Quantum Computing Inc Stock

Ladies and gentlemen, greetings, and welcome to the Quantum Computing, Inc. Second Quarter 2026 Shareholder Update Call. [Operator Instructions]

It is now my pleasure to introduce your host, John Nesbett, with IMS Investor Relations.

Thank you, and I want to welcome everyone to Quantum Computing, Inc.'s Second Quarter 2026 Shareholder Update Call.

Before we begin, please note that today's remarks may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected results, operational plans, strategy and market opportunities. These statements are made pursuant to the safe harbor provision of Section 27A of the Securities Act and Section 21E of the Exchange Act and are based on current assumptions and expectations. Forward-looking statements are neither promises nor guarantees and involve risks and uncertainties that could cause actual results to differ materially.

Important risk factors are discussed in our annual report on Form 10-K for the year ended December 31, 2025, and in subsequent SEC filings, including the quarterly report on Form 10-Q for the quarter ended June 30, 2026. We undertake no obligation to update these statements, except as required by law.

On the call today, we have Dr. Yuping Huang, Chief Executive Officer and Chairman; and Chris Roberts, Chief Financial Officer. The team will provide an update on the business, followed by a question-and-answer session.

With that, I will now turn the call over to management. Please go ahead, Yuping.

Good afternoon, and thank you for joining us for Quantum Computing, Inc.'s Second Quarter 2026 Earnings Call. During the second quarter, we continued to build on the momentum established in the first quarter, executing on our Quantum road map while expanding the technologies and manufacturing capabilities that enable both our Quantum systems and a growing portfolio of commercial products and services. We also made meaningful progress in our transition towards scalable, cost-effective production of miniaturized Quantum products based on nanophotonics and advanced packaging.

As I have said before, our goal is simple: to put Quantum products and technologies into the hands of everybody. Everything we do at QCi is focused on making Quantum systems smaller, more practical, more affordable and ultimately more accessible. At our core, QCi is a Quantum technology company. Our long-term vision is to develop Quantum systems built on nanophotonics and advanced packaging that can be manufactured at scale and deployed across real-world applications.

Supporting this strategy is the expansion of our portfolio of photonic components, lasers, detectors, photonic integrated circuits, thin-film lithium night-based technologies, optical packaging, advanced packaging and the U.S.-based semiconductor manufacturing and foundry services. These products and services address growing commercial markets today while providing the core technologies and manufacturing capabilities that will enable our current customers' access to the next-generation Quantum systems. This integrated approach is central to our strategy. By investing in commercially relevant photonics and semiconductor technologies, we are creating value today while building the engineering expertise, manufacturing scale and the production infrastructure needed to enable our long-term Quantum road map.

During the first half of the year, we completed 3 strategic acquisitions that significantly expanded our commercialization efforts, technical capabilities, manufacturing capacities and engineering talent. Together, these acquisitions have strengthened our ability to execute across multiple high-growth markets while creating a more integrated company serving customers in photonics semiconductor manufacturing, AI, defense, aerospace, telecommunications and Quantum technologies. Each acquisition contributes unique technologies and expertise that strengthens our portfolio of intellectual property, and we are already seeing the benefits of integrating these organizations. Just as importantly, we have welcomed some of the industry's leading engineers and scientists who are now focused on advancing our mission to deliver practical, scalable and accessible Quantum solutions.

During the second quarter, we completed the strategic acquisition of NHanced Semiconductors, Inc., allowing us to launch our Fab 2 initiative ahead of schedule to advance key road map development goals and expand manufacturing capabilities. NHanced is the leading independent U.S.-based advanced packaging foundry with deep expertise in integration, hybrid bonding, chiplet architectures, silicon interposers, photonic device integration and advanced semiconductor packaging and manufacturing. The NHanced acquisition immediately expands our advanced packaging and semiconductor manufacturing capabilities in core nanophotonics area and beyond, while strengthening the production infrastructure supporting our thin-film lithium niobate platform and future Quantum products.

Importantly, -- it also adds to our customer base, production capacity, operational flexibility and brings an experienced engineering team, positioning us to better serve both commercial and government customers today while accelerating commercial development of next-generation photonic and Quantum technologies. In April, we announced that NeuraWave, our next-generation photonic reservoir computing platform reached commercial readiness. NeuraWave combines photonic and digital computing to deliver fast, energy-efficient AI inference and advanced signal processing at the edge. It is designed to support a broad range of applications across defense, telecommunications, autonomous vehicles, robotics, health care, industrial monitoring and other markets where real-time intelligence and low-power operations are critical.

NeuraWave also demonstrates the versatility of our photonics platform. The technologies we are developing extend well beyond Quantum computing, enabling differentiated solutions across AI communications, sensing and edge computing. This allows us to participate in large and growing commercial market while continue to advance our Quantum road map. In June, we successfully delivered and installed our DIRAC-3 Quantum optimization machine at a global consulting firm, marking another important commercial milestone for QCi.

The DIRAC-3 system is being deployed to support our customers' engagements with their enterprise customers on complex optimization challenges, including portfolio optimization. This sale demonstrates the growing interest in practical Quantum optimization solutions and reflects our continued progress in bringing commercially relevant Quantum technologies into real-world customer environments. Also in June, we reached a framework agreement with Plank Dynamics that included an initial purchase order for 5 of our NeuraWave photonic reservoir computing systems. Beyond this initial order, the agreement provides a pathway for the potential deployment of multiple dozens of NeuraWave systems as customer milestones are achieved, representing a potential aggregate program value of more than $10 million.

We view this as an important validation of our photonic computing technology, its commercial readiness and its ability to address emerging AI infrastructure requirement on a commercial scale. We also expanded the commercial reach of our Quantum communication portfolio with a purchase order from a world-leading university for our Quantum Secure communications system. The university plans to evaluate our technology as part of its broader research and development efforts focused on Quantum secure networking for next-generation communication infrastructure. We believe this order reflects continued commercial traction for our Quantum communications solution and growing recognition of the role Quantum secure communications will play in the networks of the future.

During the second quarter, we attended 8 industry conferences to broaden our visibility and strengthen our strategic partnerships across the Quantum ecosystem. These engagements, including the fifth annual Economist Commercializing Quantum Global 2026 Conference, the Quantum Tech World Conference and the Optical Quantum Industry Summit gave us the opportunity to connect with customers, government stakeholders and prospective partners while showcasing our expanding photonics and Quantum optics capabilities.

Looking ahead, we remain focused on 2 complementary growth engines. First, we will continue to move aggressively along our Quantum technology road map, leveraging our differentiated room temperature photonic architecture to develop Quantum systems that are smaller, more scalable and more practical for real-world deployment. As these technologies become commercially viable, it allows us to better serve our existing customer base who will be exploring use cases for these systems.

Second, we will continue to grow our commercial portfolio of photonic components, lasers, detectors, photonic integrated circuits, thin-film lithium niobate technologies optical packaging, advanced packaging, semiconductor manufacturing and other foundry services. These products and services generate revenue and address attractive market opportunities today while providing technologies, manufacturing expertise and production scale that directly support and enable our long-term Quantum strategy. Our scalable manufacturing strategy has accelerated significantly with the expansion from our Fab 1 facility in Tempe, Arizona to the launch of Fab 2 through NHanced acquisition.

Together, these facilities strengthen our ability to serve commercial customers across multiple industries, support government programs, expand U.S.-based manufacturing services and scale production as demand grows. We continue to see encouraging commercial validation through new customer engagements, strategic partnerships and government programs across both our commercial photonic business and our Quantum products.

We believe our unique combination of photonics innovation, semiconductor manufacturing, advanced packaging and Quantum technology positions QSI to create sustainable long-term value by serving customers across a broad and expanded set of high-growth markets while continuing to build technologies that will define the future of Quantum computing. As we execute on our road map, our focus remains unchanged, putting Quantum into the hands of everybody. We are moving Quantum out of laboratory and into business, government agencies, critical infrastructure and ultimately, everyday applications. Our room temperature chip scale photonic architecture is a key differentiator, dramatically reducing system complexity, power consumption and cost while enabling practical deployment in real-world environments.

We believe the combination of our Quantum technology leadership expanding photonics portfolio and growing manufacturing capabilities positions QCi to help shape the next generation of information processing while creating long-term value for our customers and shareholders.

Now I'm going to turn the call over to Chris Roberts, who is going to review financials. Chris?

Thank you, Yuping. It's my pleasure to review QCi's financial performance for the second quarter. Revenue for the second quarter of 2026 totaled $5.6 million compared to $61,000 in the second quarter of 2025 and $3.7 million in the first quarter of this year. All business units of the company contributed to the second quarter revenue, which derived from a broad cross-section of government, educational and commercial customers. Second quarter revenue came mainly from the sales of various photonics products that are critical to our Quantum road map and a wide range of existing industrial applications. Operating expenses for the second quarter totaled $21.8 million compared to $10.2 million in the second quarter of 2025, an increase of 114%.

The year-over-year increase was largely due to increase in personnel and related payroll costs for R&D efforts, sales and marketing as well as acquisition-related transaction expenses of approximately $7.3 million. Interest and other income for the quarter totaled $13 million compared to $1.8 million in the second quarter of 2025. The increase in interest income was due to interest generated from the company's larger cash position compared with last year. The company reported a net loss of $11.8 million or a loss of $0.05 per share for the second quarter of 2026 compared to a net loss of $36.5 million or $0.26 per basic share for the prior year period.

The main reason for the decrease in net loss was the change in the fair value of a derivative liability. To give you some detail, in the second quarter of 2025, the company recognized a $28 million noncash loss on the mark-to-market valuation of the company's warrant derivative liability compared to a mark-to-market loss of only $1.7 million in the second quarter of 2026.

I want to emphasize, these are noncash losses. And as previously disclosed, the derivative liability we're talking about is related to the merger with C-Photon in June of '22 and the warrants issued with that transaction. Our balance sheet continues to be strong. Total assets as of June 30, 2026, were approximately $1.6 billion, relatively unchanged compared to December 31, '25. Cash, cash equivalents and investments totaled approximately $1.3 billion as of June 30, 2026, compared to approximately $1.5 billion at year-end 2025.

