value of the derivative
liability for the QPhoton Warrants, as defined below, during 2024 compared to a $528 thousand increase in 2023.

 The loss on change in value of warrant liability
is entirely comprised of mark-to-market adjustments for the QPhoton Warrants, as defined below in the accompanying notes to our consolidated
financial statements appearing elsewhere in this report, which had no carrying value as of December 31, 2023. Future mark-to-market adjustments
may result in continued losses if the price of the Company's common stock increases above the closing bid price of $16.55 per share
at December 31, 2024; such adjustments may alternatively result in gains if the closing bid share price of the Company's common
stock decreases. See Note 10, Capital Stock, in the accompanying notes to our consolidated financial statements appearing elsewhere
in this report for additional information on the QPhoton Warrants.

 In addition, interest expense, net, which consists of interest on financial
liabilities and amortization of debt issuance costs, increased $128 thousand or 43% in 2024 compared to 2023, which increase was primarily
attributable to interest paid on the secured convertible promissory note in the original principal amount of $8.25 million that we issued
to Streeterville Capital, LLC in August 2024 (the "Streeterville Convertible Note"), which we paid in full as of December
31, 2024. See Note 7, Financial Liabilities, in the accompanying notes to our consolidated financial statements appearing elsewhere
in this report for additional information.

 Liquidity and Capital Resources

 We have incurred net losses and experienced negative
cash flows from operations since inception. Through December 31, 2024, the Company has raised $167.8 million through its issuance of common
stock and $20.1 million through its issuance of convertible promissory notes and other debt for a total of $187.9 million. The Company
has no lines of credit or short-term debt obligations outstanding. We expect to incur additional losses and higher operating expenses
for the foreseeable future as we continue to invest in research and development and go-to-market programs. As of December 31, 2024, the
Company had cash and cash equivalents of $78.9 million.

 Our primary uses of cash are to fund and invest
in our operations as we continue to grow our business. We will require a significant amount of cash for continued investment in our Foundry
Services offering, including but not limited to our AZ Chips Facility and any future-identified space for expansion, as well as ongoing
research and development for our non-linear quantum optical products and photonics chips. Until such time as we can generate significant
revenue from sales or subscriptions of our hardware offerings, we expect to finance our operating and investing needs through our cash
and cash equivalents and, equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and
loan programs. We may, however, be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms,
or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary
pressures, rising interest rates, bank failures, and financial and credit market fluctuations, could reduce our ability to access capital
on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may
involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt,
making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when
needed, we may be required to delay, limit, or substantially reduce our product development and go-to-market efforts. There can be no
assurances that the Company will be able to secure additional equity and/or debt investments or achieve an adequate sales level. We believe,
however, that the Company's existing cash and cash equivalents, together with any cash generated from operations and the proceeds
from any additional equity or debt issuances will be sufficient to meet the Company's liquidity needs for at least the next 12 months.

 The following table summarizes total current assets,
liabilities and working capital at December 31, 2024, compared to December 31, 2023 (in thousands):

 2024

 2023

 Increase/
 (Decrease)

 Current assets

 $
 79,151

 $
 2,656

 $
 76,495

 Current liabilities

 $
 4,559

 $
 4,812

 $
 (253
)

 Working capital (deficit)

 $
 74,592

 $
 (2,156
)

 $
 76,748

 At December 31, 2024, we had working capital of
$74.6 million as compared to working capital deficit of $2.2 million at December 31, 2023, an increase of $76.8 million. The increase
in working capital is primarily attributable to an increase in cash from the net proceeds of our sales of 16 million shares of common
stock for an aggregate of $40 million in November 2024 and 10 million shares of common stock for an aggregate of $50 million in December
2024, and our issuance of 23.7 million shares of common stock for an aggregate of $23.8 million through the Company's ATM, as defined
below, managed by Ascendiant Capital Markets, LLC during 2024, offset by the use of cash to pay for operating expenses and capital investments
in property and equipment. For more information on the November and December issuances, please see Note 10, Capital Stock, in the
accompanying notes to our consolidated financial statements appearing elsewhere in this report.

 Cash Flows

 The following table summarizes our cash flow for
the years ended December 31, 2024 and 2023 (in thousands):

 2024

 2023

 Net cash used in operating activities

 $
 (16,213
)

 $
 (18,315
)

 Net cash used in investing activities

 (6,036
)

 (2,612
)

 Net cash provided by financing activities

 99,135

 17,678

 Net increase (decrease) in cash and cash equivalents

 $
 76,886

 $
 (3,249
)

 Net cash used in operating activities for the
years ended December 31, 2024 and 2023 was $16.2 million and $18.3 million, respectively, in each case primarily as a result of our net
loss in each period offset by noncash adjustments for stock-based compensation, mark-to-market valuation adjustments on financial liabilities,
and depreciation and amortization.

 Net cash used in investing activities for the
years ended December 31, 2024 and 2023 was $6.0 million and $2.6 million, respectively, and was attributable to our purchase of TFLN Optical
Chips manufacturing equipment for our AZ Chips Facility, as well as computer hardware and laboratory equipment. The increase in 2024 is
primarily due to the purchase of additional equipment in connection with establishing the AZ Chip Facility.

 Net cash provided by financing activities for
the years ended December 31, 2024 and 2023 was $99.1 million and $17.7 million, respectively. Cash flows provided by financing activities
during year ended December 31, 2024 were attributable to proceeds from our stock issuances in November and December 2024, and the proceeds
from our sale of shares of common stock pursuant to the ATM facility and our issuance of the Streeterville Convertible Note, partially
offset by repayments on the Streeterville Unsecured Note, as defined below, and the Streeterville Convertible Note as well as redemptions
of shares of Series A Preferred Stock.

 On a long-term basis, our liquidity is dependent
on continuation and expansion of operations and receipt of revenues. Demand for the Company's products and services will be dependent
on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions,
which are cyclical in nature. As much revenues will be derived from the sales of our products and services, our business operations may
be adversely affected by the products and services offered by our competitors and any prolonged recession periods.

 Critical Accounting Estimates

 Certain of our accounting policies require the application of significant
judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying
these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. Those
estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by
our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from
the estimates contained in our consolidated financial statements.

 Fair Value of Stock-based Compensation

 We recognize stock-based compensation expense
for all share-based payment awards in accordance with ASC 718, Compensation – Stock Compensation. Stock-based compensation
expense for expected-to-vest awards is valued under the single-option approach and amortized on a straight-line basis, accounting for
actual forfeitures as they occur. We utilize the Black-Scholes pricing model in order to determine the fair value of stock-based option
awards. The Black-Scholes pricing model requires various highly subjective assumptions including volatility, expected option life, and
risk-free interest rate. The assumptions used in calculating the fair value of share-based payment awards represent management's
best estimates. These estimates involve inherent uncertainties and the application of management judgment. If factors change and different
assumptions are used, our stock-based compensation expense could be materially different in the future.

 Fair Value of Warrant Liabilities and Derivatives

 Determining the fair market value of the QPhoton Warrants, which were
included in the merger consideration paid to the stockholders of QPhoton (the "QPhoton Merger Consideration"), is a critical
accounting estimate. The QPhoton Warrants are comprised of warrants to purchase up to 7,028,337 shares of the Company's common stock
at an exercise price of $0.0001 per share (the "QPhoton Warrants") and are exercisable when and if stock options and warrants
issued by the Company and outstanding as of June 15, 2022 are exercised. The Merger Consideration for shareholders Yuping Huang and The
Trustees of the Stevens Institute of Technology was issued in 2022. A third alleged shareholder, BV Advisory, rejected the Merger Consideration
and commenced litigation in Delaware Chancery Court (see Note 8, Contingencies – Legal Proceedings, in this Form 10-K for
additional information and Item 3, Legal Proceedings, in this Form 10-K for a full discussion), and to date that litigation has
not been resolved. Accordingly, as of December 31, 2024 and 2023, we had only issued 6,325,503 of the QPhoton Warrants. In determining
the fair market value of the QPhoton Warrants, the Company determines which underlying options and warrants are in-the-money or out-of-the-money
at period end by comparing to the bid price of the Company's common stock, then accounts for changes period-over-period by realizing
a mark-to-market gain or loss for the period.

 An additional critical accounting estimates involves
determining the fair value of the conversion features ingerent in the Streeterville Convertible Note (the "Streeterville Derivative
Liability"), which involves inherent uncertainties and the application of management judgement. The Streeterville Derivative Liability
will be mark-to-market adjusted on a quarterly basis and accreted as interest expense while the Streeterville Convertible Note is outstanding.

 Fair Market Value and Useful Life of Intangible
Assets

 Determining the fair market value and useful life
of the intangible assets acquired by the Company through the QPhoton Merger is another critical accounting estimate. In the absence of
market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and comparison with similar
transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets
for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is
too high or too low.

 Valuation Allowances for Deferred Taxes

 Our income tax expense, deferred tax assets and
liabilities, and reserves for unrecognized tax benefits reflect management's assessment of estimated current and future income taxes
to be paid. We are subject to income taxes in the United States. Significant judgments and estimates are required in determining the consolidated
income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.

 Deferred tax assets and liabilities arise from
temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements,
which are expected to result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets
within the jurisdiction from which they arise, for all material jurisdictions, we consider all available positive and negative evidence,
including scheduled reversals of deferred tax balances, projected future taxable income, tax-planning strategies and results of recent
operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future
state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future
taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses.
In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results.

 As of December 31, 2024,
we had federal and state net operating loss ("NOL") carryforwards of approximately $89.4 million, or $19.6 million on a tax-effected
basis. We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized. Accordingly, we
have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards. If our assumptions
change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on
deferred tax assets as of December 31, 2024, will be accounted for as a reduction of income tax expense.

 The calculation of our
tax liabilities involves evaluating uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions
across our global operations. ASC 740, Income Taxes, states that a tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals
or litigation processes, on the basis of the technical merits.

 We record unrecognized tax benefits as liabilities
in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not
previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a tax payment that
is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as
increases or decreases to income tax expense in the period in which new information is made available.

 We believe that none of the unrecognized tax benefits
may be recognized by the end of 2024.

 Legal and Other Contingencies

 The outcomes of legal
proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a
legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred
and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued we evaluate, among other factors,
the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these
factors could materially impact our consolidated financial statements.

 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.

 Not applicable.

 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.

 Our consolidated financial statements are contained
in pages F-1 through F-29 which appear at the end of this Annual Report on Form 10-K.

 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 None.

 ITEM 9A. CONTROLS AND PROCEDURES.

 Evaluation of Disclosure Controls and Procedures

 We maintain "disclosure controls and procedures,"
as such term is defined in Rule 13a-15(e) under the Exchange Act. In designing and evaluating our disclosure controls and procedures,
our management recognized that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls
and procedures, our management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions.

 As of the end of the period covered by this Annual
Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our principal
executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures. Based on such evaluation,
our principal executive officer and principal financial officer concluded that as of December 31, 2024, our disclosure controls and procedures
were not effective to provide reasonable assurance that (i) the information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's
rules and forms, and (ii) such information is accumulated and communicated to our management, including our Chief Executive Officer and
President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

 Report of Management on Internal Control over
Financial Reporting

 Company management is responsible for establishing
and maintaining adequate internal control over financial reporting for the Company. The Company's internal control over financial
reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected
by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

 Material Weakness in Internal Control over
Financial Reporting

 Company management has assessed the effectiveness
of the Company's internal control over financial reporting as of December 31, 2024. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework
(2013).

 Based on this assessment, management has determined
that the Company's internal control over financial reporting was not effective.

 A material weakness,
as defined by the Public Company Accounting Oversight Board, is a deficiency, or a combination of deficiencies, in internal control over
financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis.

 The ineffectiveness of
the Company's internal control over financial reporting was due to the following material weaknesses which are common to many small
companies with limited staff:

 (i)

 inadequate segregation of duties consistent with control objectives;

 (ii)

 inadequate controls related to revenue recognition;

 (iii)

 insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both accounting principles generally accepted in the United States of America and SEC Guidelines; and

 (iv)

 inadequate information technology general controls specifically related to security, segregation of duties, user access, restricted access and change management.

 Management's Plan to Remediate the
Material Weakness

 The Company has been
implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses
are remediated, such that these controls are designed, implemented, and operating effectively. In addition to identifying and remediating
design deficiencies in its processes, the Company has formally documented its procedures for many of the significant accounting and financial
reporting processes, including implementation of procedures for revenue recognition and segregation of duties. The other remediation actions
planned include:

 (i)

 further documentation and implementation of control procedures and the implementation of control monitoring; and

 (ii)

 identify and remedy gaps in our information technology general controls specifically related to the areas of security, user access, restricted access and change management.

 We are committed to maintaining
a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control
environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our
internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds allow.

 Management's report
on internal control over financial reporting was not subject to attestation by the Company's registered public accounting firm pursuant
to rules of the SEC that permit a Smaller Reporting Company to provide only Management's report in this annual report, which may
increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

 Changes in Internal
Control over Financial Reporting

 As discussed above, we
are implementing certain measures to remediate the material weaknesses identified in the design and operation of our internal control
over financial reporting. Other than those measures, there have been no changes in our internal control over financial reporting (as defined
in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2024 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.

 ITEM 9B. OTHER INFORMATION.

 Rule 10b5-1 Trading
Plans

 During the three months
ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified
the amount, pricing or timing provisions of a "Rule 10b5-1 trading arrangement," as defined in Item 408(a) of Regulation S-K,
or a "non-Rule 10b5-1 trading arrangement," as defined in Item 408(c) of Regulation S-K.

 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.

 Not applicable.

 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE.

 Directors and Executive Officers

 The following table contains information with
respect to our directors and executive officers. To the best of our knowledge, none of our directors or executive officers have an arrangement
or understanding with any other person pursuant to which he or she was selected as a director or officer. There are no family relationships
between any of our directors or executive officers. Directors serve one-year terms. Our executive officers are appointed by and serve
at the pleasure of the Board.

 Name

 Current

Age

 Position

 Dr. William McGann (1)

 Chief Executive Officer (CEO) and President (Principal Executive Officer)

 Christopher Boehmler

 Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 Dr. Yuping Huang

 Chairman of the Board and Chief Quantum Officer

 Robert Fagenson

 Vice Chairman of the Board

 Michael Turmelle

 Dr. Carl Weimer

 Dr. Javad Shabani

 Dr. McGann has served as the Company's
CEO and President since February 1, 2024. Prior to that, he had served as the Company's Chief Technology Officer and Chief
Operations Officer since January 2022 and as a Director of the Company from September 2021 to December 2021. Prior to
joining Quantum Computing, Dr. McGann was the Chief Technology Officer for the Security, Detection and Automation business at Leidos
Holdings, Inc., a provider of technical services, primarily to the U.S. government, from May 2019 to January 2022. Dr. McGann
has a strong, directed passion for transforming credible science into practical technology solutions in solving some of the world's
greatest challenges. Prior to joining Leidos, Dr. McGann held numerous business and technology leadership positions and roles including
(a) Founder of the first explosives trace detection company, Ion Track Instruments, (b) Chief Technology Officer for GE Security,
(c) VP of Engineering for United Technologies Fire and Security business, (d) CEO and board member of Implant Sciences Corp.,
and (e) Chief Technology Officer at L3Harris Aviation Security and Detection business. Dr. McGann holds a Ph. D. in Chemical
Physics from the University of Connecticut and undergraduate degrees in Chemistry and Biology.

 Mr. Boehmler has served as the Company's
Chief Financial Officer since July 1, 2023. Mr. Boehmler joined Quantum Computing Inc. as Controller in March 2022. He
worked as an independent consultant from June 2018 until March 2022, serving both private and non-profit organizations.
Previous to June 2018, his corporate finance experience includes 12 years in senior management positions for private and public
technology-driven and financial institutions, primarily at Bridgewater Associates, LP and Intelsat. During this time, he also led
the finance functions for two start-ups where he was instrumental in raising private equity and performing due diligence on acquisition
targets. His financial expertise spans capital markets, planning & analysis, accounting operations, management and regulatory
reporting, financial systems integrations, and financial risks and controls. He started his career working in the investment
banking division of Credit Suisse First Boston, followed by strategic management consulting for Booz Allen Hamilton. Mr. Boehmler
has an undergraduate degree in Economics with a minor in Germanic Studies from the University of Chicago.

