Quantum Computing Inc. (QUBT) Business

ITEM 1. BUSINESS.

The High-Performance Computing Landscape

There is a large and growing demand for ever-increasing
computational performance in information processing. The recent emergence of artificial intelligence (“AI”), large language
models (“LLMs”), and machine learning (“ML”) algorithms has added to the need for efficient processing of vast
volumes of data. Classical computers, or the computers that are currently used in home and office settings, that use silicon microprocessors
are understood to have performance limitations in solving certain classes of computational problems, in particular, large-scale optimization
problems. Optimization deals with finding the best solution to a problem according to a defined criteria from a set of possible solutions.
Solving large-scale optimization problems requires complex calculations that cannot currently be performed in a reasonable amount of time
using classical computing systems for problem sizes relevant to many industrial and real-world applications.

There is a growing belief among some computer science experts that
quantum computing will solve problems faster than traditional computers and may offer a potential solution to the hard limits now being
approached by classical computers. In addition to new computational methodologies using quantum phenomena, there is a corresponding emergence
of new materials in microprocessors that may be able to overcome some of the limitations of the silicon-based processors used in classical
computers. One promising area is in the use of photonics, which uses particles of light for computation. We believe that these emerging
approaches will create an opportunity for new materials and methods that can meet the growing demand for scalable performance and power
efficiency. While it is difficult to determine which area that quantum computers will create the first practical impact, we expect continued
technological development across multiple quantum computing modalities and architectures over the coming years. Besides quantum computing,
we also believe that photonics approaches to information processing will see continued development to eventually create impacts in various
computing spaces by significantly reducing power consumption.

Our Business

Quantum Computing Inc. is an American company
incorporated in Delaware and based in Hoboken, New Jersey utilizing integrated photonics and non-linear quantum optics to develop and
deliver machines for quantum computing, machine learning, remote sensing, imaging and cybersecurity applications. Our vision is to lead
the revolution in photonics and quantum information technology with scalable, accessible, and affordable solutions to bring quantum technology
into real-world application to solve real-world problems. QCi’s products are designed to operate at room temperature and at
very low power levels compared to other quantum systems currently available in the market, such as cryogenic products based on superconducting,
ion-trap, or annealing architectures. Our acquisition of QPhoton, Inc. in June 2022 (the “QPhoton Merger”), enabled us to
offer the aforementioned products, integrated with the Company’s former software platform, Qatalyst, that was developed before the
QPhoton Merger.

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Our proprietary core technology is our integrated
photonics approach, which allows us to condition, manipulate, and measure single and entangled photons (particles of light) and gives
us the ability to exploit the non-linear capabilities of photons (our “Core Photonics Technology”). Our Entropy Quantum Computer
(“EQC”), is a quantum application of our Core Photonics Technology, designed to solve complex optimization problems. EQC is
based on a patent-pending methodology that uses controlled feedback through energy loss in a photonic loop architecture to drive photonic
states to their least lossy configurations. The EQC’s involvement of the changing environment as an integral part of the system
is in sharp contrast to competing quantum approaches, including superconducting, trapped-ion, and annealing architectures, which seek
to establish stable quantum states by the complete elimination of environmental effects. As a result, the EQC can consume less power than
these competing methods and operates at room temperature making it compatible with an ordinary server room environment. We anticipate
that our EQC may enable us to develop and produce multiple generations of quantum machines with increasing computational power, scalability,
and speed.

Our longer-term product development plan is to migrate product designs
based on discrete components, including EQC’s current designs, to a set of optical integrated circuits built on wafers using a crystalline
material called thin film lithium niobate (“TFLN”). The Company believes that TFLN is an excellent material for optical integrated
circuit design, given its advantageous optical properties (linear, non-linear ferroelectric, and electro-optic) and its compatibility
with silicon-based semiconductor fabrication methods. In March 2025, the Company substantially completed the buildout of its state-of-the-art
TFLN chip research and development, prototyping and small-batch manufacturing facility in a leased space within Arizona State University’s
Research Park in Tempe, Arizona (the “AZ Chips Facility”). In addition, the Company is in the planning stages for another
higher volume manufacturing facility, which we sometimes refer to as “FAB 2.”