The cash balance reported at the end of the second quarter reflects expenditures for our acquisitions of Luminar Semiconductor, Newcript and NHanced Semiconductors for which we used approximately $180 million in cash, including transaction expenses. Total liabilities as of June 30, 2026, were $47.2 million, an increase of $26.5 million compared to year-end 2025. As of June 30, the company had stockholders' equity of $1.6 billion. Our contract backlog as of June 30, 2026, was approximately $42.5 million.

And now I'll turn the call back over to Yuping.

Thank you, Chris. As we look ahead to the second half of 2026, we remain focused on integrating our recent acquisitions and unlocking the full value of talent, technology and manufacturing capabilities they bring to QCi. We continue to advance our transition from research-driven innovation and prototyping towards scalable commercial manufacturing, positioning us to meet growing demand across our target markets. We are encouraged by the momentum in our commercial and government contract pipeline and remain committed to executing on the partnerships that extend our reach and credibility in the marketplace.

As always, we will continue to evaluate targeted acquisition opportunities that strategically strengthen our organization and drive our path to scale. All of this is underpinned by a strong balance sheet, which gives us the financial flexibility to invest in our organization and strategically pursue those opportunities from a position of strength. We remain guided by our core principle of practicality first, scalability by design and innovation with purpose as we build the future of Quantum for everyone. Our strategy is straightforward, move aggressively to commercialize Quantum technologies while continuing to expand the photonics, semiconductor and advanced manufacturing capabilities that create value today and provide the foundation for the Quantum industry of tomorrow.

Thank you for your time today and your continued support of Quantum Computing, Inc. We look forward to updating you on our continued progress throughout the rest of the year. Operator, please open up the call for questions.

[Operator Instructions] And the first question today is coming from John McPeake from Rosenblatt Securities.

Ying and Chris on closing NHanced and the progress here. And no problem. And the question, I have a few. The first one is on DIRAC-3, the enhancements that we've been talking about relative to additional variables being enabled in the system. Anything you can talk about there, Yuping?

Yes. Thanks, John. Certainly, on DIRAC-3, we -- in the past, as we reported, we have already seen clear advantages of using quanta effects. But we also realized that for wide adoption, we needed to provide more functionality and be able to support more and more variables. I'm very happy to report that John we have made pretty good progress on that. So I would advise you to watch out for some news coming out in the coming months. So personally, I'm very happy and excited about the progress that we have made.

Okay. So that could unlock some additional markets with more variables is the way I would think about it, I guess, yes.

I'm pretty confident on that.

All right. Great. And then if I -- just one follow-up. With the NHanced acquisition, have your CapEx needs changed relative to Fab 2 because they are bringing some nice packaging and other capabilities to you guys?

That's a really good question. We're looking closely at what we need to do to upgrade the capability at the NHanced facility. They can currently do roughly 60,000 wafers a year. So it's a substantial increase over our Fab 1. But there are some features we'd like to have. We're looking at less than we would take to build out a whole new facility. So probably in the $50 million to $100 million range, probably closer to $75 million is what we're looking at, but we don't have that -- it's still in the planning stages, and we're probably not going to spend anywhere near that this year.

The next question is coming from Max Michaelis from Lake Street Capital Markets.

A few questions from me. I want to touch on the backlog. Thanks for giving that data. $42.5 million at the end of June. Just curious to know how that's trended in the past month or 2.

Well, certainly, with the acquisition -- are you talking about up to June 30 or after June 30?

Well, after June 30, Yes, 42.5 million is up till June 30. So how has that kind of trended in the past 1.5 months or so? Just curious.

The kind of contracts we're dealing with, the backlog tends to move in fits and spurts. There'll be a quiet week and then there'll be a very big week. So there hasn't been a lot of change in the last 40 days. As you can imagine, a lot of that increase from the backlog we reported at the end of Q1 is related to NHanced, but we also had a pretty good run of business development success across the company. One way to think about the backlog is that these are not quick turn contracts. These are contracts that will be performed over a period of 12 to 18 months. So we're not expecting to burn the backlog up between now and December. This is really -- if nothing else came in, this would keep us going until third quarter of next year, maybe a little bit longer.

Perfect. And then just going off of the Q2 revenue, you touched on a range of government, educational and commercial customers. Just curious to know which end market you feel like you're having the best headway with right now in terms of customer conversations and potential orders? Just kind of maybe stack rank that -- those end markets that you guys shared in the press release today.

Right now, we are primarily a provider to government agencies, whether it's mainly through subcontracts. So commercial would be a second. Educational is a distant third in terms of just markets. And that's true across the entire company. A large portion of the work that we're doing is in subcontracts to primes, both the civil side as well as aerospace and defense. And we expect that, that's probably going to continue for a while, but we're seeing a lot of interest in commercial markets for Quantum and other products. So we think that the balance is going to gradually shift over time. But right now, roughly 70%, 80% of our business comes from government contracting, mainly as a subcontracting.

The next question will be from Troy Jensen from Cantor Fitzgerald.

Congrats on all the progress here. Maybe I'll start with you, King. I just got a question on Direct. I guess I've seen a couple of optimization examples, and there was always a Quantum computer in the background kind of driving it. So can you -- is this an app... [Technical Difficulty]

Troy, you're breaking up a little bit.

Yes. Troy, I could not hear you well.

All right. I'll try again. I was just curious, can you hear me guys? -- can you hear me now?

Breaks up a bit.

Yes. I'm going to try one more time. Can you hear me now, guys?

I can hear you...

Can you hear me?

Yes, I can hear you.

Okay. Okay. Perfect. You have to step outside. But -- so I guess I've seen a couple of these optimization examples in the past, and it seems like they're always being driven by a Quantum computer in the background. So I'm just curious, is this the DXC, is this like an application that's working with other systems? Or just explain a little bit more, that would be great.

Yes. So as you know, Troy, DIRAC-3 machines were designed specifically to solve some very complex and MHR optimization problems. The purpose of DRAC3 is really that look at how to utilize the Quantum effects to better solve those MVHR problems that is that are very challenging to solve on the classical machines usually trapped in what people usually call local minimum. And what we have found is that the Quantum effects that we utilize in the direct machines can indeed help us hop off the local minimum.

So from that perspective, so the advantage stands similarly from the Quantum, but with the distinction that it is not a Quantum machine is that it is room temperature and we use photonics -- and as I just reported in the past, both our own engineers and outside users, they have really benchmarked our machine against other optimization machines using Quantum effects. And they have reported pretty clear advantage of both classical approaches and our other Quantum machines that they can access in the market.

On the other hand, we also understand that for our technology to be widely adopted, we needed to continue to reduce the SWAP fee parameters while supporting more and more variables and improve the quality of the solutions. This is what our team has been focused on. And recently, we ended, we have made some very exciting progress and that would help us to connect with more customers, be able to give more and more Quantum values to customers for the practical applications.

Got you. Okay. And then maybe just a follow-up for Chris. Could you give us any help on like a revenue or an OpEx contribution from the NHanced acquisition?

Sure. We're still not giving formal guidance, Troy. But I want to point you to the pro formas in the most recent Q that was filed this afternoon. I think it's footnote 4. And those pro formas, which go back -- footnote 3, what you'll see is the breakout by company of the revenue by quarter, the first 6 months of this year and first 6 months of last year. And the thing that leaks out is how variable the year-over-year revenue is. This is a business that tends to be lumpy. And in the first half of last year, NHanced did about $16 million. But in the we're hoping or the earn-out goals for '27 are predicated on a $35 million revenue target. But if you look at the pro formas, their numbers have gone down a bit more recently as they've -- some of the business mix has shifted, some funding on a big Navy contract has been pushed off to the next year.

So we're -- let me answer this in 2 parts. We're standing by what we said before, which is that the models that we've seen that showed QCi before NHanced doing $20 million to $25 million for this year, we stand by that. The estimate that NHanced will contribute is somewhere in between the $7 million and $16 million that they've done in the past. And it's really going to be depending on how quickly some of these projects are delivered and accepted by their customers. And that's -- frankly, it's hard to predict when you're doing cutting-edge development work for a customer. Sometimes you get it done on the schedule and sometimes it just takes a little bit longer. So we're trying to be cautious and not get over our skis on this. I hope that helps. We have a growing backlog, but due to the inherent challenges of technical completion and delivery, it's really hard to predict on a quarter-by-quarter basis, a little easier in the aggregate for a full year. I would caution to be -- to err on the backloading if you're doing a model.

The next question will be from Nehal Chokshi from Northland Capital Markets.

And Ying, you mentioned that DRECT3 has been benchmarked against other optimization machines, and you're seeing a significant advantage. Is this data that has already been published and fully available to everybody else? Or is this just information that you have received from the customer so far?

I believe at least a portion of the data have been published in journals. And I have also watched some of our customers reporting the findings in their presentations. And most of our internal benchmark on the other hand, we have not published. And also I can ask the team to provide you a collection of the papers presentations either by our own engineers or by the external users.

That would be great. We would love to see that. All right. And in the analog Quantum computing space, I think you have 2 primary competitors with 2 different modalities. Do you see one of those 2 competitors being a particularly stronger competitor in that space?

I would like to answer this question in this way. I think we all have our own understanding of our own design of Quantum computers. But at the end of the day, it's going to be the customers. It's going to be the applications that define the value of any Quantum machine, including Quantum computers that can create. As of now, according to many market researchers and also according to our conversations with the customers, it looks like optimization problems have perhaps the largest market potential. This is one reason that we started our business focusing on optimization using Quantum effects.

Down the road, I believe that gate-based machines will find more and more applications. In fact, this has also been a part of our road map as well. So we started with the Quantum optimization machine without having to using gate, but we have been working on the basis for the Quantum gate-based machine. Of course, using photonics is much harder. But once we overcome the engineering challenges, we can be looking at the opportunity to mass produce such Quantum photonic-based machines that will support volume production and reduce the unit price because at QSI, our mission is really to democratize Quantum. We -- our mission, the North Star guiding everything what we do is to put Quantum into the hands of people. I'm not talking about a small group of people. I'm talking about large population. This is why we have chosen this path.

Again, it is much, much harder to construct the gates, Quantum gates using single photons. But once we overcome this difficulty, the manufacturing would be much easier. I think we are planning the last half mile of mountain, and I am happy with the progress our team has been making on the gate-based machine as well. So don't take me wrong. So we currently -- we don't have gate-based machine yet, but we have been making very good progress.