 Dr. Huang has served as the Company's
Chairman of the Board since December 10, 2024 and as Chief Quantum Officer and a Director since June 14, 2022. Dr. Huang
has over 20 years of experience in commercial and academic settings, with pioneering research in a wide spectrum of quantum physics,
optics, and technology. Prior to joining the Company, Dr. Yuping founded QPhoton, Inc., where he served as Chairman of the Board
and Chief Executive Officer from 2020 until its acquisition by the Company in 2022. QPhoton was a development stage company commercializing
quantum photonic technology and devices to provide innovative and practical quantum solutions for critical challenges facing big data,
cyber, remote sensing, and healthcare industries. Dr. Huang worked as a postdoctoral fellow, a research faculty member, and principal
investigator at Northwestern University from 2009-2014. Dr. Huang has been a Professor of Physics at the Stevens Institute of
Technology, a private research technological university in Hoboken, New Jersey, since 2014 (from 2014 to 2019 as assistant professor,
from 2019-2023 as associate professor and as a full professor since 2023). Dr. Huang is the founding director of the Center
for Quantum Science and Engineering and Gallagher Associate Professor of Physics at the Stevens Institute of Technology. He received a
Bachelor of Science in modern physics from the University of Science and Technology of China in 2004 and a PhD in quantum AMO physics
in 2009 from Michigan State University. Dr. Huang's expertise in quantum physics and optics and leadership experience in quantum
research qualifies him to serve as a member of the Board.

 Mr. Fagenson has served as a Director
of the Company since March 2021 and as Vice Chairman since December 10, 2024. Mr. Fagenson has served as a member of the board
of directors of National Holdings Corporation ("NHC"), a broker-dealer, since March 2012. He has served as Vice Chairman
of the board of directors of NHC since September 2016. Mr. Fagenson previously served as Co-Chief Executive Officer of
NHC from January 3, 2017 to January 31, 2017, as Chief Executive Officer and Chairman of the board of directors of NHC from
December 2014 to September 2016, and as Executive Vice Chairman of the board of directors of NHC from July 2012 to
December 2014. NHC was acquired by B. Riley Financial in February 2024. Mr. Fagenson has been a branch owner at National
Securities Corp, an operating company of NHC, since 2012, and president of Fagenson & Co., Inc., a family investment company,
since 1982. Mr. Fagenson spent the majority of his career at the New York Stock Exchange ("NYSE"), where he was
managing partner of one of the exchange's largest specialist firms. While at the NYSE, Mr. Fagenson served as a governor on
the trading floor and was elected to the NYSE board of directors in 1993, where he served for six years, eventually becoming vice
chairman of the NYSE board of directors from 1998 to 1999 and 2003 to 2004. Mr. Fagenson has served as director of the New York
City Police Museum since 2005 and as director of the Federal Law Enforcement Officers Association Foundation since 2009. He has also served
on the board of directors of Sigma Alpha Mu Foundation since 2011 and on the board of directors of New York Edge since 2015. In addition,
Mr. Fagenson served as the non-executive chairman of Document Security Systems, Inc. from 2012 to 2018 (NYSEMKT: DSS).
He is currently a member of the alumni boards of the Whitman School of Business at Syracuse University. Mr. Fagenson received his
B.S. in Transportation Sciences & Finance from Syracuse University in 1970. Mr. Fagenson's experience in the financial
services industry and in senior leadership positions qualifies him to serve as a member of the board and as chairman of the compensation
committee.

 Mr. Turmelle has served as a Director
of the Company since January 2022. Mr. Turmelle has served on the board of directors of Ideal Power Inc. since December 2017
and as chairman of the Ideal Power board since 2021. From January 2018 through January 2024, Mr. Turmelle served as the
Managing Director of Hayward Tyler, a United Kingdom private equity-backed manufacturer and service provider of pumps and motors,
which he joined in February 2015. Mr. Turmelle also served on the boards of Hayward Tyler and Energy Steel (a Hayward Tyler
subsidiary) from 2017 until January 2024. Hayward Tyler designs, manufactures, and services performance-critical electric motors
and pumps to meet the most demanding of applications for the global energy industry, as both an original equipment manufacturer supplier
and trusted partner. Previously, Mr. Turmelle ran his own consulting company, working with start-ups and turn-arounds in
the areas of renewable energy, medical, and other advanced technologies. Mr. Turmelle has served on numerous Boards of Directors
including the Board of Directors of Implant Sciences Corp., an explosive and narcotic trace detection company, where he served as Chairman
of the Board from 2015 to 2017. Mr. Turmelle was Chief Financial Officer and Chief Operating Officer and a member of the Board
of Directors of SatCon Technology Corporation, a maker of energy management systems, from 1992 to 2005. Mr. Turmelle was also
on the Board of Directors of Beacon Power, a SatCon spin-off company dealing in flywheel energy storage, from 1996 to 2000. Mr. Turmelle
has a BA in Economics from Amherst College and is a graduate of General Electric's Financial Management Program. Mr. Turmelle's
experience as a public company director and executive as well as extensive experience in finance, business operations and technology,
qualifies him to serve as a member of the Board and as chairman of the audit committee.

 Dr. Weimer has served as a director
of the Company since January 14, 2023. Dr. Weimer has over 25 years of experience in the aerospace industry. He has previously
been involved in two companies in the aerospace industry, holding positions including Director of Research, Principal Investigator, Chief
Systems Engineer, and Chief Technologist. From 1994 through 2000, Dr. Weimer was a Director Research for Ophir Corporation, an aerospace
optics company. From 2000 to 2025 he was Technical Leader for Ball Aerospace & Technologies Corp. (now BAE Systems SMS)
developing advanced high-reliability instrumentation, and in 2008 he was awarded a NASA Distinguished Public Service Medal for space-based
lidar technologies. Since 2014 he's been the Chief Technologist for the Civil Business Unit Leading a team performing R&D for
future space missions. In addition, Dr. Weimer has been a Principal Investigator for the NASA Earth Science Technology Office since
2008, and he holds seven U.S. patents in optical systems. Dr. Weimer received a Bachelor of Science degree from Harvey Mudd
College (1984) and a Master of Science (1987) and a PhD (1992) from Colorado State University, all in experimental Physics.
He did his graduate and postdoctoral research in the Ion Storage Group at NIST Boulder and a second postdoc in the Optical Standards Group.
Dr. Weimer's expertise in advanced optics and leadership experience in the aerospace industry qualifies him to serve as a member
of the Board.

 Dr. Shabani has served as a director
of the Company since April 19, 2024. Dr. Shabani has over 13 years of experience in advanced physics and quantum information
physics. Dr. Shabani has been a professor in the New York University Physics Department and director of the NYU Center for Quantum
Information Physics since 2024. From 2022 to 2024, he was an Associate Professor at the NYU Physics Department. From 2017 to 2022, he
was an Assistant Professor at the NYU Physics Department. From 2015 to 2017, Dr. Shabani was an Assistant Professor at the City College
of New York Physics Department. From 2014 to 2015, he was a Project Scientist in the California Nanosystems Institute at the University
of California Santa Barbara. He was a Postdoctoral Fellow at the Harvard University Physics Department from 2011 to 2012 and the California
Nanosystems Institute at the University of California Santa Barbara from 2012 to 2014. He was awarded the IBM Q Scholar Award in 2021,
and the US Air Force Young Investigator Program Award and the US Army Young Investigator Award in 2016. Dr. Shabani holds four patents
in quantum physics applications and has published over 85 papers. Dr. Shabani received Bachelor of Science degrees in physics and
electrical engineering from Sharif University of Technology (2004) a Master of Science in Electrical Engineering from the University
of California, Santa Cruz (2005), a Master of Arts in Electrical Engineering from Princeton University (2007) and a PhD in Electrical
Engineering from Princeton University (2011). Dr. Shabani's scholarship and experience in physics and electrical engineering
qualifies him to serve on the Board to help lead the Company towards continued growth and success.

 Delinquent Section 16(a) Reports

 Section 16(a) of the Exchange Act requires the
Company's directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section
12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive
officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of
all reports filed by them in compliance with Section 16(a).

 Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company during the fiscal year ended December 31, 2023, including those reports that we have filed
on behalf of our directors and Section 16 officers, no director, Section 16 officer, beneficial owner of more than 10% of the outstanding
common stock, or any other person subject to Section 16 of the Exchange Act, failed to file with the SEC on a timely basis during the
fiscal year ended December 31, 2023, except (i) as previously disclosed by the Company, (ii) Robert Liscouski filed a Form 4 on July 7,
2023, which was delinquent, in connection with his sale of common stock, the earliest of which occurred on November 25, 2022.

 Code of Ethics

 The Company currently maintains a code of ethics
that applies to all directors, officers, and employees. A copy of our code of ethics can be found on our website at www.quantumcomputinginc.com.
We expect that any amendments to such code, or any waivers of its requirements, will be disclosed on our website.

 Insider Trading Policy

 The Company has adopted an insider trading policy
that governs the purchase, sale and other dispositions of our securities that applies to our officers and directors, as
well as our employees that have regular access to material, nonpublic information about the Company in the normal course of their duties.
We believe that our insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations,
and listing standards applicable to us. A copy of our insider trading policy is filed as Exhibit 19.1 to this Form 10-K.

 Board Composition and Director Independence

 The Board is authorized to have up to seven members
and currently consists of five members. The nominees elected as directors at the Annual Meeting will serve until our next annual meeting
and until their successors are duly elected and qualified. Nasdaq Listing Rule 5605(a)(2) requires a majority of a listed company's
board of directors be composed of independent directors. In addition, Nasdaq Listing Rules require that, subject to specified exceptions,
each member of a listed company's audit, compensation, and nominating committees be independent, and that compensation and audit
committee members also satisfy additional independence criteria under the Exchange Act. Compensation committee members also should qualify
as "non-employee directors" under Rule 16b-3 of the Exchange Act.

 In making the determination of whether a member
of the board is independent, the Board considers, among other things, transactions and relationships between each director and his immediate
family and the Company, including those reported under the caption " Certain Relationships and Related-Party Transactions."
The purpose of this review is to determine whether any such relationships or transactions are material and, therefore, inconsistent with
a determination that the directors are independent. On the basis of such review and its understanding of such relationships and transactions,
the Board affirmatively determined that Robert Fagenson, Michael Turmelle, Carl Weimer and Javad Shabani are qualified as independent
and that they have no material relationship with us that might interfere with his exercise of independent judgment.

 Board Committees; Audit Committee Financial
Expert; Stockholder Nominations

 The Board has established an audit committee,
a compensation committee and a nominating and corporate governance committee. Each such committee has its own charter, which is available
on our website at www.quantumcomputing.com. Each of such Board committees has the composition and responsibilities described below.

 The following table identifies the committee members:

 Name

 Audit

 Compensation

 Nominating and
 Corporate
 Governance

 Independent

 Robert Fagenson

 X

 Chairman

 X

 X

 Michael Turmelle

 Chairman

 X

 X

 X

 Javad Shabani

 X

 X

 X

 Carl Weimer

 X

 Chairman

 X

 Yuping Huang

 The Board has determined that Michael Turmelle
is an "audit committee financial expert," as such term is defined in Item 407(d)(5) of SEC Regulation S-K.

 Members will serve on these committees until their
resignation or until otherwise determined by the Board.

 Involvement in Certain Legal Proceedings.

 Our Chief Executive Officer, Dr. McGann, was the
Chief Executive Officer of Implant Sciences Corporation, when it filed a petition for bankruptcy on October 11, 2016 in the Delaware Bankruptcy
Court.

 With the exception of the foregoing, to the best
of our knowledge, none of our directors or executive officers has, during the past ten years:

 been
 convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor
 offenses);

 had
 any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business
 association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years
 prior to that time;

 been
 subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction
 or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in
 any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be
 associated with persons engaged in any such activity;

 been
 found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures
 Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended,
 or vacated;

 been
 the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
 reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged
 violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions
 or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution,
 civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting
 mail or wire fraud or fraud in connection with any business entity; or

 been
 the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization
 (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange
 Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
 associated with a member.

 ITEM 11. EXECUTIVE COMPENSATION

 Summary Compensation Table

 The following summary compensation table sets
forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2024
and 2023.

 2024 EXECUTIVE OFFICER COMPENSATION TABLE

 Name and Principal Position

 Year

 Salary
 ($)

 Bonus
 ($)

 Stock Awards
 ($)

 Option Awards
 ($)

 All Other Compensation
 ($)

 Total
 ($)

 William McGann (1)

 2024

 402,216

 42,188

 151,911

 596,314

 Chief Executive Officer and President

 2023

 403,074

 207,488

 610,562

 Chris Boehmler (2)

 2024

 300,451

 70,313

 174,000

 313,062

 857,826

 Chief Financial Officer

 2023

 260,246

 5,000

 75,648

 163,101

 503,995

 Robert Liscouski (3)(4)

 2024

 33,490

 193,200

 366,667

 593,357

 Chairman

 2023

 403,130

 75,263

 478,393

 Yuping Huang

 2024

 380,369

 33,751

 414,120

 Chief Quantum Officer

 2023

 400,300

 106,496

 506,796

 (1)
 Dr.
McGann was appointed CEO and President effective February 1, 2024; prior to that time, he served as the Company's Chief Operating
Officer and Chief Technology Officer.

 (2)

 Mr. Boehmler was appointed Chief Financial Officer of the Company on July 1, 2023.

 (3)
 Mr.
Liscouski was terminated as CEO and President effective January 31, 2024.

 (4)
 All
other compensation amounts for 2024 consist of severance payments, per Mr. Liscouski's Separation Agreement and General Release.

 Employment Agreements and Change-in-Control
Provisions

 Executive Employment Agreements

 Dr. McGann Employment Agreement

 We entered into an employment agreement with Dr. William
J. McGann, our Chief Executive Officer and President, on January 3, 2022, as amended on February 1, 2024 and December 30, 2024.
Dr. McGann's employment agreement, as amended, is for a term ending on December 31, 2025. Dr. McGann's employment
agreement, as amended, provides for an annual base salary of $420,000, subject to annual review and adjustment as determined by the Board
or its compensation committee. Dr. McGann is also eligible to earn an annual cash bonus in an amount of up to 37.5% of his base salary,
subject to achieving certain performance milestones established and approved by the Board, with a minimum annual cash bonus of 5%. Pursuant
to the agreement, on January 3, 2022, Dr. McGann was granted options to purchase up to 535,000 shares of our common stock, with
one-third of the options vesting immediately upon grant and one-third vesting upon each of the first and second anniversary
of the date of grant.

 Pursuant to the terms of his employment agreement,
the Company may terminate Dr. McGann's employment with or without Cause, as defined in the agreement, and Dr. McGann may
terminate his employment with or without Good Reason, as defined in the agreement, upon written notice to the Company as set forth in
the agreement. Upon termination of Dr. McGann's employment by the Company without Cause or by Dr. McGann for Good Reason,
the Company shall continue to pay Dr. McGann his then current monthly base salary for 12 months from the date of termination.
The Company must also continue Dr. McGann's coverage under and its contributions to his health care, dental, and life insurance
benefits for six months, unless he is or becomes covered by an equivalent benefit, and pay him a pro rata portion of any bonus he
has earned prior to his termination. In addition, if the Company terminates Dr. McGann's employment without Cause or he terminates
his employment for Good Reason within 12 months after a Change of Control, as define in the agreement, or an acquisition, then the
Company must pay to Dr. McGann an additional sum equal to 12 months of his base salary.

 As a full-time employee of the Company, Dr. McGann
is eligible to participate in all of the Company's bonus and benefit programs.

 Mr. Boehmler Employment Agreement

 We entered into an employment agreement with Mr.
Christopher Boehmler, our Chief Financial Officer, dated as of June 26, 2023, pursuant to which Mr. Boehmler serves as our Chief
Financial Officer. The agreement provides for an indefinite term, that Mr. Boehmler's employment is at-will, and that either the
Company or Mr. Boehmler can terminate his employment for any reason. Mr. Boehmler's employment agreement provides for an annual
base salary of $300,000 per year, subject to annual review and adjustment as determined by the Board or its compensation committee. Under
his employment agreement, Mr. Boehmler is also eligible for an annual incentive bonus in the amount of up to 50% of his base salary, subject
to Mr. Boehmler achieving certain performance milestones established by the Board or its compensation committee, and, subject to
Board approval, an annual grant of options to purchase 125,000 shares of our common stock at an exercise price equal to 110% of the grant
date fair market value, one-third of which shall vest on the grant date and the remainder becoming exercisable in equal monthly installments
over the following three years. Pursuant to the agreement, Mr. Boehmler was issued options to purchase 300,000 shares of the Company's
common stock in 2023, 100,000 of which vested on the grant date and 100,000 of which shall vest on each of the 12- and 24-month anniversary
of the grant date.

 If the Company terminates Mr. Boehmler's
employment without Cause, as defined in the agreement, or Mr. Boehmler terminates his employment for Good Reason, as defined in the agreement,
with 90 days prior notice to the Company and subject to his execution of a release in favor of the Company, the Company shall pay Mr.
Boehmler an amount equal to his then current monthly base salary for 12 months from the date of termination. The Company must also, subject
to his timely election of continuation coverage under COBRA, continue payment or reimbursement of 100% of Mr. Boehmler's premiums
for such health insurance coverage for six months following his termination or until he becomes covered by an equivalent benefit, and
pay him a pro rata portion of any bonus he has earned prior to his termination. In addition, if the Company terminates Mr. Boehmler's
employment without Cause or he terminates his employment for Good Reason within 12 months after a Change of Control, as define in the
agreement, then the Company must pay to Mr. Boehmler an additional sum equal to 12 months of his base salary.

