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What changed in Arqit Quantum Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Arqit Quantum Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+311 added−341 removedSource: 20-F (2023-11-21) vs 20-F (2022-12-14)

Top changes in Arqit Quantum Inc.'s 2023 20-F

311 paragraphs added · 341 removed · 214 edited across 6 sections

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed0 unchanged
Biggest changeDirectors and Senior Management 46 6.B. Compensation 48 6.C. Board Practices 49 6.D. Employees 52 6.E. Share Ownership 52 Item 7. Major Shareholders and Related Party Transactions 52 7.A. Major Shareholders 52 7.B. Related Party Transactions 54 7.C. Interests of Experts and Counsel 54 Item 8. Financial Information 54 8.A. Combined Statements and Other Financial Information 54 8.B.
Biggest changeBoard Practices 47 6.D. Employees 50 6.E. Share Ownership 50 6.F Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation 50 Item 7. Major Shareholders and Related Party Transactions 50 7.A. Major Shareholders 50 7.B. Related Party Transactions 52 7.C. Interests of Experts and Counsel 52 Item 8. Financial Information 52 8.A.
Item 2. Offer Statistics and Expected Timetable 8 Item 3. Key Information 8 3.A. Selected Financial Data 8 3.B. Capitalization and Indebtedness 8 3.C. Reasons for the Offer and Use of Proceeds 8 3.D. Risk Factors 8 Item 4. Information on the Company 22 4.A. History and Development of the Company 22 4.B. Business Overview 22 4.C.
Item 2. Offer Statistics and Expected Timetable 8 Item 3. Key Information 8 3.A. Reserved 8 3.B. Capitalization and Indebtedness 8 3.C. Reasons for the Offer and Use of Proceeds 8 3.D. Risk Factors 8 Item 4. Information on the Company 22 4.A. History and Development of the Company 22 4.B. Business Overview 22 4.C. Organizational Structure 31 4.D.
Organizational Structure 32 4.D. Property, Plants and Equipment 33 4.E. Unresolved Staff Comments 33 Item 5. Operating and Financial Review and Prospects 33 5.A. Operating Results 33 5.B. Liquidity and Capital Resources 42 5.C. Research and Development, Patents and Licenses, Etc. 44 5.D. Trend Information 44 Item 6. Directors, Senior Management and Employees 46 6.A.
Property, Plant and Equipment 31 4.E. Unresolved Staff Comments 31 Item 5. Operating and Financial Review and Prospects 31 5.A. Operating Results 31 5.B. Liquidity and Capital Resources 41 5.C. Research and Development, Patents and Licenses, Etc. 43 5.D. Trend Information 43 Item 6. Directors, Senior Management and Employees 44 6.A. Directors and Senior Management 44 6.B. Compensation 46 6.C.
Added
Combined Statements and Other Financial Information 52 8.B. Significant Changes 53

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

52 edited+20 added−16 removed191 unchanged
Biggest changeIf Arqit were a passive foreign investment company, or “PFIC,” for U.S. federal income tax purposes for any taxable year, U.S. investors could be subject to adverse U.S. federal income tax consequences. If Arqit were a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S.
Biggest changeIn addition, Arqit could experience a decreased ability to issue additional securities and obtain additional capital in the future. Arqit may be a passive foreign investment company, or “PFIC,” for U.S. federal income tax purposes. Such classification for any taxable year, could result in adverse U.S. federal income tax consequences for U.S. investors.
In December 2022 Arqit updated its technology strategy to eliminate quantum satellites and the associated ground infrastructure from its core QuantumCloud TM product offering . See “Item 4.B. Business Overview - Change in Satellite Infrastructure Strategy.” In connection with this update, Arqit is planning to sell or otherwise monetize its quantum satellite currently under construction.
In December 2022 Arqit updated its technology strategy to eliminate quantum satellites and the associated ground infrastructure from its core QuantumCloud TM product offering . See “Item 4.B. Business Overview - Satellite Infrastructure.” In connection with this update, Arqit is planning to sell or otherwise monetize its quantum satellite currently under construction.
See “ Beneficial Ownership of Securities .” For so long as these shareholders continue to own a significant percentage of Arqit ordinary shares, they will be able to significantly influence or effectively control the composition of the Arqit board of directors and the approval of actions requiring shareholder approval through their voting power.
See “ Beneficial Ownership of Securities .” For so long as these shareholders continue to own a significant percentage of Arqit ordinary shares and warrants, they will be able to significantly influence or effectively control the composition of the Arqit board of directors and the approval of actions requiring shareholder approval through their voting power.
Arqit utilizes reputable third-party service providers or vendors for all of its IT and communications sytems, and these providers could also be vulnerable to harms similar to those that could damage its systems, including sabotage and intentional acts of vandalism causing potential disruptions.
Arqit utilizes reputable third-party service providers or vendors for all of its IT and communications systems, and these providers could also be vulnerable to harms similar to those that could damage its systems, including sabotage and intentional acts of vandalism causing potential disruptions.
Because Arqit will incur the costs and expenses of developing and commercializing its products before it receives any significant revenues with respect thereto, its losses in future periods may be significant.
Because Arqit will incur the costs and expenses of commercializing its products before it receives any significant revenues with respect thereto, its losses in future periods may be significant.
Despite precautions taken at these facilities, such as disaster recovery, business continuity arrangements, and diversity of supply in the Arqit network, the occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or degredations in its services, impede its ability to scale its operations or have other adverse impacts upon its business.
Despite precautions taken at these facilities, such as disaster recovery, business continuity arrangements, and diversity of supply in the Arqit network, the occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in interruptions or degradations in its services, impede its ability to scale its operations or have other adverse impacts upon its business.
On October 12, 2021, Arqit’s registration statement on Form F-1, which has since been post-effectively amended on Form F-3 (File No. 333-259982 the “Resale Registration Statement”) registering the resale by shareholders of 117,925,000 ordinary shares, 6,266,667 warrants and 14,891,640 shares issuable upon exercise of warrants, became effective.
On October 12, 2021, Arqit’s registration statement on Form F-1, which has since been post-effectively amended on Form F-3 (File No. 333-259982 the “Resale Registration Statement”) registering the resale by shareholders of 117,925,000 ordinary shares, 6,266,667 Business Combination Warrants and 14,891,640 shares issuable upon exercise of Business Combination Warrants, became effective.
Arqit is a foreign private issuer, as such term is defined in Rule 405 under the Securities Act, however, under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to Arqit on March 31, 2023.
Arqit is a foreign private issuer, as such term is defined in Rule 405 under the Securities Act, however, under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to Arqit on March 31, 2024.
Due to the recurring fair value measurement, Arqit expects that it will recognize non-cash gains or losses on its warrants each reporting period and that the amount of such gains or losses could be material. Interruption or failure of Arqit’s information technology and communications systems could impact its ability to effectively provide its products and services.
Due to the recurring fair value measurement, Arqit expects that it will recognize non-cash gains or losses on its Business Combination Warrants each reporting period and that the amount of such gains or losses could be material. Interruption or failure of Arqit’s information technology and communications systems could impact its ability to effectively provide its products and services.
Any failure, or perceived failure, to comply with current and future regulatory or customer-driven privacy, data protection, and information security requirements, or to prevent or mitigate security breaches, cyber-attacks, or improper access to, use of, or disclosure of data, or any security issues or cyber-attacks affecting Arqit, could result in significant liability, costs (including the costs of mitigation 14 Table of Contents and recovery), and a material loss of revenue resulting from the adverse impact on Arqit’s reputation and brand, loss of proprietary information and data, disruption to its business and relationships, and diminished ability to retain or attract customers and business partners.
Any failure, or perceived failure, to comply with current and future regulatory or customer-driven privacy, data protection, and information security requirements, or to prevent or mitigate security breaches, cyber-attacks, or improper access to, use of, or disclosure of data, or any security issues or cyber-attacks affecting Arqit, could result in significant liability, costs (including the costs of mitigation and recovery), and a material loss of revenue resulting from the adverse impact on Arqit’s reputation and brand, loss of proprietary information and data, disruption to its business and relationships, and diminished ability to retain or attract customers and business partners.
Pursuant to the Registration Rights Agreement and the Subscription Agreements described elsewhere in this Annual Report, certain shareholders can each demand that Arqit register their registrable securities under certain circumstances and will each have piggyback registration rights for these securities in connection with certain registrations of securities that Arqit undertakes. Arqit will bear the cost of registering these securities.
Pursuant to the Registration Rights Agreement described elsewhere in this Annual Report, certain shareholders can each demand that Arqit register their registrable securities under certain circumstances and will each have piggyback registration rights for these securities in connection with certain registrations of securities that Arqit undertakes. Arqit will bear the cost of registering these securities.
Arqit takes precautions to prevent its offerings from being exported in 13 Table of Contents violation of these laws, including: (i) seeking to proactively classify its platforms and obtain authorizations for the export and/or import of its platforms where appropriate, (ii) implementing certain technical controls and screening practices to reduce the risk of violations, and (iii) requiring compliance with U.S. export control and sanctions obligations in customer and vendor contracts.
Arqit takes precautions to prevent its offerings from being exported in violation of these laws, including: (i) seeking to proactively classify its platforms and obtain authorizations for the export and/or import of its platforms where appropriate, (ii) implementing certain technical controls and screening practices to reduce the risk of violations, and (iii) requiring compliance with U.S. export control and sanctions obligations in customer and vendor contracts.
Controls and Procedures.” Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on Arqit’s business, results of operations and financial condition and could cause a decline in the trading price of the Arqit ordinary shares.
Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on Arqit’s business, results of operations and financial condition and could cause a decline in the trading price of the Arqit ordinary shares.
For a foreign judgment to be enforced in the Cayman Islands, such 17 Table of Contents judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy).
For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy).
Any or all of these issues, or the perception that any of them have occurred, could negatively affect Arqit’s ability to attract new customers, cause existing customers to terminate or not renew their agreements, hinder Arqit’s ability to obtain and maintain required or desirable cybersecurity certifications, and result in reputational damage, any of which could materially adversely affect its results of operations, financial condition, and future prospects.
Any or all of these issues, 15 Table of Contents or the perception that any of them have occurred, could negatively affect Arqit’s ability to attract new customers, cause existing customers to terminate or not renew their agreements, hinder Arqit’s ability to obtain and maintain required or desirable cybersecurity certifications, and result in reputational damage, any of which could materially adversely affect its results of operations, financial condition, and future prospects.
Although Arqit monitors its use of open source software to avoid subjecting its products to conditions Arqit does not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way 11 Table of Contents that, for example, could impose unanticipated conditions or restrictions on its ability to commercialize its products.
Although Arqit monitors its use of open source software to avoid subjecting its products to conditions Arqit does not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that, for example, could impose unanticipated conditions or restrictions on its ability to commercialize its products.
In this event, Arqit could be required to seek licenses from third parties to continue offering its products, to make its proprietary code generally available in source code form, to re-engineer its products or to discontinue the sale of its products if re-engineering could not be accomplished on a timely basis, and Arqit’s business, financial condition and results of operations could be materially adversely affected.
In this event, Arqit could be required to seek licenses from third parties to continue offering its products, to make its proprietary code generally available in 11 Table of Contents source code form, to re-engineer its products or to discontinue the sale of its products if re-engineering could not be accomplished on a timely basis, and Arqit’s business, financial condition and results of operations could be materially adversely affected.
For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the 20 Table of Contents annual report on Form 20-F permits foreign private issuers to disclose compensation information on an aggregate basis.
For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private issuers to disclose compensation information on an aggregate basis.
If Arqit is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with technological alternatives, its products could lose market share, its revenue could decline, and Arqit’s business, financial condition and results of operations could be materially adversely affected.
If Arqit is unable to devote adequate resources to develop products or cannot otherwise successfully develop products or system configurations that meet customer requirements on a timely basis or that remain competitive with technological alternatives, its products 12 Table of Contents could lose market share, its revenue could decline, and Arqit’s business, financial condition and results of operations could be materially adversely affected.
In particular, Section 404 of the Sarbanes-Oxley Act requires Arqit to perform system and process evaluation and testing of its internal control over financial reporting to allow Arqit's management to report on the effectiveness of its internal control over financial reporting and to allow Arqit’s independent registered public accounting firm to attest to the effectiveness of such control (once Arqit becomes an accelerated filer).
In particular, Section 404 of the Sarbanes-Oxley Act requires Arqit to perform system and process evaluation and testing of its internal control over financial reporting to allow Arqit's management to report on the effectiveness of its 19 Table of Contents internal control over financial reporting and to allow Arqit’s independent registered public accounting firm to attest to the effectiveness of such control (once Arqit becomes an accelerated filer).
Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of Arqit’s platform by, or in its decreased ability to export or sell its products to, existing or potential end-customers with international operations.
Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased 13 Table of Contents use of Arqit’s platform by, or in its decreased ability to export or sell its products to, existing or potential end-customers with international operations.
See “— As an “emerging growth company,” Arqit cannot 19 Table of Contents be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make the Arqit ordinary shares less attractive to investors.” However, Arqit may no longer avail itself of this exemption when it ceases to be an emerging growth company.
See “— As an “emerging growth company,” Arqit cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make the Arqit ordinary shares less attractive to investors.” However, Arqit may no longer avail itself of this exemption when it ceases to be an emerging growth company.
Its systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm its systems.
Its systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural 14 Table of Contents disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm its systems.
These market and industry factors may materially reduce the market price of Arqit’s ordinary shares, regardless of its operating performance. 18 Table of Contents Reports published by analysts, including projections in those reports that differ from Arqit’s actual results, could adversely affect the price and trading volume of its ordinary shares.
These market and industry factors may materially reduce the market price of Arqit’s ordinary shares, regardless of its operating performance. Reports published by analysts, including projections in those reports that differ from Arqit’s actual results, could adversely affect the price and trading volume of its ordinary shares.
Arqit’s warrants are accounted for as liabilities and the changes in value of the warrants could have a material effect on its financial results.
Arqit’s Business Combination Warrants are accounted for as liabilities and the changes in value of the warrants could have a material effect on its financial results.
The shareholders who registered shares and warrants for resale under the Resale Registration Statement have registration rights under the Registration Rights Agreement and the Subscription Agreements. The registration of these securities permits the public sale of such securities.
The shareholders who registered shares and warrants for resale under the Resale Registration Statement have registration rights under the Registration Rights Agreement. The registration of these securities permits the public sale of such securities.
For as long as Arqit remains an “emerging growth company” as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Arqit may remain an “emerging growth company” until September 2, 2026 (the fifth anniversary of the closing of the merger of Centricus with and into Arqit ) or until such earlier time that it has more than $1.235 billion in annual revenues, has more than $700 million in market value of Arqit’s ordinary shares held by non-affiliates, or issues more than $1.00 billion of non-convertible debt over a three-year period.
For as long as Arqit remains an “emerging growth company” as defined in the JOBS Act, it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” Arqit may remain an “emerging growth company” until September 2, 2026 (the fifth anniversary of the closing of the Business Combination ) or until such earlier time that it has more than $1.235 billion in annual revenues, has more than $700 million in market value of Arqit’s ordinary shares held by non-affiliates, or issues more than $1.00 billion of non-convertible debt over a three-year period.
The success of its products and business depend in part on its ability to obtain patents and other intellectual property rights and maintain adequate legal protection for its products. As of the date of this Annual Report, Arqit had 1,820 claims on 33 pending or granted patents in the UK.
The success of its products and business depend in part on its ability to obtain patents and other intellectual property rights and maintain adequate legal protection for its products. As of the date of this Annual Report, Arqit had 1,966 claims on 41 pending or granted patents in the UK.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of the directors of Arqit under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.
The rights of shareholders to take action against the directors, actions by 16 Table of Contents minority shareholders and the fiduciary responsibilities of the directors of Arqit under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands.
The grant and future exercise of registration rights may adversely affect the market price of Arqit ordinary shares.
The grant and future exercise of registration rights and exercise of outstanding warrants may adversely affect the market price of Arqit ordinary shares.
Arqit, and the third-party vendors upon which Arqit relies, have experienced, and may in the future experience, cybersecurity threats, including threats or attempts to disrupt its information technology infrastructure and unauthorized attempts to gain access to sensitive 15 Table of Contents or confidential information.
Arqit, and the third-party vendors upon which Arqit relies, have experienced, and may in the future experience, cybersecurity threats, including threats or attempts to disrupt its information technology infrastructure and unauthorized attempts to gain access to sensitive or confidential information.
Holders, see “United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules.” Risks Related to Being a Public Company Arqit’s management team has limited experience managing and operating a U.S. public company.
Holders, see “Certain Material United States Federal Income Tax Considerations — Passive Foreign Investment Company Rules.” Risks Related to Being a Public Company Arqit’s management team has limited experience managing and operating a U.S. public company.
If Arqit fails to sell or otherwise monetize its satellite currently under construction, it may be required to write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
If Arqit fails to sell or otherwise monetize its satellite currently under construction, it may be required to recognize further impairment losses, write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
Such conversion and modifications will involve additional costs. In addition, Arqit may lose its ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers. Arqit has incurred and expects to continue to incur increased costs and obligations as a result of being a public company.