That's awesome. And just to follow up on the Quantum gate. You said once overcoming the engineering challenges, and you did mention single photon as being a key element here. Are there other elements -- other engineering challenges other than managing photon optical loss to the point of where you can basically maintain the integrity of a single photon throughout the Quantum computer path?

That's a great question. And I was expecting you to ask this in-depth question, Nehal. To the gate-based Quantum machine using single photons, yes, Photonphoto interaction is most critical and it's also most challenging because this is the basis for the logic. But in the meanwhile, so we are talking about building a machine, right? So we're not talking about demonstrating the gate fidelity to construct a complete machine that function at the room temperature and be able to integrate it into, say, other computing platforms such as GPU and CPU. So we needed to have a self-contained system that will require us to have the lasers the single photon detectors, controlling electronics, all integrated on a single chip. This is actually the fundamental reasons why we have acquired Luminar Semiconductor Inc. have acquired NHanced because we are looking at developing those heterogeneous integrated chips to support our Quantum computing platform and all the other Quantum technologies, including the sensing, including the communications and the photonic...

And the next question is coming from Ed Woo from Ascendiant Capital.

Yes. Congratulations on all the progress. And congratulations on your increasing commercial scale. Would you have to invest significantly in the sales force to expand your commercial opportunities?

Actually, yes. We announced, I guess, it was 2 weeks ago that we hired Susan Hunt as our new Chief Revenue Officer and our previous CRO is now in charge of products, product management. And Susan has an aggressive plan, including hiring some key people in both commercial and government sales. So while we do have a reasonable sized sales force today, we are very much want to emphasize sales going forward and try and build that backlog up as fast as we can.

Yes. Indeed. So Ed, I also wanted to add that -- so the reason that we have made this change is because our technology and manufacturing capabilities have reached an inflection point. We are now really ready to embrace the market at a sizable scale. And we are ready to bring our technology and product into a much larger market because we are ready. On the technology side, on the -- also on the manufacturing readiness level.

That does conclude today's Q&A session. I would now like to hand the call back over to management for closing remarks.

Thank you, everybody, for joining our earnings call. And if you have any further questions, feel free to reach out to our Investor Relations. I wish everybody have a nice rest of the day. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, greetings, and welcome to the Quantum Computing, Inc. First Quarter 2026 Shareholder Update Call. [Operator Instructions] It is now my pleasure to introduce your host, John Nesbett with IMS Investor Relations.

Thank you, and I want to welcome everyone to the Quantum Computing, Inc. First Quarter 2026 Shareholder Update Call. Before we begin, please note that today's remarks may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected results, operational plans, strategy and market opportunities. These statements are made pursuant to the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Exchange Act and are based on current assumptions and expectations.

Forward-looking statements are neither promises nor guarantees and involve risks and uncertainties that could cause actual results to differ materially. Important factors are discussed in our annual report on Form 10-K for the year ended December 31, 2025, and in subsequent SEC filings, including the quarterly report on Form 10-Q for the quarter ended March 31, 2026. We undertake no obligation to update these statements, except as required by law.

On the call today, we have Dr. Yuping Huang, Chief Executive Officer and Chairman; and Chris Roberts, Chief Financial Officer. The team will provide an update on the business, followed by a question-and-answer session. With that, I would now like to turn the call over to management. Please go ahead, Yuping.

Good afternoon, and thank you for joining us for Quantum Computing, Inc.'s First Quarter 2026 Earnings Call. We made meaningful progress in the first quarter of 2026, executing on our strategic initiatives and furthering our mission of delivering accessible, scalable and cost-effective quantum machines and photonic solutions for practical use across high-growth market that include high-performance computing, artificial intelligence, cybersecurity, aerospace and defense and advanced sensing and imaging.

We completed 2 key transactions during the quarter, closing the acquisitions of Luminar Semiconductor Inc. and NuCrypt, LLC. Luminar Semiconductor, which I will refer to as LSI going forward, represents a significant milestone in QCi's strategy to build a vertically integrated product driven photonics and quantum technology platform. LSI brings established capabilities in lasers, detectors, advanced packaging and testing, has a strong photonics customer base and has broad R&D and manufacturing capabilities that we believe strengthened our ability to move from small batch to higher volume production.

Included in LSI's portfolio are 3 key subsidiaries. The first is Freedom Photonics. Freedom Photonics is a leading-edge R&D and manufacturing facility that provides unique photonic components, modules and systems and is recognized for world-class semiconductor laser technology with approximately 25 issued and pending patents.

The second is EM4. EM4 is a Class 10,000 certified humidity controlled clean room facility and a leading provider of subsystem design and manufacturing, offering comprehensive photonic and fiber optical module solutions. The EM4 facility is a major supplier to several U.S. government programs and the European defense and space markets. And finally, OptoGration has a chip manufacturing facility and a device assembly and testing facility specialized in design, assembly, testing and low-volume component production.

We are currently integrating LSI, and we are excited to onboard their experienced team of operators, engineers and scientists to expand our depth of talent and execution capacity. We are focused on serving and expanding LSI's existing client base and utilizing their technology and the products to drive Quantum commercialization in our target markets.

The second acquisition completed in the quarter is NuCrypt. NuCrypt's primary patent portfolio spans quantum optics, RF photonics and photonic signal processing, which can generate, measure and distribute entangled photons over fiber optic cables. Organizations such as NASA, the U.S. Army Research Lab and the major global research universities and customers have used NuCrypt's technology. NuCrypt suite of quantum communications systems and product will enable us to further advance our technology road map while bolstering our product and solutions portfolio with the goal of further improving the performance, robustness and scalability of our technology.

We announced a key partnership with Quantum Corridor, which placed a QCi Dirac-3 quantum optimization machine on Quantum Corridor's network, an interstate quantum-safe commercial communication network in North America. The optimization machine is intended to provide enhanced secure and on-demand Dirac-3 access for institutions and commercial customers on Quantum Corridor's network. We believe this is the first data center installation of a Dirac-3 machine and the first installation of its kind in a commercial data center environment.

This collaboration marked a significant step forward in our commercial deployment strategy expanding practical access to a quantum infrastructure for both academic and enterprise users and reflecting our commercial strategy to make high-performance quantum solutions readily available in IT ecosystems. On the foundry front, our TFLN chip R&D and manufacturing facility in Tempe, Arizona, also known as our Fab 1, has been ramping up small batch manufacturing. The foundry's capabilities include nanofabrication and inspection, multiphysics simulation, in-house design and dicing and prototype packaging. While the facility has begun generating early revenue, it's important to know that its primary use is as a research and development facility.

We are actively in the planning phase and assessing options for a Fab 2 facility, a second much larger foundry, which can support higher volume production to extend our long-term manufacturing capacity and enable widespread deployment of quantum-powered hardware. It is our intent that Fab 2 facility will be where quantum manufacturing becomes scalable. We look forward to keeping you apprised concerning our Fab 2 strategy and time lines as it progresses. We have made progress on our technology road map as we work towards our commercial strategy of bringing quantum products to a broad market by evolving from a technology innovator into a full-scale manufacturer capable of delivering quantum-enabled systems at industrial scale.

It is becoming increasingly clear that we are well positioned in the marketplace. We believe we have strong quantum optics and integrated photonics foundation that enables affordable and deployable quantum hardware. By focusing on quantum photonics, our technology has the ability to operate at room temperature, dramatically reducing system footprint, complexity, cost and power requirements. We are following a strategy focused on manufacturing built for scale as we further refine our Fab 1 facility and advanced planning on Fab 2.

And finally, we believe we are getting traction across strategic partnerships and government collaboration. Our guiding principles of practicality first, scalability by design, accessibility for all and innovation with a purpose remain at the core of everything we do as we build the future of quantum for everyone.

I will now turn the call over to Chris Roberts, our Chief Financial Officer, to discuss our first quarter 2026 financials.

Thank you, Yuping. I'm pleased to announce that revenue for the first quarter totaled $3.7 million compared to $39,000 in the prior year quarter. The year-over-year increase in revenue was driven primarily by the acquisition of Luminar Semiconductor in early February and to a lesser extent, revenue from the acquisition of NuCrypt in early March.

Excluding the LSI and NuCrypt contributions, QCi revenue for the first quarter totaled $204,000, consisting primarily of deliveries of foundry orders and work on an R&D subcontract for NASA. Operating expenses for the first quarter totaled $19.8 million compared to $8.3 million in the same quarter last year. The increase in operating expenses was due to a substantial increase in staff, including administrative, technicians, engineering and scientific, which resulted in increased R&D expenses, product development and sales and marketing expenses.

Sales and marketing expenses for the quarter were $1.6 million compared to $0.7 million in the prior year, increasing primarily as a result of employee compensation costs, customer lead generation activities, trade show participation, advertising and other marketing and selling costs. General and administrative expenses for the quarter were $11.3 million compared to $4.6 million in the prior year, increasing primarily due to substantial M&A transaction expenses in the quarter for the NuCrypt and LSI transactions.

We reported a net loss of $4.1 million for the first quarter or $0.02 per share compared to net income of $17 million in the first quarter of 2025 or $0.13 per share. To put this change in the proper context, as previously reported, the $17 million net income in the first quarter of 2025 was primarily attributable to a $23.6 million noncash gain on the mark-to-market of the company's derivative liability, which relates to warrants issued for our merger with QPhoton in June of 2022.

Our balance sheet continues to be strong. We reported cash, cash equivalents and investments of $1.4 billion at March 31, 2026, compared to $1.5 billion at December 31, 2025. Interest income in the first quarter of '26 was $13.5 million, up from $1.7 million in the prior year period. At March 31, 2026, total assets were $1.6 billion, relatively unchanged compared to December 31, 2025. Stockholders' equity was also $1.6 billion at March 31, 2026, again, essentially unchanged compared to year-end 2025. Our contract backlog as of March 31 was strong at $16 million. And now I'll turn the call back over to you, Yuping Huang.

Thank you, Chris. As we move through the remainder of the year, so we are intensely focused on investing in our team across engineering, research and production, converting a growing pipeline of commercial and government engagement into recurring revenue, strengthening our fabrication capabilities and executing on both organic and inorganic growth opportunities to drive long-term value creation.

We have a very strong balance sheet and healthy backlog, and we are energized by the task in front of us as we continue advancing our mission of putting quantum-enabled solutions into the hands of people. As always, thank you for your ongoing support. We look forward to keeping you apprised of our progress as we continue to move through the year.