 As a full-time employee of the Company, Mr. Boehmler
is eligible to participate in all of the Company's benefit programs.

 Mr. Liscouski Employment Agreement

 The Company and Mr. Robert Liscouski were parties
to an amended and restated employment agreement dated as of April 26, 2021, pursuant to which Mr. Liscouski served as our Chief Executive
Officer during the fiscal years ended December 31, 2022 and 2023 (the "Liscouski Employment Agreement"). The Liscouski Employment
Agreement provided for an initial term of three years and would be automatically renewed for consecutive one-year terms at the end of
the initial term unless terminated or either party provided notice of non-renewal to the other. The agreement provided that Mr. Liscouski
would receive an annual base salary of $400,000, subject to review and increases (but not decreases) by the Board or its compensation
committee and be eligible to earn a performance bonus of up to 50% of his base salary subject to his achieving certain performance milestones
established by the Board. The agreement also provided that, beginning on the first anniversary thereof, Mr. Liscouski would receive an
annual grant of options to purchase 150,000 shares of our common stock at an exercise price equal to 110% of the grant date fair market
value, with one-third vesting on the date of grant and the remainder vesting in equal monthly installments thereafter. Pursuant to the
Liscouski Employment Agreement, Mr. Liscouski also received (i) options to purchase 250,000 shares of common stock of the Company upon
execution of the agreement and (ii) 250,000 options to purchase shares of common stock of the Company upon the Company's listing
on Nasdaq.

 In connection with the termination of Mr. Liscouski
employment as our Chief Executive Officer on January 31 2024, the Company and Mr. Liscouski entered into a Separation Agreement and General
Release. Pursuant to the separation agreement, the Company agreed to pay Mr. Liscouski $400,000, representing 12 months of his base salary,
on the Company's regular payroll dates for 12 months following his termination, to grant him 168,000 shares of Company common stock,
and, subject to his timely election of continuation coverage under COBRA, to continue to pay or reimburse 100% of his premiums for such
health insurance coverage for 12 months following his termination or until he becomes covered by an equivalent benefit. The separation
agreement also provides that Mr. Liscouski's unvested options and restricted stock grants vested as of his termination date.

 We also entered into an agreement with Mr. Liscouski, effective as
of February 1, 2024, which provides that the Company will pay him a monthly fee of $12,500 for his service as a Director of the Company
(including as Chairman of the Board). Such monthly fee will be in lieu of the standard compensation we pay to our directors. Mr. Liscouski
served on the Board of Directors from February 2018 to December 2024.

 Outstanding Equity Awards at Fiscal Year
End

 The following table sets forth information regarding
equity awards held by our named executive officers as of December 31, 2024:

 Option Awards

 Stock Awards

 Name

 securities
 underlying
 unexercised
 options
 (#)
 exercisable

 securities
 underlying
 unexercised
 options
 (#)
 unexercisable

 Option
 exercise
 price
 ($)

 Option
 expiration
 date

 shares or
 units of
 stock that
 have not
 vested
 (#)

 Market
 value of
 shares or
 units of
 stock that
 have not
 vested
 ($)

 William J. McGann (1)

 535,000

 2.40

 January 24, 2027

 William J. McGann

 1,000,000

 2.37

 October 17, 2027

 Chris Boehmler (2)

 60,834

 30,416

 2.56

 March 28, 2027

 129,850

 2,149,018

 Chris Boehmler

 5,834

 2,916

 2.37

 October 12, 2027

 Chris Boehmler

 200,000

 100,000

 1.18

 December 27, 2028

 Chris Boehmler

 53,241

 71,759

 0.46

 October 4, 2029

 -

 -

 Robert Liscouski (3)

 75,000

 1.00

 May 22 2025

 250,000

 6.85

 April 26, 2026

 250,000

 2.40

 January 24, 2027

 1,500,000

 2.37

 October 17, 2027

 150,000

 2.61

 October 17, 2027

 150,000

 1.44

 December 27, 2028

 (1)
 Dr. McGann's
stock options expiring January 24, 2027 vested as follows: (i) 178,333 options vested on January 24, 2022; (ii) 178,333
options vested on January 24, 2023; and (iii) 178,334 options vested on January 24, 2024. Dr. McGann's stock
options expiring on October 17, 2027 vested as follows: (i) 750,000 options vested on October 17, 2022; and (ii) 250,000
options vested on December 31, 2022.

 (2)
 Mr. Boehmler's
stock options expiring March 28, 2027 and October 12, 2027 vest as follows: (i) 33,334 options vested on March 28,
2023; (ii) 33,334 options vested on March 28, 2024; and (iii) 33,332 options vest on March 28, 2025. Mr. Boehmler's
stock options expiring on December 27, 2028 vest as follows: (i) 100,000 options vested on July 1, 2023; (ii) 100,000
options vested on July 1, 2024; and (iii) 100,000 options vest on July 1, 2025. Mr. Boehmler's stock options
expiring October 4, 2029 vest as follows: (i) 48,611 vested as of October 4, 2024; and (ii) the remainder vest in equal monthly
increments of 2,315 shares through July 1, 2027, with the final month vesting 2,309 shares. Mr. Boehmler's 129,850 shares
of stock vest on December 31, 2025.

 (3)
 25,000 of Mr. Liscouski's stock options expiring May 22,
2025 vested on each of April 8, 2021; April 8, 2022; and April 8, 2023. Mr. Liscouski's stock options expiring
April 26, 2026 vested on April 26, 2021. Mr. Liscouski's stock options expiring January 27, 2022 vested as follows:
(i) 83,333 options vested on July 15, 2022; (ii) 83,333 options vested on July 15, 2023; and (iii) 83,334 options
vested on March 15, 2024, pursuant to this separation agreement. Mr. Liscouski's stock options expiring October 17,
2027 with an exercise price of $2.37 vested as follows: (i) 1,000,000 options vested on October 17, 2022; and (ii) 500,000
options vested on December 31, 2022. Mr. Liscouski's stock options expiring October 17, 2027 with an exercise price of
$2.61 vested as follows: (i) 63,890 options vested on October 17, 2022; and (ii) 47,226 vested in equal monthly increments
of 2,778 shares through February 26, 2024, with the remaining 38,884 options vested March 15, 2024. Mr. Liscouski's stock options
expiring December 27, 2028 vested as follows: (i) 72,224 vested as of December 31, 2023; and (ii) 5,556 vested in
equal monthly increments of 2,778 shares through February 26, 2024, with the remaining 72,220 options vested March 15, 2024. Pursuant
to Mr. Liscouski's Separation Agreement all unvested options at the time of Mr. Liscouski's Separation Agreement vested
effective March 15, 2024.

 Action to Recover Erroneously Awarded Compensation

 Subsequent to the issuance of our Annual Report on Form 10-K for the
year ended December 31, 2023, and our subsequent retention of BPM LLP to replace BF Borgers CPA PC as our independent registered public
accounting firm, management became aware of various adjustments to be recorded to our consolidated financial statements. On September
11, 2024, we filed Amendment 1 to our Annual Report on Form 10-K for the year ended December 31, 2023, restating our financial statements
for the years ended December 31, 2023 and 2022 to correct errors primarily related to purchase accounting for the QPhoton Merger, stock-based
compensation, and financing costs. We also amended our financial statements for the nine months ended September 30, 2023, in line with
the restatement of our audited consolidated financial statements. These corrections impacted net loss, goodwill, intangible assets, liabilities,
and stockholders' equity.

 As the Company does not award incentive-based
compensation that would have been subject to recovery based on financial metrics, no recovery was required or sought from any of our executive
officers under the Company's Compensation Recovery Policy.

 Director Compensation

 During the year ended December 31, 2024, the Company's non-employee
directors each received compensation of $9,000 per quarter for their services as directors, plus an additional $4,000 per quarter if they
also served as a committee Chair. Amounts are prorated to the amount of service per quarter.

 Name

 Fees Earned or
 Paid in Cash
 ($)

 Stock
 Awards
 ($)

 Stock
 ($)

 Total
 ($)

 Robert Liscouski (1)

 129,032

 129,032

 Michael Turmelle

 52,000

 32,492

 84,492

 Carl Weimer

 36,913

 32,492

 69,405

 Robert Fagenson

 52,000

 32,492

 84,492

 Javad Shabani

 27,320

 12,376

 27,433

 67,129

 (1)
 Upon
Mr. Liscouski's termination as CEO, the Board approved a separate compensation arrangement for his service as Chairman of $12,500
per month, effective February 1, 2024 through December 10, 2024.

 In 2025, the Board approved an increase in the non-employee director
compensation to a base annual stipend of $60,000, with an annual stipend of $12,000 each to the Vice Chairman and the Chair of the Audit
Committee, and annual stipends of $6,000 each to the Chairs of the Risk, Compensation, and Nominating and Governance committees, all cash
stipends to be paid in equal quarterly installments.

 Policies And Practices Related to the Grant
of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information

 We do not grant equity awards in anticipation
of the release of material nonpublic information, and we do not time the release of material nonpublic information based on equity award
grant dates or for the purpose of affecting the value of executive compensation.

 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 The following table sets forth certain information
as of March 18, 2025 concerning the beneficial ownership of common stock for: (i) each of our directors, (ii) each named executive officer
as included in the Summary Compensation Table under "Executive Compensation" above, (iii) all executive officers and directors
as a group, and (iv) each person (including any "group" as that term is used in Section 13(d)(3) of the Exchange Act) known
by us to be the beneficial owner of 5% or more of our common stock. The address for each of the persons below who are beneficial owners
of 5% or more of our common stock is our corporate address at 5 Marine View Plaza, Suite 214, Hoboken, NJ 07030.

 Beneficial ownership has been determined in accordance
with the rules of the SEC and is calculated based on 137,244,545 shares of our common stock issued and outstanding as of March 18, 2025.
Shares of common stock subject to options, warrants, preferred stock or other securities convertible into common stock that are currently
exercisable or convertible, or exercisable or convertible within 60 days of March 18, 2024, are deemed outstanding for computing the percentage
of the person holding the option, warrant, preferred stock, or convertible security but are not deemed outstanding for computing the percentage
of any other person. Under the SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power,"
which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial ownership within 60 days through the exercise of any stock
option, warrant or other right. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a
person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Unless otherwise indicated,
each of the stockholders named in the table below, or his or her family members, has sole voting and investment power with respect to
such shares of our common stock.

 Except as indicated by the footnotes below, we
believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment
power with respect to all shares of common stock that they beneficially own.

 Name and Address of Beneficial Owner

 Common Stock
 Owned
 Beneficially

 Percent of
 Class

 Named Executive Officers and Directors

 Dr. William McGann, Chief Executive Officer (1)

 1,722,930

 1.2
 %

 Chris Boehmler, Chief Financial Officer (2)

 727,876

 0.5

 Dr. Yuping Huang (3)

 24,251,256

 17.2

 Robert Fagenson (4)

 775,000

 0.6

 Michael Turmelle (5)

 575,000

 0.4

 Dr. Carl Weimer (6)

 225,000

 0.2

 Dr. Javad Shabani (7)

 120,219

 0.1

 All directors and officers as a group (8 persons)

 28,397,281

 20.1

 Other 5% shareholders

 Total

 28,158,959

 20.00
 %

 (1)
of 162,100 shares of common stock owned currently and 1,560,830 shares of common stock underlying vested options to purchase shares of
common stock.

 (2)
of 320,010 shares of common stock owned currently and 407,866 shares of common stock underlying vested options to purchase shares of
common stock

 (3)
of 23,936,906 shares of common stock owned currently and 314,350 shares of common stock underlying vested options to purchase shares
of common stock. This does not include any shares that could be purchased upon exercise of unvested warrants received as consideration
in the QPhoton Merger that may vest upon the exercise of outstanding options and other warrants held by officers, employees, directors
and investors.

 (4)

 Consists of 100,000 shares of common stock owned currently and 675,000 shares of common stock underlying vested options to purchase shares of common stock.

 (5)
of 575,000 shares of common stock underlying vested options to purchase shares of common stock.

 (6)
of 225,000 shares of common stock underlying vested options to purchase shares of common stock.

 (7)
of 12,500 shares of common stock owned currently and 107,719 shares of common stock underlying vested options to purchase shares of common
stock.

 Changes in Control

 We are not aware of any arrangements that may
result in "changes in control" as that term is defined by the provisions of Item 403(c) of Regulation S-K.

 Equity Compensation Plan Information

 On July 5, 2022, the Board adopted the Quantum
Computing Inc. 2022 Equity and Incentive Plan (the "2022 Plan"), which includes provisions for annual automatic evergreen
increases of 1,000,000 shares of common stock. The total number of shares of our common stock reserved for issuance under the 2022 Plan,
as of March 18, 2025, is 19.0 million. The principal purpose of the 2022 Plan is to provide an incentive to designated employees, certain
consultants and advisors who perform services for us and non-employee directors to contribute to our growth by continuing to align the
interests of participants with the interests of our stockholders. The 2022 Plan was approved by a majority of the shareholders in September
2022.

 The table below sets forth certain information
as of our fiscal year ended December 31, 2024 regarding the shares of our common stock available for grant or granted under our equity
compensation plan.

 Plan Category

 securities to
 be issued
 upon
 exercise of
 outstanding
 options (2)

 Weighted-
 average
 exercise
 price of
 outstanding
 options

 securities
 available for
 future
 issuance
 under equity
 compensation
 plans

 Equity compensation plan approved by security holders – 2022 Quantum Computing Inc. Equity Incentive Plan, as amended

 10,454,781

 $
 1.78

 2,348,425

 Equity compensation plan approved by security holders – 2019 Quantum Computing Inc. Equity Incentive Plan, as amended

 1,760,500

 $
 3.90

 Equity compensation not approved by shareholders (1)

 767,500

 $
 6.28

 (1)
 The
total number of stock options issued and outstanding as of March 18, 2025 is 13,555,511.

 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 There have been no transactions involving the
Company since January 1, 2024, or any currently proposed transactions, in which the Company was or is to be a participant and the amount
involved exceeds $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our common stock,
or any immediate family member of, or person sharing a household with, any of these individuals, had or will have a direct or indirect
material interest, other than compensation arrangements that are described under the section captioned "Executive Compensation."

 Please see "Board Composition and Director
Independence" under "Item 10, Directors, Executive Officers and Corporate Governance" for a discussion of our independent
directors.

 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 BPM LLP served as our independent registered public
accountants for the years ended December 31, 2024 and 2023.

 Audit Fees

 The Company originally retained BF Borgers CPA PC ("BF Borgers")
as its independent registered public accounting firm for the Company's fiscal years ended December 31, 2024 and 2023, then following
an order by the SEC on May 3, 2024 suspending BF Borgers from appearing and practicing as an accountant before the SEC, the Company subsequently
retained BPM LLP as its independent registered public accounting firm to replace BF Borgers.

 For such professional services rendered by BPM LLP for the audit of
our restated consolidated financial statements, we incurred approximately $332 thousand and $337 thousand, respectively, for the Company's
fiscal years ended December 31, 2024 and 2023.

 For such professional services rendered by BF
Borgers for its original audit of our consolidated financial statements, we were billed approximately $110 thousand and $132 thousand,
respectively, for the Company's fiscal years ended December 31, 2024 and 2023.

 For the Company's fiscal years ended December 31, 2024 and 2023,
we were billed in fiscal year ended December 31, 2024 approximately $27 thousand for professional services rendered by BF Borgers and
$105 thousand by BPM LLP, respectively, related to the Company's Registration Statements on Form S-3 and Form S-1 and amendments
thereto filed with the SEC in those years.

 Tax Fees

 We were billed approximately $33 thousand by BPM
LLP for the Company's fiscal year ended December 31, 2024 and $9 thousand by BF Borgers for the Company's fiscal year ended
December 31, 2023 for professional services rendered for tax compliance, tax advice, and tax planning.

 Pre-Approval Policies

 All of the above services and fees were reviewed and approved by the
Audit Committee. No services were performed before or without approval.