In addition, Arqit may lose its ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers. Arqit has incurred and expects to continue to incur increased costs and obligations as a result of being a public company.
If Arqit fails to sell its satellite currently under construction, it may be required to write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
If Arqit fails to sell its satellite currently under construction, it may be required to recognize further impairment losses, write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
In addition, Arqit is in the process of transitioning its business model from an enterprise license model to distribution through channel sales partners with annual recurring revenues, and there can be no certainty over the pace and scale of revenue growth in such relationships, which might take longer than anticipated to generate material revenues.
Arqit is in the early stages of commercializing its business, and in December 2022 began transitioning its distribution model from an enterprise license model to distribution through channel partners. There can be no certainty over the pace and scale of revenue growth generated from such relationships, which might take longer than anticipated to generate material revenues.
Considering the SEC statement and the application of IFRS 9 – Financial Instruments and IAS 32 – Financial Instruments: Presentation , Arqit has determined the warrants should be classified as derivative liabilities measured at fair value on its statement of financial position, with any changes in fair value to be reported each period in earnings on its statement of comprehensive income.
In accordance with IFRS 9 – Financial Instruments and IAS 32 – Financial Instruments: Presentation , Arqit has determined that its Business Combination Warrants should be measured at fair value on its statement of financial position, with any changes in fair value to be reported each period in earnings on its statement of comprehensive income.
Arqit would also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. Arqit may also be required to modify certain of its policies to comply with good governance practices associated with U.S. domestic issuers.
Arqit would also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act.
Even if Arqit is able to finalize the development of its products and to sell them, there can be no assurance that they will be commercially successful. Arqit’s potential profitability is dependent upon the successful development and commercial introduction and acceptance of its products, which may not occur.
There can be no assurance that Arqit’s products or its sales strategy will be commercially successful. Arqit’s potential profitability is dependent upon the successful development and commercial introduction and acceptance of its products, which may not occur.
Failure to remedy any material weaknesses in its internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict Arqit’s future access to the capital markets. For details of the controls, material weaknesses and Arqit’s remediation plan, see the section of this annual report entitled “Item 15.
Failure to remedy any material weaknesses in its internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict Arqit’s future access to the capital markets.
The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of Arqit ordinary shares. Certain shareholders that own a significant percentage of Arqit may have interests that conflict with Arqit’s or yours in the future.
The exercise of a significant number of warrants may have an adverse effect on the market price of Arqit’s ordinary shares. 17 Table of Contents Certain shareholders that own a significant percentage of Arqit may have interests that conflict with Arqit’s or yours in the future.
At such time, Arqit’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. As disclosed in “Item 15.
At such time, Arqit’s independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. For the fiscal year ended September 30, 2022, Arqit identified certain material weaknesses in its internal controls.
If such write offs are required or additional expenses are incurred, Arqit’s results of operations could differ materially from its expectations and Arqit’s business, financial condition and results of operations could be materially adversely affected. Arqit is reliant upon the lease of data center capacity and access to fiber optic infrastructure from third parties in order to commercialize its product.
If Arqit is not able to access the capital required to fund its operations, its business, financial condition and results of operations could be materially adversely affected. ​ 9 Table of Contents Arqit is reliant upon the lease of data center capacity and access to fiber optic infrastructure from third parties in order to commercialize its product.
For the years ended September 30, 2020, 2021 and 2022, Arqit generated operating losses of $0.809 million, $172.6 million and $52.1 million, respectively.
For the years ended September 30, 2021, 2022 and 2023, Arqit generated operating losses of $172.6 million, $63.8 million and $84.4 million, respectively.
While Arqit is actively engaged in implementing remedial measures, it cannot assure you that these measures will be effective. Arqit also cannot assure you that there will not be additional material weaknesses or significant deficiencies in its internal control over financial reporting in the future.
While Arqit remediated these internal weaknesses during the fiscal year ended September 30, 2023, it cannot assure you that there will not be additional material weaknesses or significant deficiencies in its internal control over financial reporting in the future.
Two shareholders of Arqit beneficially own approximately 43.6% of the outstanding Arqit ordinary shares.
Four shareholders of Arqit beneficially own approximately 48.6% of the outstanding Arqit ordinary shares and currently exercisable warrants.
Arqit cannot be certain that the steps Arqit has taken will prevent unauthorized use of its technology 10 Table of Contents or the reverse engineering of its technology. Moreover, others may independently develop technologies that are competitive to or infringe its intellectual property.
Arqit cannot be certain that the steps Arqit has taken will prevent unauthorized use of its technology or the reverse engineering of its technology.
Arqit must be able to interoperate and provide products to customers with highly complex and customized internal networks, which requires careful planning and execution between its customers, its customer support teams and, in some cases, its channel partners. 16 Table of Contents Further, when new or updated elements of its customers’ infrastructure or new industry standards or protocols are introduced, Arqit may have to update or enhance its network to allow it to continue to provide its products to customers.
Arqit must be able to interoperate and provide products to customers with highly complex and customized internal networks, which requires careful planning and execution between its customers, its customer support teams and, in some cases, its channel partners.
Protecting against the unauthorized use of its intellectual property, products and other proprietary rights is expensive and difficult, particularly internationally. Arqit believes that its intellectual property is foundational in the area of encryption technology and intends to enforce the intellectual property portfolio that Arqit has built.
Arqit believes that its intellectual property is foundational in the area of encryption technology and intends to enforce the intellectual property portfolio that Arqit has built. Unauthorized parties may attempt to copy or reverse engineer its technology or certain aspects of its products that it considers proprietary.
As of the date hereof, Arqit has not made a determination as to its PFIC status for its most recent taxable year or its current taxable year.
Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. As of the date hereof, Arqit has not made a determination as to its PFIC status for its most recent taxable year or its current taxable year, and it may be possible that Arqit is a PFIC for either such years.
Arqit may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering resources.
Further, when new or updated elements of its customers’ infrastructure or new industry standards or protocols are introduced, Arqit may have to update or enhance its network to allow it to continue to provide its products to customers. Arqit may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering resources.
Holder (as defined in the section entitled “United States Federal Income Tax Considerations”) of Arqit’s ordinary shares or warrants, the U.S. Holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements.
If Arqit were a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the section entitled “Certain Material United States Federal Income Tax Considerations”) of Arqit’s ordinary shares or warrants, the U.S.
Removed
Although Arqit is developing an annual recurring revenue model, several of its early contracts have been project- based with uneven milestone payment profiles, which extend for several years. As a result, Arqit expects its early results of operations to fluctuate on an interim and annual basis. As its business matures, Arqit intends to develop an annual recurring revenue model.
Added
Arqit’s primary distribution channel is through channel partnerships, and therefore Arqit is dependent upon maintaining and increasing the number of channel partnerships, and developing annual recurring revenues through those channel partnerships, in order to continue to develop its business.
Removed
However, several of its early contracts have been projects based with uneven milestone payment profiles, which extend for several years, and as a result its interim results of operations have fluctuated and may vary significantly in the future. As such, historical comparisons of its operating results may not be relevant, meaningful or indicative of future results.
Added
In addition, Arqit is dependent upon maintaining its existing, and increasing the number of, channel partnerships in order to continue to develop its business and annual recurring revenues.
Removed
Accordingly, the results of any one quarter should not be relied upon as an indication of future 9 Table of Contents performance. Its interim financial results may fluctuate as a result of a variety of factors, many of which are outside of its control and may not fully reflect the underlying performance of its business.
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If revenues from channel partner relationships fail to develop, take longer than expected to develop, or Arqit fails to maintain existing or increase the number of its channel partnerships, the impact could adversely affect its business, financial condition, and results of operations.
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Factors that may cause these interim fluctuations include, without limitation: ● the timing and size of its customer contracts in any quarter; ● pricing changes that Arqit may adopt to drive market adoption or in response to competitive pressure; ● its ability to retain its existing customers and attract new customers; ● its ability to develop and bring to market in a timely manner products that meet customer requirements; ● fluctuations in demand pressures for its products; ● the timing and rate of broader market adoption of its products and technology; ● the ability of its customers to commercialize systems that incorporate its products; ● any change in the competitive dynamics of its markets, including regulatory developments and new market entrants; ● adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs; and ● general economic, industry and market conditions, including trade disputes.
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In May 2023 Arqit retained an adviser to assist in the process of pursuing the sale of its satellite division amongst other potential transactions. During the fiscal year ended September 30, 2023, Arqit reclassified its satellite assets from “intangible assets” to “assets classified as held for sale”, in connection with which it recognized an impairment loss of $17.6 million.
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These fluctuations could adversely affect its ability to meet its expectations or those of securities analysts, ratings agencies or investors. If Arqit does not meet these expectations for any period, the value of its business could decline significantly.
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If such impairment losses or write offs are required or additional expenses are incurred, Arqit’s results of operations could differ materially from its expectations and Arqit’s business, financial condition and results of operations could be materially adversely affected.
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Unauthorized parties may attempt to copy or reverse engineer its technology or certain aspects of its products that it considers proprietary.
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Arqit will require additional capital to fund its operations, and if it is unable to obtain such capital, it will be unable to successfully continue to develop its business and commercialize its products. As of September 30, 2023, Arqit had cash and cash equivalents of approximately $44.5 million.
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Arqit currently has and targets many customers that are large corporations with substantial negotiating power, exacting product and quality standards and potentially competitive internal solutions. Many of Arqit’s existing and potential customers are large, multinational corporations with substantial negotiating power relative to it and, in some instances, may have internal solutions that may be competitive to its products.
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Although Arqit believes it has sufficient funds to fund its operations for the next twelve months as of the filing of this Annual Report on Form 20-F, it will require additional capital in order to successfully continue to develop its business and commercialize its products.
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Many of these large, multinational corporations that are existing or potential customers also have significant development resources, which may allow them to acquire or develop independently, or in partnership with others, competitive technologies. Meeting the technical requirements of these companies will require a substantial investment of Arqit’s time and resources.
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There is no assurance that revenues from Arqit’s commercialization of its products will be sufficient to fund its operations in the future, or that additional funds will be available through other sources when required on terms that are acceptable to Arqit, or at all.
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If Arqit is unable to sell its products to these customers or is unable to enter into agreements with these customers on satisfactory terms, Arqit’s business, financial condition and results of operations could be materially adversely affected. 12 Table of Contents Arqit currently has a small number of customers, and its business could be materially and adversely affected if Arqit loses and is unable to replace any of those customers or if they are unable to pay their invoices.
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Moreover, others may independently develop technologies that are competitive to or infringe its intellectual property. 10 Table of Contents Protecting against the unauthorized use of its intellectual property, products and other proprietary rights is expensive and difficult, particularly internationally.
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Arqit is in the early stages of commercializing its business, and has a small number of customers.
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The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of Arqit ordinary shares.
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The loss of business from any of Arqit’s major customers (whether by lower overall demand for its products, cancellation of existing contracts or the failure to adopt its products or to award it new business) could have a material adverse effect on its business.
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In addition, in registered direct offerings in February 2023 and September 2023, Arqit issued a total of 7,500,000 February 2023 Investor Warrants, 550,000 February 2023 Placement Agent Warrants, 20,755,677 September 2023 Investor Warrants and 705,128 September 2023 Placement Agent Warrants.
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There is also a risk that one or more of Arqit’s major customers could be unable to pay its invoices as they become due or that a customer will simply refuse to make such payments if it experiences financial difficulties.
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All of Arqit’s outstanding warrants are currently exercisable and the shares issuable upon exercise of the warrants have been registered under registration statements.
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If a major customer were to enter into bankruptcy proceedings or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, Arqit could be forced to record a substantial loss.
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Arqit’s ordinary shares may be involuntarily delisted from trading on Nasdaq if it fails to comply with the continued listing requirements. A delisting of Arqit’s ordinary shares could reduce the liquidity of the ordinary shares and may inhibit or preclude its ability to raise additional capital.
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In April 2021, the staff of the SEC issued a statement, wherein they expressed their view that certain terms and conditions common to warrants issued by special purpose acquisition companies (“SPACs”) warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to being treated as equity.
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Nasdaq requires Arqit to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of its ordinary shares.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeIf an agreement to sell the satellite cannot be reached Arqit will suspend construction of the satellite currently under construction and any further satellites. ​ Arqit expects that these changes to its technology strategy will result in a portion of capitalized satellite costs recouped through the planned sale of the satellite currently under construction, additional revenues through the licensing of its ARQ19 intellectual property and the elimination of future capital and operating expenditures associated with use of satellites as part of its core product offering.
Biggest changeArqit announced in December 2022 that it expects that these changes to its technology strategy may result in a portion of capitalized satellite costs recouped as a result of a sale of the satellite currently under construction, joint venture development and operation of the satellite, and or the licensing of its ARQ19 intellectual property.
National Security Agency has declared that symmetric encryption is the most safe and easiest method to immediately become quantum safe. 25 Table of Contents The Arqit technology includes three areas of innovation: ● Secure Distribution of Replicated Entropy . Arqit embeds replicated entropy in data centers that host the Arqit QuantumCloud TM system which provides the source for key creation.
National Security Agency has declared that symmetric encryption is the most safe and easiest method to immediately become quantum safe. 24 Table of Contents The Arqit technology includes three areas of innovation: ● Secure Distribution of Replicated Entropy . Arqit embeds replicated entropy in data centers that host the Arqit QuantumCloud TM system which provides the source for key creation.
For example, blockchain software can be made quantum safe by the use of Arqit’s new signing technology and digital wallets at the end point and their transactions can be secured. The connected car market cannot safely operate in the long term unless the 26 Table of Contents encryption of its communications channels are secure.
For example, blockchain software can be made quantum safe by the use of Arqit’s new signing technology and digital wallets at the end point and their transactions can be secured. The connected car market cannot safely operate in the long term unless the 25 Table of Contents encryption of its communications channels are secure.
This is a completely new way to create and distribute unbreakable symmetric keys that represents a groundbreaking, novel technology. The keys are created with what is known as a “mixed trust model” which means that no third party computer ever has the key, or sufficient information to recreate or guess the key.
This is a completely new way to create and distribute unbreakable symmetric keys that represents a groundbreaking, novel technology. The keys are created with what is known as a “zero trust model” which means that no third party computer ever has the key, or sufficient information to recreate or guess the key.
QuantumCloud™ is a software platform as a service that creates unbreakable software encryption keys that are low cost and easy to use within existing standards with no new hardware and no major software upgrades or “rip and replace” required. The software has potentially universal application to every edge device and cloud machine in the world.
QuantumCloud TM is a software platform as a service that creates unbreakable software encryption keys that are low cost and easy to use within existing information technology standards with no new hardware and no major software upgrades or “rip and replace” required. The software has potentially universal application to every edge device and cloud machine in the world.
Although they all have products in market, they are at early stages with a number of pilots requiring significant support from the QKD vendors. The majority of these providers are targeting data center architectures with a product that has a limit of around 100 kilometers, meaning that it is only suitable in a metro area.
Although they all have products in market, they are at early stages with a number of pilots requiring significant support from the QKD vendors. The majority of these providers are targeting data center architectures with a product that has 28 Table of Contents a limit of around 100 kilometers, meaning that it is only suitable in a metro area.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and Arqit may be required to put in place additional mechanisms to ensure compliance with new data protection rules. For further information, see “Item 3.D.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and Arqit may be required to put in place additional mechanisms to ensure compliance with new data protection rules. For further information, see “ Item 3.D.
Export Control Act 2002 (as amended and extended by the Export Control Order 2008) and their respective implementing rules and regulations. The ITAR generally restricts the export of hardware, software, technical data, and services that have defense or strategic 31 Table of Contents applications.
Export Control Act 2002 (as amended and extended by the Export Control Order 2008) and their respective implementing rules and regulations. The ITAR generally restricts the export of hardware, software, technical data, and services that have defense or strategic applications.
PKI is currently the most widely-used encryption technology, but it is failing to prevent escalating 27 Table of Contents cyber-attacks like ransomware and is entirely vulnerable to attack by quantum computers, which are expected to become available within the next few years. A symmetric encryption key, once created, is computationally secure.
PKI is currently the most widely-used encryption technology, but it is failing to prevent escalating cyber-attacks like ransomware and is entirely vulnerable to attack by quantum computers, which are expected to become available within the next few years. A symmetric encryption key, once created, is computationally secure.
In particular, unpatented trade secrets in the fields of research, development and engineering are an important aspect of Arqit’s business by ensuring that its technology and strategic business assets remain confidential.
In particular, unpatented trade secrets in the fields of research, development and engineering are an important aspect of Arqit’s business by ensuring that its technology and 29 Table of Contents strategic business assets remain confidential.
Based on the filing dates of Arqit’s existing patent applications, and assuming the patents are granted and renewed throughout their lifetimes, Arqit currently expects each patent right to provide protection for up to 20 years from the relevant filing dates which, as of the date of this Annual Report, range from June 4, 2018 to September 20, 2022.
Based on the filing dates of Arqit’s existing patent applications, and assuming the patents are granted and renewed throughout their lifetimes, Arqit currently expects each patent right to provide protection for up to 20 years from the relevant filing dates which, as of the date of this Annual Report, range from June 4, 2018 to October 27, 2023.