With that, we will now open the call for the questions. Operator, please go ahead.

[Operator Instructions]

And the first question today is coming from John McPeake from Rosenblatt Securities.

Congrats on completing the acquisitions, Chris and Yuping. One question kind of works into 2. Where are we with the R&D effort on the next Dirac and then also your gate-based quantum computer. Maybe you could just talk a little bit about that, Yuping?

Yes. We have made very good progress on the next version of the Dirac machine. In fact, we are in the phase of internal testing and in fact every day. So when I come to the lab, people are telling me some exciting new results. I hope that we will be able to complete the last steps and put this in front of some early users. This is on the Dirac machines.

For the gate-based, we are making good progress on 2 fronts. One front is that we are continuing our engineering designs so that we can push up our gate fidelity on the theoretical front. And now as we talked before, John, so we actually have spent quite a few years on this, and we believe that we figured everything out on the theoretical and engineering side to construct gate-based machine.

On the other hand, to realize photon-photon interaction gates, it's crucial for us to get extremely high-quality photonic circuits in thin-film lithium niobate based on our patent technology. So on the fab side, we have made good progress in optimizing our recipe so that we can meet those very high requirements for the photons to interact strongly with each other. So yes, on the gate-based machines, we have made good progress, but there is still some way for us -- some way ahead of us for us to test our prototypes. We have not started to make the prototypes yet, instead we are testing our photonic integrated circuits at this time.

Well, that modality looks like it's the other companies that are attempting to produce gate-based photonic computers. They're talking a fair ways out, right, because of the technology issues you're talking about. Do you feel like you'll be in the mix when other companies are starting to deliver theirs? Sort of '29, yes. Yes, go ahead.

Let me put it this way, John. So we chose our gate-based approach to be scalable. So instead of trying to demonstrate some proof of concept, from the very beginning, we have designed our gate-based machine so that once we can test the principle on the prototype, we can quickly scale up in terms both of the gate circuit depth and the number of qubits. So right now, we are looking at overcoming the last or final hurdle on the engineering side.

And with that overcome, so we should be able to quickly ramp up. So this is why although we started relatively later than some other players on this gate-based machine, but I'm confident that as we figure out the final steps of engineering, so we can quickly catch up. And remember that the advantage of our approach is that it's very scalable, and it runs at room temperature and everything is chip integrated.

The next question is coming from Max Michaelis from Lake Street Capital.

Just a few. Thanks for sharing some of the data around backlog, that was $16 million at the end of the quarter. Is there any way you can give us sort of any insight on how that's trended now that we're a little deeper into Q2? I know you guys aren't giving specific guidance, but maybe a little bit of help on how that backlog has trended throughout the past couple of weeks?

Well, what we're finding, Max, is that the customer community is very pleased with the combination of the companies. Some of the risk that was associated with the Luminar bankruptcy has dissipated. We are pursuing a lot of -- there's nothing I can specifically announce today. But what I will say is that we are seeing a pickup in our business development activity in the pipeline. And I think we'll have a lot more going forward. But yes, the reaction of the market has been positive and our sales activity reflects that.

Awesome. And then last one for me. So Luminar and the NuCrypt were the 2 acquisitions. Give us an idea on what some of the areas you guys are probably headed towards next, probably can't share a lot, but give us sort of an idea on what's kind of at the top of mind for you guys in terms of importance in building out your platform?

Yes. I can answer this question, Max, I have announced that over the next few years, we focus on transition from a tech innovation company to volume production company. So we have been very happy with the acquisition of Luminar Semi and then NuCrypt. They really enhanced our depth and also the breadth of the technology engineering and manufacturing capabilities.

Going forward, so we will continue to execute our road map as we published on our website last year. So we are looking to execute our Fab 2 plan. And I did make a promise that we will get our Fab-2 started, and this is what we are focusing on now. And it looks like we have some pretty exciting development on that front as well. So we hope to keep the community updated on that as we make progress.

[Operator Instructions] And the next question is coming from Antoine Legault from Wedbush Securities.

To add on to what Max was asking about LSI and NuCrypt, just on those integrations, you mentioned that these companies are bringing established capabilities in laser detectors, advanced packaging and broad R&D manufacturing capabilities. Can you give us a sense of the financial synergies and more importantly, the technical synergies that you expect to realize with these 2 recent acquisitions? And just how are the integrations coming along, if you can share a bit more on that?

Sure. Let me answer the question on the tech synergy and Chris can answer the financial synergy. So on the tech side, as we discussed in the past, our goal is to develop complete quantum product and solutions. And for such, we needed to have not only our core quantum nonlinear optical technology and circuits, but also photonics products and the controlling electronics, for example.

With Luminar Semi, so they have very strong team on the lasers on photodiodes and on optical packaging and testing. We, in fact, have launched a handful of initiatives, leveraging their team and manufacturing capabilities to advance our quantum device and systems development. And in the meanwhile, so now we are working with them to develop and commercialize photonics for quantum. As many of you know, quantum technology requires some specialty photonic component and the circuits.

And now we have a team who understand both photonics and quantum. So I think we are in a very unique position to provide solutions and become a supply photonics for quantum. So this is on the tech synergy side from -- with Luminar Semiconductor. And NuCrypt actually, so we already have very high synergy in the areas of quantum communications, technology and systems.

In fact, our approach to quantum communication are complementary to each other with NuCrypt, we offer a complete toolbox and a whole suite of quantum communications technology that should be able to meet the needs of the majority of the customers. Chris, would you talk about the synergy on the other side?

Sure. That's a really good question. And the short answer is that companies are all small. So there's not like there's a big back-office processing center that we can consolidate with another one. However, now that we are close to 200 people, we're able to get better bids on things like employee benefits. Insurance is a little bit more cost effective. There are some things that benefit from scale.

The other part that sort of touches on finance, but also rolls into what Yuping was talking about is that the -- there are some synergies in the business development area where as a combined entity, we're able to go after some very interesting opportunities by combining either the core QCi technology, with the NuCrypt technology or with the LSI technology or some combination of those and we're able to go after more business than we were before, So there is a synergy there.

I don't anticipate a lot of direct cost savings from redundancies, if that's really what you're driving at. All the companies were operating with a fairly lean back-office staff. But we are finding that there's some synergistic activity between the different teams, and it's going to help us grow and integrate. The skill sets of the financial and legal and contract staff of the different companies are complementary. They work well together, and they're making us more effective. So I hope that answers your question.

It does. And thank you, both, for the very comprehensive answers. Last quick one for me. On Fab 1, you mentioned you're ramping small batch manufacturing, and it's begun to generate early revenue. Can you give us a sense of the expected ramp in revenue from here through the rest of the year and into 2026. Can you just compare and contrast that compared to the revenue you expected to generate from the LSI acquisition, which I believe had been -- you had pointed to $20 million to $25 million in annual run rate. But beyond that, is there any other contribution from your Fab 1 manufacturing revenue?

Yuping, let me take that one. As we disclosed in the press release and the 10-Q, our -- of our 200-some-odd thousand revenue, $120-some-odd thousand was directly from foundry-related sales, which is a four or fivefold increase over fourth quarter of '25. And as we get better at processing these advanced circuit designs, we're confident that, that is going to continue to grow, probably not at a dramatic pace, but we're getting better at it.

And putting together a chip fabrication facility is something that is not just a matter of plugging in the machines and turning them on. There's a lot of know-how and skill that goes into putting together these advanced prototype chipsets. The contribution of the fab is several orders of magnitude below what we're seeing from Luminar, and it probably will remain a considerably smaller, but we are expecting that to grow as we're able to successfully deliver these prototype chips and interact with the customers, hopefully get follow-on orders and take it from there.

Yes. I just wanted to add that we did not plan for Fab 1 to become the engine of revenue. So instead in our strategic plan, so we are looking at Fab 1 as our engine for innovation and chip production validation as a necessary and very helpful step to our Fab 2.

So we are using Fab 1 to understand better what it takes for us to get to the volume production of the chips because we needed to first develop and stabilize lots of recipe, as Chris said. It is not just to turn the machine and you automatically get a lot of chips. There are a lot of work to do to develop the know-how and later transfer those know-how to our Fab 2.

The next question will be from Troy Jensen from Cantor Fitzgerald.

A couple of questions for Chris. First of all, just gross margins, I'm just thinking there may have done some onetime stuff in the March quarter. I mean, kind of going forward, as LSI is more fully integrated and we have a full quarter, are gross margins more in like the 25% to 30%, 35% range? Or any help on that would be great.

Sure. I appreciate you picking up on that. Yes, gross margins were -- came in pretty low. And what's driving that is underutilization. As you probably understand, the chip business is very capital intensive. And the capital equipment, once you turn it on and start using it, you have to amortize that. And when the utilization of the facility falls below a certain point, you just have a lot of costs with relatively little revenue to offset it.

And that was what affected the gross margins in Q1. We started recognizing revenue in the Fab 1, but that required us to recognize a lot of the production overhead costs, which is part of accounting. Same thing with Luminar, they're coming out of the Luminar technology bankruptcy, going through a phase where the production volume was a little on the low side. So there's a lot of unabsorbed costs that hit the gross margins. We should be able to get back to 20%, 30% as volume picks up. But it's -- I can't really tell you exactly how long it's going to take to get there.

Understood. That was helpful enough. And also, can you just give us a little color on the OpEx lines? You mentioned a lot of M&A-related expense in G&A. So I mean, if you strip that out and think of kind of a normal G&A quarter or on the flip side, I think R&D should go up because you've got a full quarter of Luminar or LSI here. Just thoughts on kind of OpEx sequentially here?

Okay. Yes, M&A costs were close to $6 million just in the first quarter. There's a lot of legal fees and due diligence fees and banker fees. So it's just an expensive process, and that did cause a spike in the G&A. In terms of other run rate, keep in mind that in the first quarter, we added the management costs, G&A costs of 2 other, Luminar and -- LSI and NuCrypt to the total. So there was just more people and more G&A-related expenses.

The increase was in line with what we would expect, given that QCi's core staff was 75 people and brought on another 100 people in the first quarter. So that most of the costs are related to -- most of the costs other than the M&A-related external costs really are driven by the increase in headcount.

The next question will be from Nehal Chokshi from Northland Capital.

Congrats on the acquisitions, especially the Luminar one. I really like that one, very nice. So just to put a point on it, can you just explicitly say what is the new quarterly OpEx run rate with these acquisitions now folded in?