 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 Exhibit

 Reference

 Filed or Furnished

 Number

 Exhibit Description

 Form

 Exhibit

 Filing Date

 Herewith

 2.1

 Agreement and Plan of Merger by and among Quantum Computing Inc., Project Alpha Merger Sub I, Inc., Project Alpha Merger Sub II, LLC, QPhoton, Inc., and Yuping Huang, dated as of May 18, 2022

 10.1

 05/23/2022

 3.1(i)

 Amended and Restated Certificate of Incorporation

 10-K/A

 3.1(i)

 07/10/2023

 3.1(ii)

 Certificate of Designations of the Series A Convertible Preferred Stock

 3.1

 11/17/2021

 3.1(iii)

 Certificate of Amendment of Certificate of Designations of Series A Convertible Preferred Stock of Quantum Computing Inc., filed with the Delaware Secretary of State on December 16, 2021

 3.1

 12/17/2021

 3.1(iv)

 Certificate of Designation with respect to the Series B Preferred Stock, par value $0.0001 per share, dated June 14, 2022

 3.1

 3.2

 Amended and Restated By-laws

 10-K/A

 3.2

 07/10/2023

 4.1

 Common Stock Specimen

 10-12(g)

 4.1

 01/09/2019

 4.2

 Description of Securities

 4.4

 04/01/2024

 4.3

 Form of Placement Agent Warrant

 4.1

 4.4

 Form of Placement Agent Warrant

 4.1

 01/08/2025

 4.5

 Form of Placement Agent Warrant

 X

 4.6

 Unsecured Promissory Note issued by QPhoton, Inc. to Quantum Computing, Inc., in the amount of $1,250,000, dated February 18, 2022

 10.2

 02/23/2022

 10.1*

 2019 Quantum Computing Inc. Equity and Incentive Plan

 S-1

 10.8

 11/22/2019

 10.2*

 Form Director Agreement

 10.1

 02/23/2021

 10.3*

 Amended and Restated Employment Agreement, dated as of April 26, 2021, by and between Quantum Computing Inc. and Robert Liscouski

 10.1

 04/30/2021

 10.4*

 Employment Agreement between Christopher Roberts and Quantum Computing, Inc., dated as of April 26, 2021

 10.2

 04/30/2021

 10.5*

 Employment Agreement between by and between Quantum Computing Inc. and William McGann, dated as of January 3, 2022

 10.2

 01/03/2022

 10.6

 Note Purchase Agreement, dated as of February 18, 2022, between Quantum Computing Inc. and QPhoton, Inc.

 10.1

 02/23/2022

 10.7

 Escrow Agreement, dated as of June 16, 2022, by and among Quantum Computing Inc., Yuping Huang and Worldwide Stock Transfer, LLC

 10.2

 10.8

 Stockholders Agreement by and among Quantum Computing, Inc. and each of the Stockholders set forth on Exhibit A thereto, dated as of June 16, 2022

 10.3

 10.9

 Form
 Registration Rights Agreement

 10.4

 10.10*

 Employment
Agreement, dated as of June 15, 2022, by and between Quantum Computing Inc. and Yuping Huang

 10.5

 10.11

 ATM
Agreement, dated as of December 5, 2022, between Quantum Computing Inc. and Ascendiant Capital Markets, LLC

 1.1

 12/06/2022

 10.12*

 Agreement between Quantum Computing Inc. and Dr. Carl Weimer, dated January 6, 2023

 10.1

 01/09/2023

 10.13

 Employment
Agreement between Quantum Computing Inc. and Christopher Boehmler, dated as of June 26, 2023

 10.1

 06/26/2023

 10.14*

 Quantum Computing Inc. 2022 Equity and Incentive Plan

 10-K/A

 10.42

 07/10/2023

 10.15

 First
Amendment to ATM Agreement, dated as of August 17, 2023, between Quantum Computing Inc. and Ascendiant Capital Markets, LLC

 1.1

 08/21/2023

 10.16

 Series A Preferred Redemption and Waiver Agreement, dated as of March 19, 2024

 10.1

 03/25/2024

 10.17

 Separation Agreement, dated as of March 15, 2024, by and between Quantum Computing, Inc. and Robert Liscouski

 10.26

 04/01/2024

 10.18*

 Agreement, dated as of March 8, 2024, by and between Quantum Computing, Inc. and Robert Liscouski

 10.27

 04/01/2024

 10.19

 Director Agreement between Quantum Computing Inc. and Dr. Javad Shabani, dated April 19, 2024

 10.1

 04/25/2024

 10.20

 Modification 2 to Consulting Services Agreement, dated as of June 18, 2024, by and between Quantum Computing, Inc. and Christopher Roberts

 X

 10.21

 Secured Promissory Note issued to Streeterville Capital, LLC, dated August 6, 2024

 4.1

 10.22

 Securities Purchase Agreement between Quantum Computing Inc. and Streeterville Capital, LLC, dated August 6, 2024

 10.1

 10.23

 Security Agreement between Quantum Computing Inc. and Streeterville Capital, LLC, dated August 6, 2024

 10.2

 10.24

 IP Security Agreement between Quantum Computing Inc. and Streeterville Capital, LLC, dated August 6, 2024

 10.3

 10.25

 Guaranty by QPhoton, LLC, Qubittech International, Inc., Qubittech, Inc., and QI Solutions, Inc., dated August 6, 2024

 10.4

 10.26

 Form
 of Securities Purchase Agreement, dated as of November 14, 2024, between Quantum Computing Inc. and each Purchaser (as defined therein)

 10.1

 11/15/2024

 10.27

 Placement Agency Agreement, dated November 14, 2024, between Quantum Computing Inc. and Titan Partners Group LLC, a division of American Capital Partners, LLC

 10.2

 11/15/2024

 10.28

 Form of Lock-Up Agreement dated November 14, 2024

 10.3

 11/15/2024

 10.29

 Amendment to Employment Agreement by and between Quantum Computing Inc. and Yuping Huang, dated as of September 1, 2024

 10.5

 11/06/2024

 10.30

 Modification 3 to Consulting Services Agreement, dated as of December 20, 2024, by and between Quantum Computing, Inc. and Christopher Roberts

 X

 10.31

 Form
 of Registered Offering Purchase Agreement, dated as of December 10, 2024, between Quantum Computing Inc. and each Purchaser (as defined
 therein)

 10.1

 10.32

 Form of Placement Purchase Agreement, dated as of December 10, 2024, between Quantum Computing Inc. and each Purchaser (as defined therein)

 10.2

 10.33

 Placement Agency Agreement, dated December 10, 2024, between Quantum Computing Inc. and Titan Partners Group LLC, a division of American Capital Partners, LLC

 10.3

 10.34

 Form of Lock-Up Agreement dated December 12, 2024

 10.4

 10.35

 Second Amendment to Employment Agreement between Quantum Computing Inc. and William J. McGann, dated as of December 30, 2024

 10.1

 12/31/2024

 10.36

 Form
 of Purchase Agreement, dated as of January 7, 2025, between Quantum Computing Inc. and each Purchaser (as defined therein)

 10.1

 01/08/2025

 10.37

 Placement Agency Agreement, dated January 7, 2025, between Quantum Computing Inc. and Titan Partners Group LLC, a division of American Capital Partners, LLC

 10.2

 01/08/2025

 10.38

 Form of Lock-Up Agreement dated January 7, 2025

 10.3

 01/08/2025

 10.39

 First Amendment to Employment Agreement between Quantum Computing Inc. and William J. McGann, dated as of February 1, 2024

 S-1

 10.7

 01/22/2025

 14.1

 Quantum Computing Inc. Code of Ethics

 14.1

 09/25/2024

 19.1

 Quantum Computing Inc. Insider Trading Policy

 X

 21.1

 List of Subsidiaries

 X

 23.1

 Consent of BPM LLP, Independent Registered Public Accounting Firm

 X

 31.1

 Principal Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 X

 31.2

 Principal Financial Officer Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 X

 32.1

 Principal Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 X

 32.2

 Principal Financial Officer Certification Pursuant to Item 601(b)(32) of Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 X

 97.1

 Policy relating to recovery of erroneously awarded compensation.

 97.1

 04/01/2024

 101.INS

 X

 101.SCH

 X

 101.CAL

 X

 101.DEF

 X

 101.LAB

 X

 101.PRE

 X

in Exhibit 101).

 X

 *
 Indicates
a management contract or compensatory plan or arrangement.

 SIGNATURES

 Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

 Date: March 20, 2025

 Quantum Computing Inc.

 By:

 /s/ Dr. William McGann

 Dr. Willan McGann

 Chief Executive Officer

 Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on
the dates indicated.

 Name

 Capacity

 Date

 /s/ Yuping Huang

 Chairman of the Board of Directors and Chief Quantum Officer

 Yuping Huang

 /s/ Dr. William McGann

 Chief Executive Officer

 Dr. Willan McGann

 (Principal Executive Officer)

 /s/ Christopher Boehmler

 Chief Financial Officer, Treasurer

 Christopher Boehmler

 (Principal Financial Officer and

Principal Accounting Officer)

 /s/ Michael Turmelle

 Michael Turmelle

 /s/ Robert Fagenson

 Vice Chairman of the Board of Directors

 Robert Fagenson

 /s/ Dr. Carl Weimer

 Dr. Carl Weimer

 /s/ Dr. Javad Shabani

 Dr. Javad Shabani

 Index to the Consolidated
Financial Statements

 Description

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 207)

 Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023

 Consolidated Statement of Operations for the Year Ended December 31, 2024 and 2023

 Consolidated Statement of Stockholders' Equity for the Year Ended December 31, 2024 and 2023

 Consolidated Statement of Cash Flows for the Year Ended December 31, 2024 and 2023

 Notes to the Consolidated Financial Statements

 F- 1

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

 To the Board of Directors and Stockholders of

 Quantum Computing Inc.

 Opinion on the Consolidated Financial Statements

 We have audited the accompanying consolidated
balance sheets of Quantum Computing Inc. (a Delaware Corporation) and its subsidiaries (collectively, the "Company") as of
December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive loss, mezzanine and stockholders'
equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to
as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash
flows for the each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted
in the United States of America.

 Basis for Opinion

 These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financing reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.

 Critical Audit Matter

 The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 Valuation of Warrant Liabilities

 As described in Notes 1 and Note 10, on June 16,
2022, the Company merged with QPhoton, Inc., which was accounted for as a business combination using the acquisition method of accounting.
In conjunction with the merger, the Company issued warrants that become exercisable when and if stock options and warrants outstanding
as of the time of the merger are exercised. The Company is accounting for these warrants as a derivative liability and is valued at $40.5
million as of December 31, 2024 and resulted in a mark-to-market loss of $40.5 million in the year ended December 31, 2024.

 The principal considerations for our determination
that performing procedures relating to the valuation of the derivative liability is a critical audit matter due to the significant
amount of judgment by management required in estimating the fair value of the warrants, including the use of valuation methodologies that
were sensitive to significant assumptions, specifically the probability of the underlying options and warrants being exercised, which
is affected by expected future market or economic conditions, which in turn led to significant auditor judgment, subjectivity and effort
in performing audit procedures and evaluating audit evidence relating to the analysis..

 Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures
included, among others, assessing the appropriateness of the valuation methodologies and testing the significant assumptions discussed
above, specifically the probability of the underlying options and warrants being exercise, and other factors considered by management
in developing the model.

 /s/ BPM LLP

 We have served as the Company's auditor
since 2024.

 San Jose, California

 F- 2

 Consolidated Balance Sheets

 (In thousands, except par value)

 2024

 2023

 Assets

 Current assets:

 Cash and cash equivalents

 $
 78,945

 $
 2,059

 Accounts receivable, net

 Inventory

 Loans receivable, net

 -

 Prepaid expenses and other current assets

 Total current assets

 79,151

 2,656

 Property and equipment, net

 8,212

 2,870

 Operating lease right-of-use assets

 1,522

 1,051

 Intangible assets, net

 8,972

 12,076

 Goodwill

 55,573

 55,573

 Other non-current assets

 Total assets

 $
 153,559

 $
 74,355

 Liabilities and Stockholders' Equity

 Current liabilities:

 Accounts payable

 $
 1,372

 $
 1,462

 Accrued expenses

 2,134

 Financial liabilities, net of issuance costs

 -

 1,925

 Deferred revenue

 -

 Other current liabilities

 Total current liabilities

 4,559

 4,812

 Derivative liability

 40,532

 -

 Operating lease liabilities

 1,181

 Total liabilities

 46,272

 5,652

 Contingencies (see Note 8)

 Stockholders' equity:

 Preferred stock, $ 0.0001 par value, 1,550 shares Series A Preferred authorized; no shares and 1,490 thousand shares issued and outstanding as of December 31, 2024 and 2023, respectively; 3,080 thousand shares of Series B Preferred Stock authorized; no shares issued and outstanding as of December 31, 2024 and 2023

 -

 -

 Common stock, $ 0.0001 par value, 250,000 thousand shares authorized; 129,012 thousand and 77,451 thousand shares issued and outstanding as of December 31, 2024 and 2023, respectively

 Additional paid-in capital

 307,756

 200,635

 Accumulated deficit

 ( 200,482
)

 ( 131,940
)

 Total stockholders' equity

 107,287

 68,703

 Total liabilities and stockholders' equity

 $
 153,559

 $
 74,355

 The accompanying notes are an integral part
of these consolidated financial statements.

 F- 3

 Consolidated Statements of Operations

 (In thousands, except per share data)

 2024

 2023

 Total revenue

 $

 $

 Cost of revenue

 Gross profit

 Operating expenses

 Research and development

 11,318

 8,891

 Sales and marketing

 1,818

 1,806

 General and administrative

 12,913

 15,708

 Total operating expenses

 26,049

 26,405

 Loss from operations

 ( 25,937
)

 ( 26,243
)

 Non-operating income (expense)

 Interest and other income

 Interest expense, net

 ( 2,496
)

 ( 1,602
)

 Change in fair value of warrant liabilities

 ( 40,532
)

 Loss before income tax provision

)

)

 Income tax provision

 -

 -

)

)

 Less: Series A convertible preferred stock dividends

 -

 Net loss attributable to common stockholders

 $
)

 $
 ( 27,883
)

 Loss per share – basic and diluted

 $
 ( 0.73
)

 $
 ( 0.42
)

 Weighted average shares used in computing net loss per common share – basic and dilutive

 93,881

 66,611

 The accompanying notes are an integral part
of these consolidated financial statements.

 F- 4

 Consolidated Statements of Mezzanine and Stockholders'
Equity

 (In thousands, except par value)

 Mezzanine

 Series A
 Preferred
 Stock

 Common Stock

 Additional Paid-in

 Accumulated

 Total Stockholders'

 Equity

 Shares

 Amount

 Shares

 Amount

 Capital

 Deficit

 Equity

 Balances, January 1, 2023

 $
 -

 1,500

 $
 -

 55,963

 $

 $
 169,175

 $
 ( 104,057
)

 $
 65,124

 Issuance of shares for cash

 -

 -

 17,572

 24,728

 -

 24,730

 Conversion of preferred stock

 -

 ( 10
)

 -

 -

 -

 Preferred stock dividends

 -

 -

 -

 -

 -

 -

 ( 861
)

 ( 861
)

 Stock-based compensation

 -

 -

 -

 2,330

 -

 4,238

 -

 4,238

 Stock-based compensation for services

 -

 -

 -

 1,575

 -

 2,493

 -

 2,493

 -

 -

 -

 -

 -

 -

)

)

 Balances, December 31, 2023

 -

 1,490

 -

 77,451

 200,635

 ( 131,940
)

 68,703

 Issuance of shares for cash

 -

 -

 -

 49,679

 106,761

 -

 106,766

 Conversion of Series A preferred stock to common stock

 ( 4,097
)

 ( 745
)

 -

 -

 4,097

 -

 4,097

 Reclassification of Series A preferred stock to mezzanine equity

 8,195

 -

 -

 -

 -

 ( 8,195
)

 -

 ( 8,195
)

 Repurchase of redeemable shares

 ( 4,098
)

 ( 745
)

 -

 -

 -

 -

 -

 -

 Stock-based compensation

 -

 -

 -

 -

 4,322

 -

 4,322

 Stock-based compensation for services

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

 -

)

)

 Balances, December 31, 2024

 $
 -

 -

 $
 -

 129,012

 $

 $
 307,756

 $
 ( 200,482
)

 $
 107,287

 The accompanying notes are an integral part
of these consolidated financial statements.

 F- 5

 Consolidated Statements of Cash Flows

 (In thousands)

 2024

 2023

 Cash flows from operating activities:

 $
)

 $
)

 Adjustments to reconcile net loss to net cash used in operations

 Depreciation and intangibles amortization

 3,798

 3,307

 Amortization of issuance costs

 2,059

 Change in fair value of warrant liability

 40,532

 ( 528
)

 Change in value of derivative

 ( 666
)

 -

 Provision for credit losses

 Other recognized losses (gains)

 Stock-based compensation expense

 5,782

 4,271

 Stock-based compensation expense for services

 Changes in operating assets and liabilities

 Accounts receivable

 ( 52
)

 Inventories

 ( 70
)

 Prepaid expenses and other current assets

 ( 110
)

 Other non-current assets

 -

 ( 69
)

 Accounts payable

 ( 90
)

 Deferred revenue

 -

 Accrued expenses and other current liabilities

 Other long-term liabilities

 ( 130
)

 ( 241
)

 Net cash used in operating activities

 ( 16,213
)

 ( 18,315
)

 Cash flows from investing activities:

 Purchase of property and equipment

 ( 6,036
)

 ( 2,112
)

 Issuance of loan receivable

 -

 ( 500
)

 Net cash used in investing activities

 ( 6,036
)

 ( 2,612
)

 Cash flows from financing activities:

 Proceeds raised from financial liabilities, net of issuance costs

 6,995

 -

 Payments of financial liabilities

 ( 10,313
)

 ( 6,187
)

 Series A Preferred stock dividend payments

 ( 215
)

 ( 865
)

 Repurchase of Series A preferred stock

 ( 4,098
)

 -

 Proceeds from issuance of common stock

 106,766

 24,730

 Net cash provided by financing activities

 99,135

 17,678

 Net increase (decrease) in cash

 76,886

 ( 3,249
)

 Cash and cash equivalents, beginning of period

 2,059

 5,308

 Cash and cash equivalents, end of period

 $
 78,945

 $
 2,059

 Supplemental disclosures of cash flow information:

 Cash paid for interest

 $

 $

 Non-cash investing and financing activities:

 Reclassification of Series A preferred stock to mezzanine equity

 $
 8,195

 $
 -

 Valuation of derivative associated with convertible financial liability

 $

 $
 -

 Conversion of Series A preferred to common stock

 $
 4,097

 $
 -

 Operating lease right-of-use assets obtained in exchange for operating lease liabilities

 $

 $
 -

 The accompanying notes are an integral part
of these financial statements.