They are created at the end points in a manner that means they can never be known by a third party, and can be used once if necessary and replaced infinitely.
They are created at the end points in a manner that means they can never be known by a third party, and 22 Table of Contents can be used once if necessary and replaced infinitely.
Arqit believes that every connected service is vulnerable to current and future attacks on PKI, in particular by quantum computers in the near to mid-term.
Arqit believes that every connected service is vulnerable to current and future attacks on PKI, in particular by 23 Table of Contents quantum computers in the near to mid-term.
Arqit’s technology combines world-leading innovation in two areas: the secure distribution of replicated entropy to data centers and a software agent that can be downloaded onto any device. ​ ● As part of the background technology that allows Arqit’s software agent to operate at end points, identical sets of random numbers (“replicated entropy”) must be delivered securely and frequently to data centers.
Arqit’s technology combines world-leading innovation in two areas: the secure distribution of replicated entropy to data centers and a software agent that can be downloaded onto any device and makes the use of symmetric key encryption a scalable business model. ​ ● As part of the background technology that allows Arqit’s software agent to operate at end points, identical sets of random numbers (“replicated entropy”) must be delivered securely and frequently to data centers.
Arqit Limited was incorporated in England in 2017. In September 2021, the Company completed the Business Combination pursuant to which the Company merged with and into Centricus Acquisition Corp.
Arqit Limited was incorporated in England in 2017. In September 2021, the Company completed the Business Combination pursuant to which the Company merged with and into Centricus Acquisition Corp., with the Company surviving the merger, and the security holders of Centricus Acquisition Corp.
Unfortunately, each class has at least one requirement for secure implementation that makes drop-in replacement unsuitable.” Separately, in May 2022, the U.S. National Security Agency stated that symmetric encryption keys are recommend for use by federal agencies which wish to become quantum safe.
Unfortunately, each class has at least one requirement for secure implementation that makes drop-in replacement unsuitable.” Separately, in May 2022, the U.S. National Security Agency stated that symmetric encryption keys are recommend for use by federal agencies which wish to become quantum safe. NIST’s expressed concerns are amplified by the White House National Security Memorandum 10 dated May 4, 2022.
(“Centricus”), with the Company surviving the merger, and the security holders of Centricus (other than security holders of Centricus electing to redeem their Centricus ordinary shares) became security holders of the Company, and the Company acquired all of the issued and outstanding share capital of Arqit Limited from the shareholders of Arqit Limited in exchange for ordinary shares of the Company, such that Arqit Limited is a direct wholly owned subsidiary of the Company.
(other than those who elected to redeem their ordinary shares) became security holders of the Company, and the Company acquired all of the issued and outstanding share capital of Arqit Limited from the shareholders of Arqit Limited in exchange for ordinary shares of the Company, such that Arqit Limited is a direct wholly owned subsidiary of the Company.
BUSINESS OVERVIEW Overview Arqit is a cybersecurity company that has pioneered a unique symmetric key agreement technology which makes the communications links of any networked device or data at rest secure against current and future forms of cyber attack — even an attack from a quantum computer. During 2022, Arqit made significant advances in its strategy.
BUSINESS OVERVIEW Overview Arqit is a cybersecurity company that has pioneered a unique symmetric key agreement technology which makes the communications links of any networked device or data at rest secure against current and future forms of cyber attack — even an attack from a quantum computer. Arqit delivers its symmetric key agreement technology via its QuantumCloud TM .
The more times a key is used, the more likely an attacker might learn about it over time, and the more opportunities there may be for it to be stolen. Therefore, QuantumCloud TM provides some very significant advantages to such organizations.
The more times a key is used, the more likely an attacker might learn about it over time, and the more opportunities there may be for it to be stolen. Therefore, QuantumCloud TM provides some very significant advantages to such organizations. Competitive Strengths Arqit’s unique cybersecurity technology provides it with a number of competitive strengths.
Once created, the keys cannot be broken even by a universal quantum computer in a usable time period, estimated to be in excess of millions of years. ​ Until recently, Arqit has been a development stage company, however during the fiscal year ended September 30, 2021, it began commercializing its products.
Once created, the keys cannot be broken even by a universal quantum computer in a usable time period, estimated to be in excess of millions of years. ​ Arqit began commercializing its products in the fiscal year ended September 30, 2021.
Pricing will vary depending on the number of end points and keys consumed. · Private Instance : QuantumCloud TM can also be sold as a private instance, typically for government customers who want total control over all infrastructure.
Pricing will vary depending on the number of end points and keys consumed. · Private Instance : QuantumCloud TM can also be sold as a private instance, typically for government customers who want total control over all infrastructure. · Standardized Products : Arqit has developed standardized products to address specific customer use cases.
Arqit’s DSCC invention allows quantum-safe cryptography to be commercialized for the mass market. QuantumCloud TM Platform The QuantumCloud TM is a Platform as a Service or “PaaS” that creates a secure global mesh between different cloud providers and on-premises data centers around the globe.
Arqit’s DSCC invention allows quantum-safe cryptography to be commercialized for the mass market. QuantumCloud TM Platform QuantumCloud TM is a platform as a service that creates a secure global mesh between different cloud providers and on-premises data centers around the globe. QuantumCloud TM supplies the platform that enables end points to share data securely for the creation of new keys.
However, PKI is becoming less secure as new technologies develop, and is not secure against quantum computers, which are expected to be of sufficient scale to break PKI within the next few years. For example, the U.S.
Public key infrastructure or “PKI” is currently the most widely-used encryption technology. However, PKI is becoming less secure as new technologies develop, and is not secure against quantum computers, which are expected to be of sufficient scale to break PKI within the next few years. For example, the U.S.
Arqit does not distribute keys to data centers, it distributes replicated entropy, which are an input into a key creation process involving other areas of Arqit proprietary classical cryptography. ● QuantumCloud TM Software .
Arqit is able to securely deliver replicated entropy to data centers globally using a set of classical digital hardware and software elements. Arqit does not distribute keys to data centers, it distributes replicated entropy, which are an input into a key creation process involving other areas of Arqit proprietary classical cryptography. ● QuantumCloud TM Software .
Such decisions are influenced by the U.S. government’s commitments to multilateral export control regimes, particularly the Missile Technology Control Regime concerning the spaceflight business. Many different types of internal controls and measures are required to ensure compliance with such export control rules.
Such decisions are influenced by the U.S. government’s commitments to multilateral export control regimes, particularly the Missile Technology Control Regime concerning the spaceflight business. Many different types of internal controls and measures are required to ensure compliance with such export control rules. The inability to secure and maintain other necessary export authorizations could negatively impact Arqit’s ability to compete successfully.
Treasury, the U.S. Department of State and the European Union. These statutes generally prohibit providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. Arqit may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of these laws.
Treasury, the U.S. Department of State and the European Union. These statutes generally prohibit providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage.
PROPERTY, PLANTS AND EQUIPMENT Arqit operates from serviced offices for its headquarters at Nova North, 7th Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom, and additionally leases 191 square feet of research space at Cambridge Science Park.
PROPERTY, PLANTS AND EQUIPMENT Arqit operates from serviced offices for its headquarters at Nova North, 7th Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom.
Data Protection Laws and Regulations Arqit’s operations and sales are subject to laws and regulations addressing privacy and the collection, use, storage, disclosure, transfer and protection of a variety of types of data, including the UK Data Protection Act 2018, the UK General Data Protection Regulation, European Directive 2002/58/EC (the ePrivacy Directive) and implementing national legislation and any data laws and regulations enacted in the United Kingdom post-Brexit.
Arqit may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of these laws. 30 Table of Contents Data Protection Laws and Regulations Arqit’s operations and sales are subject to laws and regulations addressing privacy and the collection, use, storage, disclosure, transfer and protection of a variety of types of data, including the UK Data Protection Act 2018, the UK General Data Protection Regulation, European Directive 2002/58/EC (the ePrivacy Directive) and implementing national legislation and any data laws and regulations enacted in the United Kingdom post-Brexit.
QuantumCloud TM supplies the platform that enables end points to share data securely for the creation of new keys. It also allows Arqit to provide highly secure services for customers to store, communicate and sign their data. This PaaS architecture means that Arqit’s customers can easily integrate quantum safe cryptographic services into new or existing platforms.
It also allows Arqit to provide highly secure services for customers to store, communicate and sign their data. This platform as a service architecture means that Arqit’s customers can easily integrate quantum safe cryptographic services into new or existing platforms.
As a result of innovation in its technology in 2022, Arqit is able to securely deliver replicated entropy to data centers globally using a set of classical digital hardware and software elements. Distributed replicated entropy is fundamental to the creation at end points of symmetric encryption within Arqit’s QuantumCloudTM.
Through its proprietary method of distribution, Arqit is able to securely deliver replicated entropy to data centers globally using a set of classical digital hardware and software elements. Distributed replicated entropy is fundamental to the creation at end points of symmetric encryption within Arqit’s QuantumCloud TM . Arqit delivers replicated entropy to data centers that host the Arqit QuantumCloud™ system.
Arqit’s pioneering technology provides a simple, cost-effective and secure way to create and distribute symmetric keys electronically that can be applied universally across geographies, industries and devices, making it well placed to take advantage of this significant upcoming market opportunity. 23 Table of Contents Total Addressable Market According to Gartner, it is estimated that the global addressable market for information security services will be $261.7 billion by the end of 2026.
Arqit’s pioneering technology provides a simple, cost-effective and secure way to create and distribute symmetric keys electronically that can be applied universally across geographies, industries and devices, making it well placed to take advantage of this significant upcoming market opportunity.
Arqit’s Technology Encryption is the foundation of the communications technology everyone uses. However, the technology we rely on for encryption in most cases was developed over 30 years ago.
As a result, Arqit has assumed that the entire information security market represents its total addressable market. Arqit’s Technology Encryption is the foundation of the communications technology everyone uses. However, the technology we rely on for encryption in most cases was developed over 30 years ago.
These products will be delivered in the cloud, requiring no extra infrastructure or hardware on the part of the customer, and with the use of simple lightweight agents at end points like servers, firewalls, mobile phones, cars or Internet of Things sensors.
These products will be delivered in the cloud, requiring no extra infrastructure or hardware on the part of the customer, and with the use of simple lightweight agents at end points like servers, firewalls, mobile phones, cars or Internet of Things sensors. 26 Table of Contents As a platform as a service QuantumCloud TM is broadly applicable across all geographies and sectors, delivering the same key creation functionality to all applications and use cases.
ORGANIZATIONAL STRUCTURE Organizational Structure The legal name of the company is Arqit Quantum Inc. which is an exempted limited liability company incorporated under the laws of the Cayman Islands. 32 Table of Contents Significant Subsidiaries The subsidiaries of the Company are listed below. ​ ​ ​ ​ ​ ​ ​ ​ Country of Incorporation Proportion of Ordinary Name ​ and Place of Business ​ Shares Held by the Company Arqit Limited United Kingdom 100 % Arqit Inc.
Significant Subsidiaries The subsidiaries of the Company are listed below. ​ ​ ​ ​ ​ ​ ​ ​ Country of Incorporation Proportion of Ordinary Name ​ and Place of Business ​ Shares Held by the Company Arqit Limited United Kingdom 100 % Arqit Inc.
There are well-known vulnerabilities in this technology today, and near term developments in quantum computing will significantly increase risks. 24 Table of Contents The origins of encryption are in symmetric encryption keys — long truly random numbers.
There are well-known vulnerabilities in this technology today, and near term developments in quantum computing will significantly increase risks. The origins of encryption are in symmetric encryption keys — long truly random numbers. The number of permutations involved in guessing a 256 digit symmetrical key is estimated to be equal to all of the atoms in the Milky Way.
Arqit pursues patent protection when it believes it has developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings.
Arqit pursues patent protection when it believes it has developed a patentable invention and the benefits of obtaining a patent outweigh the risks of making the invention public through patent filings. As of the date of this Annual Report, Arqit has approximately 1,966 patent claims on 41 pending or granted patents in the UK.
In addition, during the year ended September 30, 2022, an additional $21.3 million in proceeds was generated through the exercise of warrants. Arqit’s ordinary shares and warrants trade on Nasdaq under the symbols “ARQQ” and “ARQQW”, respectively. The Company is subject to certain of the informational filing requirements of the Exchange Act.
Arqit’s ordinary shares and Business Combination Warrants trade on Nasdaq under the symbols “ARQQ” and “ARQQW”, respectively. The Company is subject to certain of the informational filing requirements of the Exchange Act.
As of the date of this Annual Report, Arqit has approximately 1,820 patent claims on 33 pending or granted patents in the UK Arqit pursues global registration of its domain names and products and services trademarks and as of the date of this Annual Report, Arqit had 18 registered trademarks.
Arqit pursues global registration of its domain names and products and services trademarks and as of the date of this Annual Report, Arqit had 28 registered trademarks.
Arqit is focused on the following key end markets: ● defense ● large enterprises ● financial services ● telecommunications To date, Arqit has signed long term contracts for QuantumCloud TM service in the telecoms and government sectors in the UK and Japan with BT and Sumitomo, respectively.
Go-to-Market Strategy Arqit is focused on the following key end markets: · Telecommunications · Financial services · Large enterprises 27 Table of Contents · Government · Defense Arqit has entered into contracts for QuantumCloud TM service in several geographies and sectors, including AUCloud in Australia and BT and Nine23 in the UK.
Arqit has already signed significant, long-term contracts for its services with large companies and government institutions. Arqit sold its product to select early customers on a master distribution agreement basis, an enterprise license basis and as a Platform as a Service.
Arqit sold its product to select early customers on a master distribution agreement basis, an enterprise license basis and as a platform as a service, including BT plc, AUCloud and Nine23.
The PaaS creates keys in the cloud and at end points. These keys can be used variously to encrypt channels, encrypt data at rest and sign transactions.
Arqit’s Products QuantumCloud TM Arqit’s core product is QuantumCloud TM , which is a platform as a service that, in conjunction with its software agent, creates keys in the cloud and at end points. These keys can be used variously to encrypt channels, encrypt data at rest and sign transactions.
Previously, Arqit had been focused on developing an enterprise license sales model directly to customers. The May 2022 publication of the independent review of Arqit’s product by the University of Surrey, a GCHQ UK National Cyber Security Centre Accredited Centre of Excellence for Cyber Security increased interest in Arqit’s symmetric key agreement software by leading technology companies.
The May 2022 publication of the independent review and assurance of the security proofs for the design aspects of the key-establishment protocols used to enable symmetric key agreement over classical IP network infrastructures within QuantumCloud TM in Arqit’s product by the University of Surrey, a GCHQ UK National Cyber Security Centre Accredited Centre of Excellence for Cyber Security, increased interest in Arqit’s symmetric key agreement software by leading technology companies.
The security of the symmetric key agreement software created by Arqit was independently reviewed and assured in May 2022 by the University of Surrey, which is accredited as a Centre of Excellence for Cyber Security by the UK Government’s National Cyber Security Centre.
The security proofs for the design aspects of the key-establishment protocols used to enable symmetric key agreement over classical IP network infrastructures within QuantumCloud TM were independently assured in 2022 by the University of Surrey, which is accredited as a Centre of Excellence for Cyber Security by the UK Government’s National Cyber Security Centre.
The company is engaged in discussions with additional customers and channel partners Market Opportunity Arqit believes that there will be significant market opportunities for its innovative products as a result of an expected transformation in the cyber encryption industry over the next decade. Public key infrastructure or “PKI” is currently the most widely-used encryption technology.
Market Opportunity Arqit believes that there will be significant market opportunities for its innovative products as a result of an expected transformation in the cyber encryption industry over the next decade. The need for improved encryption, resulting from weaknesses in existing encryption architectures and the future threat of quantum computers, is an increased concern.
Going forward, Arqit will focus on selling its products on a Platform as a Service basis, primarily through channel partners, which is expected to generate annual recurring revenue. Arqit’s current customers include the UK Government, the European Space Agency, BT plc, Sumitomo Corporation, Virgin Orbit, AUCloud and Nine23.
Arqit announced in December 2022 that it will focus on selling its products on a Platform as a Service basis, primarily through channel partners and distributors, which is expected to generate annual recurring revenue.
As a result, although previously Arqit intended to distribute replicated entropy to data centers via Arqit developed satellites, it will now distribute replicated entropy securely through its terrestrial classical means. ​ ● A second innovation is a small software agent downloaded from the QuantumCloud™ onto any form of device or integrated into any piece of software.
Replicated entropy is an important constituent part of Arqit’s QuantumCloud™ product. Arqit developed a propriety method for the secure distribution of replicated entropy to data centres using classical digital hardware and software elements. ​ ● A second innovation is a small software agent downloaded from the QuantumCloud™ onto any form of device or integrated into any piece of software.
During 2022, Arqit shifted its focus to the establishment of channel partner relationships and has recently announced agreements with Fortinet, Dell, AWS and TraxPay. Pursuant to these relationships, channel partners will offer QuantumCloud TM directly or indirectly to customers as part of their integrated product offering.
Pursuant to these relationships, channel partners will offer QuantumCloud TM and or Arqit’s standardized products directly or indirectly to customers as part of their integrated product offering. Going forward Arqit intends to primarily focus on maximizing sales opportunities through these and other potential major technology partners.