I don't really have that number at this point. So I'm going to dodge that question for the moment.

All right. That's fine. Can you describe the final engineering hurdle in more detail that's being currently worked on in response to one of the questions that was asked earlier today here?

You're talking about the Dirac-3 capability hurdle or the gate model hurdle?

Gate model hurdle.

Yes. Okay. So gate model hurdle. Very good question, Nehal. So you know that I've been thinking about this question of how to build a room temperature quantum computer for over 10 years. In fact, it's close to 15 years. I have -- I believe that figured out everything on the technology and the physical side, but the last remaining hurdle is really on the engineering side.

In fact, through our validated simulation and is based on many of our proof-of-concept experiments, we have identified that we have to achieve 5 pretty extreme conditions for the photons to interact strongly with each other. So that is really to bring the nonlinear optics to the single photon level. And so far, so we have achieved 4.5. The other half is that we needed to increase the quality factor of our microring resonators to be above 10 million. And I can tell you that right now, we are at a mark of 2 million.

And of course, we have the recipe and we also have done a lot of tests to have find a way to get it to the 10 million. I think right now, this is something that I'm pretty confident that we can achieve and -- but just needed to get our engineers in our Fab 1 a little bit more time so that they can consistently achieve over 10 million on the chips that we make because eventually, it is not that we need just one gate. We needed to integrate tens of hundreds of gates on a single inch square chip. So this is the last engineering hurdle.

Okay. That's great. And then you also mentioned that there are some specialty photonics components for quantum. Which particular components are you talking about that's specific to quantum?

Yes. For example, so the way that we create quantum entanglement in photonics is by using a laser to drive what people call spontaneous parametric down conversion process. And in order to have very high purity in the generated entangled photon pairs, you have to start with very high-quality laser with narrow line width and with almost zero phase noise, especially in the wavelength channels of the entangled photons.

So you have to make sure that the laser itself is very clean. And this requirement is very strong. And oftentimes, it is only pertaining to such quantum entanglement generation process. And another is that, as you know, for quantum, we have to minimize the losses and because if a photon is lost, it's lost and then the game is over. So we really needed to minimize the loss all the way through the transmission line.

And this is hard and this is also a unique requirement for quantum. There are other special requirements for photonic devices suitable for quantum applications.

Our next question will be from Ed Woo from Ascendiant Capital.

Congratulations on all the progress. My question is Quantum typically focused on domestic opportunities. Now with the acquisition of NuCrypt and LSI, does that diversify your potential revenue and geographic reach?

Yes. In fact, NuCrypt was one of the very first companies in the U.S. to have started commercializing quantum communication technology. So they have sold the product to quite a few countries in the world, and we certainly plan to tap on their successes and use the pipeline to expand our overseas commercial presence.

And the EM4, they already have a strong base in the defense and aerospace, not only in the U.S. but also in Europe. So this is also an area that we will continue to support and potentially grow and also utilize those pipelines to quickly expand our quantum product market.

This does conclude today's Q&A session. I will now turn the call over to management for final remarks.

Thank you for your time. Really appreciate you joining our call and those questions. Should you have any further questions, please feel free to reach out to our Investor Relations. I wish everybody a great rest of your day. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, greetings, and welcome to the Quantum Computing Inc. Fourth Quarter 2025 Shareholder Update Call. [Operator Instructions] Please note this conference is being recorded. Following management's remarks, the call line will be opened for questions. It is now my pleasure to introduce your host, as Rosalyn Christian with IMS Investor Relations.

Thank you. And I want to welcome everyone to the Quantum Computing Inc. Fourth Quarter and Full Year 2025 Shareholder Update Call. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements based on our current expectations and projections regarding future events and are subject to change based on various important factors.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this call. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission.

On the call today, we have Dr. Yuping Huang, CEO and Chairman; and Chris Roberts, CFO. The team will provide an update on the business, followed by a question-and-answer session.

With that, I would like to turn the call over to management. Please go ahead.

Good afternoon, and thank you for joining us for Quantum Compute, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. 2025 was a transformational year for QCI. We made meaningful progress advancing our strategy to build a vertically integrated photonics and Quanta optics platform capable of supporting scalable commercial applications across AI, high-performance computing, cyber security and remote sensing.

Over the course of the year, we achieved several key milestones. We completed and opened our Stanfield photonic chip fabrication facility marking an important step towards domestic scalable production of high-performance specialized photonic integrated circuits. We continue to expand our foundry services business, which has now begun to generate early revenue and customer engagement, and we are employing phase for our second fabrication facility, which is what we call Fab 2.

We strengthened our leadership team and the Board, adding an experienced director and executive with deep expertise in scaling advanced technology companies and join in both organic and inorganic growth. I was appointed CEO effective January 1, 2026, after serving as interim CEO since May 2025. And we welcomed Chris Roberts as our new Chief Financial Officer; and Eric Schrott as a new independent board member each brand's deep expertise and executional focus as we scale the business.

And importantly, we recently completed the acquisition of Lumina Semiconductor Inc. or LSI, which enhances our design, fabrication and packaging capabilities and accelerate our path to scalable manufacturing. LSI also contributes a established customer base and a steady revenue to the combined organization.

Those accomplishments reflect the steady execution of our long-term strategy and position us well as demand for energy-efficient room temperature photonic and Quanta solutions continue to grow.

Turning into the fourth quarter. Revenue in the quarter reflects early contributions from our foundry service business and increasing customer engagement across our product portfolio. As many of you know, Q2 operates Fab 1 as a rapid prototyping facility dedicated to same litigate photonic integrated circuits in support of our Quantum machine development road map.

This facility is not intended to serve as a large-scale commercial production foundry. But it does generate revenue by providing foundry services to our customers, but many functions as an internal innovation engine that face validated designs and process knowledge into downstream manufacturing partners as technologies mature.

That 1 enables rapid design, fabrication, test iteration cycles for advanced photonic devices century to QCI Quantum architectures. It allows us to explore novel sinfulitanibat-based components validated system level concept and derisk emerging designs ahead of volume manufacturing.

Fab 2 is intended to provide a domestic vertically integrated processing capability to support QCI's internal technology road map, particularly the development and scaling of our photonic quantum machines and quantity enabled systems. It will focus on producing specialized Quantum and another photonic chips and will complement not compete with the broader silicon photonic ecosystem. We expect to engage external foundries as partners as technologies scale.

By combining internal vertical integration with external foundry partnerships, QCI and to strengthen supply chain resilience, accelerate innovation and support the responsible scaling of advanced photonic and quantum technologies. In December 2025, we announced the acquisition of ASI, which closed in February 2026.

This subsidiary brings existing customer base and additional semiconductor capabilities that expands our addressable market and strengthen our ability to deliver integrated photonic solutions at scale. Integration efforts are underway, and we are focused on aligning teams, processes and customer programs to accelerate growth in 2026 and beyond.

From a product perspective, we continued advancing our Quanta authentication and networking technologies as well as our direct platform and the remote sensing initiatives, which remain areas of strong interest across government and commercial customers.

In the fourth quarter, we also unveiled our photonic-based reservoir computing system Eurogate at Supercompute 2025. Eurogate represents a significant milestone as it is designed to integrate with existing computing infrastructure and address emerging AI workloads with improved energy efficiency.

We also announced a strategic collaboration with pot technologies to develop next-generation high-speed Filimodulator-based optical engines designed to support AI network infrastructure. Importantly, we continue to expand our global reach through continued industry engagement.

We recently participated in many conferences, which just in the fourth quarter included optical Quanta Industry Summit super compute and Q2 Silicon Valley.

Finally, during the year, we formulized and communicated a focused multiyear technology road map, which is available on our website. This road map is centered on scalable room temperature photonic and Quantum products, systems and solutions.

Our vision is to bring Quantum technology into real-world applications. That means putting the power of Quanta technology into the hands of people by moving it out of the laboratory and into enterprise, government, commercial and consumer environments through chip integrated, low-power deployable systems.

At the core of our road map are 3 capabilities that define our platform, capture, compute, communicate. Capture information through quantum sensing and photonic data acquisition, compute through photonic and quantum processing systems, including our direct platform and photonic AI capabilities, communicate through quantum secure networking authentication and encryption technologies.

This framework aligns our product development manufacturing strategy and go-to-market efforts around delivering practical scalable quantum enabled products and systems. Importantly, this road map represents our transition from a development stage a company to a commercial manufacturing-driven platform business.

We are evolving from a technology innovator into a company capable of delivering repeatable, high-performance photonic and Quanta hardware at industrial scale. Our differentiation remains clear. Unlike Progenic Quantum systems, our platform is built on time-fill Lithonia photonics enabling room temperature operation, lower power consumption, smaller form factors and lower total cost of ownership, which we believe are critical for broad adoption.

As we progress our chip manufacturing capabilities over time, we expect to support global deployment of chip integrated Quantum systems across high-performance computing, telecom, defense, space and enterprise markets.

Our road map is designed to move QCI from innovation to industrial scale production, positioning us to deliver practical quantum technologies that are accessible, scalable and commercially viable.

Overall, we exited 2025 with a strong balance sheet supported by significant capital raised during the year, a growing commercial foundation through foundry services and product development. An expanded technology platform following the integration of AOSI and a clear path towards scaling revenue through a combination of semiconductor services and Quantum enabled products.

Like many companies across the broader technology, AI and Quanta sectors, we have experienced recent volatility in our share price, which we believe reflects broader market conditions rather than any change in our underlying business performance or long-term outlook. Our focus remains squarely executing our strategy, advancing our technology road map and building a sustainable commercial business.

We believe the long-term fundamentals for photonics, quantum technology and AI infrastructure remains strong, and we are well positioned within these trends.

With that, I will now turn the call over to our Chief Financial Officer, Chris Roberts.

Thank you, Yuping. Revenue for the fourth quarter totaled approximately $198,000 compared to $62,000 in the prior year quarter. The year-over-year increase was driven primarily by hardware sales and services associated with our Fab 1 facility, which began contributing revenue during the fourth quarter. As we previously mentioned, we completed the acquisition of Luminor Semiconductor, Inc. in February 2026. We expect this business to begin contributing revenue in the first quarter of '26. Operating expenses for the fourth quarter totaled $22.1 million compared to $8.9 million in the same quarter last year.