 F- 6

 Notes to Consolidated Financial Statements

 December 31, 2024

 Note 1 – Nature of the Organization and
Business

 Corporate History

 Quantum Computing Inc. ("QCi" or the
"Company") was formed in the State of Nevada on July 25, 2001, under its original name, Ticketcart, Inc., which was changed
to Innovative Beverage Group Holdings, Inc. in 2009. The Company redomiciled to Delaware on February 22, 2018 and changed its name to
Quantum Computing Inc. Effective July 20, 2018, the trading symbol for the Company's common stock, par value $ 0.0001, on the OTC
Market changed from "IBGH" to "QUBT". On July 15, 2021 the Company uplisted to The Nasdaq Stock Market LLC. On
June 16, 2022, the Company merged with QPhoton, Inc. ("QPhoton"), a developer of quantum photonic systems and related technologies
and applications. The QPhoton Merger enabled us to develop hardware applications integrated with the Company's software platform,
Qatalyst, that existed before the QPhoton Merger.

 Nature of Business

 QCi is an American company utilizing integrated
photonics and non-linear quantum optics to develop and deliver machines for quantum computing, reservoir computing, and remote sensing,
imaging and cybersecurity applications based on patented and proprietary photonics technology. QCi's products are designed to operate
at room temperature and at very low power levels compared to other quantum systems currently available in the market, such as superconducting,
ion-trap, or annealing architectures. Our core photonics technology enables the execution of a go-to-market strategy which emphasizes
scalability, accessibility and affordability. Our quantum machines, supported by professional services through our "Quantum Solutions"
offering, enable subject matter experts (SMEs) and end users to deliver critical business solutions involving highly complex optimization
problems.

 The leading application of our quantum offerings
today is our Entropy Quantum Computing. Our longer-term product development plan is to migrate the EQC's current design, as well
as other product designs based on discrete components, to a set of optical integrated circuits (TFLN Optical Chips) built on TFLN wafers.

 Liquidity

 The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets, and the satisfaction
of liabilities in the normal course of business. We have not achieved a level of sales adequate to support the Company's cost structure.
The Company has historically incurred losses and negative cash flows from operations. During the year ended December 31, 2024, the Company
issued 49,679 shares of common stock for net proceeds of $ 106.8 million. Cash and cash equivalents on hand were $ 78.9 million as of December
31, 2024. As of December 31, 2024, the Company also had an accumulated deficit of $ 200.5 million and working capital of $ 74.6 million.
In January 2025, the Company issued 8,163,266 shares of common stock for net proceeds of $ 93.3 million. As a result, the Company has adequate
cash and cash equivalents on hand to meet its obligations over the next 12 months.

 Note 2 – Significant Accounting Policies:

 Basis of Presentation and Principles of Consolidation:

 The Company prepares its consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") as determined
by the Financial Accounting Standards Board (the "FASB"), including ASC 810, Consolidation. The accompanying consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation. The Company's fiscal year end is December 31.

 F- 7

 Risk and Uncertainties

 The Company is subject to certain risks and uncertainties
and believes changes in any of the following areas could have a material adverse effect on the Company's future consolidated financial
position or consolidated results of operations or cash flows: new product development, including market receptivity; litigation or claims
against the Company based on intellectual property, patent, product regulation or other factors; competition from other products; general
economic conditions; the ability to attract and retain qualified employees; and, ultimately, to sustain profitable operations.

 Reclassifications

 Certain reclassifications have been made to the
fiscal year 2023 consolidated financial statements to conform ot the fiscal year 2024 presentation. The reclassifications had no impact
on net loss, total assets, total liabilities, or stockholders' equity.

 Use of Estimates

 These consolidated financial statements have been
prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting period. Some of the more significant estimates required to be made by management include the valuation of goodwill and intangible
assets, deferred tax assets, equity-based transactions and liquidity assessment. Actual results may differ from these estimates.

 Segments

 Our Chief Operating Decision Maker ("CODM"),
the Chief Executive Officer, manages the Company's business activities as a single operating and reportable segment at the consolidated
level. Accordingly, our CODM uses consolidated net loss to measure segment profit or loss, allocate resources and assess performance.
Further, the CODM reviews and utilizes natural expenses, such as employee wages and benefits at a consolidated level, to manage the Company's
operations and strategic growth initiatives. Other segment items include interest income, interest expense, deferred offering costs, changes
in fair value of derivative warrant liabilities and other operational expenses which are reflected in the consolidated statements of operations.

 Cash and Cash Equivalents

 Highly liquid investments with a maturity of three
months or less when purchased are considered to be cash equivalents. The Company maintains its cash in mutual funds and deposit and money
market accounts with high quality financial institutions which, at times, may exceed federally insured limits. As of December 31, 2024
and December 31, 2023, the Company had $ 78.9 million and $ 960 thousand, respectively, in cash equivalents invested in mutual funds. The
Company has not experienced any losses on these deposits and believes it is not exposed to significant credit risk on cash.

 Revenue

 The Company recognizes revenue in accordance with
ASC 606 – Revenue from Contracts with Customers, by analyzing contracts with its customers using a five-step approach:

 1.

 Identify the contract;

 2.

 Identify the performance obligations;

 3.

 Determine the transaction price;

 4.

 Allocate the transaction price to the performance obligations; and

 5.

 Recognize revenue when performance obligations are satisfied.

 F- 8

 The revenue the Company has recognized in the
years ended December 31, 2024 and 2023 were primarily derived from contracts to perform professional services. Revenue from time and materials-based
contracts is recognized as the direct hours worked during the period times the contractual hourly rate, plus direct materials and other
direct costs as appropriate, plus negotiated materials handling burdens, if any. Revenue from units-based contracts is recognized as the
number of units delivered or performed during the period times the contractual unit price. Revenue from fixed price contracts is recognized
as work is performed with estimated profits recorded on a percentage of completion basis. The Company has no cost-plus type contracts
at this time.

 The Company includes depreciation and amortization
expenses in manufacturing overhead, which is a component of cost of revenue. However, at the present time manufacturing overhead, including
depreciation and amortization expense related to production equipment, is not material and the primary components of cost of revenue are
direct labor and direct materials, with a small amount of shipping expenses.

 The Company's revenues consist of (in thousands):

 2024

 2023

 % Change

 Services

 $

 $

 ( 2
)%

 Products

 %

 Total

 $

 $

 %

 The Company disaggregates revenue from contracts
with customers based on the timing of transfer of goods or services to customers (point-in-time or over time) and geographic region based
on the shipping location of the customer. The geographic regions that are tracked for the years ended December 31, 2024 and 2025 are the
Americas and Europe.

 Total net sales based on the disaggregation criteria
described above are as follows (in thousands):

 2024

 2023

 Point-in-Time

 Over Time

 Total

 Point-in-Time

 Over Time

 Total

 Americas

 $

 $

 $

 $

 $

 $

 Europe

 -

 -

 -

 -

 Total

 $

 $

 $

 $

 $

 $

 Accounts Receivable

 Accounts receivable consists of amounts due from
customers for work performed on contracts. The Company records accounts receivable at their net realizable value. Periodically, the Company
evaluates its accounts receivable to establish a provision for credit losses, when deemed necessary, based on the history of past write-offs,
collections and current credit conditions. The customer accounts receivable as of December 31, 2024 are considered not fully collectible
and thus the Company has recorded a provision for credit losses of $ 3.5 thousand; the customer accounts receivable as of December 31,
2023 were considered fully collectible.

 F- 9

 Provision for Credit Losses

 The Company estimates losses on loans and other
financial instruments in accordance with Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial
Instruments. ASU 2016-13 introduces the current expected credit losses ("CECL") methodology for estimating allowances for
credit losses. The CECL framework requires the Company to measure all expected credit losses for financial assets held at the reporting
date based on historical experience, current conditions and reasonable and supporting forecasts. Under CECL, the allowance for credit
losses is measured as the difference between the financial asset's cost basis and the net amount expected to be collected on the
financial asset. CECL allows us to use information about past events including historical loan loss experience, current conditions, and
reasonable and supportable forecasts to assess the collectability of the financial assets. The receivables for financial assets as of
December 31, 2024 and 2023 are not considered fully collectible and thus management has recorded a provision for credit losses. See Note
9, Loan Receivable, for additional information.

 Inventory

 Inventory is stated at the lower of cost or net
realizable value. Cost is determined on a standard cost basis which approximates actual cost on a first in-first out method. Lower of
cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors.
Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired
inventory and are charged to cost of revenue. Once the cost of the inventory is reduced, a new lower-cost basis for that inventory is
established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established
cost basis. Factors influencing these adjustments include changes in demand, product life cycle and development plans, component cost
trends, product pricing, physical deterioration and quality issues. Revisions to these adjustments would be required if these factors
differ from our estimates.

 Operating Leases

 The Company determines if an arrangement is a
lease at inception. Operating lease right-of-use ("ROU") assets are included in right-of-use assets, net on the consolidated
balance sheets. The current and long-term components of operating lease liabilities are included in the current operating lease liabilities
and non-current operating lease liabilities, respectively, on the consolidated balance sheets.

 Operating lease ROU assets and operating lease
liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company's
leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement
date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease expense
for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less
are not recorded on the consolidated balance sheet. All of our operating leases are comprised of office space leases, and as of December
31, 2024 and 2023, we had no finance leases.

 Business Combinations and Valuation of Goodwill

 We account for business combinations under the
acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date
fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill.
Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction
costs related to business combinations are recorded withing general and administrative expenses.

 The Company reviews goodwill for impairment on
an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performs
an annual impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized
for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed
the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill carrying
amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The Company has determined
that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to
assess impairment, its common stock price is an important component of the fair value calculation. If the Company's stock price
continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead
to potential impairment in future periods. The Company performed its annual impairment test during the second quarter of fiscal 2024 and
2023 and determined that its goodwill was not impaired. As of December 31, 2024 and 2023, we had not identified any factors that indicated
there was an impairment of our goodwill and determined that no additional impairment analysis was then required.

 F- 10

 Property and Equipment

 Property and equipment are stated at cost or contributed
value. Depreciation of furniture, software and equipment is calculated using the straight-line method over their estimated useful lives,
and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term.
The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the
undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment. Maintenance and repairs are charged
against expense as incurred.

 Impairment of Long-Lived Assets

 The Company has long-lived assets such as tangible
property and equipment, identified intangible assets consisting of acquired patents and core technology. When events or changes in circumstances
occur that could indicate the carrying value of long-lived assets may not be recoverable, the Company assesses recoverability by determining
whether the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. If the
undiscounted cash flow is less, an impairment charge is recognized for the excess of the carrying amounts of these assets over the fair
values. Fair values are determined by discounted future cash flows, appraisals or other methods.

 During years ended December 31, 2024 and 2023,
the Company did not record any impairment from long-lived assets.

 Fair Value of Financial Instruments

 The carrying amount of certain financial instruments
held by the Company, such as cash equivalents, accounts receivable, contract assets and liabilities, accounts payable, and accrued and
other current liabilities, approximate fair value due to their short maturities. The carrying amount of the liabilities for the convertible
preferred stock warrants represent their fair value. The carrying amounts of the Company's borrowings and lease liabilities approximate
fair value due to the market interest rates that these obligations bear and interest rates currently available to the Company.

 Fair value is defined as the exchange price that
would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair
value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level
valuation hierarchy for disclosure of fair value measurements as follows:

 Level 1

 Unadjusted quoted prices in active markets for identical assets or liabilities;

 Level 2

 Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 Level 3

 Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

 The categorization of a financial instrument within
the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. As of December 31,
2024 and 2023, the Company had $ 78.9 million of the $ 78.9 million cash and cash equivalents and $ 960 thousand of the $ 2.1 million cash
and cash equivalents, respectively, in Level 1 assets, comprised of U.S. Government mutual funds, and $ 40.5 million and no carrying value,
respectively, for Level 3 liabilities, which are comprised of derivative and warrant liabilities. See Note 10, Capital Stock, for
a full discussion of the warrant liability.

 F- 11

 Research and Development Cost s

 Research and development costs include costs directly
attributable to the conduct of research and development programs, including the cost of services provided by outside contractors, acquiring
work-in-progress intellectual property, development, and mandatory compliance fees and contractual obligations. All costs associated with
research and development are expensed as incurred.

 Software Development Cost s

 Software development costs incurred subsequent
to the establishment of technological feasibility for software intended to be sold, licensed or otherwise marketed to customers will be
capitalized, but development costs not meeting the criteria for capitalization are expensed as incurred. With respect to internal use
software, the Company will capitalize such development costs incurred during the application development stage, but development costs
incurred prior to that stage will be expensed as incurred. No amortization expense will be recorded until the software is ready for its
intended use. To date, the Company has not incurred any material capitalizable software development costs.

 Stock-based Compensation

 Stock-based compensation expense for expected-to-vest
awards is valued under the single-option approach and amortized on a straight-line basis, accounting for actual forfeitures as they occur.
We utilize the Black Scholes pricing model in order to determine the fair value of stock-based option awards. The Black Scholes pricing
model requires various highly subjective assumptions including volatility, expected option life, and risk-free interest rate. The assumptions
used in calculating the fair value of share-based payment awards represent management's best estimates. These estimates involve
inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based
compensation expense could be materially different in the future.

 Income Taxes

 The Company uses the asset and liability method
of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable
to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities.
Valuation allowances are established when necessary to reduce deferred tax assets where, based upon the available evidence, management
concludes that it is more-likely-than-not that the deferred tax assets will not be realized. Realization of deferred tax assets is also
dependent upon future earnings, if any, the timing and amount of which are uncertain.

 The Company records a liability for the uncertain
tax positions taken or expected to be taken on the Company's tax return when it is more-likely-than-not that the tax position might
be challenged despite the Company's belief that the tax return positions are fully supportable, and additional taxes will be due
as a result. To the extent that the assessment of such tax positions changes, for example, based on the outcome of a tax audit, the change
in estimate is recorded in the period in which the determination is made. The provision for income taxes includes the impact of provisions
for uncertain tax positions.

 Net Loss Per Share

 Basic net loss per common share is computed by
dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is
computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the
number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the
"If-Converted" method), unless the effect of such issuances would have been anti-dilutive.

 F- 12

 The following table sets forth the computation
of basic and diluted loss per share (in thousands, except for per share data):

 2024

 2023

 Numerator:

 $
)

 $
)

 Less: Series A convertible preferred stock dividends

 -

 Net loss attributable to common stockholders – basic and diluted

 $
)

 $
 ( 27,883
)

 Denominator:

 Weighted average shares used in computing net loss per common share – basic and diluted

 93,881

 66,611

 Net loss per common share – basic and diluted

 $
 ( 0.73
)

 $
 ( 0.42
)

 Net loss per share is based on the weighted average
number of common shares and common share equivalents outstanding during the period.

 In periods with a reported net loss, the effect
of anti-dilutive stock options, unvested restricted common stock and warrants are excluded and diluted loss per share is equal to basic
loss per share. Due to a net loss in the years ended December 31, 2024 and 2023, there were therefore no dilutive securities and hence
basic and diluted loss per share were the same. The following is a summary of the weighted average common stock equivalents for the securities
outstanding during the respective periods that have been excluded from the computation of diluted net loss per common share, as their
effect would be anti-dilutive (in thousands):

 2024

 2023

 Warrants

 2,583

 6,053

 12,907

 12,280

 Unvested restricted common stock

 2,997

 1,192

 Total potentially dilutive shares

 18,487

 19,525

 As all potentially dilutive securities are anti-dilutive
as of December 31, 2024 and 2023, diluted net loss per share is the same as basic net loss per share for each period.

 Recently Adopted Accounting Standards

 In November 2023, the FASB issued ASU No. 2023-07,
 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which amends reportable segment requirements, primarily
through enhanced disclosures about significant segment expenses, including for public entities that have a single reportable segment.
The standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning December
15, 2024. The Company adopted ASU 2023-07 on January 1, 2024 and have made the necessary reportable segment disclosures (See Note 3, Segment
Reporting).

 Recently Issued Accounting Pronouncements Not
Yet Adopted

 From time to time, new accounting pronouncements
are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise
discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated
financial position or results of operations upon adoption.