Arqit believes that it has developed an almost universal solution to previously identified issues with delivery of symmetric encryption keys.
Unlike solutions utilizing Post-Quantum Cryptographic Algorithms proposed by other parties, Arqit believes it has the only commercially available symmetric key encryption system which is the preferred cryptographic architecture of both NIST and The White House. Arqit believes that it has developed an almost universal solution to previously identified issues with delivery of symmetric encryption keys, particularly scalability and zero-trust.
Arqit recently announced important channel partnerships, including Fortinet, AWS, Dell, and TraxPay, through which it will sell directly and indirectly to end customers.
Arqit has announced channel partnerships and distribution agreements with Juniper, Fortinet, AWS, TraxPay, Exclusive Networks, Sierra Nevada Corporation Mission Systems UK, SecureCloud+, DETASAD, Advanced International Electronic Equipment Company, and Carahsoft through which it will sell directly and indirectly to end customers. Arqit is currently engaged in discussions with additional customers, channel partners and distributors.
Removed
Concurrently with the completion of the Business Combination, certain investors also subscribed for an aggregate of 7,100,000 ordinary shares of the Company (the “PIPE Financing”). Following the closing of the PIPE Financing, and after giving effect to redemptions of shares by shareholders of Centricus and payment of transaction expenses, the transactions described above generated approximately $96 million for Arqit.
Added
Arqit believes that its symmetric key agreement platform is compliant with the NSA Commercial Solutions for Classified Symmetric Key Management Requirements Annex 1.2 which dictates how Government agencies can incorporate quantum-safe symmetric key protections into solutions which use off-the-shelf commercial products to protect classified networks.
Removed
It has removed, through innovation, the costly and complex satellite component from the tech stack of QuantumCloud TM , its software platform as a service.
Added
Arqit platform as a service will be sold as standardized products to specific target markets or a Private Instance to customers to require control of the end-to-end technology.
Removed
After initially focusing on selling enterprise licenses, especially to government and defense customers, Arqit made faster than expected progress in generating interest from large, global technology vendors, and has therefore switched its focus to securing distribution through channel partners. It recently announced agreements with Fortinet, Dell and AWS, along with a number of other specialized regional cloud providers.
Added
The memorandum sets a crucial deadline for government agencies – ensuring quantum-safe security for National Security Systems by the end of 2023. This mandate reflects the urgent need to safeguard classified information against the computational power of quantum computers. Memorandum 10 has made it clear that adoption of symmetric key protections for NSS is the preferred solution.
Removed
Arqit previously referred to its technology as quantum encryption, however following innovations that resulted in improvements in its technology it is more accurate to describe it as symmetric key agreement.
Added
Arqit’s Symmetric Key Agreement platform delivers encryption in a manner that meets the demands of US National Security Memorandum 10 and National Security Agency Commercial Solutions for Classified Symmetric Key Management Requirements Annex version 2.1.
Removed
Replicated entropy is an important 22 Table of Contents constituent part of Arqit’s QuantumCloud™ product. Arqit invented a quantum satellite protocol to securely deliver replicated entropy to data centers through satellites. However, the satellites that are required for the quantum satellite protocol are expensive to launch and maintain .
Added
Total Addressable Market According to Gartner (Gartner, Inc., Forecast: Information Security and Risk Management, Worldwide, 2021-2027, 3Q23 Update, Published September 29, 2023), it is estimated that the global addressable market for information security services will be $289 billion by the end of 2027.
Removed
Arqit continued to innovate in regards to the distribution of replicated entropy and has deployed an advanced version of a terrestrial method of delivering replicated entropy using a set of classical digital hardware and software elements (i.e. not quantum communications).
Added
Marketing standardized products is the key focus of its sales efforts. Standardized Products Arqit has developed a set of standardized products which address specific customer use cases. By standardizing a product Arqit can quickly meet an end market need with little or no customization for individual customers to begin utilizing its technology.
Removed
In addition, the University of Surrey’s independent review and validation of the security of the encryption keys created by QuantumCloud TM was independent of the method of delivery of replicated entropy.
Added
To date, Arqit has announced three standardized products. · NetworkSecure TM : Arqit has developed a standardized interface for network devices, like firewalls, to agree quantum-safe symmetric keys and upgrade the security of VPN connections over Internet Security Protocol (“IPsec”) – a secure network protocol suite that authenticates and encrypts packets of data to provide secure encrypted communication between two computers over a network.
Removed
As a result, Arqit has assumed that the entire information security market represents its total addressable market.
Added
To date, Arqit has integrated NetworkSecure TM into the firewall products of Juniper and Fortinet and is available for purchase through their respective distribution channels. Arqit is in discussions with additional firewall and network device manufacturers regarding integrating NetworkSecure TM .
Removed
Arqit’s estimates of its total addressable market are limited by a lack of reliable data on the government and Internet of Things markets, which are therefore excluded from its total addressable market estimate, but which Arqit expects to be two of its key markets in the future. _________ Source: Calculations performed, and charts/graphics created, by Arqit based on Gartner, Inc. research.
Added
Integrating into firewall and network devices makes the purchasing decision for the end customer simpler as upgrading to Arqit’s symmetric key cryptography becomes an up-sell rather than a discrete purchasing decision and implementation. · TradeSecure TM : TradeSecure TM generates and distributes digital trade finance instruments, protecting finance supply chains against disruption and fraud and improving their cash flow.
Removed
Gartner, Inc., Forecast: Information Security and Risk Management, Worldwide, 2019-2026, 3Q22 Update, September 28, 2022. The Gartner content described herein (the “Gartner Content”) represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact.
Added
TradeSecure TM can be deployed into any trade financing platform, giving customers quantum-safe security against all current and future cyber threats.
Removed
Gartner Content speaks as of its original publication date (and not as of the date of this Annual Report), and the opinions expressed in the Gartner Content are subject to change without notice. Arqit has successfully targeted companies in several of these sectors, and now intends to further expand into others given its products are highly relevant to all sub-segments.
Added
Using distributed ledger technology, Arqit provides customers with a unique referenceable and transferable digital finance instrument - which is easier to manage than paper-based alternatives. · WalletSecure TM : An application product which makes any Ethereum-based digital wallet used to store and transact digital asset transactions quantum-safe.
Removed
The number of permutations involved in guessing a 256 digit symmetrical key is estimated to be equal to all of the atoms in the Milky Way.
Added
WalletSecure TM can secure the issuance of digital assets, the storage and transacting of digital assets and enforcing of real-time regulatory compliance. Arqit believes that the mainstream adoption of digital assets is accelerating and that providing long term security is important to financial services company adoption of digital asset technology.
Removed
The implication of the innovation is that Arqit no longer requires satellites or associated ground equipment to distribute replicated entropy. Arqit delivers replicated entropy to data centers that host the Arqit QuantumCloud™ system.
Added
Not only can Arqit’s quantum-safe technology prevent today’s cybercriminals from stealing digital assets (even if they are able to steal the private keys held by the user), it also enables real-time regulatory enforcement, preventing non-compliant transactions before they occur. Arqit expects to introduce additional standardized product in the future which have at their core Arqit’s QuantumCloud TM symmetric key technology.
Removed
Heretofore, Arqit intended to distribute replicated entropy via satellite. However, as a result of further innovation Arqit is able to securely deliver replicated entropy to data centers globally using a set of classical digital hardware and software elements.
Added
Arqit’s initial go-to-market had been focused on developing an enterprise license sales model directly to customers.
Removed
Change in Satellite Infrastructure Strategy The technology of the company involves the supply of a lightweight software agent to customer end point devices or cloud machines for the purpose of making encryption keys which cannot be broken.
Added
During 2022, Arqit shifted its focus to the establishment of channel partner relationships and announced agreements with Fortinet, AWS and TraxPay. Since the announcement of those channel partnerships, Arqit has established additional relationships with Juniper Networks, Sierra Nevada Corporation Mission Systems UK (SNC), SecureCloud+, Exclusive Networks, DETASAD, AIEE and Carahsoft.
Removed
As part of the background technology that allows this software agent to operate, identical sets of replicated entropy must be delivered securely and frequently to data centers. Arqit invented a quantum satellite protocol to securely deliver replicated entropy to data centers through satellites, however, the satellites that are required for the quantum satellite protocol are expensive to launch and maintain.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeResults of Operations Comparison of the Years Ended September 30, 2022 and 2021 The following table presents Arqit’s historic operating results: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2022 September 30, 2021 Variance ​ $'000 $'000 $'000 % Revenue ​ 7,212 ​ 48 ​ 7,164 14,925 % Other operating income ​ 12,843 ​ — ​ 12,843 ​ — ​ Administrative expenses ​ (72,153) ​ (14,559) ​ (57,594) ​ 396 % Reverse acquisition expense ​ — ​ (155,460) ​ 155,460 ​ — ​ Nasdaq listing expense ​ — ​ (2,590) ​ 2,590 ​ — ​ Operating (loss)/profit ​ (52,098) ​ (172,561) ​ 120,463 ​ (70) % Change in fair value of warrants ​ 117,394 ​ (98,090) ​ 215,484 ​ (220) % Finance costs ​ (221) ​ (1,078) ​ 857 ​ (79) % Profit/(loss) before tax ​ 65,075 ​ (271,729) ​ 336,804 ​ (124) % Income tax credit ​ — ​ — ​ — ​ — ​ Profit/(loss) for the financial year ​ 65,075 ​ (271,729) ​ 336,804 ​ (124) % ​ Revenue Revenue increased by $7.164 million from $0.048 million for the year ended September 30, 2021 to $7.212 million for the year ended September 30, 2022.
Biggest changeDuring the year ended September 30, 2023, Arqit reached fewer revenue recognition milestones under the ESA contract, compared with the number of milestones during the year ended September 30, 2022. 38 Table of Contents Comparison of the Years Ended September 30, 2022 and 2021 The following table presents Arqit’s historic operating results: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2022 September 30, 2021 Variance ​ $'000 ​ $'000 ​ $'000 % Revenue ​ 7,212 ​ 48 ​ 7,164 ​ 14,925 % Administrative expenses ​ (70,977) ​ (14,559) ​ (56,418) ​ 388 % Reverse acquisition expense ​ — ​ (155,460) ​ 155,460 ​ — ​ Nasdaq listing expense ​ — ​ (2,590) ​ 2,590 ​ — ​ Operating (loss)/profit ​ (63,765) ​ (172,561) ​ 108,796 ​ (63) % Change in fair value of warrants ​ 117,394 ​ (98,090) ​ 215,484 ​ (220) % Finance costs ​ (221) ​ (1,078) ​ 857 ​ (79) % Profit/(loss) before tax ​ 53,408 ​ (271,729) ​ 325,138 ​ (120) % Profit/(loss) from continuing operations ​ 53,408 ​ (271,729) ​ 325,138 ​ (120) ​ Profit from discontinued operations ​ 11,667 ​ — ​ 11,667 ​ — ​ Profit/(loss) for the financial year ​ 65,075 ​ (271,729) ​ 336,805 ​ (124) % ​ Revenue Revenue increased by $7.164 million from $0.048 million for the year ended September 30, 2021 to $7.212 million for the year ended September 30, 2022.
Nasdaq listing expense primarily consisted of non-recurring legal and other professional fees incurred in preparation for and execution of the Business Combination which closed on September 3, 2021, and was therefore a one-time, non-recurring for the year ended September 30, 2021.
Nasdaq listing expense primarily consisted of non-recurring legal and other professional fees incurred in preparation for and execution of the Business Combination which closed on September 3, 2021, and was therefore a one-time, non-recurring expense for the year ended September 30, 2021.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 5.A. OPERATING RESULTS This operating and financial review should be read together with the section captioned “Item 4, Information on the Company-4.B. Business Overview” and the audited consolidated financial statements of the Company and the related notes to those statements included elsewhere in this Annual Report.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 5. OPERATING RESULTS This operating and financial review should be read together with the section captioned “Item 4, Information on the Company-4.B. Business Overview” and the audited consolidated financial statements of the Company and the related notes to those statements included elsewhere in this Annual Report.
Arqit’s policy regarding research and development expenses is consistent with the requirements of IFRS IAS 38. Research costs are expensed as incurred through the income statement, while development costs are capitalized after technical and commercial feasibility of the asset for sale or use have been established.
Arqit’s policy regarding research and development expenses is consistent with the requirements of IAS 38. Research costs are expensed as incurred through the income statement, while development costs are capitalized after technical and commercial feasibility of the asset for sale or use have been established.
“ Operating Results—Key Factors Affecting Operating Results—Market Trends ” of this Annual Report, which are incorporated by reference herein, we are not aware of any trends, uncertainties, demands, commitments or events since the beginning of our year ended September 30, 2021 that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition. 5.E.
“ Operating Results—Key Factors Affecting Operating Results—Market Trends ” of this Annual Report, which are incorporated by reference herein, we are not aware of any trends, uncertainties, demands, commitments or events since the beginning of our year ended September 30, 2023 that are reasonably likely to have a material effect on our net revenues, income from operations, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition. 5.E.
Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use. For the periods ended September 30, 2022, 2021 and 2020, there were no research costs reflected in the statement of comprehensive income. This is primarily due to the research phase being deemed as complete in 2018.
Capitalized development costs are recorded as intangible assets and amortized from the point at which the asset is ready for use. For the periods ended September 30, 2023, 2022 and 2021, there were no research costs reflected in the statement of comprehensive income. This is primarily due to the research phase being deemed as complete in 2018.
As a result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Form 20-F, our actual results may differ materially from those anticipated in these forward-looking statements. Please see “Cautionary Note About Forward-Looking Statements” in this Annual Report.
As a 31 Table of Contents result of many factors, such as those set forth under “Risk Factors” and elsewhere in this Form 20-F, our actual results may differ materially from those anticipated in these forward-looking statements. Please see “Cautionary Note About Forward-Looking Statements” in this Annual Report.
Detail on the reverse acquisition of Arqit is disclosed in the notes to Arqit’s audited consolidated financial statements. 44 Table of Contents Capitalization of Development Costs Arqit capitalizes costs for product development projects.
Detail on the reverse acquisition of Arqit is disclosed in the notes to Arqit’s audited consolidated financial statements. 43 Table of Contents Capitalization of Development Costs Arqit capitalizes costs for product development projects.
Interest Rate Risk Management Arqit would be exposed to interest rate risk if it borrows funds, when required, at variable interest rates. There is currently no exposure to interest rate risk. 41 Table of Contents Credit Risk Credit risk is the risk of financial loss where counterparties are not able to meet their obligations.
Interest Rate Risk Management Arqit would be exposed to interest rate risk if it borrows funds, when required, at variable interest rates. There is currently no exposure to interest rate risk. Credit Risk Credit risk is the risk of financial loss where counterparties are not able to meet their obligations.
Arqit manages liquidity risk by continuously monitoring forecast and actual cash flows, matching the expected cash flow timings of financial assets and liabilities with the use of cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a minimum of 12 months to maturity.
Arqit manages liquidity risk by continuously monitoring forecast and actual cash flows, matching the expected cash flow timings of financial assets and liabilities with the use of cash and cash equivalents, borrowings, overdrafts and committed revolving credit facilities with a 40 Table of Contents minimum of 12 months to maturity.
Impact of the COVID-19 Pandemic Given the nature of its products and business operations, the COVID-19 pandemic has not had any material impact, positive or negative, on Arqit’s business during the periods under review. Key Components of Statement of Comprehensive Income Basis of Presentation Currently, Arqit conducts business through one operating segment, which is the provision of cybersecurity services.
Impact of the COVID-19 Pandemic Given the nature of its products and business operations, the COVID-19 pandemic did not have any material impact, positive or negative, on Arqit’s business during the periods under review. Key Components of Statement of Comprehensive Income Basis of Presentation Currently, Arqit conducts business through one operating segment, which is the provision of cybersecurity services.
As the Series B convertible loan notes were redeemable at the request of the holder and convertible into a variable number of equity instruments, they were treated as a financial liability in accordance with 37 Table of Contents IFRS International Accounting Standards (“IAS”) 32.
As the Series B convertible loan notes were redeemable at the request of the holder and convertible into a variable number of equity instruments, they were treated as a financial liability in accordance with IFRS International Accounting Standards (“IAS”) 32.
Arqit’s policy is that surplus cash, when not used to repay borrowings, is placed on deposit with its main relationship banks and with other banks or money market funds based on a minimum credit rating of A3/A- and maximum exposure. There is no significant concentration of risk to any single counterparty.
Arqit’s policy is that surplus cash, when not used to pay liabilities, is placed on deposit with its main relationship banks and with other banks or money market funds based on a minimum credit rating of A3/A- and maximum exposure. There is no significant concentration of risk to any single counterparty.
Gartner estimates that the global addressable market for information security services will be $261.7 billion by the end of 2025. There will continue to be demand for more secure encryption products and Arqit is not currently aware of any competitors that offer or are developing encryption technology that addresses the threat of quantum computers.
Gartner estimates that the global addressable market for information security services will be $289 billion by the end of 2027. There will continue to be demand for more secure encryption products and Arqit is not currently aware of any competitors that offer or are developing encryption technology that addresses the threat of quantum computers.
