OTC: ZPTA

In late 2024 the Company voluntarily elected to
temporarily suspend its operations due to its limited capital resources and inability to access adequate liquidity to continue to fund
its operations and meet its outstanding debt obligations. In June 2025, the Company commenced debt restructuring and capital raising transactions
and the reinstatement of operations by (1) entering into exchange agreements with unsecured creditors pursuant to which such creditors
agreed to exchange outstanding obligations payable to them for Common Stock and certain rights related thereto, and (2) the Company sold
convertible notes and warrants for gross proceeds of $3 million. The Company has since been continuing efforts to negotiate and restructure
outstanding obligations and raise capital. In the furtherance of recommencing operations, the Company has also entered into advisory agreements
with third parties and agreed to compensate such parties in the form of equity and/or cash compensation.

Following a period of broader AI exploration, the
Company undertook, in 2024 and 2025, a strategic realignment to refocus on its core quantum mission: developing the software and tooling
layer that enables enterprises, governments, and researchers to harness quantum computing for economically meaningful outcomes.

Zapata’s hardware-agnostic approach and proprietary
technology address the “software bottleneck” that limits quantum adoption. The Company’s products - Orquestra, Bench-Q,
Quantum Graph, and Quantum Pilot - provide the infrastructure and workflow tools that connect problem discovery, algorithm design, and
hardware execution. These tools are supported by professional services, partnerships, and licensing programs that collectively form the
Company’s business model.

The Company’s business plans and operations
described herein, and our ability to execute and continue with such efforts, will depend on our ability to raise capital needed to repay
vendors and creditors, rehire various personnel and fund our working capital and growth needs. Further, our capital raising efforts and
business and operations generally are subject to numerous risks and uncertainties, as described under “Item 1A – Risk Factors.”

Introduction to Quantum Computing

Quantum computing exploits the principles of quantum
mechanics - superposition, entanglement, and interference - to process information in fundamentally new ways. Whereas classical computers
operate on bits that are either 0 or 1, quantum computers use quantum bits, or “qubits” that can exist in multiple states
simultaneously. This enables exponential scaling of computational possibilities and the potential to solve certain classes of problems
- such as molecular simulation, combinatorial optimization, and cryptographic analysis - that are intractable on classical machines.

The field of quantum computing is advancing rapidly,
supported by significant broad-based investment. Global governments have announced multibillion-dollar quantum initiatives, venture and
public-market investment have accelerated considerably, and major cloud computing providers now offer access to quantum processors. A
2024 Boston Consulting Group analysis estimates that quantum technologies will create $450 billion to $850 billion of economic value globally,
sustaining a $90 billion to $170 billion market for hardware and software providers by 2040.

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Phases of Quantum Computing Technology Development

The first phase of quantum computing has been the
arrival of Noisy Intermediate-Scale Quantum (NISQ) devices, characterized by limited qubit counts and the absence of full error correction.
Despite these constraints, NISQ computing can still deliver tangible value especially in areas such as materials, chemical simulations
and optimization.

Zapata has contributed significantly to the advancement
of NISQ approaches including pioneering the Variational Quantum Eigensolver (VQE), a foundational hybrid quantum-classical algorithm that
combines quantum state preparation with classical optimization to estimate molecular and materials properties, with applications to other
domains as well.

VQE demonstrated one of the first practical uses
of quantum hardware and helped establish the hybrid quantum-classical paradigm that continues to define much of the industry’s progress.
Building on this foundation, Zapata develops software and tools that extend hybrid approaches to broader classes of scientific and industrial
problems, creating an adaptable framework that evolves with each generation of hardware.

Rapid progress is now being made toward the second
phase of quantum computing, known as Fault-Tolerant Quantum Computing (FTQC), where error-corrected qubits enable deep, large-scale algorithms
with transformative performance. As these systems come online, the race is underway to display what is known as “quantum advantage”
or “quantum supremacy” in an increasing number of key problem areas.

The number of announcements by leading FTQC hardware
providers has accelerated considerably in recent months - including improvement in qubit coherence times, falling error rates, the demonstration
of prototype logical qubits, and the announcement of quantum advantage for some problems. As these breakthroughs accumulate, the focus
of progress is shifting toward the application and software layer - where practical utility will first emerge. This is the domain where
Zapata Quantum operates.