 On December 14, 2023, the FASB issued ASU 2023-09,
 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Under ASU 2023-09, entities are required to uniformly classify
and present greater disaggregation of information in the rate reconciliation and income taxes paid. ASU 2023-09 is intended to benefit
users of our consolidated financial statements by improving transparency and decision usefulness of income tax disclosures. The new standard
is effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of this new guidance to have
a material impact on our consolidated financial statements and have decided not to early adopt ASU 2023-09.

 F- 13

 Note 3 - Segment Reporting

 The Company operates as one operating segment
as its CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and
evaluating financial performance. In addition to consolidated net loss, our CODM reviews and utilizes natural expenses, such as employee
wages and benefits at a consolidated level, to manage the Company's operations and strategic growth initiatives. The following table
presents segment information of revenue, significant expenses and net loss (in thousands):

 2024

 2023

 Revenue

 $

 $

 Less:

 Salaries and employee related costs

 9,534

 9,745

 Stock-based compensation

 5,805

 4,555

 Rent and facilities

 Professional services and legal fees

 2,959

 3,963

 Technology & IT costs

 1,062

 1,198

 Other sales and marketing costs

 1,471

 Direct and indirect materials

 Depreciation and amortization expense

 3,798

 3,307

 Other operational expenses

 1,568

 1,748

 Operating loss

 ( 25,937
)

 ( 26,243
)

 Other income (expense)

 Interest expense

 ( 254
)

 ( 602
)

 Interest and other income (expense) (1)

 ( 1,819
)

 ( 705
)

 (Gain) loss on change in fair value of warrant liabilities

 ( 40,532
)

 Segment and net loss

 $
)

 $
)

 (1)
 Includes
interest income of $ 423 thousand and $ 295 thousand for the years ended December 31, 2024 and 2023, respectively.

 Note 4 – Intangible Assets, net

 As a result of the merger with QPhoton in June
2022, the Company has the following amounts related to intangible assets, net (in thousands):

 December 31, 2024

 December 31, 2023

 Gross Carrying Amount

 Accumulated Amortization

 Net Carrying Amount

 Gross Carrying Amount

 Accumulated Amortization

 Net Carrying Amount

 Non-compete agreement with founder

 $
 3,251

 $
 ( 2,800
)

 $

 $
 3,251

 $
 ( 1,715
)

 $
 1,536

 Website domain name and trademark

 1,009

 ( 521
)

 1,009

 ( 320
)

 Technology and licensed patents

 12,731

 ( 4,698
)

 8,033

 12,731

 ( 2,880
)

 9,851

 Total

 $
 16,991

 $
 ( 8,019
)

 $
 8,972

 $
 16,991

 $
 ( 4,915
)

 $
 12,076

 F- 14

 The amortization expense of the Company's
intangible assets for both the years ended December 31, 2024 and 2023 was approximately $ 3.1 million. The Company expects future amortization
expense to be the following (in thousands):

 Amortization

 2025

 $
 2,472

 2026

 2,021

 2027

 1,903

 2028

 1,819

 2029

 Thereafter

 -

 Total

 $
 8,972

 Note 5 – Income Taxes

 The Company's provision for income taxes
differs from the amount determined by applying the applicable federal statutory tax rate to the loss before income taxes due to the valuation
allowance for the net deferred income tax assets. A reconciliation of the U.S. statutory tax rate to our effective tax rate is presented
below:

 Year Ended December, 31

 2024

 2023

 2022

 Federal statutory income tax rate

 21.0
 %

 21.0
 %

 21.0
 %

 State income taxes, net of federal benefit

 ( 3.1
)%

 0.0
 %

 0.0
 %

 Warrant mark-to-market adjustments

 ( 12.4
)%

 2.0
 %

 2.7
 %

 Change in business credits

 0.5
 %

 0.0
 %

 0.0
 %

 Other permanent differences

 ( 0.1
)%

 ( 0.3
)%

 ( 0.1
)%

 True-ups

 0.0
 %

 0.0
 %

 0.0
 %

 Change in deferred tax asset valuation allowance

 ( 6.0
)%

 ( 22.3
)%

 ( 23.7
)%

 Effective income tax rate

 0.0
 %

 0.4
 %

 0.0
 %

 Income tax expense attributable to pretax loss
from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 21 % to pretax loss from
continuing operations as a result of both temporary and permanent differences in the U.S. GAAP vs tax treatment of certain types of expenses,
including stock-based compensation, depreciation and amortization, research and development and meals and entertainment. Additionally,
the Company's policy is to account for interest and penalties as income tax expense. As of December 31, 2024, the Company had no interest
related to unrecognized tax benefits, and no amounts for penalties related to unrecognized tax benefits were recognized in the provision
for income taxes. We do not anticipate any significant change within twelve months of this reporting date.

 As of December 31, 2024, the Company had federal
and state net operating loss carryforwards of approximately $ 89 million and $ 7 million, respectively. All of the federal NOL carryforwards
were generated during 2018 or later and will carryforward indefinitely but will be subject to 80 % taxable income limitation beginning
tax years after December 31, 2021, as provided by the Coronavirus Aid, Relief, and Economic Security ("CARES") Act (PL 116-136).
State net operating loss will begin to expire in 2043 for state tax purposes. Furthermore, the utilization of NOLs and tax credit carryforwards
to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously
or may occur in the future. Under Sections 382 and 383 of the Internal Revenue Code, a corporation that undergoes an ownership change
may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future
taxable income and/or tax liability. An ownership change is defined as a cumulative change of 50 % or more in the ownership positions of
certain stockholders during a rolling three-year period. The Company has determined that ownership changes have occurred, primarily driven
by the Transactions, and hence the Company's ability to use its NOLs or tax credit carryforwards may be restricted.

 As of December 31, 2024, in addition to the $ 89.4
million in tax-effected NOL carryforwards, at an assumed tax rate of 30 %, the significant components of the Company's net deferred
tax assets included stock-based compensation of $ 14 million, capitalized research and development expenditures of approximately $ 3 million.
As of December 31, 2023, in addition to the $ 13 million in tax-effected NOL carryforwards, also at an assumed tax rate of 26 %, the significant
components of the Company's net deferred tax assets included stock-based compensation of $ 11 million and capitalized research and
development expenditures of approximately $ 2 million. The Company believes that it is more likely than not that the benefit from the net
deferred tax assets will not be realized. Accordingly, it has provided a full valuation allowance on any potential deferred tax assets
The valuation allowance increased by approximately $ 16 million for the period ended December 31, 2024. The provision for income taxes
is not material in the years presented due to there being no taxable income.

 F- 15

 The Company has federal R&D credit carryforwards
of approximately $ 878 thousand. The Company has no state R&D credit carryforwards.

 The Company files income tax returns in the U.S. federal jurisdiction
and various state jurisdictions, with varying statutes of limitations. The tax years from inception through 2024 remain open to examination
due to the carryover of unused net operating losses that are being carried forward for tax purposes.

 Uncertain Tax Positions

 The Company has unrecognized tax benefits related to research and development
credit carryforwards. A full valuation allowance has been provided against the Company's research and development credits. Therefore,
any adjustments to these unrecognized tax benefits would be offset by corresponding adjustments to the valuation allowance, resulting
in no impact on the consolidated balance sheet or statement of operations.

 2024

 Beginning balance as of December 31, 2023

 $
 -

 Changes related to tax positions taken in the prior year

 96,767

 Changes related to tax positions taken in the current year

 167,774

 Ending balance as of December 31, 2024

 $
 263,541

 Note 6 – Property and Equipment, net

 The Company's property and equipment, net
are primarily located at the Company's leased facilities in Hoboken, NJ and Tempe, AZ and consist of (in thousands):

 Classification

 2024

 2023

 Computer and laboratory equipment

 $
 8,438

 $
 2,999

 Network equipment

 Furniture and fixtures

 Software

 Leasehold improvements

 Total cost of property and equipment

 9,178

 3,142

 Accumulated depreciation

 Property and equipment, net

 $
 8,212

 $
 2,870

 The approximate $ 6.0 million increase in property
and equipment is primarily driven by purchases of laboratory equipment, as well as leasehold improvements, in establishing the AZ Chips
Facility.

 The Company began depreciating select property
and equipment at the AZ Chips Facility as they were put in service during the year ended December 31, 2024, and recorded total depreciation
expense of $ 694 thousand and $ 203 thousand during the years ended December 31, 2024 and 2023, respectively, using useful lives of the
Company's long-lived assets as follows:

 Estimated
 Useful Life
 (Years)

 Computer and laboratory equipment

 Network equipment

 Furniture and fixtures

 Software

 Leasehold improvements

 Lessor of lease term or 5

 $ 5.4 million of property and equipment have yet
to be placed in service and have not started depreciating.

 Maintenance and repairs are charged to operations
when incurred. When property and equipment are sold or otherwise disposed, the asset account and related accumulated depreciation and
amortization accounts are relieved, and any gain or loss is included in other income or expense. There were no significant gains or losses
in the year ended December 31, 2024 and 2023, respectively.

 F- 16

 Note 7 – Financial Liabilities

 The Company has the following amounts related to financial liabilities
(in thousands):

 2024

 2023

 Remaining loan balances

 $
 -

 $
 2,063

 Remaining unamortized debt issuance costs

 -

 ( 138
)

 Financial liabilities, net

 $
 -

 $
 1,925

 Additionally, the Company has no and $ 14 thousand
of accrued interest as of December 31, 2024 and 2023, respectively, which is included in Other Current Liabilities.

 Secured Promissory Note

 On August 6, 2024, the Company entered into a Securities Purchase Agreement
(the "Secured SPA") with Streeterville Capital, LLC ("Streeterville"), pursuant to which the Company issued and
sold to Streeterville a Secured Convertible Promissory Note (the "Streeterville Convertible Note") in the original principal
amount of $ 8.25 million. The principal amount includes an original issue discount of $ 750 thousand. Streeterville paid $ 7.5 million in
cash for the Streeterville Convertible Note. The Streeterville Convertible Note accrues interest at a rate of 10 % per annum and has a
maturity date of February 6, 2026, unless earlier prepaid, redeemed or accelerated in accordance with its terms prior to such date. The
Company intends to use the net proceeds from the sale of the Streeterville Convertible Note primarily for general working capital purposes,
including for (i) operations as the Company increases its sales and marketing efforts; (ii) capital expenditures in outfitting its chip
fabrication facility in Tempe, AZ; and (iii) for any other planned or unplanned expenditures that might arise in support of the Company's
business plan. Ascendiant Capital Markets, LLC served as the placement agent on the transaction and received a fee of $ 450 thousand, and
the Company recognized $ 55 thousand in other issuance costs, primarily for legal services. The Company repaid the Streeterville Convertible
Note on November 18, 2024. As of December 31, 2024, there was no outstanding balance and the Company has no further obligations with respect
to the Secured SPA or Streeterville Convertible Note.

 Unsecured Promissory Note

 On September 23, 2022, the Company entered into a note purchase agreement
(the "Unsecured NPA") with Streeterville Capital, LLC ("Streeterville"), pursuant to which Streeterville purchased
an unsecured promissory note (the "Note" or the "Streeterville Unsecured Note") in the initial principal amount
of $ 8.25 million. The Streeterville Unsecured Note bore interest at 10 % per annum. The maturity date of the Note was defined as 18 months
from the date of its issuance (the "Maturity Date"). The Streeterville Unsecured Note carried an original issue discount of
$ 750 thousand, which was included in the principal balance of the Note. If the Company had elected to prepay the Streeterville Unsecured
Note prior to the Maturity Date, it would have paid to Streeterville 120 % of the portion of the Outstanding Balance the Company would
have elected to prepay. As of December 31, 2024, Streeterville has redeemed the full principal amount of the Unsecured NPA. There was
an outstanding balance of $ 1.9 million as of December 31, 2023. As of December 31, 2024, there was no outstanding balance and the Company
has no further obligations with respect to the Unsecured NPA or Streeterville Unsecured Note.

 Note Purchase Agreement – the Company
and Wholly-Owned Subsidiary QPhoton

 On February 18, 2022, the Company entered into
a Note Purchase Agreement (the "QCi Note Purchase Agreement") with QPhoton, pursuant to which the Company agreed to loan money
to QPhoton using two unsecured promissory notes (each, a "QCi Note"), each in the principal amount of $ 1.25 million, subject
to the terms and conditions of the QCi Note Purchase Agreement. Also, on February 18, 2022, pursuant to the terms of the QCi Note Purchase
Agreement, the Company loaned the principal amount of $ 1.25 million to QPhoton. On April 1, 2022, pursuant to the terms of the QCi Note
Purchase Agreement, the Company loaned the principal amount of $ 1.25 million to QPhoton, for a total loan under the two QCi Notes of $ 2.5
million.

 The QCi Note Purchase Agreement contains customary
representations and warranties by QPhoton and the Company, as well as a "most favored nations" provision for the benefit of
the Company. The QCi Notes issued under the QCi Note Purchase Agreement, including the QCi Notes issued on February 18, 2022 and April
1, 2022, provide that the indebtedness evidenced by the applicable QCi Note bears simple interest at the rate of 6 % per annum (or 15 %
per annum during the occurrence of an event of default, as defined in the QCi Notes), and becomes due and payable in full on the earlier
of (i) March 1, 2023, subject to extension by one year at the option of QPhoton, (ii) a change of control (as defined in the QCi Notes)
of QPhoton or (iii) an event of default. As a result of the merger, the QCi Note and accrued interest is eliminated through consolidation.
However, the two QCi Notes were not forgiven or converted to equity, remain outstanding under the terms and conditions of the QCi Note
Purchase Agreement, and are eliminated for presentation purposes in these consolidated financial statements.

 F- 17

 Note 8 – Contingencies

 Indemnification Arrangements

 We enter into standard indemnification arrangements
in our ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless, and agree to reimburse the indemnified
parties for losses suffered or incurred by the indemnified parties (generally our business partners or customers) in connection with any
trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to our products. The
term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount
of future payments we could be required to make under these agreements is not determinable. We have never incurred costs to defend lawsuits
or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is
minimal.

 We have entered into indemnification agreements
with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason
of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature. These
agreements also require us to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified
and to make good faith determination whether or not it is practicable for us to obtain directors and officers insurance. We currently
have directors and officers liability insurance.

 Legal Proceedings

 From time to time, we may be involved in legal
proceedings arising in the ordinary course of business. In general, management believes that ordinary course of business matters will
not have a material adverse effect on our consolidated financial position or consolidated results of operations and are adequately covered
by our liability insurance. However, it is possible that consolidated cash flows or results of operations could be materially affected
in any particular period by the unfavorable resolution of one of more of these contingencies or because of the diversion of management's
attention and the incurrence of significant expenses.

 See Part I, Item 3, Legal Proceedings,
in this Form 10-K for additional details on the status of the following proceedings.

 BV Advisory v. QCi Breach Lawsuit

 At the time of the QPhoton Merger in June 2022,
QPhoton had an outstanding balance of principal and interest due to BV Advisory based on a note purchase agreement that QPhoton had entered
into with BV Advisory on March 1, 2021 (the "BV Note Purchase Agreement"). Accordingly, the Company has recorded an estimated
payable (the "BV Advisory Payable"), recognized as other current liabilities on the consolidated financial statements, based
on best available information in the amount of $ 536 thousand as of December 31, 2024 and 2023.

 On August 16, 2022, BV Advisory filed a complaint
Delaware Chancery Court naming the Company and certain of its directors and officers (among others) as defendants seeking, among other
relief, monetary damages for an alleged breach of the BV Note Purchase Agreement. During the year ended December 31, 2024, BV Advisory's
other claims were dismissed by the Delaware Chancery Court and BV Advisory transferred its claim for breach of the BV Note Purchase Agreement
to the Delaware Superior Court. The Company believes that BV Advisory's claims have no merit and intends to defend itself vigorously.
BV Advisory's claims are not covered by the Company's liability insurance, nor does the Company believe it is necessary to
accrue an amount in addition to the BV Advisory Payable at this time.

 BV Advisory v. QCi Appraisal Action

 BV Advisory was purportedly a shareholder of QPhoton,
Inc., the predecessor in interest to QPhoton, LLC, a wholly owned subsidiary of the Company (both referred to as "QPhoton"
in this Legal Proceedings discussion). BV Advisory rejected the Merger Consideration (as defined below) and on October 13, 2022 filed
a petition in the Delaware Chancery Court seeking appraisal of the shares of QPhoton it allegedly owned (which shares represented 10 %
of the shares of QPhoton outstanding immediately prior to the Company's acquisition of QPhoton). The Appraisal Petition is currently
pending in Delaware Chancery Court. The Company included BV Advisory's purported ownership of QPhoton in the purchase price accounting
for the QPhoton Merger.