The increase was in part due to an increase in share based compensation expense of $22.915 million as the result of the granting of restricted share units (“RSUs”) to employees and an increase in foreign exchange expense of $13.535 million as the result of market fluctuations from trading in different currencies.
The increase was in part due to an increase in share based compensation expense of $21.742 million as the result of the granting of restricted share units (“RSUs”) to employees and an increase in foreign exchange expense of $13.535 million as the result of market fluctuations from trading in different currencies.
Share-Based Payments Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant.
Share-Based Compensation Estimating fair value for share-option payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant.
This may also lead Arqit to make changes to its commercialization plans, which could result in cost overruns or unanticipated delays, which could in turn adversely impact margins and cash flows. ​ 35 Table of Contents Technology Strategy Update In December 2022 Arqit updated its technology strategy to eliminate quantum satellites and the associated ground infrastructure from its core QuantumCloud TM product offering .
This may also lead Arqit to make changes to its commercialization plans, which could result in cost overruns or unanticipated delays, which could in turn adversely impact margins and cash flows. Satellite Infrastructure In December 2022 Arqit updated its technology strategy to eliminate quantum satellites and the associated ground infrastructure from its core QuantumCloud TM product offering .
If Arqit fails to sell its satellite currently under construction, it may be required to write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
If Arqit fails to sell its satellite currently under construction, it may be required to recognise further impairment losses, write off capitalized satellite costs or incur breakage fees under certain of its contracts related to satellite construction obligations.
In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. At September 30, 2022, the carrying amount of capitalized development costs were $40.291 million, compared with $18.235 million at September 30, 2021 and $8.777 million at September 30, 2020.
In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. At September 30, 2023, the carrying amount of capitalized development costs were $3.414 million, compared with $40.291 million at September 30, 2022 and $18.235 million at September 30, 2021.
As Arqit expects to continue to increase hiring in connection with further expansion of its commercial operations, it expects its cash used in operating activities to increase significantly before it starts to generate material cash flows from commercialization of its products. During the year ended September 30, 2022 cash used in operating activities was $26.916 million.
As Arqit expects to continue to increase hiring in connection with further expansion of its commercial operations, it expects its cash used in operating activities to increase significantly before it starts to generate material cash flows from commercialization of its products. During the year ended September 30, 2023 cash used in operating activities was $32.825 million.
Arqit’s solution combines world-leading innovation in two areas: the secure distribution of replicated entropy to data centers and a software agent that can be downloaded onto any device. ● As part of the background technology that allows Arqit’s software agent to operate at end points, identical sets of random numbers (“replicated entropy”) must be delivered securely and frequently to data centers.
Arqit’s technology combines world-leading innovation in two areas: the secure distribution of replicated entropy to data centers and a software agent that can be downloaded onto any device and makes the use of symmetric key encryption a scalable business model. ​ ● As part of the background technology that allows Arqit’s software agent to operate at end points, identical sets of random numbers (“replicated entropy”) must be delivered securely and frequently to data centers.
Keys are never “delivered”, they are created, and so they cannot be intercepted. They are created at the end points in a manner that means they can never be known by a third party, and can be used once if necessary and replaced infinitely.
They are created at the end points in a manner that means they can never be known by a third party, and can be used once if necessary and replaced infinitely.
Finance Costs and Finance Income Finance costs and finance income primarily related to the accounting recognition and measurement of Arqit’s £3,500,000 convertible loan notes issued June 21, 2019 and November 6, 2019 (the “Series B convertible loan notes”) in line with the requirements of IFRS, which were converted to equity in connection with the completion of the Business Combination and are no longer outstanding.
Finance costs for the year ended September 30, 2021 also related to the accounting recognition and measurement of Arqit’s £3,500,000 convertible loan notes issued June 21, 2019 and November 6, 2019 (the “Series B convertible loan notes”) in line with the requirements of IFRS, which were converted to equity in connection with the completion of the Business Combination and are no longer outstanding.
Prior to July 2021, Arqit was a pre-revenue company and as of the date of this Annual Report, it still has only limited commercial operations relating to its core product — QuantumCloud™. Its activities to date have been conducted in the United Kingdom.
Prior to July 2021, Arqit was a pre-revenue company and as of the date of this Annual Report, it still has only limited commercial operations relating to its core product — QuantumCloud™. Its activities to date have been conducted in the United Kingdom and the United States of America. Arqit’s historical results are reported in IFRS.
Net cash provided by financing activities for the year ended September 30, 2022 was primarily related to shares issued upon the exercise of warrants. The significant increase for the year ended September 30, 2021 was as a result of funds raised in connection with the Business Combination. 5.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Net cash provided by financing activities for the year ended September 30, 2022, was limited to proceeds from shares issued upon the exercise of Business Combination Warrants, and net cash provided by financing activities for the year ended September 30, 2021 was related to funds raised in connection with the Business Combination. 5.C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
Overview Arqit is a cybersecurity company that has pioneered a unique symmetric key agreement technology which makes the communications links of any networked device secure against current and future forms of cyber attack — even an attack from a quantum computer.
Overview Arqit is a cybersecurity company that has pioneered a unique symmetric key agreement technology which makes the communications links of any networked device or data at rest secure against current and future forms of cyber attack — even an attack from a quantum computer. Arqit delivers its symmetric key agreement technology via its QuantumCloud TM .
Cash Flows Used in Investing Activities Net cash used in investing activities was $24.432 million for the year ended September 30, 2022, compared with $ 9.305 million for the year ended September 30, 2021 and $4.571 million for the year ended September 30, 2020 .
Cash Flows Used in Investing Activities Net cash used in investing activities was $16.082 million for the year ended September 30, 2023, compared with $24.432 million for the year ended September 30, 2022 and $9.305 million for the year ended September 30, 2021.
(“Centricus”), with the Company surviving the merger, and the security holders of Centricus (other than security holders of Centricus electing to redeem their Centricus ordinary shares) became security holders of the Company, and the Company acquired all of the issued and outstanding share capital of Arqit Limited from the shareholders of Arqit Limited in exchange for ordinary shares of the Company, such that Arqit Limited is a direct wholly owned subsidiary of the Company.
(other than those who elected to redeem their ordinary shares) became security holders of the Company, and the Company acquired all of the issued and outstanding share capital of Arqit Limited from the shareholders of Arqit Limited in exchange for ordinary shares of the Company, such that Arqit Limited is a direct wholly owned subsidiary of the Company.
The primary factors affecting operating cash flows during the period were a net profit of $65.575 million and adjustments for non-cash items of $93.187 million. During the year ended September 30, 2021 cash used in operating activities was $24.035 million.
The primary factors affecting operating cash flows during the period were a net profit of $53.408 million and adjustments for non-cash items of $91.796 million. During the year ended September 30, 2021 cash used in operating activities was $24.035 million.
By exchanging information with the QuantumCloud TM , which moderates a key agreement process with all parties involved in a unique way, this software agent is able to create new symmetric encryption keys in partnership with any other device or cloud machine, or in large groups of devices.
By exchanging information with the QuantumCloud™, which moderates a key agreement process with all parties involved in a unique way, this software agent is able to create new symmetric encryption keys in partnership with any other device or cloud machine, or in large groups of devices. Keys are never “delivered”, they are created, and so they cannot be intercepted.
Change in Fair Value of Warrants The change in fair value of warrants represents the difference in valuation of Arqit’s warrants as of September 30, 2022, compared with the valuation as of September 30, 2021, which was non-cash profit of $117.394 million for the year ended September 30, 2022, compared with a non-cash loss of $98.090 million for the year ended September 30, 2021.
Change in Fair Value of Warrants The change in fair value of Business Combination Warrants represents the difference in valuation of Arqit’s warrants as of September 30, 2023, compared with the valuation as of September 30, 2022, which was non-cash profit of $10.638 million for the year ended September 30, 2023, compared with a non-cash profit of $117.394 million for the year ended September 30, 2022.
Key Factors Affecting Operating Results Arqit has not yet begun to generate material revenues through the commercialization of its products and believes that its performance and future success depend on several factors that present significant opportunities for it but also pose risks and challenges, including those discussed below and in the section of this Annual Report entitled “Item 3.D, Risk Factors — Risks Related to Arqit’s Business and Operations”. 34 Table of Contents Accounting for Business Combination The acquisition of Arqit Limited’s shares by Arqit in connection with the Business Combination was accounted for as a “reverse acquisition” in accordance with IFRS.
Key Factors Affecting Operating Results Arqit has not yet begun to generate material revenues through the commercialization of its products and believes that its performance and future success depend on several factors that present significant opportunities for it but also pose risks and challenges, including those discussed below and in the section of this Annual Report entitled “Item 3.D, Risk Factors — Risks Related to Arqit’s Business and Operations”.
Arqit’s software is fulfilled from the cloud requiring no extra infrastructure or hardware on the part of the customer. Its products have broad application across industries, including 5G networks, connected autonomous vehicles, national security and financial services network security.
Arqit’s software is fulfilled from the cloud requiring no extra infrastructure or hardware on the part of the customer. Its products have broad application across industries, including 5G networks, connected autonomous vehicles, national security and financial services network security. Arqit’s future success will be dependent on its ability to continue to execute against its product roadmap.
Fair Value Movement on Loss in Warrant Valuation Warrants are classified as financial liabilities at fair value, and the change in the fair value of the warrants is reflected in Arqit’s consolidated statement of comprehensive income.
Change in Fair Value of Warrants Arqit’s Business Combination Warrants are classified as financial liabilities at fair value, and the change in the fair value of the warrants is reflected in Arqit’s consolidated statement of comprehensive income.
However, Arqit is early in the process to generate material revenues through the commercialization of its products. Arqit ultimately achieving profitability is dependent upon the successful development, commercial introduction and acceptance of its products, the continued interest of potential customers in its products and the successful negotiation of contracts with those customers.
Arqit ultimately achieving profitability is dependent upon the successful development, commercial introduction and acceptance of its products, the continued interest of potential customers in its products and the successful negotiation of contracts with those customers.
In December 2022, Arqit filed a registration statement on Form F-3 in order to establish an at-the-market equity offering program (the “ATM Program”) pursuant to which, once the registration statement is declared effective, it may issue and sell ordinary shares with an aggregate offering price of up to $50.0 million.
In December 2022, Arqit filed a registration statement on Form F-3 in order to establish an at-the-market equity offering program (the “ATM Program”) pursuant to which it may issue and sell ordinary shares with an aggregate offering price of up to $30.0 million. Arqit has no obligation to sell any such shares under its ATM Program.
Reverse acquisition expenses represent the non-cash premium paid for obtaining the public listing in connection with the Business Combination which closed on September 3, 2021, and was therefore a one-time, non-recurring expense for the year ended September 30, 2021.
Reverse acquisition expenses represent the non-cash premium paid for obtaining the public listing in connection with the Business Combination which closed on September 3, 2021, and was therefore a one-time, non-recurring expense for the year ended September 30, 2021. 39 Table of Contents Nasdaq Listing Expense Arqit did not incur Nasdaq listing expense for the year ended September 30, 2022, compared with $2.590 million for the year ended September 30, 2021.
Cash Flows Summary The following table shows a summary of Arqit’s cash flows for the years ended September 30, 2022 and 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ September 30, ​ Year ended ​ September 30, ​ 2022 September 30, 2021 2020 Net cash provided by (used in): $'000 $'000 $'000 Operating activities (26,916) (24,035) (1,334) Investing activities (24,432) (9,305) (4,571) Financing activities 22,373 120,105 1,680 Net (decrease) increase in cash and cash equivalents (28,975) 86,765 (4,225) ​ Cash Flows Used in Operating Activities Cash flows used in operating activities to date have primarily resulted from personnel related costs, fluctuations in trade payables and other current assets and liabilities.
Related Party Transactions.” Cash Flows Summary The following table shows a summary of Arqit’s cash flows for the years ended September 30, 2023 and 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended Year ended Year ended ​ ​ September 30, ​ September 30, ​ September 30, ​ 2023 2022 2021 Net cash generated from/(used in): $'000 $'000 $'000 Operating activities (32,825) ​ (26,719) ​ (24,035) Investing activities (16,082) ​ (24,432) ​ (9,305) Financing activities 44,853 ​ 22,176 ​ 120,105 Net (decrease) increase in cash and cash equivalents (4,054) (28,975) 86,765 ​ Cash Flows Used in Operating Activities Cash flows used in operating activities to date have primarily resulted from personnel related costs, fluctuations in trade payables and other current assets and liabilities.
Deferred tax assets, arising from unutilised tax losses, require Arqit to assess the likelihood it will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets.
Deferred Tax Asset Judgement is required to determine whether deferred tax assets are recognised in the statement of financial position. Deferred tax assets, arising from unutilised tax losses, require Arqit to assess the likelihood it will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred tax assets.
At initial recognition on day one, the Series B convertible loan notes were measured at fair value, calculated by applying the prevailing market interest rate at the time of issue, for similar non-convertible debt. The difference between the fair value and the transaction value is reflected in Arqit’s statement of comprehensive income as finance income.
At initial recognition on day one, the Series B convertible loan notes were measured at fair value, calculated by applying the prevailing market interest rate at the time of issue, for similar non-convertible debt. As the discount unwound over the period from subscription date to maturity date, it was reflected as finance costs in Arqit’s statement of comprehensive income.
The primary factors affecting operating cash flows during the period were a net loss of $271.729 million and adjustments for non-cash items of $253.769 million. During the year ended September 30, 2020 cash used in operating activities was $1.334 million.
The primary factors affecting operating cash flows during the period were a net loss of $74.049 million and adjustments for non-cash items of $37.708 million. During the year ended September 30, 2022 cash used in operating activities was $26.720 million.
In accordance with IFRS 2, the difference in the fair value of the Arqit Limited equity instruments deemed issued to Arqit shareholders over the fair value of identifiable net assets of Arqit represents a service for listing, and is accounted for as a share-based payment which is expensed as incurred, and is reflected on Arqit’s consolidated statement of comprehensive income as “reverse acquisition expense.” Operations prior to the acquisition of the Arqit Limited shares by Arqit will be deemed to be those of Arqit Limited.
In accordance with IFRS 2, the difference in the fair value of the Arqit Limited equity instruments deemed issued to Arqit shareholders over the fair value of identifiable net assets of Arqit represents a service for listing, and is accounted for as a share-based payment which is expensed as incurred, and is reflected on Arqit’s consolidated statement of comprehensive income as “reverse acquisition expense.” Operations prior to the acquisition of the Arqit Limited shares by Arqit will be deemed to be those of Arqit Limited. 33 Table of Contents Valuation of Warrants Pursuant to the guidance in IFRS 9 ( Financial Instruments ), Arqit has determined that its Business Combination Warrants should be classified as derivative liabilities measured at fair value on its statement of financial position, with any changes in fair value to be reported each period in earnings on its statement of comprehensive income.
A valuation of the warrants was performed as of each period end, and the difference between the two valuations is non-cash profit or loss that is reflected in Arqit’s consolidated statement of comprehensive income.
A valuation of the warrants was performed as of each period end, and the difference between the two valuations is non-cash profit or loss that is reflected in Arqit’s consolidated statement of comprehensive income. Finance Costs Finance costs relate to interest costs on agreements subject to accounting recognition and measurement in accordance with IFRS 16 (Leases).
As a result of the recurring fair value measurement, Arqit’s financial statements may fluctuate quarterly, based on factors which are outside of its control. Due to the recurring fair value measurement, Arqit expects that it will recognize non-cash gains or losses on its warrants each reporting period and that the amount of such gains or losses could be material.
Due to the recurring fair value measurement, Arqit expects that it will recognize non-cash gains or losses on its Business Combination Warrants each reporting period and that the amount of such gains or losses could be material.
During the year ended September 30, 2022, Arqit met milestones under the ESA contract which permitted it to recognize project revenue during that period, compared with no revenue recognition during the year ended September 30, 2021. 38 Table of Contents Administrative Expenses The following table summarizes Arqit’s administrative expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2022 September 30, 2021 Variance ​ $'000 ​ $'000 ​ $'000 % Staff costs ​ 21,148 ​ 10,936 ​ 10,212 ​ 93 % Capitalisation of staff costs ​ (4,920) ​ (3,478) ​ (1,442) ​ 41 % Professional fees ​ 6,355 ​ 4,733 ​ 1,622 ​ 34 % Property costs ​ 754 ​ 187 ​ 567 ​ 303 % Share based compensation ​ 22,915 ​ 165 ​ 22,750 ​ 13,788 % Depreciation ​ 1,292 ​ 53 ​ 1,239 ​ 2,338 % Foreign exchange ​ 13,535 ​ 623 ​ 12,912 ​ 2,073 % Other administrative costs ​ 11,074 ​ 1,340 ​ 9,734 ​ 726 % ​ ​ 72,153 ​ 14,559 ​ 57,594 ​ 396 % ​ Total administrative expenses have increased by $57.594 million from $14.559 million for the year ended September 30, 2021 to $72.153 million for the year ended September 30, 2022.