Unlocking the full potential of FTQC will depend
not only on better hardware, but also a mature software stack which will enhance the development of algorithms, compilers, and workflows
that translate real-world problems into quantum form. Zapata has proven itself as a leader in this space, with pioneering work across
a variety of domains - including chemistry, materials science, optimization, cryptography and machine learning.

By advancing the software infrastructure and application
frameworks that will define the next generation of quantum computing, Zapata plays a critical role in enabling the industry’s evolution
toward large-scale, fault-tolerant quantum advantage.

Market Opportunity

The quantum computing market is entering what many
observers describe as its “readiness phase,” evidenced by Microsoft’s declaration of 2025 as the year of quantum readiness.
In 2024, McKinsey & Co. estimated annual global spend on quantum computing technologies of approximately $2 billion, growing at 35%
per year, including about $400 million directed to software and services.

While hardware improvements draw attention, the
limiting factor to adoption is the absence of a robust, reusable software infrastructure. Enterprises seeking to explore quantum advantage
face steep learning curves, fragmented hardware ecosystems, and scarce talent. Zapata addresses these pain points by providing a coherent,
hardware-agnostic software stack and associated technical services.

The potential impact of quantum computing technology
spans nearly every high-value computational domain:

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Cryptography and cybersecurity - post-quantum encryption, secure communication, and threat assessment;

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Optimization - financial portfolio construction, logistics, manufacturing scheduling, and energy-grid control;

•
Discovery and simulation - drug design, materials discovery, and climate modeling;

•
Defense and aerospace - signal processing, sensor fusion, and strategic decision optimization.

We believe the software layer will capture a high
share of the value created by these solutions to our planet’s most intractable problems. Zapata’s strategy is to occupy this
enabling layer - bridging scientific discovery and commercial deployment.

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Products

Zapata’s products
are organized around what it refers to as the Generalized Quantum Stack - a three-layer model that defines the end-to-end process of quantum
application development and execution. This framework, validated through Zapata’s multi-year leadership across all technical areas
of DARPA’s Quantum Benchmarking program, provides the blueprint for accelerating progress from use case identification to implementation
on physical hardware.

Zapata Generalized Quantum Stack

Layer 1: WHY - Use-Case and Utility Benchmark
Evaluation

Defines the purpose of quantum computing by assessing
quantum-amenable problems and related utility benchmarks across domains such as chemistry, optimization, cryptography, and materials science.
This layer involves curating high-utility, domain-driven benchmarks that connect abstract industry challenges to well-defined computational
instances. Zapata’s work here includes building repositories of potential applications and developing workflows for systematic problem
formulation, addressing a critical gap in how enterprises and researchers determine where quantum advantage will emerge.

Layer 2: WHAT - Algorithm Development and Benchmarking

Focuses on the design of quantum applications and
algorithms. Zapata’s tools enable modular algorithm composition, evaluation, and benchmarking to translate domain problems into
executable quantum circuits. This layer bridges academic innovation with industrial relevance by combining Zapata’s curated algorithm
library and benchmarking datasets with methods for performance comparison across algorithms and hardware types.

Layer 3: HOW - Resource Estimation and Execution

Represents the implementation phase, encompassing
resource estimation, compilation, and hybrid execution across quantum and classical backends. Zapata’s platform, Orquestra, provides
an environment for orchestrating these workflows, allowing developers to simulate, optimize, and run algorithms on real quantum hardware
or high-performance classical infrastructure. This layer ensures forward compatibility as the industry transitions from NISQ systems to
FTQC architectures.

Together, these layers define the roadmap for scalable
quantum application development. Zapata is the only hardware-agnostic quantum software company to have demonstrated leadership across
all three layers of this stack - uniquely positioned to lead the acceleration of the field from theoretical research to practical implementation.