The increase in operating expenses is the result of substantial growth in personnel for research and development, engineering, manufacturing and sales and marketing as we can position the company for long-term growth.

M&A expenses in the fourth quarter also contributed to the higher expenses. We are scaling our organization across the board to support this expansion, including all functional areas of the company. As a result, SG&A is expected to grow in the near term as we invest in the resources and personnel necessary to advance our technology and execution capabilities.

The company reported a net loss of $1.6 million for the fourth quarter or $0.01 loss per share compared to a net loss of $51.2 million in the fourth quarter of 2024. The decrease in net loss this quarter was primarily due to a gain of $7 million from the mark-to-market of a derivative liability plus interest income of $13.6 million. For the year ended December 31, 2025, the company reported a net loss of $18.7 million or $0.11 per share compared to a loss of $68.5 million or $0.73 per share in the year ended December 31, 2024.

As Yuping mentioned earlier, we continued to strengthen our balance sheet during the fourth quarter. In October, we announced that QCI entered into securities purchase agreements with a group of institutional investors for the purchase and sale of 37 million shares of common stock in a private placement, resulting in gross proceeds of $750 million, before deducting offering expenses.

That brings the total capital raised in 2025 to $1.55 billion. As a result, we ended the year with cash and cash equivalents of $738 million and investments of $783 million on our balance sheet, roughly $1.52 billion in total. Our interest income for the 2025 year was $20.7 million, a substantial increase from $423,000 in 2024. As of December 31, 2025, total assets stood at $1.6 billion, up from $154 million at year-end 2024.

The Stockholders' equity rose to $1.6 billion at 2025 year-end, reflecting our strengthened financial position. And now I'll turn the meeting back over to you, Yuping.

Thank you, Chris. As we look ahead to 2026, our priorities are clear. scaling our foundry services business and increasing customer engagements, advancing our product portfolio toward broader commercialization successfully integrating AOSI and capturing synergies across our platform and continue to execute with this plan while preserving capital.

We are building a differentiated technology platform based on room temperature, low-power photonic and point solutions. And we believe QCI is uniquely positioned to address growing demand for energy-efficient, secure communications and advanced sensing technologies.

We appreciate the continued support of our shareholders, customers and partners, and we look forward to updating you on our progress through 2026.

Thank you. With that, we will now open the call for questions. Operator, please go ahead.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. The first question comes from John McPeake with Rosenblatt Securities.

Thank you, Ping and Chris. Congrats on closing the LSI acquisition. Okay. I just want to make sure you guys could hear me for a second there. So great. So you have a step function revenue change happening here. Could you just remind us of the LSI revenues, how we should think about that going forward? And also their expenses a little bit as we try to take a stab at updating our models here would you take this question?

Sure. I'd be happy to John, I've seen a couple of analyst reports back up. As you know, we are not in the habit of giving revenue guidance. So I want to make clear that we're not doing that now. However, I understand the question. And there have been several analyst reports that have indicated that -- or projected that revenue would be in the $20 million to $25 million per year range.

And I think that's a reasonable estimate right now. And in terms of costs, we have some work to do with LSI. This is a company we acquired out of the Lumina technology bankruptcy, and they had a different shared services model. So we're reconstructing some things probably not going to be profitable at this scale, but we're working on realigning and integrating the businesses.

So we really don't want to be too specific at this point because we're trying to grow both the core level business in the QCI business and develop synergistic products. So there's a lot of spending that's going on around there. I think it's safe to say that, that we'll be investing a fair amount of money in growing the business, and we're not going to be trying to squeeze every nickel out of profitability in the near term.

Okay. That's fair. And if I could just have a follow-up on Tiffin #2. You got some fabs with LSI -- could you give us a sense -- do you think you're going to be able to co-locate with 1 of those fabs? And when should we think about the expenses, the CapEx, et cetera, kicking in for Tiffin #2 and maybe I don't know if you can gauge what that might be like typically of the size you're thinking about? And that's all I got.

That's a really good question, John. In terms of co-locating, the -- let me take some steps. -- the current facility we have for Fab 1 is about 9,000, 9,600 square feet. And it's not possible to put Fab 2 in the same area. The space isn't there. It's not really set up that way. So what we're looking for is a larger facility, whether we end up doing a build-to-suit or acquire an existing facility and modify it, we're exploring multiple options.

We're not likely to incur large costs this year, because we have a lot of design and evaluation work to do. So the larger cost would be 2 and 3 years out. The cost really hard to estimate at this point in time. Obviously, it's going to be several hundred million dollars to build any kind of sizable fab.

But it's too early right now to be able to give you a hard number. We're still in the design and development phase. We've engaged some experienced design firms. And we're just beginning the process. So I don't have a hard number for you at this point, but nothing substantial is likely to happen in terms of CapEx outlays this year.

The next question comes from Max Michaelis with Lake Street.

I just want to go back to the Luminar acquisition that was made -- so you mentioned $20 million to $25 million of revenue. I mean, can you help us out in terms of that 2026 revenue versus 2025? Is it at least growing? Or how should we think about that?

We are expecting some growth. It's a little early at this point to say how much, but we can say that the initial customer reaction to the acquisition has been positive. We -- QCI acquiring Luminar brings stability and substantial financial resources to the business, which would be their existing customer base greatly appreciate it.

We have been working closely with the Luminar sales team to reassure their customers and drive some additional business. So we're hoping to at least stabilize and hopefully grow the business this year.

Okay. Yes. Max, if I may, I wanted to add that in fact is right now, we're about 4 weeks into the acquisitions. So we have already seen very good momentum.

Okay. That's good to hear. And it doesn't sound like nothing really to do on Fab 2 in 2026. But if we look out this year, I mean, what are the critical or the crucial milestones you guys are looking to hit, if you can help share sort of maybe from an internal perspective on you guys?

Yes. So the first 1 is to successfully integrate Lumina semi. I think we have made a pretty good progress so far. So I'm actually very pleased with where we are now. As you know, Max, we are a quantum company, but all of our products and technology are based on optics and photonics.

And what's nice is that our team members across the U.S. already speak the same language and synergy is already high. In fact, these are areas, the synergies are higher than what I initially expected. Several cross-site collaborations are already underway. And the combined larger team is pursuing large-scale opportunities that would have not been possible without us join forces.

So for 2026, the number 1 task is we successfully integrate the team now that with our head count doubled and with our product portfolio largely expanded. The second is that we will continue to push our Quantum product portfolio.

As I said on the call, we're really focused on transitioning from a technology innovator to a company capable of scalable manufacturing of quantum products based on photonics and our integrated circuits. And as we outlined in our road map that we have published online. So we do have a plan to roll out several products across computing, sensing, AI and our chips. And third would be that -- so we hope to continue to grow our team so that we can move up to the system level engineering for Quantum devices.

We are very happy to have now lots of engineers and manufacturing technicians join us from the Lumina semi acquisition. The next step is -- so now we have the expertise in many aspects now in the same room. So how fast we can move to the manufacturing of Quantum products above the subsystem of above the component level.

The next question comes from Antoine Legault with Wedbush Securities.

You mentioned the various main potential addressable markets across -- you mentioned quantum computing, sensing, AI and then film within abate. Where do you see the largest and maybe the most immediately addressable market or use cases? And which market or submarket are you most excited about this year?

For this year, I think the timing is a bad is an area that I feel particularly excited -- as you may recall, we constructed our fab last year and then we commercial commissioned all the rules last fall. And since then, we have made prototype chips.

And we have also utilized our resources to develop and refine recipes and the fabrication processes. And now -- so we are really in the phase of locking down the processes and to -- and we are ready to ramp up the manufacturing. So all of our current products now are designed to utilize this integrated photonic chip technology, which will make our product smaller, powerful, ready to be produced at the scale.

So I'm very excited to see what could happen with the Sanfin litigate production line in the meanwhile. So now we are ramping up our quantum communications development and commercialization following on the sale of system to a top 5 U.S. bank last year. I believe that quantum communications because this technology really address a network security issue that concerns almost everybody. If we can lower the entrance point for this Quanta technology, so it could be 1 of the very first Quantum technology that can be adopted by large population.

That's very helpful. Last 1 for me, if I may. I know you recently completed the acquisition of LSI for just over $100 million. You clearly still have a lot of cash on the balance sheet and you have the ability to pursue strategic M&A. Are there any particular areas of interest or focus on the M&A front as you look ahead to 2026?

Yes. We have been following very disciplined approach to M&A. So our strategy has been that the acquisition should accelerate our road map as we publish on our website. And while being able to help build our customer base. So the Lumina semi acquisition has been moved along this direction because it really helped fill some technology gaps that we had.

I think the next move is to accelerate our road map on the scalable manufacturing, so we hope to quickly establish mass production capabilities for some of our quantum machines.

Okay. The next question comes from Ed Woo with Ascendiant.

Yes. Congratulations on the Luminar acquisition. My question is, is that going to make you guys much more exposed to international business.

Let me take this one. At the present time, the bulk of the customer base is domestic. There's a lot of U.S. government contracts. And business in the aerospace and defense field. But I think your larger point is that Photonics technology has a global market. We will look at opportunities overseas. We do source supplies parts from overseas.

But in terms of pursuing a large overseas market, that will come in time. But in the near term, I would anticipate that the bulk of our revenue is going to be from domestic sources, certainly for the next few quarters.

The next question is from Troy Jensen with Cantor Fitzgerald.

Congrats on the Grade, just maybe question for you -- my belief you guys are probably a couple of years away from commercializing a photonics-based kind of quantum computer all-in. But near term, there's a lot of other cool applications and sensing -- can you talk to us a little bit about what you're doing there? Is this an area that can inflect quicker? And maybe do you guys have exposure to security applications to Quantum.

Thank you, Troy. Yes, I believe that general purpose can computing is still some time further down the road and this applies to all the approaches in terms of the practical utilities. On the other hand, I believe that there are some applications where specialized Quanta computers can be -- can find significant utilities without having to construct a data-based large-scale can computers.

And so this is actually an area that we have been working on in our direct series quantum of plantation machine where we have seen that in many use cases, we already established appreciable Quanta advantages there. In terms of the remote sensing at QCI, so we mainly commercialize our proprietary technology in single photon detection added by the noise rejection, by what we have developed over the past 10 years using non-optics and our way of using time-gated photon detection to reduce the background noise.