Administrative Expenses The following table summarizes Arqit’s administrative expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2022 September 30, 2021 Variance ​ ​ $'000 ​ $'000 ​ $'000 % Staff costs 21,148 ​ 10,936 ​ 10,212 ​ 93 % Capitalisation of staff costs ​ (4,920) ​ (3,478) ​ (1,442) ​ 41 % Professional fees ​ 6,355 ​ 4,733 ​ 1,622 ​ 34 % Property costs ​ 754 ​ 187 ​ 567 ​ 303 % Share based compensation ​ 21,742 ​ 165 ​ 21,577 ​ 13,077 % Depreciation ​ 1,292 ​ 53 ​ 1,239 ​ 2,338 % Foreign exchange ​ 13,535 ​ 623 ​ 12,912 ​ 2,073 % Other administrative costs ​ 11,071 ​ 1,340 ​ 9,730 ​ 725 % ​ ​ 70,977 ​ 14,559 ​ 56,418 ​ 388 % ​ Total administrative expenses have increased by $56.418 million from $14.559 million for the year ended September 30, 2021 to $70.977 million for the year ended September 30, 2022.
Arqit’s non-cash items primarily consist of fair value movement on warrant valuation, listing service expense, share-based charges and depreciation, while movements in working capital are primarily driven by changes in trade and other payables.
The primary factors affecting operating cash flows during the period were a net loss of $271.729 million, and adjustments for non-cash items of $253.769 million. Arqit’s non-cash items primarily consist of fair value movement on warrant valuation, listing service expense, share-based charges and depreciation, while movements in working capital are primarily driven by changes in trade and other payables.
Finance Costs Finance costs decreased by $0.857 million from $1.078 million for the year ended September 30, 2021 to $0.221 million for the year ended September 30, 2021. The increase was primarily due to lower interest expense during the period as the result of convertible loans converting to equity in connection with the Business Combination closing on September 3, 2021.
The increase was primarily due to lower interest expense during the period as the result of convertible loans converting to equity in connection with the Business Combination closing on September 3, 2021. The balance consisted of interest costs incurred on the lease agreements entered into during the year ended September 30, 2022.
To the extent that future cash flows and taxable income differ significantly from estimates, Arqit’s ability to realise the net deferred tax assets recorded at the reporting date could be impacted. 45 Table of Contents
To the extent that future cash flows and taxable income differ significantly from estimates, Arqit’s ability to realise the net deferred tax assets recorded at the reporting date could be impacted. Assets held for sale Arqit’s management uses its professional judgement based on offers and commercial appraisal.
Arqit’s product, called QuantumCloud TM , creates unbreakable software encryption keys that are low cost and easy to use with no new hardware required. The software has universal application to every edge device and cloud machine in the world.
QuantumCloud TM is a software platform as a service that creates unbreakable software encryption keys that are low cost and easy to use within existing information technology standards with no new hardware and no major software upgrades or “rip and replace” required. The software has potentially universal application to every edge device and cloud machine in the world.
Margin Improvements Arqit believes that it has the opportunity to establish high margin unit economics when operating at scale as its software, fulfilled from the cloud, automatically creates keys in infinite volumes at minimal cost, resulting in low capital expenditure once deployed.
Arqit’s future growth and financial performance is highly dependent on the continued demand for its products and on its ability to successfully compete with any current or new competitors. 34 Table of Contents Margin Improvements Arqit believes that it has the opportunity to establish high margin unit economics when operating at scale as its software, fulfilled from the cloud, automatically creates keys in infinite volumes at minimal cost, resulting in low capital expenditure once deployed.
The Business Combination and the PIPE Financing Arqit Limited was incorporated in England in 2017. In September 2021, the Company completed the Business Combination pursuant to which the Company merged with and into Centricus Acquisition Corp.
In September 2021, the Company completed the Business Combination pursuant to which the Company merged with and into Centricus Acquisition Corp., with the Company surviving the merger, and the security holders of Centricus Acquisition Corp.
Arqit sold its product to select early customers on a master distribution agreement basis, an enterprise license basis and as a Platform as a Service. Going forward, Arqit will focus on selling its products on a Platform as a Service basis, primarily through channel partners, which is expected to generate annual recurring revenue.
Arqit announced in December 2022 that it will focus on selling its products on a Platform as a Service basis, primarily through channel partners and distributors, which is expected to generate annual recurring revenue.
Under this method of accounting, Arqit was treated as the “acquired” company for financial reporting purposes.
Accounting for Business Combination The acquisition of Arqit Limited’s shares by Arqit in connection with the Business Combination was accounted for as a “reverse acquisition” in accordance with IFRS. Under this method of accounting, Arqit was treated as the “acquired” company for financial reporting purposes.
The increase was primarily due to the continued ramp up of Arqit’s commercial operations during the year ended September 30, 2022. Other Operating Income Other operating income increased by $12.843 million in the year ended September 30, 2022 from $nil for the year ended September 30, 2021. Other operating income relates to project revenues under Arqit’s contract with ESA.
The increase was primarily due to the continued ramp up of Arqit’s commercial operations during the year ended September 30, 2022.
The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in the notes to Arqit’s audited consolidated financial statements. Accounting Treatment of Income from European Space Agency (“ESA”) There are mixed indicators whether the arrangement is in scope of IAS 20 or IFRS 15, and this assessment is a key management judgement.
The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in the notes to Arqit’s audited consolidated financial statements.
These year over year increases were primarily attributed to the costs incurred in the development of intangible fixed assets. 43 Table of Contents Cash Flows Provided by Financing Activities Net cash generated from financing activities was $22.373 million for the year ended September 30, 2022, compared with $120.105 million for the year ended September 30, 2021 and $1.680 million for the year ended September 30, 2020 .
Cash Flows Generated from Financing Activities Net cash generated from financing activities was $44.853 million for the year ended September 30, 2023, compared with $22.176 million for the year ended September 30, 2022 and $120.105 million for the year ended September 30, 2021 .
In addition, changes in the valuation of accounts denominated in currencies other than British pounds sterling are reflected in administrative expenses. Arqit expects its administrative expenses to increase as its overall activity levels increase due to the commencement and expansion of commercial operations, and costs associated with being a public company.
In addition, changes in the valuation of accounts denominated in currencies other than British pounds sterling are reflected in administrative expenses.
Arqit intends to use the net proceeds from the offering of such shares, if any, for general corporate purposes.
Arqit intends to use the net proceeds from the offering of such shares, if any, for general corporate purposes. In the year ended September 30, 2023, Arqit issued 7,814,459 shares under the ATM Program, generating proceeds to the Company before fees and expenses of approximately $11.5 million.
Until recently, Arqit has been a development stage company, however during the fiscal year ended September 30, 2021, it began commercializing its products. Arqit has already signed significant, long-term contracts for its services with large companies and government institutions.
Once created, the keys cannot be broken even by a universal quantum computer in a usable time period, estimated to be in excess of millions of years. ​ Arqit began commercializing its products in the fiscal year ended September 30, 2021. Arqit has already signed contracts for its services with large companies and government institutions.
As a result, although previously Arqit intended to distribute replicated entropy to data centers via Arqit developed satellites, it will now distribute replicated entropy securely through terrestrial means. 33 Table of Contents ● A second innovation is a small software agent downloaded from the QuantumCloud TM onto any form of device or integrated into any piece of software.
Replicated entropy is an important constituent part of Arqit’s QuantumCloud™ product. Arqit developed a propriety method for the secure distribution of replicated entropy to data centres using classical digital hardware and software elements. ​ ● A second innovation is a small software agent downloaded from the QuantumCloud™ onto any form of device or integrated into any piece of software.
Arqit will continue to incur net losses in accordance with its operating plan as it begins commercialization of its products. 42 Table of Contents Since inception, Arqit has funded its operations, research and development, capital expenditure and working capital requirements through capital contributions, loans and borrowings from certain venture investors and grants from UK government’s Future Fund.
Arqit will continue to incur net losses in accordance with its operating plan as it begins commercialization of its products.
Administrative Expenses The following table summarizes Arqit’s administrative expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2021 September 30, 2020 Variance ​ ​ $'000 ​ $'000 ​ $'000 % Staff costs 10,936 ​ 3,090 ​ 7,846 ​ 254 % Capitalisation of staff costs ​ (3,478) ​ (1,534) ​ (1,944) ​ 127 % Professional fees ​ 4,733 ​ 424 ​ 4,309 ​ 1,016 % Property costs ​ 187 ​ 159 ​ 28 ​ 18 % Share based compensation ​ 165 ​ 122 ​ 43 ​ 35 % Depreciation ​ 53 ​ 5 ​ 48 ​ 960 % Foreign exchange ​ 623 ​ (10) ​ 633 ​ 6,330 % Other administrative costs ​ 1,340 ​ 517 ​ 823 ​ 159 % ​ ​ 14,559 ​ 2,773 ​ 11,786 ​ 425 % ​ Total administrative expenses have increased by $11.786 million from $2.773 million for the year ended September 30, 2020 to $14.559 million for the year ended September 30, 2021.
Administrative Expenses The following table summarizes Arqit’s administrative expenses for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Year ended ​ ​ ​ ​ ​ September 30, 2023 September 30, 2022 Variance ​ $'000 ​ $'000 ​ $'000 % Staff costs ​ 24,187 ​ 21,148 ​ 3,039 ​ 14 % Capitalisation of staff costs ​ (1,956) ​ (4,920) ​ 2,964 ​ (60) % Professional fees ​ 12,415 ​ 6,355 ​ 6,060 ​ 95 % Property costs ​ 2,289 ​ 754 ​ 1,535 ​ 204 % Share based compensation ​ 14,118 ​ 21,742 ​ (7,624) ​ (35) % Depreciation ​ 2,543 ​ 1,292 ​ 1,251 ​ 97 % Amortisation of intangible assets ​ 91 ​ — ​ 91 ​ — % Foreign exchange ​ (8,764) ​ 13,535 ​ (22,299) ​ (165) % Other administrative costs ​ 10,278 ​ 11,071 ​ (793) ​ (7) % ​ ​ 55,201 ​ 70,977 ​ (15,776) ​ (22) % ​ 37 Table of Contents Total administrative expenses have decreased by $15.776 million from $70.977 million for the year ended September 30, 2022 to $55.201 million for the year ended September 30, 2023.
A further valuation of the warrants was performed as of the September 30, 2021 year end. The difference between the two valuations was a non-cash loss of $98.090 million for the year ended September 30, 2021.
Change in Fair Value of Warrants The change in fair value of Business Combination Warrants represents the difference in valuation of Arqit’s warrants as of September 30, 2022, compared with the valuation as of September 30, 2021, which was non-cash profit of $117,394 million for the year ended September 30, 2022, compared with non-cash loss of $98.090 million for the year ended September 30, 2021. ​ Finance Costs Finance costs decreased by $0.857 million from $1.078 million for the year ended September 30, 2021 to $0.221 million for the year ended September 30, 2021.
Arqit’s historical results are reported in IFRS. 36 Table of Contents Revenue Arqit commenced commercialization and began generating revenue in the fiscal year ended September 30, 2021 through QuantumCloud™ — its core product. Arqit has already signed contracts with several large companies and government institutions for the provision of those services.
Revenue Arqit commenced commercialization and began generating revenue in the fiscal year ended September 30, 2021 through QuantumCloud™ — its core product. The majority of revenue is expected to be derived from the sale of QuantumCloud™ and other related services through channel partners. Other income Other income relates to income from the sale of property, plant and equipment.
Removed
Arqit has not only invented a ground-breaking new quantum protocol, but it has also found a way to translate the benefits of quantum security to end point devices.
Added
The security proofs for the design aspects of the key-establishment protocols used to enable symmetric key agreement over classical IP network infrastructures within QuantumCloud TM were independently assured in 2022 by the University of Surrey, which is accredited as a Centre of Excellence for Cyber Security by the UK Government’s National Cyber Security Centre.
Removed
The security of the encryption keys created was independently reviewed and validated in May 2022 by the University of Surrey, a GCHQ UK National Cyber Security Centre Accredited Centre of Excellence for Cyber Security.
Added
Arqit believes that its symmetric key agreement platform is compliant with the NSA Commercial Solutions for Classified Symmetric Key Management Requirements Annex 1.2 which dictates how Government agencies can incorporate quantum-safe symmetric key protections into solutions which use off-the-shelf commercial products to protect classified networks.
Removed
Replicated entropy is the basis for Arqit’s QuantumCloud TM product. Arqit invented a quantum satellite protocol to securely deliver replicated entropy to data centers through satellites, however, the satellites that are required for the quantum satellite protocol are expensive to launch and maintain.
Added
Arqit sold its product to select early customers on a master distribution agreement basis, an enterprise license basis and as a platform as a service, including BT plc, AUCloud and Nine23.
Removed
Arqit continued to innovate in regards to the distribution of replicated entropy and has deployed an advanced version of a terrestrial method of delivering replicated entropy using a set of classical digital hardware and software elements (i.e. not quantum communications).
Added
Arqit platform as a service will be sold as standardized products to specific target markets or a Private Instance to customers to require control of the end-to-end technology.
Removed
In addition, the University of Surrey’s independent review and validation of the security of the encryption keys created by QuantumCloud TM was independent of the method of delivery of replicated entropy.
Added
Arqit has announced channel partnerships and distribution agreements with Juniper, Fortinet, AWS, TraxPay, Exclusive Networks, Sierra Nevada Corporation Mission Systems UK, SecureCloud+, DETASAD, Advanced International Electronic Equipment Company, and Carahsoft through which it will sell directly and indirectly to end customers.
Removed
Arqit’s current customers include the UK Government, the European Space Agency, BT plc, Sumitomo Corporation, Virgin Orbit, AUCloud and Nine23. Arqit recently announced important channel partnerships, including Fortinet, AWS, Dell, and TraxPay, through which it will sell directly or indirectly to end customers. The company is engaged in discussions with additional customers and channel partners.
Added
Arqit is currently engaged in discussions with additional customers, channel partners and distributors. ​ ​ ​ ​ ​ ​ 32 Table of Contents ​ ​ The Business Combination ​ Arqit Limited was incorporated in England in 2017.
Removed
Concurrently with the completion of the Business Combination, certain investors also subscribed for an aggregate of 7,100,000 ordinary shares of the Company (the “PIPE Financing”). Following the closing of the PIPE Financing, and after giving effect to redemptions of shares by shareholders of Centricus and payment of transaction expenses, the transactions described above generated approximately $96 million for Arqit.
Added
As a result of the recurring fair value measurement, Arqit’s financial statements may fluctuate quarterly, based on factors which are outside of its control.
Removed
As a consequence of the Business Combination, the Company’s ordinary shares were registered under the Exchange Act and listed on Nasdaq, which will require the Company to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices.
Added
Commencement of Commercialization and Partnerships Arqit is early in the process to generate material revenues through the commercialization of its products, and in December 2022 began transitioning its distribution model from an enterprise license model to distribution through channel partners.

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Biggest changeRitchie joined Centricus, a London-based global investment firm, where he leads the firm’s capital markets and advisory business. Mr. Ritchie earned his B.Com. in Finance and Economics from the University of Port Elizabeth. General Stephen Wilson is a member of the board of directors of Arqit. General Stephen W. Wilson is a retired 4-star U.S.
Biggest changeIn 2018, he became its sole Head and was appointed as President. In June 2020, Mr. Ritchie joined Centricus, a London-based global investment firm, where he leads the firm’s capital markets and advisory business. Mr.
Prior to joining Barclays, he served as Head of International M&A, first at Credit Suisse and then at Merrill Lynch from 2006 to 2011. Prior to this, Mr. Calabria worked at Credit Suisse from 1990 to 2006 and began his investment banking career at Morgan Grenfell & Co. Ltd in 1983.
Prior to joining Barclays, he served as Head of International M&A, first at Credit Suisse and then at Merrill Lynch from 2006 to 2011. Prior to this, Mr. Calabria worked at Credit Suisse from 1990 to 2006 and began his investment banking career at Morgan Grenfell & Co. Ltd in 1983. Mr.
Mr Calabria holds a Master of Arts (Honors) in Economics from Rome University, La Sapienza. Stephen Chandler is a member of the board of directors of Arqit. Mr. Chandler is an entrepreneur, investor and company builder, with 20 years of experience in forming, funding, running, advising and investing in technology businesses. Mr.
Calabria holds a Master of Arts (Honors) in Economics from Rome University, La Sapienza. Stephen Chandler is a member of the board of directors of Arqit. Mr. Chandler is an entrepreneur, investor and company builder, with 20 years of experience in forming, funding, running, advising and investing in technology businesses. Mr.
These responsibilities include: · retaining and terminating our independent auditors, subject to ratification by the board of directors, and in the case of retention, subject to ratification by the shareholders; · pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms; · overseeing the accounting and financial reporting processes of Arqit; · managing audits of Arqit’s financial statements; · preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act; · reviewing with management and Arqit’s independent auditor its annual and interim financial statements prior to publication, filing, or submission to the SEC; · recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, as well as approving the yearly or periodic work plan proposed by the internal auditor; · reviewing with Arqit’s general counsel and/or external counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements; 50 Table of Contents · identifying irregularities in Arqit’s business administration, inter alia, by consulting with the internal auditor or with the independent auditor, and suggesting corrective measures to the board of directors; · reviewing policies and procedures with respect to transactions (other than transactions related to compensation or terms of services) between Arqit and its officers and directors, affiliates of officers or directors, or transactions that are not in the ordinary course of business and deciding whether to approve such acts and transactions; and · establishing procedures for handling employee complaints relating to the management of Arqit’s business and the protection to be provided to such employees.
