From the Desk of the Chief Executive Officer

From: William McGann, Ph.D.

Office of the Chief Executive

September 1, 2024

QCi has made significant progress this month. All corporate activities have remained strongly aligned with our vision of generating revenue and seeking additional investment in our business.

We onboarded two critical sales leaders, Richard Nelson and Pouya Dianat, to drive sales of our commercial products and to establish our business strategy for photonic chips. Both new leaders will drive profitable growth and credibility in the high-performance computing and nanophotonic chips markets.

We also conducted our first technology webinar on the topic of entropy computing. More than 175 attendees tuned into the live session to listen to QCi Quantum Technology Lead, Dr. Lac Nguyen, and QCi Scientific Advisor and Professor of Physics, Mohammad-Ali Miri, as they discussed the company’s accessible quantum optimization machines for non-convex and combinatorial problems. For example, Dr. Nguyen explained the recent increase in data center power demand and illustrated the energy efficiency advantage of Dirac-3, which consumes about 25 watts on Supply Chain problems up to 900 variables and 100 watts total combined with support electronics. Not only does this reduce the carbon footprint and lower operational costs, but also the low power demand from Dirac-3 can be easily integrated with other systems, such as a plane, boat, or drone, acting as an edge computing device.

On the high-performance computing front with Dirac-3, the strategy with National Laboratories has been steadily progressing. Our team is working diligently on a series of benchmark problems provided to us from both Oak Ridge National Laboratory (ORNL) and Lawrence Berkeley National Laboratory (LBNL) to demonstrate our system’s ability to solve high-dimensional computational problems using mixed integer and multi-body interactions. The early results show that Dirac-3 has strong capabilities, and our goal is for these studies to lead to potential future sales to the government.

We also had the opportunity to visit Los Alamos National Laboratory (LANL) this month to present QCi’s technology. The recognition of Dirac-3’s capabilities by these National Laboratories instills confidence that our machine is going to be a game changer in the market as we continue to promote and demonstrate its performance.

On the photonic chips front, the fabrication facility located in Tempe, Arizona is moving into its final phase of construction and capital equipment installation. Milan, Pouya, and the team are working diligently to complete the fab and begin producing high-quality photonic chips. In parallel with the completion of the fab, the team has been conducting market and voice of the customer surveys to ensure that our “first step” into the market will be in the right direction. As of today, all indications suggest that there is considerable interest in our technology for Thin Film Lithium Niobate (TFLN) and the global TFLN Modulator market size is forecasted to a readjusted size of USD 1931.3 million by 2029 with a CAGR of 39.2%. These market possibilities, coupled with the tremendous energy savings available from TFLN devices, will put our U.S. Department of Energy (DOE) Title 17 loan program submission into a much higher probability of success. This would be a significant source of long-term, non-dilutive funding for the Company.

In addition to this market growth opportunity, TFLN sits at the heart of our ultimate scalable design for a multi-million qubit quantum machine that will have unsurpassed computational performance and the best SWAP-c specifications in the world. So, while there are several important elements of our go-to-market approach for TFLN devices, we remain confident that our Tempe facility will generate early revenues for the company and become a strong foundation for a foundry services business as well as the underlying driver for our core technology advancements in our commercial products.

Finally, QCi’s senior leadership team has been diligently working to regain our company’s compliance with the U.S. Securities and Exchange Commission (SEC) and Nasdaq following the SEC ruling back in May to ban B.F. Borges from conducting public company financial audits. While this ruling sent strong ripples across the public markets for hundreds of companies, including QCi, we quickly mobilized to appoint a new auditor, BPM LLP, who is well into the process of reauditing our financial statements for the last two years and reviewing our financial statements for the first and second quarters of 2024. The completion of the new auditor’s work will pave the way for QCi to regain SEC and NASDAQ compliance, which will enable the company to achieve its goal of achieving higher quality investment capital.

As we quickly approach the end of the third quarter, I remain optimistic that 2024 will be the year in which significant product revenue will be achieved. A detailed review of our budget for sales and costs will occur in the coming weeks, and as in prior years, will serve to further inform our growth playbook and strategy. It is essential that we consistently take a step back to assess the progress in our business and the steps we are taking to get there. As always, we will look to evaluate what has worked and what has not, and then make the necessary adjustments to our execution to improve in those areas.

- Bill

“Those bold enough to think they can change the world are the ones that do” … (Steve Jobs, Former CEO and Co-Founder of Apple)