Specific Zapata products within these layers include:

Orquestra

Orquestra is Zapata’s software platform for
developing, orchestrating, and executing quantum and hybrid classical/quantum applications. It provides a unified environment for constructing
computational workflows that combine classical and quantum resources. Orquestra manages the end-to-end lifecycle: from problem definition
through algorithm selection, circuit compilation, resource estimation, execution, and results analysis. The platform has been used in
commercial and research settings including with BP p.l.c., BASF Group , Banco Bilbao Vizcaya Argentaria (BBVA), and Defense Advanced Research
Projects Agency (DARPA) .

Bench-Q

Bench-Q was developed under the U.S. Defense Advanced
Research Projects Agency’s Quantum Benchmarking program, where Zapata uniquely participated across all technical areas (TA-1, TA-1.5
and TA-2). Bench-Q provides a standardized framework and software toolkit for evaluating quantum algorithms and hardware performance against
utility-driven benchmarks. It defines metrics and workflows that allow researchers to trace the progression from abstract problem instances
to executable circuits. The methods and data models produced in Bench-Q are core to Zapata’s commercial products.

Quantum Graph

Quantum Graph (QG) is a structured knowledge base
that catalogs quantum use cases, algorithms, and application instances in a graph-based format. It provides a searchable, modular representation
of how problems, algorithms, and hardware resources connect, forming a foundation for composable quantum application development.

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Quantum Pilot

Quantum Pilot (QP) builds upon Quantum Graph by
introducing an AI-assisted development environment that helps users compose, test, and refine hybrid quantum-classical workflows. By leveraging
machine-learning models to suggest algorithmic building blocks and resource optimizations, Quantum Pilot aims to accelerate the design
of viable quantum applications by orders of magnitude relative to manual methods.

Services

In-line with our historical activities prior to
the cessation of operations in June 2024, we intend to complement our software offerings with high-value technical services to help customers
unlock value using Zapata’s software products. Zapata’s service engagements will be performed by teams of quantum scientists,
engineers, and domain experts. We expect that certain projects may evolve into longer-term subscriptions to our products, recurring research
programs, or joint development agreements that involve co-created or licensed intellectual property.

These services will be strategically important
both in the current noisy intermediate-scale quantum (NISQ) era and as fault-tolerant quantum computers (FTQC) become commercially available.
By embedding its software and expertise in customer workflows today, Zapata intends to position itself as a long-term partner through
the industry’s transition from research to scalable deployment.

Customer Value Proposition

Zapata’s quantum application development
gives enterprises the confidence to invest in quantum computing with clarity and measurable results. It empowers customers to identify
where quantum will create real value, validate that potential through data-driven modeling and benchmarking, and prove performance on
real hardware before making costly commitments. By uniting discovery, design, and execution in one hardware-agnostic workflow, Zapata
delivers readiness by reducing uncertainty, accelerating time-to-insight, and future-proofing quantum adoption. The result is faster innovation,
smarter resource allocation, and tangible evidence of competitive advantage, turning quantum ambition into validated business outcomes.

Customers and Go-To-Market Strategy

In the public sector, Zapata has served as a prime
contractor and collaborator under the Defense Advanced Research Projects Agency (DARPA) Quantum Benchmarking (QB) program. It was the
only provider chosen to contribute to all technical areas - TA1 (use-case identification and benchmark definition), TA1.5 (algorithm design
and implementation), and TA2 (hardware resource estimation and execution) - covering the full spectrum from problem formulation through
algorithm development to hardware realization.

Through this work, Zapata developed the foundational
methodologies and tooling that now underpin its commercial platforms, including Bench-Q, Orquestra, Quantum Graph and Quantum Pilot, in
collaboration with leading universities, government research agencies, and hardware partners.

The Company’s go-to-market strategy is focusing
on direct enterprise sales, channel partnerships, and ecosystem collaborations. It also partners with strategy consultancies that serve
enterprise clients exploring quantum readiness. This partnership-driven approach amplifies reach while keeping the Company focused on
its core software and IP development.

Business Model

Our business model is to provide subscription-based
offerings that combine Zapata Quantum software—specifically the Orquestra platform and any modules such as Bench-Q, Quantum Pilot
or Quantum Graph which are delivered on top of it—as well as related services to develop and efficiently deploy custom quantum or
hybrid quantum-classical computing applications designed to resolve our enterprise customers’ specific problems.