These responsibilities include: · retaining and terminating our independent auditors, subject to ratification by the board of directors, and in the case of retention, subject to ratification by the shareholders; · pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms; · overseeing the accounting and financial reporting processes of Arqit; · managing audits of Arqit’s financial statements; · preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act; · reviewing with management and Arqit’s independent auditor its annual and interim financial statements prior to publication, filing, or submission to the SEC; · recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, as well as approving the yearly or periodic work plan proposed by the internal auditor; · reviewing with Arqit’s general counsel and/or external counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements; · identifying irregularities in Arqit’s business administration, inter alia, by consulting with the internal auditor or with the independent auditor, and suggesting corrective measures to the board of directors; 48 Table of Contents · reviewing policies and procedures with respect to transactions (other than transactions related to compensation or terms of services) between Arqit and its officers and directors, affiliates of officers or directors, or transactions that are not in the ordinary course of business and deciding whether to approve such acts and transactions; and · establishing procedures for handling employee complaints relating to the management of Arqit’s business and the protection to be provided to such employees.
Lefebvre d’Ovidio serves as the Vice President of the Monaco Chamber of Shipping, Vice Chairman of the World Travel and Tourism Council, and has held a number of key roles in Cruise Lines International Association, including European Chairman, Member of the Global Executive Committee, and Chairman from 2007 to 2013. Mr.
Lefebvre d’Ovidio serves as the Vice Chairman of the Monaco Chamber of Shipping, Vice Chairman of the World Travel and Tourism Council, and has held a number of key roles in Cruise Lines International Association, including European Chairman, Member of the Global Executive Committee, and Chairman from 2007 to 2013. Mr.
Daniel Shiu 53 Chief Cryptographer Patrick Willcocks 54 General Counsel and Corporate Secretary ​ ​ David Williams is the Founder, Chief Executive Officer and Chairman of the board of directors of Arqit. Prior to founding Arqit, from 2002 to 2017 Mr. Williams was the co-founder and CEO of Avanti Communications Group plc, which pioneered the use of Ka-band satellite communication.
Daniel Shiu 54 Chief Cryptographer Patrick Willcocks 55 General Counsel and Corporate Secretary ​ ​ David Williams is the Founder, Chief Executive Officer and Chairman of the board of directors of Arqit. Prior to founding Arqit, from 2002 to 2017 Mr. Williams was the co-founder and CEO of Avanti Communications Group plc, which pioneered the use of Ka-band satellite communication.
Furthermore, a 51 Table of Contents shareholder’s investment may be adversely affected to the extent Arqit pays the costs of settlement and damage awards against its officers and directors pursuant to these indemnification provisions. Arqit believes that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors. 6.D.
Furthermore, a 49 Table of Contents shareholder’s investment may be adversely affected to the extent Arqit pays the costs of settlement and damage awards against its officers and directors pursuant to these indemnification provisions. Arqit believes that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors. 6.D.
Manfredi Lefebvre d’Ovidio serves as co-Chairman of A&K Travel Group Ltd, and has led the expansion of the group both internally and externally, notably with the acquisition of Cox & Kings and more recently (in June 2022) with the acquisition of the cruise ships Crystal Serenity and Crystal Symphony in addition to the Crystal Cruises brand. Mr.
Manfredi Lefebvre d’Ovidio serves as Executive Chairman of A&K Travel Group Ltd, and has led the expansion of the group both internally and externally, notably with the acquisition of Cox & Kings and more recently (in June 2022) with the acquisition of the cruise ships Crystal Serenity and Crystal Symphony in addition to the Crystal Cruises brand. Mr.
Following an early career at Deloitte and then UBS, he was the Chief Financial Officer at MessageLabs, a cyber security company, through to its acquisition by Symantec in 2008. He is a current or former board director of several growing tech companies, including GoCardless, Griffin, Paddle, Panaseer, Novatiq and Virtual Stock. Mr.
Following an early career at Deloitte and then UBS, he was the Chief Financial Officer at MessageLabs, a cyber security company, through to its acquisition by Symantec in 2008. He is a current or former board director of several growing tech companies, including GoCardless, Griffin, Paddle, Pana seer, Novatiq and Virtual Stock. Mr.
Mr. Williams also served as Founder Chairman of the Advisory Board of Seraphim Space Ventures, a $100 million high technology venture capital firm based in London, which he initiated with UK Government support in 2014. Prior to this, Mr. Williams was an investment banker specializing in financing international telecom businesses. Mr.
Mr. Williams also served as Founder Chairman of the Advisory Board of Seraphim Space Ventures, a $100 44 Table of Contents million high technology venture capital firm based in London, which he initiated with UK Government support in 2014. Prior to this, Mr. Williams was an investment banker specializing in financing international telecom businesses. Mr.
In addition, each 48 Table of Contents executive officer and employee is subject to a perpetual confidentiality covenant, and non-competition and non-solicitation restrictive covenants during the term of employment and for a period of three to twelve months after the termination of employment.
In addition, each executive officer and employee is subject to a perpetual confidentiality covenant, and non-competition and non-solicitation restrictive covenants during the term of employment and for a period of three to twelve months after the termination of employment.
Lefebvre d’Ovidio was honored by being awarded the rank of Knight of the Order of Saint Charles and Grimaldi by H.S.H. Prince Albert of Monaco, and has been Honorary Consul of Ecuador in Monaco since April 2019. 46 Table of Contents Carlo Calabria is a member of the board of directors of Arqit. Mr.
Lefebvre d’Ovidio was honored by being awarded the rank of Knight of the Order of Saint Charles and Grimaldi by H.S.H. Prince Albert II of Monaco, and has been Honorary Consul of Ecuador in Monaco since April 2019. Carlo Calabria is a member of the board of directors of Arqit. Mr.
Arqit has eight directors, six of whom – directors Calabria, Chandler, d’Ovidio, Jamieson, Ritchie and Wilson – the board has determined qualify as independent directors as defined in the Nasdaq corporate governance rules. Classes of Directors The board of directors is divided into three staggered classes of directors.
Arqit has six directors, four of whom – directors Calabria, Chandler, d’Ovidio, and Ritchie – the board has determined qualify as independent directors as defined in the Nasdaq corporate governance rules. Classes of Directors The board of directors is divided into three staggered classes of directors.
Each director who serves as the chairman of a committee receives an additional $20,000 per year and each other member of a committee receives an additional $10,000 per year per committee. Directors have the option to elect to receive their cash compensation in the form of either cash or RSUs.
Each non-executive director receives an annual cash retainer of $60,000. Each director who serves as the chairman of a committee receives an additional $20,000 per year and each other member of a committee receives an additional $10,000 per year per committee. Directors have the option to elect to receive their cash compensation in the form of either cash or RSUs.
Compensation Committee Arqit’s compensation committee is comprised of Garth Ritchie, Carlo Calabria and Lt General VeraLinn Jamieson, all of whom are independent directors. Carlo Calabria serves as the chairperson of the compensation committee. The board of directors adopted a compensation committee charter setting forth the responsibilities of the committee.
Compensation Committee Arqit’s compensation committee is comprised of Garth Ritchie and Carlo Calabria, all of whom are independent directors. Carlo Calabria serves as the chairperson of the compensation committee. The board of directors adopted a compensation committee charter setting forth the responsibilities of the committee.
Stephen Chandler serves as the chairperson of the audit committee. All members of the audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq corporate governance rules.
The audit committee is comprised of Stephen Chandler and Garth Ritchie. Stephen Chandler serves as the chairperson of the audit committee. All members of the audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq corporate governance rules.
Nominations and Corporate Governance Committee Arqit’s nominations and corporate governance committee is comprised of Manfredi Lefebvre d’Ovidio, General Stephen Wilson and Carlo Calabria. Manfredi Lefebvre d’Ovidio serves as the chairperson of the nominations and corporate governance committee.
Nominations and Corporate Governance Committee Arqit’s nominations and corporate governance committee is comprised of Manfredi Lefebvre d’Ovidio and Carlo Calabria. Manfredi Lefebvre d’Ovidio serves as the chairperson of the nominations and corporate governance committee.
Risk Oversight The board of directors oversees the risk management activities designed and implemented by its management. The board of directors executes its oversight responsibility both directly and through its committees. The board of directors also considers specific risk topics, including risks associated with its strategic initiatives, business plans and capital structure.
The board of directors executes its oversight responsibility both directly and through its committees. The board of directors also considers specific risk topics, including risks associated with its strategic initiatives, business plans and capital structure.
The holders of each of these options agreed to exchange these options for equivalent options to acquire ordinary shares, 8,004,813 of which remain outstanding as of September 30, 2022, which were issued under amended option agreements with terms consistent with the Incentive Award Plan.
The holders of each of these options agreed to exchange these options for equivalent options to acquire ordinary shares, 6,303,402 of which remain outstanding as of September 30, 2023, which were issued under amended option agreements with terms consistent with the Incentive Award Plan.
COMPENSATION Historical Executive Officer and Director Compensation The aggregate cash compensation paid by Arqit and its subsidiaries to its executive officers and directors who for the year ended September 30, 2022 was $3,794,536. This amount includes $88,786, set aside or accrued to provide pension, severance, retirement or similar benefits or expenses.
COMPENSATION Historical Executive Officer and Director Compensation The aggregate cash compensation paid by Arqit and its subsidiaries to its executive officers and directors for the year ended September 30, 2023 was $3,056,583. This amount includes $112,275, set aside or accrued to provide pension, severance, retirement or similar benefits or expenses.
At each annual meeting of its shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring, as follows: · the Class I directors include Stephen Chandler, Lt General VeraLinn Jamieson and General Stephen Wilson; · the Class II directors include Nick Pointon and Carlo Calabria; and 49 Table of Contents · the Class III directors include David Williams, Manfredi Lefebvre d’Ovidio and Garth Ritchie.
At each annual meeting of its shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring, as follows: · the Class I director is Stephen Chandler; · the Class II directors include Nick Pointon and Carlo Calabria; and · the Class III directors include David Williams, Manfredi Lefebvre d’Ovidio and Garth Ritchie. 47 Table of Contents Risk Oversight The board of directors oversees the risk management activities designed and implemented by its management.
Willcocks was General Counsel and Company Secretary of Avanti Communications Group plc. Prior to this, Patrick was a senior attorney at HP/EDS, a banking and financing solicitor at Eversheds Sutherland, and an investment banker at a number of international banks.
Prior to this, Patrick was a senior attorney at HP/EDS, a banking and financing solicitor at Eversheds Sutherland, and an investment banker at a number of international banks.
The aggregate number of ordinary shares available for issuance under the Incentive Award Plan, excluding awards granted, is equal to 13.3% of the sum of the total number of issued and outstanding ordinary shares as of December 9, 2022, which equals an aggregate pool of 16.2 million ordinary shares.
The aggregate number of ordinary shares available for issuance under the Incentive Award Plan, excluding awards granted, is equal to 8.4% of the sum of the total number of issued and outstanding ordinary shares as of November 17, 2023, which equals an aggregate pool of 17.4 million ordinary shares.
In addition, 2,686,071 restricted shares units (net of forfeitures) were granted during the year ended September 30, 2022, leaving 5,509,850 ordinary shares available for issuance in respect of future grants of awards under the Incentive Award Plan.
In addition, 2,784,610 restricted shares units (net of forfeitures) were granted during the year ended September 30, 2023, leaving 3,966,134 ordinary shares available for issuance in respect of future grants of awards under the Incentive Award Plan.
He has a Master of Arts (Honors) Degree in Geography from the University of Cambridge. Dr. Daniel Shiu has served as the Chief Cryptographer of Arqit since 2021. Prior to joining Arqit, Dr. Shiu worked for the UK’s intelligence, cyber and security agency GCHQ for 19 years.
Daniel Shiu has served as the Chief Cryptographer of Arqit since 2021. Prior to joining Arqit, Dr. Shiu worked for the UK’s intelligence, cyber and security agency GCHQ for 19 years.
The agreements include a notice period of one week to one month if either Arqit or the executive officer or employee wishes to terminate the agreement, other than for cause, in which case termination is effective immediately. Arqit may provide payment in lieu of such notice or may require the executive officer or employee to be placed on garden leave.
The agreements include a notice period of one week to one month if either Arqit or the executive officer 46 Table of Contents or employee wishes to terminate the agreement, other than for cause, in which case termination is effective immediately.
For biographical information concerning the directors and executive officers, see below. ​ ​ ​ ​ ​ ​ Name Age Position David Williams 53 Executive Chairman, Founder and Chief Executive Officer David Bestwick 57 Co-Founder and Chief Technology Officer Nick Pointon 52 Chief Financial Officer and Executive Director Manfredi Lefebvre d’Ovidio 69 Senior Independent Director Carlo Calabria 62 Director Stephen Chandler 53 Director Lt General VeraLinn Jamieson 62 Director Garth Ritchie 54 Director General Stephen Wilson 63 Director Air Vice-Marshal Peter Rochelle 57 Chief Operating Officer Paul Feenan 49 Chief Revenue Officer Dr.
For biographical information concerning the directors and executive officers, see below. ​ ​ ​ ​ ​ ​ Name Age Position David Williams 54 Executive Chairman, Founder and Chief Executive Officer David Bestwick 58 Co-Founder and Chief Technology Officer Nick Pointon 53 Chief Financial Officer and Executive Director Manfredi Lefebvre d’Ovidio 70 Senior Independent Director Carlo Calabria 63 Director Stephen Chandler 54 Director Garth Ritchie 55 Director Paul Feenan 50 Chief Revenue Officer Dr.
EMPLOYEES As of September 30, 2022, Arqit had 140 full-time employees based in the UK and 5 full-time employees based in the US, a majority of which are engaged in research and development and related functions. Arqit anticipates significant employee growth as it continues to commercialize its products. Arqit is highly dependent on human capital and a strong leadership team.
EMPLOYEES As of September 30, 2023, Arqit had 139 full-time employees based in the UK and 8 full-time employees based in the US, a majority of which are engaged in research and development and related functions. Arqit is highly dependent on human capital and a strong leadership team.
Feenan was the Director for Government Services at Avanti Communications Group plc from 2012 to 2016. Prior to this, Mr. Feenan was a commissioned British Army Officer where he served for over 16 years in a variety of Command and Operational roles including as the lead for Domestic Counterterrorism in the run-up to the 2012 London Olympic Games.
Feenan was a commissioned British Army Officer where he served for over 16 years in a variety of Command and Operational roles including as the lead for Domestic Counterterrorism in the run-up to the 2012 London Olympic Games. He has a Master of Arts (Honors) Degree in Geography from the University of Cambridge. Dr.
Ritchie was appointed to Deutsche Bank’s Management Board with responsibility for Deutsche Bank’s markets division. In 2017, he became Co-Head of the newly created Corporate & Investment Bank. In 2018, he became its sole Head and was appointed as President. In June 2020, Mr.
Ritchie joined Deutsche Bank in the Johannesburg office and went on to become a member of the Global Markets Executive Committee in 2009 as Head of Equities. In January 2016, Mr. Ritchie was appointed to Deutsche Bank’s Management Board with responsibility for Deutsche Bank’s markets division. In 2017, he became Co-Head of the newly created Corporate & Investment Bank.
As of September 30, 2022, 55,500 options to purchase ordinary shares had been granted to Arqit’s executive officers and directors. During the year ended September 30, 2022, 1,360,655 RSUs were granted to Arqit’s executive officers and directors, no shares or options vested during the year ended September 30, 2022.
As of September 30, 2023, 1,519,980 options to purchase ordinary shares and 1,474,953 RSUs had been granted to Arqit’s executive officers and directors. During the year ended September 30, 2023, 422,463 shares were issued to Arqit’s executive officers and directors in connection with the vesting of RSUs, and 76,772 options granted to Arqit’s executive officers and directors vested.
Paul Feenan has served as the Chief Revenue Officer of Arqit since April 2021. Prior to this, Mr. Feenan was the Managing Director for Global Institutional Sales at Arqit since April 2020. Mr. Feenan was previously the Director for Strategic Partnerships at JUMO, a Cape Town headquartered, global financial technology company, from 2016 to 2020. Mr.
Feenan was previously the Director for Strategic Partnerships at JUMO, a Cape Town headquartered, global financial technology company, from 2016 to 2020. Mr. Feenan was the Director for Government Services at Avanti Communications Group plc from 2012 to 2016. Prior to this, Mr.
“ Director, Senior Management and Employees — Executive Officer and Director Compensation — E quity Compensation—Incentive Award Plan . ”
“ Director, Senior Management and Employees — Executive Officer and Director Compensation — E quity Compensation—Incentive Award Plan . ” 6.F. DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION Not applicable.