 F- 18

 The Company's total purchase price of QPhoton
was approximately $ 71.0 million, or $ 69.9 million net of cash acquired, consisting of Company common stock, Series B Preferred Stock and
QPhoton Warrants (as defined below). While the total shares of the Company's common stock on an as-converted basis offered in the
QPhoton Merger was 36,600,823 (the "Merger Consideration"), the fair market valuation contemplated 31,299,417 of the shares,
which assumed full conversion of the 2,377,028 shares of Series B Preferred Stock to common stock at the 10:1 ratio, and that only 1,726,931
of the warrants to purchase up to 7,028,337 shares of the Company's common stock (the "QPhoton Warrants") would eventually
be exercised (specifically only the QPhoton Warrants for which the associated Company options and/or warrants had an exercise price at
or below $ 2.27 at the time of the QPhoton Merger).

 Accordingly, as of December 31, 2024 and 2023,
the Company has neither issued 2,957,251 shares of the Company's common stock on an as converted basis (the "Unissued QPhoton
Shares") nor 702,834 warrants to purchase shares of the Company's common stock (the "Unissued QPhoton Warrants")
that were included in the Merger Consideration. The Unissued QPhoton Shares are included in the statement of stockholder's equity
as additional paid in capital as of as of December 31, 2024 and 2023, and the Unissued QPhoton Warrants have a carrying value of $ 40.5
million as a liability on the Company's consolidated balance sheet as of December 31, 2024, and no carrying value as a liability
on the Company's consolidated balance sheet as of December 31, 2023.

 QCi v. BV Advisory Injunction Lawsuit

 On January 31, 2025, the Company filed a complaint
in Delaware Chancery Court against BV Defendants (BV Advisory and its principal Keith Barksdale) asserting claims for defamation, breach
of contract, conversion, aiding and abetting conversion, and misappropriation of trade secrets based on the BV Defendants' unauthorized
possession and dissemination of certain of the Company's confidential and privileged documents. The Company seeks, among other relief,
injunctive relief and damages. On February 11, 2025, the Court granted the Company's motion for temporary restraining order and
instructed the parties to negotiate an expedited case schedule. On February 13, 2025, the Court entered a stipulated case schedule that
set a trial for April 8 and 9, 2025 on the Company's claims for conversion, aiding and abetting conversion, and misappropriation
of trade secrets. The parties are currently engaged in discovery. The Company does not believe it is necessary to accrue a litigation
reserve at this time.

 Securities Class Action Lawsuit

 On February 25, 2025, a class action lawsuit was
filed against the Company and certain of its current and past officers in the New Jersey District Court, by a plaintiff seeking to represent
a class of all persons who purchased the Company's securities between March 30, 2020 and January 15, 2025, alleging violations of
Section 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that the Company made false and/or misleading statements
and/or failed to disclose material information about the Company's customers, contracts and business operations. To date, the New
Jersey District Court has not certified a class or designated a lead plaintiff. The Company disputes the allegations in the complaint,
intends to vigorously defend against the claims asserted, and does not believe it is necessary to accrue a litigation reserve at this
time.

 Arbitration over Stock Options

 In February 2025, the Company entered into arbitrations
with Former Consultants (two individuals) regarding forfeiture of stock options. The Company had issued stock options to the consultants
in 2020 and 2021 and terminated the Former Consultants' agreements in March 2024, at which time the Company informed the Former
Consultants that any vested options had to be exercised within three months of the termination date, per the Company's Equity and
Incentive Plans. The Former Consultants did not exercise their vested options, and the options were duly forfeited. In December 2024,
the Former Consultants claim that they still retain the right to exercise the options, which the Company has rejected. The Company believes
these claims are without merit, intends to defend itself vigorously, and does not believe it is necessary to accrue a litigation reserve
at this time.

 F- 19

 Note 9 – Loan Receivable

 On May 16, 2023, the Company entered into a Summary
of Proposed Terms (the "Letter of Intent") with millionways, Inc ("millionways") to provide bridge loans to millionways
and enter into due diligence to acquire up to 100 % of the AI firm. On June 6, 2023, the Company entered into a note purchase agreement
(the "MW Agreement") with millionways, pursuant to which the Company agreed to purchase from millionways up to three unsecured
promissory notes (each, a "MW Note"), in an aggregate principal amount of up to $ 2.0 million, subject to the terms and conditions
of the MW Agreement. Also on June 6, 2023, pursuant to the terms of the MW Agreement, the Company purchased the MW Notes from millionways
and loaned an aggregate principal amount of $ 500 thousand to millionways.

 The MW Agreement contains customary representations
and warranties by millionways and the Company, as well as a "most favored nations" provision for the benefit of the Company.
The MW Notes issued under the MW Agreement, including the MW Notes issued on June 6, 2023, provide that the indebtedness evidenced by
the applicable MW Note bears simple interest at the rate of 10 % per annum (or 15 % per annum during the occurrence of an event of default,
as defined in the MW Notes), and becomes due and payable in full on the earlier of (i) May 16, 2024, (ii) a change of control (as defined
in the MW Notes) of millionways, (iii) dollar-for-dollar prepayment for additional capital received through any vehicle from a third party
or (iv) an event of default.

 The Company reserved $ 558 thousand of the outstanding
$ 558 thousand receivable as uncollectible based on credit risk in the consolidated financial statements as of December 31, 2024, however,
as of March 18, 2025, is actively seeking collection of $ 658 thousand, including principal and interest.

 Note 10 – Capital Stock

 Authorized Classes of Stock

 As of December, 2024, the Company's Board
of Directors has authorized two classes of preferred stock. The Board has authorized 1,550,000 shares of preferred stock as Series A preferred
stock, par value $ 0.0001 per share, none of which are issued and outstanding at December 31, 2024, and 1,490,004 of which were issued
and outstanding as of December 31, 2023. The Board has also authorized 3,079,864 shares of preferred stock as Series B preferred stock,
par value $ 0.0001 per share, none of which are issued and outstanding at December 31, 2024 and 2023.

 Series A Convertible Preferred Offering

 From November 10, 2021 through November 17, 2021,
the Company conducted a private placement offering (the "Private Placement") pursuant to securities purchase agreements with
7 accredited investors (the "Series A Investors"), whereby the Series A Investors purchased from the Company an aggregate
of 1,545,459 shares of the Company's newly created Series A convertible preferred stock, par value $ 0.0001 per share (the "Series
A Preferred Stock") and warrants to purchase 1,545,459 shares of the Company's common stock (the "Preferred Warrants")
for an aggregate purchase price of $ 8.5 million. The Private Placement was completed and closed to further investment on November 17,
2021.

 The Series A Preferred Stock ranks senior to common
stock with respect to the payment of dividends and liquidation rights. Each holder of Series A Preferred Stock is entitled to receive,
with respect to each share of Series A Preferred Stock then outstanding and held by such holder, dividends at the rate of 10 % per annum
(the "Preferred Dividends.") The Company is obligated to pay the Preferred Dividends quarterly, in arrears, within 15 days
of the end of each quarter. The Company has the option to pay the Preferred Dividends in cash or in common stock, at a price per share
of common stock equal to the average of the closing sale price of the common stock for the 5 trading days preceding the applicable dividend
payment date. The Preferred Dividends are accrued monthly, but not compounded, and are recorded as interest expense, because the Preferred
Dividends are mandatory and not declared at the discretion of the Board of Directors.

 The number of shares of the Company's common
stock issuable upon conversion of any share of Series A Preferred Stock shall be determined by dividing (x) the Conversion Amount of such
share of Series A Preferred Stock by (y) the Conversion Price. "Conversion Amount" means, with respect to each share of Series
A Preferred Stock, as of the applicable date of determination, the sum of (1) the stated value thereof plus (2) any accrued dividends.
"Conversion Price" means, with respect to each share of Series A Preferred Stock, as of any optional conversion date, Mandatory
Conversion Date or other date of determination, $ 5.50, subject to adjustment for stock splits, dividends, recapitalizations and similar
corporate events.

 F- 20

 The Preferred Warrants were two -year warrants
to purchase shares of the Company's common stock at an exercise price of $ 7.00 per share, subject to adjustment, were exercisable
at any time on or after the date that was six months following the issuance date, and provided for cashless exercise in the event the
underlying shares of the Company's common stock are not registered. As of December 31, 2023, all of the Preferred Warrants had expired
unexercised.

 In connection with the Purchase Agreement, the
Company and the Series A Investors entered into a registration rights agreement (the "Registration Rights Agreement") pursuant
to which the Company agreed to file a registration statement to register the shares of the Company's common stock underlying the
Series A Preferred Stock and warrants within 180 days. Pursuant to the Registration Rights Agreement, the Series A Investors received
certain rights, including but not limited to piggyback registration rights, providing that the holder be given notice of any proposed
registration of securities by the Company, and requiring that the Company register all or any portion of the registrable securities that
the holders request to be registered, in each case, subject to the terms and conditions of the Registration Rights Agreement. On April
27, 2022 the Company filed a Registration Statement on Form S-3 to register the resale of the shares of common stock as required by the
Registration Rights Agreement. The Form S-3 went effective on June 2, 2022.

 On June 13, 2022, one of the Series A Investors,
Falcon Capital Partners, converted 45,455 shares of Series A Preferred Stock into 47,728 shares of the Company's common stock.

 On February 9, 2023, one of the Series A Investors,
Greenfield Children, LLC, converted 10,000 shares of Series A Preferred Stock plus accrued dividends into 11,096 shares of the Company's
common stock.

 On March 19, 2024, the Company entered into a
Redemption and Waiver Agreement (the "Series A Redemption Agreement") with the current holders (the "Series A Holders")
of its Series A Preferred Stock. Accordingly, $ 8.125 million of additional paid in capital was reclassified from shareholders' equity
to mezzanine equity (the "Mezzanine Equity") on the Company's consolidated balance sheet in accordance with
Accounting Series Release No. 268, Presentation in Financial Statements of "Redeemable Preferred Stocks". The Mezzanine Equity
was valued at the date of the Private Placement issuance. Pursuant to the Series A Redemption Agreement, the Company agreed to redeem
all outstanding shares of the Series A Preferred Stock for an aggregate cash purchase price of $ 8,195,000, or $ 5.50 per share, at its
sole discretion, in 18 monthly payments (each a "Monthly Redemption Threshold" payment), which may be accelerated at the Company's
sole discretion and which does not prevent the Series A Holders from converting outstanding shares of Series A Preferred Stock at a conversion
price of $ 5.50 per share. In addition, the Series A Holders agreed to waive (the "Waivers"), on a month-by-month basis following
each monthly payment, certain rights granted to them in (i) the Preferred Stock Certificate of Designation (the "Preferred Stock
COD"), including for the accrual and payment of accrued and future dividends; and (ii) the Preferred Stock Securities Purchase Agreement
(the "Preferred Stock SPA"). In the event the Company opts to not make a Monthly Redemption Threshold payment, the Waivers
are forfeited and the terms revert to those detailed in the Preferred Stock COD and Preferred Stock SPA. During the year ended December
31, 2024, the Company redeemed 745,047 shares of Series A Preferred Stock for approximately $ 4.1 million in cash paid to the Series A
Holders.

 During November 2024 and December 2024, the Series
A Holders converted 744,957 shares of Series A Preferred Stock into 744,957 shares of the Company's common stock. As of December
31, 2024, there were no shares of Series A Preferred Stock issued and outstanding and the Mezzanine Equity valuation was reduced to zero.

 At-the-Market Facility

 During the years ended December 31, 2024 and 2023,
the Company sold 23,679,391 and 17,571,926 shares of common stock, respectively, through its At-The-Market (ATM) facility, managed by
Ascendiant Capital Markets, LLC, at an average price of $ 1.21. The Company received net aggregate proceeds of $ 48.5 million, of which
$ 23.8 million and $ 24.7 million, respectively, was received during the years ended December 31, 2024 and 2023.

 F- 21

 Registered Direct Offering

 On November 14, 2024, the Company entered into
securities purchase agreements (the "November RDO SPAs") for a registered direct offering (the "November RDO")
to sell an aggregate of 16 million shares of the Company's common stock, par value $ 0.0001 per share, at a purchase price of $ 2.50
per share (the "November RDO Shares"), resulting in gross proceeds of $ 40 million, before deducting placement agent commissions
and other offering expenses. On November 18, 2024, the Company completed the sale of the November RDO Shares and announced its intention
to use the net proceeds from the November RDO for the repayment of debt, working capital, and general corporate purposes. Specifically,
the Company used approximately $ 9.3 million of the gross proceeds to pay in full the Streeterville Convertible Note.

 In conjunction with the November RDO SPAs, the
Company also entered into a placement agency agreement with Titan Partners Group LLC ("Titan"), a division of American Capital
Partners, LLC (the "November Placement Agent") dated November 14, 2024, pursuant to which the November Placement Agent will
act as the exclusive placement agent for the Company in connection with the November RDO. The Company agreed to pay the November Placement
Agent a cash fee of 7.25 % of the gross proceeds from the November RDO and to issue to the November Placement Agent (or its designees)
 800,000 five-year warrants representing 5 % of the securities sold in the November RDO, which will be exercisable beginning on May 13,
2025, and have an initial exercise price per share of the Company's common stock of $ 2.875. In addition, the Company agreed to reimburse
the November Placement Agent for up to $ 100,000 of its fees and expenses in connection with the November RDO.

 Registered Direct and Private Placement Offerings

 On December 10, 2024, the Company entered into
securities purchase agreements (the "December RDO SPAs") for a registered direct offering (the "December RDO"),
an aggregate of 1,540,000 shares of the Company's common stock, par value $ 0.0001 per share, at a purchase price of $ 5.00 per share.
Also on December 10, 2024, the Company entered into securities purchase agreements, pursuant to which the Company agreed to issue in a
concurrent private placement (the "December Private Placement" and together with the December RDO, the "December SPAs"),
an aggregate of 8,460,000 shares (the "December Placement Shares") of common stock at a purchase price of $ 5.00 per share.
The December SPAs closed on December 12, 2024. The December RDO resulted in gross proceeds of $ 7.7 million and the December Private Placement
resulted in gross proceeds of $ 42.3 million, in each case before deducting placement agent commissions and other offering expenses. Furthermore,
the Company filed a registration statement registering the resale of the December Placement Shares on December 20, 2024, which went effective
January 6, 2025.

 In conjunction with the December SPAs, the Company
also entered into a placement agency agreement with Titan (the "December Placement Agent"), dated December 10, 2024, pursuant
to which the December Placement Agent will act as the exclusive placement agent for the Company in connection with the December SPAs.
The Company agreed to pay the December Placement Agent a cash fee of 7 % of the gross proceeds from the December SPAs and to issue to the
December Placement Agent (or its designees) 500,000 five-year warrants (representing 5 % of the securities sold in the Offerings), which
will be exercisable beginning on June 8, 2025, and have an initial exercise price per share of the Company's common stock of $ 5.75.
In addition, the Company agreed to reimburse the December Placement Agent for up to $ 100,000 of its fees and expenses in connection with
the December SPAs.

 The combined amount of net proceeds raised from
the ATM and RDOs was $ 106.8 million and $ 24.7 million for the years ended December 31, 2024 and 2023, respectively.

 Warrants

 The table below summarizes the warrants outstanding
at December 31, 2024 (in thousands, except exercise prices):

 Issuance Date

 Expiration Date

 Exercise Price

 Issued

 Exercised

 Forfeited /
 Canceled

 Warrants
 Outstanding

 August 18, 2020

 August 18, 2025

 $
 2.00

 ( 150
)

 -

 June 16, 2022

 May 9, 2027

 $
 0.0001

 6,325

 -

 ( 4,121
)

 2,204

 November 18, 2024

 November 18, 2029

 $
 2.875

 -

 -

 December 12, 2024

 December 12, 2029

 $
 5.75

 -

 -

 F- 22

 In connection with a restricted stock units offering
in June 2020, the Company issued warrants in August 2020 to purchase 171,000 shares of the Company's common stock, at an exercise
price of $ 2.00. Those warrants are exercisable for five years from the date of issuance.

 In connection with the QPhoton Merger on June
16, 2022, the Company issued 6.3 million warrants to purchase shares of the Company's common stock at an exercise price of $ 0.0001.
Those warrants are exercisable when and if stock options and warrants issued by the Company and outstanding as of June 15, 2022 (the "Underlying
Options") are exercised. As of December 31, 2024, all of the QPhoton Warrants linked to the outstanding Underlying Options are expected
to be exercised as the exercise prices of all the Underlying Options are below the closing stock price as of December 31, 2024. The 6.3
million issued warrants represent a portion of the 7.0 million warrants included in the Merger Consideration, having been received by
two QPhoton shareholders. A third alleged shareholder rejected the Merger Consideration and commenced litigation, and to date that litigation
has not been resolved and the associated 702,834 warrants have not been issued, of which 457,926 would have been canceled to date due
to forfeitures of Underlying Options. See Part I, Item 3, Legal Proceedings, for additional information on the status of the litigation.