As part of our long-term strategic
plan to acquire complimentary businesses, in February 2026, the Company acquired Luminar Semiconductor, Inc. (“LSI”). LSI
provides products and services that leverage its advanced photonics semiconductor technologies.   LSI designs chip-scale devices
including laser diodes, semiconductor optical amplifiers, avalanche photodiodes, passive waveguides, photonic integrated circuits, and
other related photonic chips, which are incorporated into products at various levels of integration by leveraging extensive in-house advanced
photonic packaging technologies.  The LSI integrated solutions include components, modules, subsystems, and systems that serve a
broad set of customer requirements.  Extensive design capabilities are complemented by an in-house III-V photonic semiconductor fabrication
facility and photonics module manufacturing capabilities.  These production resources are employed to deliver high performance, high
reliability products to a growing number of customers in a wide array of industries that include aerospace and defense, sensing and instrumentation,
and optical communications.  Acquiring LSI provides QCi with advanced semiconductors and related components, as well as design, testing
and consulting services to industry, in particular for Aerospace and Defense applications. Through the acquisition of LSI, QCi has broadened
its photonic chip design capability as well as our optical component and system design and advanced packaging capabilities. LSI’s
capabilities are highly synergistic with the QCi technology roadmap and will support the integration of chip-scale devices such as laser
diodes and photodetectors with QCi’s thin film lithium niobate photonic integrated circuit (PIC) platform.  Collaborative efforts
between the LSI and QCi technical teams will be instrumental to delivering QCi’s photonic- and quantum-based system products.

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

Our Strategy

QCi’s strategy is to build a vertically integrated photonics
and quantum optics platform capable of supporting scalable, commercial applications across AI, high-performance computing, cybersecurity,
and remote sensing. Our Core Photonics Technology is central to our strategy because we believe it provides advantages in size,
weight, power, and cost over competing cryogenic products. We further differentiate ourselves in the market by offering, in addition to
cloud-based access to our quantum computers, on-premises installation of our EQC product, which is rack-mountable and compatible with
standard server room infrastructure and requires no special cooling, shielding, or power considerations.

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

Market Opportunity

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

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While the current quantum computing market comprises a fraction of
the broader high-performance computing market, we believe that quantum computers will unlock new applications that are unlikely to be
addressable by existing high-performance computers that utilize classical processing units. Estimates of the size of the global high-performance
computing industry vary, but according to Grand View Research, the high-performance computing market was valued at $39.1 billion in 2019
and is expected to reach a value of $53.6 billion by 2027, see Grand View Research - High Performance Computing Market Size Worth $53.6
Billion By 2027, https://www.grandviewresearch.com/press-release/global-high-performance-computing-hpc-market According to a report
from Allied Market Research, the global enterprise quantum computing market size was valued at $1.3 billion in 2020 and is projected to
reach $18.3 billion by 2030, growing at a compound annual growth rate of 29.7% from 2021 to 2030, according to a published report on the
enterprise quantum computing market at https://www.alliedmarketresearch.com/enterprise-quantum-computing-market (Information contained
on, or that can be accessed through, these websites is not incorporated by reference in this Annual Report, and you should not consider
information on these websites to be part of this Annual Report). As an early participant in this rapidly growing market, we believe we
are positioned to seek to capture a portion of this growth, although commercialization remains uncertain.

Additionally, we believe that our foundry services
offering through our AZ Chips Facility will address the growing TFLN market and photonic integrated circuit markets. A recent Market
Research Reports: Document ID: LPI08232779; Published August 8, 2023 “Thin Film Lithium Niobate Market Forecast 2023 - 2029,”
indicates a significant potential market growth for TFLN devices, from $190.4 million in 2022 to an estimated $1.9 billion by 2029 - a
compound annual growth rate of 39 percent. The report further describes how such increase in demand is expected to be principally driven
by the advantages of large bandwidth, low power consumption, and small size that TFLN electro-optical modulators possess. Further, Mordor
Intelligence published a market report, “Photonic Integrated Circuit Market Size & Share Analysis - Growth Trends & Forecasts
(2024 - 2029)” which forecasts that the photonic integrated circuit (“PIC”) market, valued at $15.1 billion in 2024,
will grow at a compound annual growth rate of 20.5% to $38.4 billion in 2029. We believe QCi is well-positioned to benefit from this forecasted
increase in demand.

Products and Products in Development

We believe our Core Photonics Technology provides
us with a competitive advantage as compared to our competitors and it allows QCi to offer a suite of quantum machines to the market today
with a robust technology roadmap for the future. The QPhoton Merger substantially broadened the Company’s technology portfolio and
enabled us to develop a group of closely related products to the EQC, based on our underlying Core Photonics Technology.