So far, we have commercialized a photonic vibe meter, which can measure very small amplitude vibration remotely. And in the meanwhile, so we have worked with NASA, as we announced in the past, to explore some quantum sensing technology suitable for space deployment and in some cases, for earth science applications.

We are continuing such research and development. And now with the addition of Lumina 17, we are looking at other optical sensing and quantum sensing opportunities by utilizing their laser technology, their detector technology and their very strong optical packaging capabilities. This is what we are working on on the sensing side.

I would now like to turn the floor back to management for any closing remarks. Thank you.

Thank you, everyone, for joining and participating in today's call. I encourage you to follow us on our social media channels, where we regulate post updates and insights into our business and technology. Should you have any questions, please reach out to the Investor Relations team. Have a good rest of your day. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, greetings, and welcome to the Quantum Computing Inc. Third Quarter 2025 Shareholder Update Call. [Operator Instructions]

It is now my pleasure to introduce your host, Roslyn Christian with IMS Investor Relations.

Thank you, and I want to welcome everyone to the Quantum Computing Inc. Third Quarter 2025 Shareholder Update Call.

Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements based on our current expectations and projections regarding future events and are subject to change based on various important factors. In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this call. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission.

On the call today, we have Dr. Yuping Huang, Interim CEO and Chairman; and Chris Roberts, CFO. The team will provide an update on the business, followed by a question-and-answer session.

With that, I would like to turn the call over to management. Please go ahead, Yuping.

Thank you, everyone, for joining us today to hear about QSI's progress in the third quarter of 2025. The past few months have been pivotal for our company. We ended the quarter with a strengthened balance sheet, a growing portfolio of commercial relationships and a clear disciplined strategy for selling our technology.

To date, in 2025, we have reached over $1.5 billion in capital. And we now have the resources to execute thoughtfully on our long-term vision, putting Quantum technology into the hands of people.

In the third quarter, we raised $500 million. And subsequent to the quarter, we reached another $750 million. This raises put us in a very strong position to drive our road map forward and make strategic investments in engineering, manufacturing and sales.

As many of you know, QSI's mission has always been centered around building Quantum systems that are practical, scalable and accessible. We're not just developing Quantum technologies for laboratories, we are working to Quantum useful for a broader community of industries and innovators with the ultimate goal of having our technology as ingredient in society as cell phones.

This is what sets QSI apart. While many Quantum players remain focused on theoretical advances or systems that require complex chorogenic environment our integrated photonic approach enables room temperature operation, compactor form factors and energy-efficient performance. These advantages not only reduce the cost and the complexity of deployment but also make it possible to scale Quantum solutions to world range of real-world settings for aerospace and the defense to telecommunications, finance and data security.

As the technology matures, we believe the key differentiator will not be who can build the most powerful point of prototype in isolation, but who can scale Quantum reliably and affordably. The challenge ahead is one-off engineering and manufacturing execution, and that's where QSI's focus lies today.

Our long-term goal is to move from prototype and small batch manufacturing towards volume production. And we see that transition take shape by the end of this decade. Together, our current 3-year road map is focused on refining our processes, scaling small batch production and expanding our team and facility to position QSI for industry scale output.

In other words, the technology is there. Our Quantum machines and photonic chips have been validated across multiple use cases. The next step is to scale the engineering and the manufacturing behind them. And we now have the team, resources, facility and plan to make that happen.

Let me take a moment to highlight some of the key updates from the third quarter. First, on the commercial front, we continue to see growing adoption of our Quantum and photonic solutions across research, enterprise and government sectors.

During the quarter, we recorded revenue from our ongoing NASA LIDAR initiative, which uses our direct 3 Quanta optimization machine to remove solar noise from space-based LiDAR data. This project represents a significant technical achievement and underscores the real-world value of QSI's Quantum Computing technology for scientific and environmental applications. as well as our initiatives to drive strong relationships within government programs.

We also saw meaningful momentum in our commercial engagements. Following the sale of our reservoir computing device early this year to a global automotive manufacturer. In the third quarter, we completed a transaction with a major U.S. financial institute, making another important milestone in validating our Quantum AI and security platforms in real work settings.

Our foundry operations in Tempe, Arizona also continue to progress. As we have shared previously, this facility, also known as one is a small-scale manufacturing site designed to qualified processes and support early customer programs in photonic chips. This is an important first step in our broader manufacturer strategy.

Since launch, our team has been refining the production line, expanding our operations stuff and building relationships with early customers across research, government and commercial sectors. This engagement help us fine-tune both process quality and device yield. Importantly, we are already in the early stage of planning for Fab 2, which we expect to begin developing over the next 3 years.

Step 2 will be designed to support higher volume manufacturing and serve as a cornerstone for scaling production to meet growing demand in telecommunications, sensing and Quantum information systems.

As we advance this manufacturing strategy, our hiring efforts are ramping accordingly. Over the past quarter, we have added key technical and operations staff to strengthen our execution capabilities, and we expect that trend to continue as we prepare for higher production volumes.

We have also continued to broaden awareness of QSI's capabilities within the Quanta and photonic communities. Over the past several months, we have the active participants at multiple industry events and conferences presenting our work and engaging both public and private sector partners. Those events include IEEE, International Conference on Quantum Computing and Engineering, the MYC Quantum Computing the Dutch Photonics event, the 51st European Conference on Optical Communications, Quantum Tech Europe and the Quanta Innovation and the Readiness Firm.

We also recently joined the Quanta Economic Development Consortium and the Consumer Technology Association QSI with expanding network of technology leaders and innovators. These memberships enhanced our visibility and influence in shaping the future of Quantum computing, cyber photonics and AI solutions across the consumer technology landscape.

In September, we deepened our thought leadership presence in the photonics and AI communities through a webnar hosted optical titled Photonic Machine Learning for Time Series Programs. The session highlighted how our Immucor reservoir computing platform and the next-generation photonic architecture address memory and power consumption, both in modern AI workloads and underscored our [indiscernible] foundry capability for high performance photonic systems. This engagement further expands our creditability in both academic and industrial circles, and underscores QSI's increasing visibility as a practical quantum and photonic innovator.

We have also been pleased with the increasing level of inbound interest from prospective customers and collaborators across academia and industry. The conversations we are having today reflect the momentum building behind integrated photonics and quantum-ready devices where QSI has a clear first-mover advantage.

QSI's approach positions us uniquely for the next phase of industry evolution. While the broader quantum computing sector continue to grapple with scalability and stability challenges, our integrated photonics platform operates at room temperature with significantly lower size, weight and power and cost requirements, the so called SWaP-C advantages. These advantages become increasingly relevant as global energy constraints and the computation of demand of artificial intelligence push existing infrastructure to its limit.

We believe that energy-efficient room temperature Quantum devices represent a critical piece for the next generation of computing, and QSI is positioned to deliver such solutions at scale.

Over the next 3 years, our road map priority is small-scale, high-value manufacturing as we refine processes, demonstrate performance across customer applications and establish supply chain and design partnerships. In parallel, we will be developing the foundation for Fab 2, which will enable volume manufacturing and allow us to bring Quantum-enabled devices into wider user across multiple sectors.

The Quantum era is unfolded faster than most predicted. And our team is determined to ensure QSI remains at the center of transformation delivery technologies that make quantum practical, scalable and accessible to the world.

With that, I will now turn the call over to our Chief Financial Officer, Chris Roberts.

Thank you, Yuping. And now let's review the financial results from the quarter. Revenue during our third quarter totaled approximately $384,000 compared to $101,000 in the same period last year. The increase in revenue was primarily due to increases in the number of size and level of effort on research and development services contracts and custom hardware contracts. We also started to recognize some revenue for cloud-based access to the Direct 3 Quantum optimization system during the third quarter.

Looking ahead, the company continues to build a healthy pipeline of sales and partnership opportunities, which we expect will support future growth as customer adoption of our products and technologies continues to increase.

Our gross margin for the third quarter increased to 33% compared to 9% in the third quarter of 2024. However, it's important to keep in mind that with a small number of active contracts, some of which involve custom design work, gross margin is likely to be variable from one period to the next.

As Yuping mentioned earlier, we have been active in the capital markets and substantially strengthened our balance sheet during the third quarter, closing on a $500 million equity financing in September 2025. As a result, we ended the third quarter with cash and cash equivalents of $352 million and investments of $460 million on our balance sheet at the end of the quarter. After the end of the third quarter, we also closed on an additional $750 million financing in October.

As a result of the recent financings, we now have substantial resources to implement our TFLN fabrication and Quantum machine development initiatives. In addition to organic growth plans, a key element of our long-term strategy is to evaluate acquisition opportunities that could help us accelerate our vision of putting Quantum technology in the hands of people.

Operating expenses for the third quarter totaled $10.5 million compared to $5.4 million in the same quarter last year. The increase in operating expenses is the result of substantial growth in personnel for research and development, engineering, manufacturing, sales and marketing and administration as we position the company for long-term growth.

We are scaling our organization across the board to support this expansion plan, including all functional areas of the company. As a result, SG&A expense is expected to grow in the near term as we invest in the necessary resources to advance our technology and execution capabilities.

The company reported net income of $2.4 million for the third quarter or approximately $0.01 per share compared to a net loss of $5.7 million in the third quarter of 2024. The increase in net income this quarter was primarily due to a gain of $9.2 million from the mark-to-market of a derivative liability plus interest income of $3.5 million. For the 9 months ended September 30, 2025, the company reported a net loss of $17.1 million or $0.12 per share compared to a net loss of $17.3 million or $0.19 per share in the first 9 months of 2024.

As of September 30, 2025, total assets stood at $898 million, up from $154 million at year-end 2024. Since the end of 2024, cash and cash equivalents have increased by $273 million to $352 million, and total investments have increased by $460 million. Total liabilities at the end of the third quarter were $20 million, which is a decrease of approximately $26 million compared to year-end 2024. Now this decrease in liability is driven primarily by a $25.8 million decrease in the derivative liability related to the Q Photon merger warrants. Stockholders' equity rose to $878 million at the end of the third quarter, which also shows our strengthened financial position.

And now it's my pleasure to turn the meeting back over to Yuping.

