Zapata Quantum, Inc. Enters Securities Purchase Agreement for Series D Preferred Stock and Warrants

Key Developments

• Material Definitive Agreement: On April 7, 2026, Zapata Quantum, Inc. (the “Company”) entered into a Securities Purchase Agreement for the issuance and sale of its newly designated Series D Convertible Preferred Stock (“Series D”) and related warrants.
• Unregistered Securities Offering: The Series D and warrants were offered and sold in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933 and Rule 506(b).
• Automatic Conversion of Series A: On the same date, all outstanding shares of Series A Convertible Preferred Stock were automatically converted into common stock pursuant to their terms.
• Filing of Certificate of Designations: On April 1, 2026, the Company filed the Certificate of Designations for Series D with the Delaware Secretary of State, authorizing up to 15,000 shares.
• Material Terms and Shareholder Approval: The Series D shares contain provisions that could materially impact future shareholder value and corporate governance, including voting rights, dividend policies, anti-dilution protections, and significant restrictions on Company actions.

Details of the Series D Preferred Stock

• Ranking: Series D shares are senior to all other classes of stock, including common and other preferred. No junior or pari passu classes may be created without Series D consent.
• Conversion Rights: Holders can convert Series D shares into common stock at a conversion rate based on the prevailing conversion price. Mechanics are specified, with delivery of notice by email or other means.
• Anti-Dilution and Down-Round Protection: If the Company issues new shares or equivalents at a price below the then conversion price, the conversion price of Series D is automatically adjusted downward according to a weighted average formula, protecting Series D holders from dilution.
• Dividend Policy: Series D holders are entitled to annual dividends at 8% of the Stated Value, payable quarterly in arrears in common stock, based on the conversion price.
• Liquidation Preference: In the event of liquidation, dissolution or winding up, Series D holders are entitled to receive payments in preference to all junior stock.
• Voting Rights: Series D holders vote with common stockholders on an as-converted basis on all matters (subject to beneficial ownership limits). Some actions require explicit approval of the “Required Holders” (majority of Series D outstanding).
• Protective Provisions (Major Restrictions): Without approval of the Required Holders, the Company may not:
  • Amend the Certificate of Incorporation or Bylaws to alter Series D rights;
  • Create any new class of shares pari passu or senior to Series D;
  • Pay or declare any dividends on common stock or junior securities;
  • Incur new indebtedness above \$2 million (except for limited government loans, capital leases, or refinancing of existing debt);
  • Redeem, purchase, or acquire preferred or common shares except for limited exceptions;
  • Enter into transactions with officers, directors, or affiliates outside the ordinary course of business.
• Other Important Terms: The Series D Certificate of Designations includes additional rights such as participation in rights offerings, notice requirements for material events, and procedures for amendment or shareholder consent.

Warrant Terms

• Exercise Price and Adjustments: Warrants issued in connection with the Series D offering have an exercise price subject to adjustment for stock splits, stock dividends, reorganizations, and dilutive issuances.
• Cashless Exercise Option: Holders may elect a cashless exercise, with the number of shares issued calculated based on the difference between fair market value and exercise price using a specified formula.
• Term: Warrants are exercisable for a period of 7.5 years from issuance.
• Protective Provisions: Similar to Series D, warrant terms provide strong anti-dilution protections and require the Company to obtain shareholder approval for certain actions if needed to allow full exercise.

Shareholder and Market Impact (Price-Sensitive Elements)

• Potential Significant Dilution: Conversion of Series D and exercise of warrants could lead to substantial issuance of new common shares, diluting existing shareholders.
• Major Restrictions on Company Actions: Many significant actions (new debt, dividends, new senior classes, related party transactions) cannot occur without Series D holder approval. This can affect the Company’s flexibility and may influence strategic decisions, mergers, or capital structure changes.
• Enhanced Control by Preferred Holders: Series D holders will have outsized influence over corporate governance, potentially affecting future M&A, capital raises, and other value-driving events.
• Automatic Conversion of Series A Shares: The clean-up of legacy preferred shares into common stock may simplify the Company’s capital structure, but also increases the float and could impact trading volumes and price volatility.
• Dividend Policy: 8% annual dividend on Series D, paid in common stock, may increase share count and affect earnings per share calculations.
• Filing of Key Agreements: All principal documents (Certificate of Designations, Warrant, Purchase Agreement, Registration Rights Agreement) are available as exhibits for investor review.

What Investors Should Watch

• Timing and volume of Series D conversions and warrant exercises, as these can create new supply in the market.
• Any Company proposals requiring Series D approval, especially strategic transactions, financings, or changes to dividend policy.
• Future communications on registration of underlying shares or amendments to agreements, as these could signal upcoming corporate actions.
• Quarterly dividend payments in stock, which will increase the outstanding share count.

Conclusion

The Series D Preferred Stock and associated warrants introduce significant new rights for investors holding these instruments and impose substantial restrictions on Company actions. The anti-dilution protections and voting rights afforded to Series D holders, combined with the potential for dilution from conversion and warrant exercises, are material for all shareholders. These developments could impact the Company’s share price and strategic flexibility.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review the full filings and consult with their financial advisor before making investment decisions. The above summary is based on the Company’s recent SEC filing and may be subject to future amendments or clarifications.

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