TFLN Optical Chips

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

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Entropy Quantum Computer

“Dirac” is our EQC product platform
of increasingly advanced optimization devices utilizing our Core Photonics Technology. QCi launched a new EQC device during the first
quarter of 2024 (Dirac-3), which improved upon and expanded the capability we had previously shown with our Dirac-1 and Dirac-2 products,
and plans to release a series of additional EQC products in the coming years that build and expand upon the same architecture. We are
currently developing our Dirac-4 device. This planned evolution of technology and product enhancements will involve improving the size
and capacity of the EQC machines, as well as speed, scalability, and performance fidelity. The EQC is available both as a cloud-based
service, similar to other quantum machines, as well as an on-premises solution.

Artificial intelligence

Launched in June 2023, QCi’s first AI product,
a reservoir computing machine (an “RC”) called “Emucore,” is an edge device that can be reprogrammed after manufacturing
and optimized for recurrent neural network applications. An “edge device” allows the users to process, measure, and analyze
data locally (connected directly to the user’s device) as opposed to over a network where data must be sent over the internet or
through some cloud service. QCi’s RC is a standalone device that can be plugged into a local computer or server without having to
connect over the internet. Based on internal benchmarking results, we believe that the RC’s hardware-based approach may provide
advantages over certain traditional software implementations, including faster processing speeds and lower energy consumption in selected
time-dependent tasks. Actual performance may vary depending on use case and deployment environment. Our analyses further show that the
RC is capable of delivering superior performance in time-dependent tasks, such as chaotic time series prediction, unstructured financial
model prediction, natural language processing, and weather forecasting. To date, the market for reservoir computing has been limited due
to computing cost and technical implementation complexities, which the RC is designed to address. We anticipate that future generations
of the RC will introduce greater performance and scalability, which will enable the RC to participate in LLM training and other applications.
While technology challenges remain in scaling this technology, this is one of our focus areas to gain a significant share in the AI/ML
hardware market. In November 2025, we launched our newest version RC called “Neurawave,” a photonics based reservoir computer.

LiDAR and Quantum Photonic Vibrometer

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

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

Quantum Networks and Quantum Authentication

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

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Competition

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

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

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

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

Intellectual Property

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

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Trademarks

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

Patents

The Company has three granted United States patents.

In connection with the Luminar Acquisition (as
defined below), QCi acquired 23 issued patents, 16 pending United States patents and 9 foreign patent publications.

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Exclusive License Agreement

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

Government Regulation and Incentives

Export Regulation

The Department of Commerce Bureau of Industry
and Security (BIS) issued regulations in September 2024 placing some controls and licensing requirements on the export of certain quantum
computing products and technology under the U.S. Export Administration Regulations. Exports of such products may require a license in
certain circumstances. We are reviewing these regulations but do not believe they will have a substantial adverse impact on the Company,
although the regulatory landscape continues to evolve. The U.S. government has also placed some export restrictions on certain other technologies
potentially relevant to the Company’s products including cryogenic quantum computing equipment as well as some optical materials,
integrated circuits and related microelectronics. At this time, however, we do not expect there to be significant limitations on the Company’s
products.

Corporate Information

Our executive offices are located at 5 Marine
View Plaza, Suite 214, Hoboken, NJ 07030, and our telephone number is (703) 436-2121. Our corporate website is www.quantumcomputinginc.com.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, and amendments to reports
filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) will be
made available free of charge on our website as soon as reasonably practicable after we electronically file these materials with, or furnish
it to, the SEC on their website located at www.sec.gov. The information contained on, or that can be accessed through, and the contents
of our website are not incorporated into this Annual Report on Form 10-K, and our reference to the URL for our website is intended to
be an inactive textual reference only.

Human Capital

As of December 31, 2025, the Company had 72 full-time
employees and 5 part-time contract staff, 55 of whom are focused on product development. Our employees are not part of a collective bargaining
agreement and we believe that our relationships with our employees and contract workers are good. The Company offers a health and welfare
benefit plan to current full-time employees that provides medical, dental, vision, life, and disability benefits. The Company also offers
a 401(k) retirement savings plan and participation in the stock option plan to all full-time employees. There are no unpaid liabilities
under the Company’s benefit plans, and the Company has no obligation to pay for post-retirement health and medical costs of retired
employees.