He has a BSc (Honors) and ARCS in Mathematics from Imperial College London, and a DPhil in Mathematics from the University of Oxford (Pembroke College). Patrick Willcocks is General Counsel and Corporate Secretary of Arqit. Prior to joining Arqit, Mr. Willcocks ran a legal consultancy. From 2009 to 2018, Mr.
Patrick Willcocks is General Counsel and Corporate Secretary of Arqit. Prior to joining Arqit, Mr. Willcocks ran a legal consultancy. From 2009 to 2018, Mr. Willcocks was General Counsel and Company Secretary of Avanti Communications Group plc.
Arqit has a compensation plan for its directors. Arqit, working with the compensation committee, has set director compensation at a level comparable with those directors with similar positions at comparable companies. Each non-executive director receives an annual cash retainer of $60,000.
Arqit may provide payment in lieu of such notice or may require the executive officer or employee to be placed on garden leave. Arqit has a compensation plan for its directors. Arqit, working with the compensation committee, has set director compensation at a level comparable with those directors with similar positions at comparable companies.
Chandler is a qualified Chartered Accountant and holds a Bachelor of Arts (Honors) in Accounting & Economics from the University of Exeter. Lt General VeraLinn Jamieson is a member of the board of directors of Arqit. Lt. General Jamieson is experienced in data management, cloud technology, artificial intelligence and machine learning, with over 37 years of government experience.
Chandler is a qualified Chartered Accountant and holds a Bachelor of Arts (Honors) in Accounting & Economics from the University of Exeter. Garth Ritchie is a member of the board of directors of Arqit. Mr. Ritchie has over 25 years of experience in banking and finance where he has held a number of senior leadership positions. In 1996, Mr.
Shiu also served as Head of the Heilbronn Institute for Mathematical Research (HIMR) and represented GCHQ in co-directing the National Quantum Technologies Program. Throughout his career, Dr. Shiu’s has received multiple prizes, including an international, annual award for best crypto-mathematician and on three separate occasions an international award for the best cryptanalytic achievement of the year.
Shiu also served as Head of the Heilbronn Institute for Mathematical Research (HIMR) and represented GCHQ in co-directing the National Quantum Technologies Program. In 2023, Daniel Shiu was elected to the National Security Committee of the techUK trade body for which he undertakes duties for the sovereign skills subgroup. Throughout his career, Dr.
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She achieved the rank of Lieutenant General in the U.S. Air Force. Lt. General Jamieson served as the Director of the United States Air Force’s Intelligence Surveillance, Reconnaissance and Cyber Effects enterprise, conducting operations for the Department of Defense from 2016 to 2019.
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Ritchie earned his B.Com. in Finance and Economics from the University of Port Elizabeth. 45 Table of Contents Paul Feenan has served as the Chief Revenue Officer of Arqit since April 2021. Prior to this, Mr. Feenan was the Managing Director for Global Institutional Sales at Arqit since April 2020. Mr.
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She led units in Germany, Hawaii, Miami, Afghanistan, and Virginia and was the driving force behind building a cohesive team of the Air Forces’ intelligence and cyber forces into a single war fighting organization. She has been the senior Government representative to multiple Senate and House of Representatives committees and hearings. Lt.
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Shiu’s has received multiple prizes, including an international, annual award for best crypto-mathematician and on three separate occasions an international award for the best cryptanalytic achievement of the year. He has a BSc (Honors) and ARCS in Mathematics from Imperial College London, and a DPhil in Mathematics from the University of Oxford (Pembroke College).
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General Jamieson also serves as a director of Digital Realty Inc. She holds a Bachelor of Science in Business Administration from West Virginia University and a Master of Arts in Strategic Studies and Aviation Management from the National Defense University and Embry Riddle University. Garth Ritchie is a member of the board of directors of Arqit. Mr.
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Audit Committee Listing Requirements As permitted by Nasdaq Listing Rules, we have elected as a “foreign private issuer" to follow home country corporate governance practices with respect to our audit committee composition in lieu of the otherwise applicable Nasdaq corporate governance requirements. Under Nasdaq corporate governance rules, we are still required to maintain an audit committee consisting of independent directors.
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Ritchie has over 25 years of experience in banking and finance where he has held a number of senior leadership positions. In 1996, Mr. Ritchie joined Deutsche Bank in the Johannesburg office and went on to become a member of the Global Markets Executive Committee in 2009 as Head of Equities. In January 2016, Mr.
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Compensation Recovery Policy We have adopted a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules and applicable listing standards.
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Air Force General with over 39 years of military service. General Wilson has extensive operational experience including commanding the largest Wing in the Middle East and commanding and reinvigorating America’s nuclear Bombers and Missile forces in Global Strike Command before assuming his duties as the 39 th Vice Chief of Staff of the Air Force.
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As the Vice Chief, he managed the organizing, training and equipping of over 685,000 active duty, Guard and Reserve Airmen, helping direct strategy, policy, acquisition, technology, personnel and risk management. He helped manage the planning, programming, budgeting and execution of the Air Force’s $205 billion annual budget.
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General Wilson also served on the Joint Requirements Oversight Council setting the acquisition requirements for the Department of Defense. General Wilson was widely acknowledged as the driving force for embracing both innovative technology and new thinking to include the startup of a U.S.
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Air Force program which expands technology, talent and transition partnerships for rapid and affordable commercial and military capabilities. General Wilson was also the catalyst behind the U.S. Air Force/M.I.T. AI Accelerator partnership to advance and improve Air Force operations while also addressing broader societal needs. General Wilson is a member of the Council of Foreign Relations.
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He serves on the board of directors of New Vista Acquisition Corp and BAE Systems, Inc. as well as on several advisory boards. His many awards and decorations include three Defense Service Medals, the Defense Superior Service Medal, two Legions of Merit, two Bronze Stars and two Air Medals.
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General Wilson is a command pilot with over 4,500 flight hours, including nearly 700 combat hours. He is a graduate of Texas A&M University (cum laude, Aerospace Engineering) and the U.S. Air Force Weapons School.
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He holds two Masters degrees – one in Engineering Management from South Dakota School of Mines and Technology and one in Strategic Studies from Air University. Air Vice-Marshal Peter Rochelle has served as the Chief Operating Officer of Arqit since September 2020. Prior to joining Arqit, Air Vice-Marshal Rochelle served in the Royal Air Force for 34 years.
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After his MA in Defence, he was involved in the Acquisition and Government Strategic Programme Delivery. He proceeded to act as Chief of Staff for DG FMC and then Programme director, for Carrier Enabled Power Projection project.
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After completing his role as Chief of Staff Capability, Acquisition and Force Development 47 Table of Contents in April 2020, Peter was mandated to deliver a record high £40 billion sub-portfolio. This included the delivery of the F35 programme, acquisition of P8 and E7. Peter was also instrumental in the development of the RAF and the UK’s Rapid Capability Office.
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He co-developed the UK’s first Air Information Experimentation Lab, Space Coalition development and created the Op Olympic Defender justification. Throughout his extensive military experience, he has been awarded DFC (Kosovo), an OBE and a CB for services to Acquisition. Additionally he was recognised as fellow of the UK endorsed Innovation Knowledge Exchange (FIKE).
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Audit Committee Listing Requirements Under Nasdaq corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise. The audit committee is comprised of Stephen Chandler, Lt General VeraLinn Jamieson and Garth Ritchie.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

9 edited+5 added−5 removed8 unchanged
Biggest change(6) The business address for each of the directors and executive officers of the Company is Nova North, 7 Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom. 53 Table of Contents Registered Holders Based on a review of the information provided to us by our transfer agent, as of December 9, 2022, we had approximately 64 shareholders of record of our ordinary shares.
Biggest changeRegistered Holders Based on a review of the information provided to us by our transfer agent, as of November 17, 2023, we had approximately 46 shareholders of record of our ordinary shares. We estimate that as of November 17, 2023, approximately 36.4% of our outstanding ordinary shares are held by two U.S. record holders.
The Registration Rights Agreement also (i) provides the Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions, and (ii) terminated the registration and shareholder rights agreement, dated as of February 3, 2021, among Centricus, the Sponsor and the other “Holders” named therein. 7.C. INTERESTS OF EXPERTS AND COUNSEL Not Applicable.
The Registration Rights Agreement also (i) provides the Holders with “piggy-back” registration rights, subject to certain requirements and customary conditions, and (ii) terminated the registration and shareholder rights agreement, dated as of February 3, 2021, among Centricus Acquisition Corp., Centricus Heritage LLC and the other “Holders” named therein. 7.C. INTERESTS OF EXPERTS AND COUNSEL Not Applicable.
MAJOR SHAREHOLDERS The following table sets forth information regarding the beneficial ownership of the Company as of December 9, 2022, by: · each beneficial owner of more than 5% of the outstanding the Company’s Ordinary Shares; · each executive officer or a director of the Company; and · all of the Company’s executive officers and directors as a group.
MAJOR SHAREHOLDERS The following table sets forth information regarding the beneficial ownership of the Company as of November 17, 2023, by: · each beneficial owner of more than 5% of the outstanding the Company’s Ordinary Shares; · each executive officer or a director of the Company; and · all of the Company’s executive officers and directors as a group.
Daniel Shiu * * ​ Patrick Willcocks * * ​ All directors and executive officers of the Company as a group . 73,951,754 54.7 % * Less than 1.0%. ​ (1) The business address for D2BW Limited is Nova North, 7 Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom.
Daniel Shiu * * ​ Patrick Willcocks * * ​ All directors and executive officers of the Company as a group . 84,422,701 40.7 % * Less than 1.0%. ​ (1) The business address for D2BW Limited is Nova North, 7 Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom.
Includes 30,304,808 shares held by D2BW Limited, of which David Williams and David Bestwick are the beneficial owners and have shared investment and voting power over the shares held by D2BW Limited. (3) The business address for Ropemaker Nominees Limited is 91 Wimpole Street, London W1G 0EF, United Kingdom.
Includes 30,322,651 shares held by D2BW Limited and 1,000,000 shares held by the Williams and Bestwick Foundation, of which David Williams and David Bestwick are the beneficial owners and have shared investment and voting power. (3) The business address for Ropemaker Nominees Limited is 91 Wimpole Street, London W1G 0EF, United Kingdom.
(5) The business address for Heritage Assets SCSP is c/o Heritage Services SAM Attn: Cristina Levis, 7 Rue Du Gabian, 98000, Monaco. Includes (1) 11,653,049 shares and 6,266,667 warrants (which became exercisable on February 8, 2022) held by Heritage Assets SCSP, over which Mr. Lefebvre d’Ovidio has sole investment and voting power, and (2) 2,500 shares held by Mr.
Includes 1,909,522 September 2023 Investor Warrants that are currently exercisable. (4) The business address for Heritage Assets SCSP is c/o Heritage Services SAM Attn: Cristina Levis, 7 Rue Du Gabian, 98000, Monaco. Includes (1) 11,653,049 shares, 6,266,667 Business Combination Warrants and 5,769,231 September 2023 Investor Warrants that are currently exercisable and held by Heritage Assets SCSP, over which Mr.
This number of holders of record also does not include shareholders whose shares may be held in trust or by other entities. 7.B.
The actual number of shareholders is greater than this number of record holders 51 Table of Contents and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include shareholders whose shares may be held in trust or by other entities. 7.B.
Arqit has granted the PIPE Investors certain registration rights in connection with the PIPE Financing. Registration Rights Agreement On September 3, 2021, Arqit, the Sponsor, Adam M. Aron, Nicholas Taylor, the shareholders of Arqit Limited prior to the Share Acquisition Closing and Heritage Assets SCSP entered into the Registration Rights Agreement.
The September 2023 Investor Warrants are currently exercisable at an exercise price of $0.78 per share. Registration Rights Agreement On September 3, 2021, Arqit, Centricus Heritage LLC, Adam M. Aron, Nicholas Taylor, the shareholders of Arqit Limited prior to the completion of the Business Combination and Heritage Assets SCSP entered into the Registration Rights Agreement.
The PIPE Investors include Garth Ritchie, a director of Arqit who invested $500,000 in the PIPE Financing. The PIPE Investors also include Heritage Assets SCSP, which invested $50,000,000 in the PIPE Financing. Mr. Lefebvre d’Ovidio has sole investment and voting power over the shares held by Heritage Assets SCSP and is a director of Arqit.
Company director Manfredi Lefebvre d’Ovidio has sole investment and voting power over the shares held by Heritage Assets SCSP, and Arqit director Stephen Chandler is on the investment committee of Notion Capital Managers LLP, which is the beneficial owner of the Company shares held by Ropemaker Nominees Limited, and Carlo Calabria is a director of the Company.
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Beneficial ownership percentages are based on a total of 135,262,115 ordinary shares, which includes (i) 122,102,697 ordinary shares issued and outstanding as of December 9, 2022, (ii) 13,038,904 warrants that became exercisable on February 8, 2022, and (iii) a total of 297,045 restricted share unit grants that are due to vest within 60 days of December 9, 2022. 52 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Percentage of ​ ​ ​ ​ Outstanding ​ ​ Number of ​ Ordinary ​ ​ Ordinary Shares ​ Shares Five Percent Holders: ​ D2BW Limited (1) 30,304,808 22.4 % David Williams (2) 45,148,582 33.4 % David Bestwick (2) 38,392,744 28.4 % Ropemaker Nominees Limited (3) 16,192,494 12.0 % The Evolution Technology Fund II, SCSp.
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Beneficial ownership percentages are based on a total of 207,388,051 ordinary shares, which includes (i) 164,071,365 ordinary shares issued and outstanding as of November 17, 2023, (ii) 13,038,904 Business Combination Warrants, (iii) 7,500,000 February 2023 Investor Warrants, (iv) 550,000 February 2023 Placement Agent Warrants, (v) 20,755,677 September 2023 Investor Warrants, (vi) 705,128 September 2023 Placement Agent Warrants (vii) a total of 766,977 restricted share unit and option grants that are due to vest within 60 days of November 17, 2023.
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(4) 9,931,461 7.3 % Heritage Assets SCSP (5) 17,922,216 13.2 % Directors and Executive Officers (6) ​ David Williams (2) 45,148,582 33.4 % David Bestwick (2) 38,392,744 28.4 % Nick Pointon * * ​ Carlo Calabria 2,446,337 1.8 % Stephen Chandler * * ​ Manfredi Lefebvre d’Ovidio (3) 17,922,216 13.2 % Lt General VeraLinn Jamieson * * ​ Garth Ritchie 150,605 * ​ General Stephen Wilson * * ​ Air Vice-Marshal Peter Rochelle * * ​ Paul Feenan * * ​ Dr.
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All of the Company’s outstanding warrants are currently exercisable. 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ Percentage of ​ ​ ​ ​ Outstanding ​ ​ Number of ​ Ordinary ​ ​ Ordinary Shares ​ Shares Five Percent Holders: ​ D2BW Limited (1) 30,322,651 14.6 % David Williams (2) 43,765,319 21.1 % David Bestwick (2) 37,777,116 18.2 % Ropemaker Nominees Limited (3) 20,011,538 9.6 % Heritage Assets SCSp.
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(4) The business address for The Evolution Technology Fund II, SCSp. is 15 Boulevard F.W. Raiffeisen, L-2411 Luxembourg. Evolution Equity Partners II Sarl is the general partner of The Evolution Technology Fund II, SCSp. and has sole investment and voting power over the shares held by The Evolution Technology Fund II, SCSp.
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(4) 29,458,178 14.2 % Directors and Executive Officers (5) ​ David Williams (2) 43,765,319 21.1 % David Bestwick (2) 37,777,116 18.2 % Nick Pointon * * ​ Carlo Calabria (6) 2,967,076 1.4 % Stephen Chandler * * ​ Manfredi Lefebvre d’Ovidio (4) 29,469,428 14.2 % Garth Ritchie 158,522 * ​ Paul Feenan * * ​ Dr.
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We estimate that as of December 9, 2022, approximately 27.7% of our outstanding ordinary shares are held by four U.S. record holders. The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
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Lefebvre d’Ovidio has sole investment and voting power, and (2) 11,250 shares held by Mr. Lefebvre d’Ovidio in his individual capacity. (5) The business address for each of the directors and executive officers of the Company is Nova North, 7 Floor, 11 Bressenden Place, London SW1E 5BY, United Kingdom. (6) Includes 256,411 September 2023 Investor Warrants that are currently exercisable.
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RELATED PARTY TRANSACTIONS PIPE Subscription Agreements Concurrently with the execution of the Business Combination Agreement, Centricus and Arqit entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors agreed to subscribe for and purchase, and Arqit agreed to issue and sell to such PIPE Investors, an aggregate of 7,100,000 ordinary shares at $10.00 per share for gross proceeds of $71,000,000 immediately following the consummation of the Business Combination.
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RELATED PARTY TRANSACTIONS September 2023 Registered Direct Offering On September 12, 2023 the Company completed a registered direct offering of its ordinary shares and warrants to purchase ordinary shares, in which Heritage Assets SCSP, Ropemaker Nominees Limited and Carlo Calabria purchased 7,935,164 ordinary shares, together with warrants to purchase up to 7,935,164 ordinary shares at a combined offering price of $0.78 per ordinary share and accompanying warrant.

Other ARQQW 10-K year-over-year comparisons