Thank you, Chris. As we move into the final months of 2025, I wanted to take a moment to thank our employees, partners and shareholders for their continued support. The technological and the strategic progress we have made this year positions QSI for what I believe will be a defining period ahead. Our technology is maturing rapidly, and our focus remains on scaling our engineering and manufacturing capabilities, advancing customer programs and continue to strengthen our relationships across government, industry and academia. With a solid balance sheet, a growing and a clear road map, we are well positioned to drive this next phase of growth.

Thank you for joining us today and for your continued confidence in our mission. With that, we will now open the call for questions. Operator, please go ahead.

[Operator Instructions] Your first question is coming from Max Michaelis from Lake Street Capital.

A few here kind of set around a couple of different topics. First one is going to be I noticed the press release about Poet Technologies. I was wondering if you could give maybe a little bit more detail on outside of just what was said in the press release and maybe you think about sort of the long-term opportunity with them and then maybe some other partnerships you have in the pipeline similar to that Poet Technologies?

Okay. Sure. Thanks, Max. So on that front, we have actually been very actively talking with multiple parties on using our [indiscernible] technology for the next-generation high-speed transceiver technology. So as you probably know, the industry is recognizing samples as the next generation platform for much higher speed Internet. So this collaboration with Poet is one of the equipment that we have discussed and has come to flourish. And we look forward to work with them and also with others to explore same for the telecom and datacom applications at abroad?

Okay. And my next one is just sort of around that top 5 U.S. banks you guys secured or purchase order you guys secured in the quarter around quantum security solutions. Can you give some other sort of use cases you guys are having discussions with, with other large opportunities, I guess, or other large firms outside of just security solutions?

Yes. In fact, we have been talking with other firms, including the potential of putting our technology on photonic integrated chips. And so that -- so we can really shrink the size of our current Quantum Communication Systems our Quantum part chips and our Quantum number generators to inch square chip so that -- so there are many sectors, including the wireless or Internet providers, so they can easily adopt. So we have been in discussion also with some potential partners to see if we can apply our Quantum Communication technology to the aerospace platform, so that can solve the issue of the long-term Quantum Internet challenge.

Okay. And then, Chris, I think you mentioned organic opportunities around M&A and sort of how valuations and multiples trended in that space as well as maybe adding on sort of the end markets or technologies you guys plan on going after when it comes to M&A?

Well, the M&A market continues to be volatile and the valuations depend in good part about how the stock market is going. And right now, it's very unsold. We are looking actively for acquisition candidates and evaluating them as they come up, nothing formal we can announce at this time, but we are working very hard in that direction. As I mentioned before, we're looking at M&A as a way of doing 2 things. One is to acquire customers and revenue and product lines that can be move forward and migrated forward with our technologies. And we're also looking to fill in some key aspects of our own technology road map so we can accelerate our commercialization. Does that help your answer your question? Or do you have a different point in mind?

No, that's great.

Sure thing, Max.

Let me just add to you things said about the Poet project. it's a perfect example of why we built Fab 1 because we have the only fabrication facility in the U.S. I can work with thin film lithium niovate. And this gives us the ability to do this type of advanced prototyping of product concepts that we can then -- if we're successful, move forward into Fab 2 and produce in collaboration with firm like Poet for a larger market. This is a real validation of the idea behind the investment in Fab 1.

Your next question is coming from Troy Jensen from Cantor Fitzgerald.

Maybe a couple of quick ones for Chris. First, can give you us what is the remaining CapEx for Fab 1 roughly?

Fab 1 is -- Good question. Fab 1 is pretty much built out or it is built out. But we're always looking at new equipment, but Yuping you might be a better one to answer on that. I don't have anything now is lined up near term.

Yes. Yes. So right now, it's Fab 1 is fully operational, and we actually are making chips to deliver the 10-plus foundry service orders that we have received so far. But we do have plan to install a very high speed measurement equipment in the foundry, so that -- so we can quickly test the property of high-speed electro-optical modulations on the chip. So there, we are looking at a CapEx -- additional CapEx of about $2 million to add this very high-speed testing equipment.

All right. That seems pretty modest. With respect to Fab 2, building that out with you guys, obviously, hopefully producing your own picks, but is the idea to outsource capacity to other people that need thin-film lithium at capabilities?

Yes. Yes. So we are scoping Fab 2 both support our own quantum machine manufacturer so -- and as well as to serve the increase in demand on thin-film chips as the industry is becoming more and more interested due to the many nice property of this interesting material for different applications beyond Quantum. So Troy, so our goal there is that so we hope that we can quickly establish Fab 2 that can make hundreds to -- like hundreds of millions of chips per year. So that will both support our own needs for our Quantum machines and also substantially sending from others on the thinking manufacturing.

Okay. How about a quick one for Chris. Could you let us know what the share count will be exiting '26?

Well, at the moment, we have 224 million shares outstanding and 250 million shares authorized. We're not expecting to do another financing. So it will probably end up with another couple of million shares potentially if options are exercised, but it would not be a large number, because...

The offering that just happened. I mean if you include the offering that happened here in Q4...

Including the $750 million offering that was included in October, we have 224 million shares outstanding. There are several million outstanding warrants and stock options, which I have no way of predicting when they may be exercised, but that gives you a sense of the range of possible outcomes at the '26.

Great. So for a share count that we should be modeling, it should be the 224 million number for Q4?

224 million for Q4, yes, that's probably best number I can provide, but at the end of '26, that's a little harder because it really depends on market conditions and...

Yes. That's good. How If I could toss in one more for you, here. I guess I'd love to like hear stats on your QPU with respect to Q count or Fidelity or maybe it's too early to talk about that now and maybe correct me if I'm wrong, but is the near-term opportunity more in the sensing and other applications that you guys are targeting right now versus kind of QPU type sales?

Sure. I can talk about both. So -- on the QPU front, so in fact, we have the upgrading our current direct system where some of our external users, they actually start to find some real nice advantage our classical computers. So we have some pretty exciting results there. And in the meanwhile, so we are actually making very good progress in building the next version of that, so which based on the same architecture and build for the organization. But so there -- so we increased the speed by orders of magnitude.

So we are making pretty good progress here for our Quanta optimization machine. And in the meanwhile, as I reported last time that, so we do have the road map of going to gate-based machines. And so we have done a lot of theoretic work and the proof of concept in the lab. But so we just got started to -- on the hardware development because the gate machine requires very high-quality chips. And as you know that we just finished the construction of Fab 1 in March and over the summer. So we give the recipe and the set up the processes and so there -- so the fund has just started. And with that, we will quickly get to the hardware of the gate-based machine.

So on the Quantum sensor part, so yes, as we reported, so we did sell one for our Quantum photonic meter and so people are using it for different applications. And we also sold a Quantum Communication System to a U.S. bank as we reported, and we have also made some sales on the AI front and we continue to engage the community on thin-film and we have recorded more sales on foundry services.

Your next question is coming from John McPeake from Rosenblatt Securities.

Congratulations, Dr. Yuping and Chris on the momentum in the business and the bank deal. We certainly -- there's been some new implementations of algorithm that suggests that pretty soon, we're going to be able to crack RSA 2048. I guess when I say soon, we're talking about years at least kind of over the career of a CISO at a large company, so they can't just ignore it. And I'm just wondering if that might be increasing the pipeline of potential security deals, particularly in the financial sector.

Yes, definitely. So John, so one thing that we all have to keep in mind that -- so if somebody somewhere has a very powerful Quantum computer to correct our passwords, so he or she will not make a public announcement on that, right? So we have to really to deal with the cyber threat. So we really have to think ahead and act fast and the plan ahead. So, so far, as I know, so the only truly secure cyber solution against the attack of the Quantum computer would be using Quantum itself to secure our Internet.

So at QCI, we actually -- our engineers like we are leveraging over 10 years of NDD work in Quantum Communication, Quantum encryption, Quantum authentication. And now, so we are pushing our engineering effort to to put our technology in practical footprint. So in fact -- so our -- we have designed our technology that, so it is fully compatible with the existing fiber-based telecom infrastructure.

So in order to use our technology, so you can just buy some end units from us and hook onto the fiber portal in your garage and you will be able to enjoy Quantum-secured Internet and so you don't need to worry about if somebody has already a powerful Quantum computer or not. So yes, John, so in short to your question, I think at this time, it is really, really time for us to start to adopt a Quantum-secured Internet solutions.

So on the other side of the business on the optimization, I guess, the Direct 3 is just starting to have revenues recognized this past quarter, what's that -- how is that market trending right now? Is there more awareness of these solutions for optimization?

Yes. Yes. And so I would like to put it in this way. So Quantum Computing is a pretty disruptive technology. And just like how other disruptive technologies are commercialized, we must address 3 hurdles before we can see wide adoption and very meaningful revenue. So the first is that the customers really needed to know and understand at some levels, the technology itself. The second is that so that we needed to see a clear path to be able to integrate and adopt the technology with their existing systems and solutions. The third is that we, as the technology providers, we must lower the entry level so that people can quickly get to the technology, so that include -- so we make the device very compatible. We have very easy user interface. And so the price tag is reasonable.

And for the first one, so we are ramping up our marketing communication, including pushing out more educational material on website, the publishing open access journals so that people can find the material to know and to understand our technology.

For the second, so we are actually building and expanding our applications team to explore and help with potential customers to adopt our technology. Now for the third, we are actually in the phase of transitioning our sales from a technology innovation company to volume production so that we can reduce the unit cost of our Quantum Computing products. So those are the 3 measures that we are taking -- we are undertaking now in order to quickly get our technology into the hands of people.

[Operator Instructions] Your next question is coming from Ed Woo from [indiscernible] Capital.

Yes. Congratulations on all the progress. I was just curious about international opportunity. It seems like most of your focus now is in the U.S. Do you have plans to focus on international opportunities?

Yes. Yes. In fact, so quantum is also very hot outside U.S. And so we have been very active in talking to looking for opportunities either partnering or providing our products and services to international institute, for example. So we actually sold our Immucor system, which is a AI device at edge, and we sold our wiper meter to [indiscernible] in Europe, and we actually -- we are working with a distributor in South Korea to explore the market there. And so our direct 3, we actually have users from Singapore.

That concludes our Q&A session. I will now hand the conference back to management for closing remarks. Please go ahead.

Thank you, everyone, for joining and participating in today's call. I encourage you to follow us on our social media channels, including LinkedIn, where we regularly post updates and insights into our business and technology. Should you have any questions, please do not hesitate to reach out to our Investor Relations. Have a great rest of your day. Thank you, everybody.