10-Q: Zapata Quantum Reports Q1 2026 Results, Faces Liquidity Concerns

Zapata Quantum, Inc. filed its Q1 2026 10-Q, detailing a net loss of $1.31 million and a significant decrease in cash, while also announcing a $15 million capital raise in April 2026.

Summary

• Zapata Quantum, Inc. reported a net loss of $1,310,000 for the first quarter ended March 31, 2026, compared to a net loss of $770,000 for the same period in 2025.
• The company's cash balance decreased significantly from $1,659,000 at December 31, 2025, to $642,000 at March 31, 2026.
• Operating expenses increased to $1,197,000 in Q1 2026 from $680,000 in Q1 2025, primarily due to increases in sales and marketing, research and development, and general and administrative expenses.
• In April 2026, the company raised $15 million in gross proceeds through the sale of Series D preferred stock and warrants, with net proceeds of $13.8 million intended for working capital and general corporate purposes.
• Management expects current cash to be sufficient for at least twelve months from the issuance date of the financial statements following the capital raise.
• The company identified material weaknesses in its internal controls, including insufficient segregation of duties and lack of complete written documentation of internal control policies and procedures.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to the increased net loss, significant cash burn, and identified material weaknesses in internal controls, despite the recent capital raise.

Positives

• Successfully raised $15 million in gross proceeds in April 2026 through the sale of Series D preferred stock and warrants, providing crucial capital for operations.
• Net proceeds of $13.8 million from the capital raise are expected to fund operations for at least twelve months.
• The company has a robust intellectual property portfolio with over 60 patents, granted and pending, in quantum and hybrid quantum-classical computing.
• Zapata Quantum has participated in all technical areas of DARPA's Quantum Benchmarking program and has worked with Fortune 500 enterprises and government agencies.

Negatives

• Reported a net loss of $1.31 million for Q1 2026, an increase from $0.77 million in Q1 2025.
• Cash balance significantly decreased to $642,000 as of March 31, 2026, from $1,659,000 as of December 31, 2025.
• Operating expenses more than doubled to $1.197 million in Q1 2026 from $0.68 million in Q1 2025.
• The company has incurred significant losses and negative cash flows since inception and expects this trend to continue.
• Identified material weaknesses in internal controls over financial reporting, including insufficient segregation of duties and lack of documentation.
• The company's ability to continue as a going concern is dependent on its ability to raise additional capital.

Risks

• The company has incurred significant losses and negative cash flows from operations since inception and expects to continue to incur losses and negative cash flows for the foreseeable future.
• The company's long-term success is dependent upon its ability to successfully market, deliver, and scale its quantum computing application development solutions, increase revenue, meet its obligations, obtain additional capital when needed and, ultimately, achieve profitable operations.
• There is no assurance that the Company will be able to continue raising the additional capital necessary to continue operations and execute on the Company's business plan.
• The company is subject to risks and uncertainties similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, risks associated with changes in information technology, and the ability to raise additional capital to fund operations.
• Material weaknesses in internal controls over financial reporting could lead to a material misstatement of the Company's financial statements.
• The company's ability to continue as a going concern is dependent on its ability to raise sufficient capital.

Future Outlook

Management expects current cash to be sufficient to fund the operating plan for at least twelve months from the date of issuance of the financial statements, following the April 2026 capital raise. However, the company continues to incur losses and negative cash flows and expects this trend to continue, with its long-term success dependent on its ability to scale operations, increase revenue, meet obligations, and obtain additional capital.

Management Comments

• Following a strategic realignment in 2025, the Company offers subscription-based solutions to efficiently deploy and accelerate the development of quantum and hybrid quantum-classical computing applications.
• To the Company's knowledge, it is the only organization to have participated across all technical areas of the Defense Advanced Research Projects Agency's (DARPA)s Quantum Benchmarking program and it has worked with Fortune 500 enterprises and government agencies to unlock the potential of quantum computing.
• In late 2024 the Company voluntarily elected to temporarily suspend its operations due to its limited capital resources and inability to access adequate liquidity to continue to fund its operations and meet its outstanding debt obligations.
• In April 2026, we sold and issued to accredited investors a total of 15,000 shares of Series D (which are convertible into 34,160,784 shares of Common Stock, subject to adjustment) and Warrants to purchase up to 17,080,392 shares of Common Stock (representing 50% warrant coverage on an as-converted basis) for total gross proceeds of $15 million.
• We intend to use the net proceeds for working capital and general corporate purposes.
• We expect our existing cash will be sufficient to fund our current operating plan for at least twelve months from the date of issuance of these financial statements.

Industry Context

StockSavvy.ai notes that Zapata Quantum's focus on quantum and hybrid quantum-classical computing applications positions it in a nascent but rapidly evolving industry. The company's strategy to address the software bottleneck for quantum adoption aligns with industry trends, but its reliance on continued capital raises and its current financial state highlight the high-risk, high-reward nature of this sector.

Comparison to Industry Standards

• The company's net loss of $1.31 million for Q1 2026 and negative operating cash flow of $0.999 million are significant for a company at its stage, especially when compared to more established players in the broader AI and cloud computing sectors which often show revenue growth alongside losses.
• The substantial increase in operating expenses (from $0.68 million to $1.197 million) without corresponding revenue growth is a concern, though common in early-stage R&D-intensive companies. Competitors in the quantum computing space, such as IBM and Google, are also investing heavily in R&D but typically have diversified revenue streams to offset these costs.
• The company's reliance on convertible notes and preferred stock for financing is standard for early-stage technology companies, but the terms and the need for frequent capital raises, as seen with the April 2026 Series D offering, are critical factors for investors to monitor. This contrasts with companies like Microsoft or Amazon, which generate substantial free cash flow from established product lines.

Corporate Governance

Legal Proceedings

• As of the filing date, the company is not aware of any material legal proceedings to which it or any of its subsidiaries is a party, nor any threatened or pending litigation or proceedings contemplated by governmental authorities.

Related Party Transactions

• Convertible promissory notes, current, include $300,000 to related parties as of March 31, 2026, and December 31, 2025.

Stakeholder Impact

• Shareholders: Increased dilution risk due to ongoing need for capital raises and potential for further equity issuances. Current stock price may be negatively impacted by financial performance and control weaknesses.
• Creditors: The company's ability to meet its debt obligations (Senior Secured Notes, Convertible Promissory Notes) is contingent on future financing. Forbearance agreements indicate past payment difficulties.
• Employees: Potential impact on morale due to financial instability and material control weaknesses. Stock-based compensation is a significant component of employee incentives.
• Consultants: Compensation may be in the form of equity, leading to potential dilution for existing shareholders.

Next Steps

• Continue efforts to negotiate and restructure outstanding obligations and raise capital.
• Implement plans for remediation of material weaknesses in internal controls.
• Utilize net proceeds from the Series D offering for working capital and general corporate purposes.
• Expand penetration of the quantum computing application development market.
• Achieve profitable operations.

Key Dates

Recommendation

The company has a promising technology in a high-growth sector, evidenced by its IP portfolio and participation in DARPA programs. However, the significant increase in net loss, substantial cash burn, and identified material weaknesses in internal controls present considerable risks. The recent capital raise provides a runway, but the company's ability to achieve profitability and secure future funding remains uncertain. A 'hold' recommendation reflects the speculative nature of the investment, balancing potential upside with significant downside risks.

Keywords

Zapata Quantum, 10-Q, Quantum Computing, Financial Report, Q1 2026, Net Loss, Capital Raise, Series D Preferred Stock, Warrants, Internal Controls, Going Concern