 As of December 31, 2024, of the 6.3 million QPhoton Warrants issued,
approximately 65 % have been forfeited because the corresponding Underlying Options had expired or been forfeited. Further, as discussed
in Note 2, Significant Accounting Policies – Fair Value of Financial Instruments, the QPhoton Warrants issued on June 16,
2022, are considered Level 3 liabilities for fair value measurement on the valuation hierarchy. In determining the fair market value of
the QPhoton Warrants, the Company determines which underlying options and warrants are in-the-money or out-of-the-money at period end
by comparing to the bid price of the Company's common stock, then accounts for changes period-over-period by realizing a mark-to-market
gain or loss for the period. Due to the difference between the exercise price and the market value of the Company's stock as of the balance
sheet dates, the market value of the stock and the probability of the underlying options and warrants being exercised are the only significant
inputs in the valuation of the warrant liability. Accordingly, the Company recognized a mark-to-market loss of $ 40.5 million and a mark-to-market
gain of $ 528 thousand during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, the QPhoton Warrants have
a carrying value of $ 40.5 million as a liability on the Company's consolidated balance sheet, an increase of $ 40.5 million as compared
to the Company's December 31, 2023 consolidated balance sheet, where the QPhoton Warrants had no carrying value as a liability on
the Company's consolidated balance sheet.

 Note 11 – Stock-based Compensation

 Incentive Plans

 The Quantum Computing Inc. 2019 Equity and Incentive
Plan, as amended in 2021 (the "2019 Plan") enabled the Company to grant incentive stock options or nonqualified stock options
and other equity awards to employees, directors and consultants of the Company up to a total of 3.0 million shares of common stock, all
of which have been issued.

 On July 5, 2022, the Board of Directors adopted
the Quantum Computing Inc. 2022 Equity and Incentive Plan (the "2022 Plan"), which was approved by a majority of the shareholders
in September 2022. The 2022 Plan initially provided for the issuance of up to 16 million shares of the Company's common stock and
includes provisions for annual automatic evergreen increases of 1,000,000 shares of common stock. As of December 31, 2024, the total number
of shares of our common stock reserved for issuance under the 2022 Plan is 18 million and a total of 13 million shares and options were
issued and outstanding under the 2022 Plan.

 The following table summarizes the Company's
option activity for the year ended December 31, 2024 (in thousands, except exercise price and contractual life data):

 Number
 Outstanding

 Weighted
 Average
 Exercise
 Price per

Share

 Weighted
 Average
 Remaining
 Contractual
 Life (Years)

 Balance as of January 1, 2023

 9,165

 3.51

 4.2

 5,340

 1.38

 5.0

 Forfeited

 ( 662
)

 4.41

 -

 Balance as of December 31, 2023

 13,843

 $
 2.64

 3.7

 0.92

 5.0

 Forfeited

 ( 1,690
)

 4.14

 -

 Balance as of December 31, 2024

 12,983

 $
 2.34

 2.9

 Vested and exercisable as of December 31, 2023

 8,803

 3.21

 3.4

 Vested and exercisable as of December 31, 2024

 9,646

 $
 2.66

 2.7

 F- 23

 The following table presents the assumptions used
in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted during the years ended December
31, 2024 and 2023:

 2024

 2023

 Exercise price

 $
 0.46 – 1.12

 $
 0.85 – 1.84

 Risk-free interest rate

 4.2 – 5.2 %

 4.7 – 5.0 %

 Expected volatility

 90 – 105 %

 98 – 137 %

 Expected dividend yield

 %

 %

 Expected life of options (in years)

 5.0

 5.0

 The following table summarizes the exercise price
range as of December 31, 2024 (in thousands):

 Exercise Price

 Outstanding

 Exercisable

 $ 0.00 – 1.00

 $ 1.00 – 2.00

 5,803

 2,928

 $ 2.00 – 3.00

 5,879

 5,525

 $ 3.00 – 6.00

 $ 6.00 – 8.00

 $ 8.00 – 12.00

 12,983

 9,646

 The weighted average grant-date fair value of
stock options granted during the years ended December 31, 2024 and 2023 was $ 0.92 per share and $ 1.38 per share, respectively. As
of December 31, 2024, total unrecognized compensation cost related to common stock options was $ 3.1 million, which is expected to be recognized
over a period of 3.0 years.

 Restricted Stock

 As of December 31, 2024, there were 1.3 million
shares of the Company's common stock issued and unvested that had been awarded as stock-based compensation under the 2022 Plan.
 The following table summarizes the Company's activity for restricted stock tied to vesting schedules for the year ended December
31, 2024 (in thousands):

 Number

 Outstanding

 Weighted

 Average Fair

 Value

 Unvested as of January 1, 2023

 $
 5.70

 2,429

 1.36

 Vested

 ( 1,046
)

 1.48

 Forfeited

 ( 24
)

 1.28

 Unvested as of December 31, 2023

 1,409

 $
 1.42

 1.58

 Vested

 ( 1,049
)

 1.82

 Unvested as of December 31, 2024

 1,264

 $
 1.20

 F- 24

 Stock-based compensation

 The Company recognized stock-based compensation
expense related to common stock options and restricted shares of common stock in the following expense categories of its consolidated
statements of operations (in thousands):

 2024

 2023

 Research and development

 $
 4,024

 $
 2,080

 Selling and marketing

 ( 279
)

 General and administrative

 1,457

 2,470

 Total stock-based compensation

 $
 5,782

 $
 4,271

 For the years ended December 31, 2024 and 2023, the consolidated statement
of stockholders' equity was lower by $ 1.5 million and $ 33 thousand, respectively, as compared to the consolidated statement of cash
flows for timing differences between award dates and the realization of stock-based compensation expense.

 In terms of new issuances, the Company issued
 995 thousand shares of the Company's common stock to employees in the year ended December 31, 2024 (the "2024 SBC Awards),
as compared to 2.3 million in the year ended December 31, 2023 (the "2023 SBC Awards").

 The 2024 SBC Awards included 218 thousand such
shares issued to former executives per their respective employment and separation agreements (the "Separation Agreement Shares")
and 777 thousand such shares issued as performance and incentive awards, which included 727 thousand shares of the Company's common
stock issued to 30 employees as payment in lieu of cash for 2023 performance bonuses (the "2024 Performance Incentive Shares")
and 50 thousand shares of common stock as retention bonuses to five employees identified as key technical staff (the "2024 Retention
Incentive Shares"). The 2024 Performance Incentive Shares are restricted with the following vesting schedule: one-half vested on
December 31, 2024 and one-half will vest on December 31, 2025. The 2024 Retention Incentive Shares are restricted and vested on December
31, 2024.

 The Company recognized $ 197 thousand and $ 815
thousand, respectively, of stock-based compensation expense during the year ended December 31, 2024 in conjunction with the Separation
Agreement Shares and 2024 Retention Incentive Shares, and does not expect future expense related to these issuances as they are fully
vested. In conjunction with the 2024 Performance Incentive Shares, the Company recognized $ 244 thousand of stock-based compensation expense
during the year ended December 31, 2024, and expects future expense related to these offerings to total $ 244 thousand in the year ending
December 31, 2025.

 The 2023 SBC Awards included 854 thousand shares of the Company's
common stock issued to 35 employees as payment in lieu of cash for 2022 performance bonuses (the "2023 Performance Incentive Shares")
and 1.5 million shares of the Company's common stock as long-term incentive bonuses to five employees identified as key technical
staff (the "2023 Retention Incentive Shares"). The 2023 Performance Incentive Shares are restricted and vested in equal halves
on each of December 31, 2023 and 2024. As of December 31, 2024, the Company canceled 23,600 of the issued shares that were forfeited by
employees no longer with the Company and does not expect future expense related to these offerings as they are fully vested. The 2023
Retention Incentive Shares are restricted and vest annually in equal amounts over a five-year period as follows: 20 % vested or will vest
on each December 31 of 2023, 2024, 2025, 2026 and 2027, subject to the grantee continuing to perform services for the Company in the capacity
in which the grant was received on each applicable vesting date. In conjunction with the 2023 Performance Incentive Shares, the Company
recognized $ 462 thousand of stock-based compensation expense during the year ended December 31, 2024 and does not expect future expense
related to these offerings as they are fully vested. In conjunction with the 2023 Retention Incentive Shares, the Company recognized $ 533
thousand and $ 320 thousand, respectively, of stock-based compensation expense during the years ended December 31, 2024 and 2023, and expects
future expense related to these offerings to total $ 1.3 million over the remaining vesting periods.

 F- 25

 Stock-based compensation for services

 The Company recognized $ 23 thousand and $ 284 thousand,
respectively, during the years ended December 31, 2024 and 2023 in stock-based compensation for services in lieu of cash payments to certain
consultants, including expenses for both shares issued and stock option awards granted. For the years ended December 31, 2024 and 2023,
the statement of stockholders' equity was higher by $ 114 thousand and $ 2.2 million, respectively, as compared to the statement of
cash flows for timing differences between award dates and the realization of stock-based compensation for services expense.

 In terms of issuances, the Company issued 142
thousand shares of the Company's common stock to various consultants for market and media advisory services in the year ending December
31, 2024, as compared to 1.6 million shares of the Company's common stock in the year ending December 31, 2023 (the "2023
Advisor Shares"). The Company issued 1.5 million of the 2023 Advisor Shares to a consultant who served as an advisor on the QPhoton
Merger (the "QPhoton Advisor Shares"), comprised of 750 thousand such shares to Draper, Inc. and 750 thousand such shares
to Carriage House Capital, Inc, and issued 75 thousand of the 2023 Advisor Shares to FMW Media Works as compensation for services rendered
in support of marketing and communications. For the QPhoton Advisor Shares, the expense was recognized in 2022 at the time of the merger,
though the shares were not awarded and issued until 2023.

 Note 12 – Related Party Transactions

 There were no related party transactions during
the years ended December 31, 2024 and 2023.

 Note 13 – Operating Leases

 As of December 31, 2024, the Company has use of
space in three different locations, Hoboken, NJ, Tempe, AZ, and Arlington, VA, under lease or membership agreements, which expire at various
dates through November 30, 2028. The Company's leases do not provide an implicit rate, and the rates implicit in our leases are
not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease
assets and liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement
to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company's leases all contain
options to extend or renew the lease or membership term.

 The table below reconciles the undiscounted future
minimum lease payments under these operating leases to the total operating lease liabilities recognized on the consolidated balance sheet
as of December 31, 2024 (in thousands):

 Year

 Lease Payments
 Due

 2025

 $

 2026

 2027

 2028

 Total minimum payments

 1,755

 Less: imputed interest

 ( 136
)

 Present value of operating lease liabilities

 1,619

 Less: current portion included in other current liabilities

 ( 438
)

 Long-term operating lease liabilities

 $
 1,181

 F- 26

 Other information related to operating lease liabilities
consists of the following:

 2024

 2023

 Cash paid for operating lease liabilities

 $

 $

 Weighted average remaining lease term in years

 3.3

 3.7

 Weighted average discount rate

 %

 %

 Note 14 – License Agreement – Stevens
Institute of Technology

 Effective December 17 th, 2020, QPhoton
signed a License Agreement with the Stevens Institute. The License Agreement enables the Company to commercially use technology such as
licensed patents, licensed patent applications and licensed "Know-How". QPhoton is also able to issue sublicenses for the
technology under the agreement. The agreement is effective until the later of: (i) the 30-year anniversary of the effective date, or (ii)
the expiration of the licensed patent or licensed patent application that is last to expire. As part of the merger of the Company and
QPhoton, the Stevens License Agreement was assigned to the Company.

 During the term of the agreement and prior to
any commercialization or sublicensing of the technology by the Company, the Company shall be required to submit annual reports to the
Stevens Institute reporting on all research, development, and efforts toward commercialization and/or sublicensing made during the year.
Once any commercialization and/or sublicensing has been initiated, the Company shall deliver quarterly reports to the Stevens Institute
reporting on the revenue received by the Company, all sublicenses derived from the sale of licensed products, and the net sales price
associated with each transaction. The Company will be responsible for reimbursing Stevens for any costs associated with the prosecution
and maintenance of the licensed patents and licensed patent applications moving forward.

 Consideration for the agreement

 As consideration for the license and other rights
granted under the agreement, QPhoton agreed to pay the following: (i) $35 thousand within 30 days of execution of the agreement, (ii)
$28 thousand within 30 days of each annual anniversary of the effective date, (iii) equity in the Company equivalent to 9.0% of the membership
units of the Company within 30 days of the execution of the agreement, and (iv) royalties of 3.5% of the Net Sales Price of each licensed
product sold or licensed by the Company during the quarter then-ended, for which it also received payment, concurrent with the delivery
of the relevant quarterly report.

 As of December 31, 2024, the Company has begun
to commercialize some of the licensed technology, though the Company has not recorded any related revenue and hence has not incurred any
royalty expenses payable to the Stevens Institute.

 Note 15 – Subsequent Events:

 On January 7, 2025, the Company entered into securities
purchase agreements (the "January SPAs") pursuant to which the Company agreed to issue, in a private placement (the "January
Private Placement"), an aggregate of 8,163,266 shares (the "January Placement Shares") of the Company's common
stock, par value $ 0.0001 per share, at a purchase price of $ 12.25 per share. The January SPAs required the Company to file a registration
statement registering the resale of the January Placement Shares by January 24, 2025. The Company's Registration Statement on Form
S-1 (File No. 333-284416), to register resale of the the shares sold in this offering was filed on January 22, 2025 and became effective
on February 3, 2025. The January Private Placement resulted in gross proceeds of approximately $ 100 million before deducting placement
agent commissions and other offering expenses. The closing of the January Private Placement took place on January 9, 2025, following the
satisfaction of customary closing conditions.

 Pursuant to the January SPAs, the Company has
agreed not to issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any shares of common stock or
common stock equivalents, or file any registration statement or any amendment or supplement thereto, for a period of 75 days after the
closing date of the January Private Placement, subject to certain customary exceptions, without the consent of the January SPAs purchasers
and the January Placement Agent, as defined below.

 F- 27

 The Company also entered into a placement agency
agreement with Titan (the "January Placement Agent"), dated January 7, 2025, pursuant to which the January Placement Agent
will act as the exclusive placement agent for the Company in connection with the January SPAs. The Company agreed to pay the January Placement
Agent a cash fee of 6 % of the gross proceeds from the January SPAs and to issue to the January Placement Agent (or its designees) 326,531
 five -year warrants (representing 4 % of the securities sold in the Placement), which will be exercisable beginning on July 6, 2025, and
have an initial exercise price per share of the Company's common Stock of $ 14.0875. In addition, the Company agreed to reimburse
the January Placement Agent for up to $ 100,000 of its fees and expenses in connection with the January SPAs.

 As a condition of the January SPAs, the Company's
directors and executive officers entered into Lock-Up Agreements with the Company pursuant to which they agreed for a period of 60 days
after the closing date of the January SPAs, subject to certain exceptions, not to directly or indirectly offer, sell, contract to sell,
hypothecate, pledge or otherwise dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position with respect to, any shares of the Company's common stock or securities convertible, exchangeable
or exercisable into the Company's common stock, that they beneficially own, hold, or thereafter acquire, or make any demand for
or exercise any right or cause to be filed a registration, including any amendments thereto, with respect to the registration of any the
Company's common stock or common stock equivalents or publicly disclose the intention to do any of the foregoing.

 On January 28, 2025, the Delaware Chancery Court
reassigned the BV Advisory appraisal action from Vice Chancellor Glasscock (following his retirement on January 15, 2025) to Vice Chancellor
Bonnie David, effective as of that date.

 On January 31, 2025, the Company filed a complaint
in Delaware Chancery Court against BV Defendants (BV Advisory and its principal Keith Barksdale) asserting claims for defamation, breach
of contract, conversion, aiding and abetting conversion, and misappropriation of trade secrets based on the BV Defendants' unauthorized
possession and dissemination of certain of the Company's confidential and privileged documents. The Company seeks, among other relief,
injunctive relief and damages. On February 11, 2025, the Court granted the Company's motion for temporary restraining order and
instructed the parties to negotiate an expedited case schedule. On February 13, 2025, the Court entered a stipulated case schedule that
set a trial for April 8 and 9, 2025 on the Company's claims for conversion, aiding and abetting conversion, and misappropriation
of trade secrets.

 On February 25, 2025, a class action lawsuit was
filed against the Company and certain of its current and past officers in the New Jersey District Court, by a plaintiff seeking to represent
a class of all persons who purchased the Company's securities between March 30, 2020 and January 15, 2025, alleging violations of
Section 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that the Company made false and/or misleading statements
and/or failed to disclose material information about the Company's customers, contracts and business operations. To date the New
Jersey District Court has not certified a class or designated a lead plaintiff. The Company disputes the allegations in the complaint
and intends to vigorously defend against the claims asserted.

 In February 2025, the Company entered into arbitrations
with two former consultants (two individuals) regarding forfeiture of stock options. The Company had issued stock options to the consultants
in 2020 and 2021 and terminated the former consultants' agreements in March 2024, at which time the Company informed the former
consultants that any vested options had to be exercised within three months of the termination date, per the 2019 Plan and the 2022 Plan.
The former consultants did not exercise their vested options, and the options were duly forfeited. In December 2024, the former consultants
claimed that they still retained the right to exercise the options, which the Company rejected. The Company believes these claims are
without merit and intends to defend itself vigorously.

 There are no other events of a subsequent nature
that in management's opinion are reportable.

 F- 28

 2024-06-30

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