Our primary revenue model is based on subscription
payments for our offerings which are utilized to develop and efficiently deploy quantum or hybrid quantum-classical computing applications.
Based on our prior operating experience, these engagements typically span use case discovery to prototyping, benchmarking, and ultimately
production as quantum hardware advances. We will also, consistent with our historical activity, selectively pursue government contracts
related to the advancement of quantum computing applications as a complementary revenue source.

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Competition

The quantum computing industry remains early and
fragmented. Competition arises from (a) hardware manufacturers developing vertically integrated stacks (e.g., IBM, IonQ, Rigetti), (b)
software-focused startups (e.g., Classiq, QC Ware, Horizon Quantum), and (c) internal R&D groups within large enterprises.

Management believes that Zapata’s differentiation
derives from several advantages:

•
Hardware agnosticism - Compatibility with all leading quantum hardware architectures

•
Comprehensive stack coverage - Participation across every technical area of DARPA’s Quantum Benchmarking Program, providing unique insight into end-to-end application development

•
Proprietary IP portfolio - More than 60 issued or pending patents across jurisdictions covering the critical control points of quantum computing - program compilation, optimization methods, and information retrieval - validated by third-party analysis as essential to the emerging quantum software ecosystem

•
Scientific leadership - A team of world-class researchers with deep roots in academic quantum computing, collectively holding dozens of publications and thousands of citations

•
AI integration - The use of generative-AI and agent-based methods to augment and automate the creation of quantum algorithms, enabling order-of-magnitude gains in efficiency

These factors position Zapata as the leading pure-play
publicly traded quantum software company.

Human Capital

As of December 31, 2025, Zapata had seven employees,
three of whom are full-time including its Chief Executive Officer. The Company intends to expand its headcount considerably upon raising
future financing including the re-hiring of certain employees who were with the Company prior to its restructuring.

To date, Zapata maintains good working relationships
with its employees. None of our employees are subject to a collective bargaining agreement or are represented by labor unions at this
time.

Culture

Zapata’s culture is built around its people
and network: a global cohort of accomplished scientists, engineers and business professionals. Zapata has, since its founding, demonstrated
a commitment to hiring people from diverse backgrounds and locations.

One of Zapata’s core strengths is innovation,
not only in its offerings, but also with the mindset of its people. Over the course of Zapata’s eight years in business, employees
have, and continue to, organically collaborate in open forums with varying degrees of organization. Examples include, but are not limited
to:

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Weekly science meetings where employees present their work;

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Working groups where cross-functional group of employees converge to discuss how to move the platform forward; and

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A book club, which rotates books and members and serves as a forum to have non-work-related discussions.

Core Values

The company adheres to five core values:

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Integrity: The practice of being honest and showing a consistent and uncompromising adherence to strong moral, ethical, and scientific principles and values.

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Revolutionary Mindset: An attitude towards changing established paradigms and looking for innovative solutions to problems.

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Transparency: Operating in a way that makes it easy for others to see what actions are performed. This manifests itself in a culture of providing feedback and communicating clearly, recognizing our own mistakes, disagreeing in a constructive way.

•
Inclusiveness: The quality of including many different types of people and treating them all fairly and equally. We strive to be empathic and to appreciate the unique perspective of other people and teams at Zapata Quantum, their own needs and struggles, and to build processes that intentionally include a broad range of perspectives.

•
Thoughtfulness: Making ourselves aware of the needs and feelings of others and acting accordingly. Bringing new depth to solutions takes time and attention. We make decisions with a rounded view, considering the needs of all stakeholders and the impact it will have, with as much data as possible.

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Intellectual Property

Zapata Quantum’s platform is grounded in
a broad and growing portfolio of intellectual property that secures its position as a leader in quantum software. The Company’s
intellectual property (IP) strategy focuses on protecting core technologies that enable the efficient development, benchmarking, and deployment
of quantum and hybrid applications across multiple hardware platforms.

As of December 31, 2025, Zapata Quantum held or
had pending more than 60 patents worldwide, spanning the United States, Europe, Canada, Australia, and Israel. These patents and applications
cover critical methods and systems that define the key control points in quantum software - including program compilation, optimization
methods, and information retrieval between classical and quantum computing systems.

