QCLS

Business Context and Reporting Period

Company: Q/C Technologies, Inc. (Ticker: QCLS)
Filing Type: Form 10-Q (Unaudited)
Period Ended: March 31, 2026
Business Overview: The Company has pivoted from its legacy pharmaceutical business (Isomyosamine and Supera-CBD) to a new strategy focused on energy-efficient blockchain and cryptocurrency infrastructure using quantum-class laser-based computing (qc-LPU100). This transition was solidified by the acquisition of LPU Holdings LLC in September 2025. The Company is currently pre-revenue, relying on investment income and capital raises to fund operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Operating Expenses: Total operating expenses decreased by approximately $616,641 (25%) to $1,855,193. This was driven primarily by a significant reduction in Research and Development (R&D) expenses, which fell from $1,545,513 to $510,534 due to the suspension of the Phase 2b study for Isomyosamine. Conversely, General and Administrative (G&A) expenses increased by $224,965 (27%) due to higher professional service fees and personnel costs.
• Other Income/Expense: The Company recorded a net other income of $612,416 in Q1 2026, compared to $1,347,091 in Q1 2025. The decrease is largely attributed to a smaller gain on the change in fair value of derivative liabilities ($510,000 gain in 2026 vs. $1,284,000 gain in 2025).
• Liquidity Position: Cash and cash equivalents increased significantly from $73,244 in Q1 2025 to $1,127,619 in Q1 2026, supported by net proceeds from warrant exercises ($511,175) and net cash provided by investing activities ($2,973,256) from the sale of marketable securities.
• Franchise Tax: A new franchise tax expense of $219,403 was recorded in Q1 2026, representing a late payment for the 2025 tax year. No such expense was recorded in Q1 2025.

Guidance, Outlook, and Risks

• Outlook: Management believes current financial resources are sufficient to fund operations for the next twelve months. The Company expects operating expenses to increase as it advances the development of the qc-LPU100 laser-based computing product. Revenue generation is contingent upon successful development, certification, and commercialization of these new products.
• Capital Needs: The Company anticipates needing substantial additional funding to support both the new computing operations and the monetization of legacy pharmaceutical assets. Future capital may be raised through equity or debt financings, though no assurance is given that such financing will be available.
• Risks and Contingencies:
  • Derivative Liabilities: The Company holds significant derivative liabilities ($1,647,000) and contingent consideration ($10,909,000) related to preferred stock and the LPU acquisition, which are subject to fair value adjustments impacting net income.
  • Preferred Stock: Outstanding Series G and Series H Preferred Stock carry high dividend rates (10% and 7% respectively, increasing to 15% upon triggering events) and complex conversion terms that could dilute common shareholders.
  • Going Concern: While management asserts sufficiency for 12 months, the Company has a history of losses and negative cash flows from operations, creating dependency on future capital raises.

Investor Verification Checklist

• Capital Structure Dilution: Verify the impact of the full-ratchet anti-dilution provisions on Series F, F-1, G, and H preferred stock and warrants, which have significantly lowered exercise/conversion prices following recent stock splits and option issuances.
• Derivative Valuation: Review the assumptions (volatility, risk-free rate, probability of default) used in the Monte Carlo simulations for derivative liabilities, as these non-cash gains/losses heavily influence reported net loss.
• Liquidity Runway: Confirm the sufficiency of the $12.98 million in liquid assets (cash + marketable securities) against the burn rate of approximately $3.3 million per quarter from operating activities.
• Contingent Consideration: Assess the likelihood of triggering the $10.9 million contingent consideration payable related to the LPU acquisition, which is tied to future equity offerings and milestones.
• Legacy Asset Divestiture: Monitor progress on the potential divestiture of the Isomyosamine and Supera-CBD platforms, as this is a stated strategy to fund the new computing initiative.