Representative Patents

•
U.S. Patent No. 11,599,344 - Computer Architecture for Compiling Hybrid AI / Quantum Programs (QIR) - foundational compiler framework enabling concurrent classical-quantum execution through a Quantum Intermediate Representation (QIR).

•
U.S. Patent No. 11,615,329 - Hybrid Quantum-Classical Computer for Bayesian Inference - improves probabilistic inference by reducing measurement overhead and enhancing efficiency as hardware scales.

•
U.S. Patent No. 11,605,015 - Hybrid Quantum-Classical Computer System for Implementing and Optimizing Quantum Boltzmann Machines - supports hybrid learning models for generative AI and materials discovery.

•
U.S. Patent No. 11,663,513 - Quantum Computer with Exact Compression of Quantum States - reduces qubit requirements through mathematically exact state compression.

•
U.S. Patent No. 11,169,801 - Hybrid Quantum-Classical Computer for Variational Coupled Cluster Methods - pioneering VQE-based algorithm for molecular and materials simulation.

•
U.S. Patent No. 11,681,774 - Classically-Boosted Quantum Optimization System - enhances convergence speed of quantum optimization algorithms using classical heuristics

The Company’s early and sustained investment
in these domains established Zapata as one of the first companies to secure foundational intellectual property for hybrid quantum-classical
computing. The Company believes its intellectual property represents a durable competitive advantage that will be increasingly difficult
for competitors to replicate. Zapata continues to evaluate opportunities to assert, license, and expand its IP rights globally to maximize
shareholder value and maintain leadership in quantum software innovation.

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Research and Development

Research and development (“R&D”)
are central to Zapata Quantum’s mission of advancing practical quantum computing. The Company’s R&D program focuses on
the creation of scalable algorithmic frameworks, benchmarking methodologies, and AI-assisted development tools that enhance the performance
and usability of its software platforms. These initiatives support both near-term hybrid computing and the transition to future fault-tolerant
quantum systems.

Zapata’s R&D activities are carried out
through close collaboration with government agencies, research consortia, leading universities, and quantum hardware providers. The Company
has partnered with multiple academic and national research institutions worldwide, engaging in joint projects that span algorithm design,
benchmarking, and system integration. These collaborations help validate Zapata’s technologies in real-world settings and ensure
alignment with global scientific and industrial standards.

The Company is also supported by a Scientific Advisory
Board composed of prominent researchers and technical leaders from across the globe who are recognized authorities in quantum information
science, applied mathematics, and computational physics. This board provides guidance on long-term research directions, peer review of
core technologies, and input on emerging scientific and policy trends affecting the quantum ecosystem.

Through these efforts, Zapata seeks to accelerate
the development of useful quantum applications while deepening its intellectual-property base. The Company’s integrated research
program - combining internal innovation, academic collaboration, and global scientific advisory oversight - positions it to contribute
meaningfully to the advancement and commercialization of quantum computing technologies.

Legal Proceedings

From time to time, Zapata Quantum may be involved
in legal proceedings and claims that arise in the ordinary course of business, including matters relating to intellectual-property protection,
contracts, employment, or regulatory compliance. As of the filing of this report, the Company is not a party to any material pending legal
proceeding that, if adversely determined, would have a material adverse effect on its financial position or results of operations.

Government Regulation

We may receive, store, and otherwise process personal
information and other data from and about our employees, and from other stakeholders like our vendors. There are numerous federal, state,
provincial, local, and international laws and regulations regarding privacy, data protection, information security, and the storing, sharing,
use, processing, transfer, disclosure, retention, and protection of personal information and other content, the scope of which is rapidly
changing, subject to differing interpretations and may be inconsistent among regions, countries and states, or conflict with other legal
requirements. We strive to comply with applicable laws, regulations, policies, and other legal obligations relating to privacy, data protection,
and information security.

For a discussion of certain of the government
regulations we currently or may in the future face in conducting our business and the risks and uncertainties relating thereto, see Item
1A – Risk Factors contained in this Report.

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