Form 20-F x    Form 40-F o

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Xanadu Quantum Technologies Limited (the “Company” or “Xanadu”) was incorporated under the Business Corporations Act (Ontario) on October 2, 2025. The Company was formed to facilitate the merger (the “Reverse Recapitalization”) between Xanadu Quantum Technologies Inc. (“Old Xanadu”) and Crane Harbor Acquisition Corp. (“SPAC”), a special purpose acquisition company. Old Xanadu was incorporated under the Canada Business Corporations Act on December 7, 2016, and subsequently continued under the Business Corporations Act (Ontario) on October 29, 2025. The Company is headquartered in Toronto, Ontario.

On March 26, 2026, Xanadu completed its previously announced Reverse Recapitalization pursuant to the merger agreement (the "Agreement"), dated November 3, 2025, with Old Xanadu and SPAC, a Cayman Islands exempted corporation. SPAC was incorporated on January 2, 2025, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar reverse recapitalization with one or more businesses. Upon closing, Xanadu became the parent company of both Old Xanadu and SPAC. SPAC was continued under the Business Corporations Act (Ontario) on March 20, 2026 and was renamed Xanadu Quantum Technologies Former SPAC Inc. on March 27, 2026. The Reverse Recapitalization was accounted for as a reverse recapitalization in accordance with U.S. GAAP.

Following the Reverse Recapitalization the Xanadu Class B Subordinate Voting Shares began trading on the Nasdaq and the TSX under the symbol “XNDU”.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting and pursuant to the accounting and disclosure rules and regulations of the United States Securities and Exchange Commission ("SEC"), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of June 30, 2026 and the results of operations and cash flows for the periods presented. Certain information or footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of results that may be expected for the full year or any other period. Unless otherwise noted, these condensed consolidated financial statements are presented in thousands of United States (U.S.) dollars (except per share amounts), which is also the Company’s functional currency.

The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in our Annual Report on Form 20-F for the year ended December 31, 2025 filed with the SEC and Canadian Securities Administrators ("CSA") on April 9, 2026.

As discussed in Note 3, 'Reverse Recapitalization,' the Reverse Recapitalization was accounted for as a reverse recapitalization. Accordingly, the information presented for the year ended and as of December 31, 2025, and the three and six months ended June 30, 2025, represents the results and financial position of Old Xanadu.

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Basis of Consolidation

The condensed consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries. Any subsidiaries that are formed or acquired during the year are consolidated from their respective dates of formation or acquisition.

All intercompany transactions and balances have been eliminated.

Use of Estimates

Xanadu’s accounting estimates and assumptions may change over time in response to risks and uncertainties. As of the date of issuance of these condensed consolidated financial statements, Xanadu is not aware of any specific event or circumstance that would require Xanadu to update estimates, judgments or revise the carrying value of any assets or liabilities.

Liquidity and Going Concern

The condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred recurring net losses and negative cash flows from operations since inception.

As of June 30, 2026 and December 31, 2025, the Company had an accumulated deficit of $270,365 and $206,303, respectively. For the six months ended June 30, 2026 and 2025, the Company incurred net losses of $62,655 and $27,345, respectively, and the Company had net cash outflows from operating activities of $30,630 and $27,374, respectively.

As of June 30, 2026 and December 31, 2025, the Company had cash and cash equivalents of $312,780 and $16,164 and net working capital of $318,249 and $31,237, respectively.

On March 26, 2026, Xanadu successfully consummated its reverse recapitalization with SPAC and Old Xanadu and a concurrent PIPE investment. The Company received gross proceeds from the Reverse Recapitalization of $301,646, which includes $275,000 of PIPE financing and $26,646 of cash from the SPAC's trust account. Additionally, during the second quarter of 2026, we received $67,154 in net cash proceeds, through the issuance of 5,467,524 Class B Subordinate Voting Shares under the synthetic at-the-market facility ("SATM Facility") that the Company entered into in the second quarter of 2026 (see Note 13). As of June 30, 2026, the Company had remaining share issuance capacity under the SATM Facility of up to 24,532,476 shares, or up to $232,846.

Based on Xanadu's current operating plan, management believes that the existing cash and cash equivalents will be sufficient to fund operations, research and development ("R&D") activities, and capital expenditure requirements for at least 12 months from the date these condensed consolidated financial statements are issued.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and

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comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to not opt out of such extended transition period.

Summary of Significant Accounting Policies

(a) Cash and cash equivalents:

Xanadu considers all short term highly liquid investments purchased with original maturities at their acquisition date of three months or less to be cash equivalents. Xanadu maintains its cash and investments with major financial institutions, which, at times, may exceed federally insured limits. Xanadu did not hold any cash equivalents as of June 30, 2026 and December 31, 2025.

(b) Accounts receivable, net:

Trade receivables are non-interest bearing and represent amounts billed and currently due from customers at the gross invoiced amount as well as unbilled amounts related to unconditional rights for consideration to be received for services performed but not yet invoiced. A receivable is recorded when Xanadu has an unconditional right to receive payment. Xanadu’s accounts receivable includes trade and other types of receivables.

On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance for credit losses. This assessment is based on management’s evaluation of the aging of accounts, historical collection experience and current economic expectations. As of June 30, 2026 and December 31, 2025, Xanadu had not recorded any allowance for doubtful accounts.

(c) Materials and supplies, net:

Materials and supplies are carried at average cost and recorded in materials and supplies in the consolidated balance sheets. Materials and supplies used in R&D efforts are expensed when consumed if an alternative use exists, otherwise are expensed when incurred.

Materials and supplies are evaluated for excess quantities and obsolescence. This evaluation includes an analysis of Xanadu’s current and future strategic plans, risk of technological obsolescence, and general market conditions.

(d) Property and equipment, net:

Property and equipment are stated at acquisition cost, less accumulated depreciation and impairment. Depreciation on property and equipment is computed on a straight-line basis over the estimated useful lives of the assets at the time of acquisition. Leasehold improvements are amortized over the lesser of the term of the lease or the useful life of the asset.

The estimated useful lives of Xanadu’s property and equipment are as follows:

Computer systems and servers			3 years
Lab equipment			7 years
Test and computer equipment			7 years
Furniture and fixtures			3 years
Leasehold improvements			Shorter of lease term or estimated useful life

Equipment deposits for property and equipment are classified as long-term deposits on the consolidated balance sheets until the underlying assets are delivered, installed, and placed in service, at which time they are reclassified to property and equipment, net.

Repairs and maintenance costs are expensed as incurred. Upon disposition of property and equipment, the cost and related accumulated depreciation are derecognized and any resulting gain or loss is reflected in other income (expense), net within the consolidated statements of operations and comprehensive loss.

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(e) Intangible assets, net:

Xanadu’s intangible assets include patents and external software licenses, which are carried at cost less accumulated amortization and impairment. Intangible assets with finite useful lives are amortized over their estimated useful lives on a straight-line basis. Xanadu capitalizes costs associated with internal use software incurred during the application development stage. Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related expenses for employees who are directly associated with and allocate time to the internal-use software project. Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred.

Patents			3 years
Internally developed software			5 years
External software licenses			3 years

(f) Impairment of long-lived assets:

Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. The determination of whether any impairment exists includes a comparison of estimated undiscounted future cash flows anticipated to be generated over the remaining life of the asset or asset group to its net carrying value. If the estimated undiscounted future cash flows associated with the asset or asset group are less than the carrying value, an impairment loss is recognized to the extent the carrying amount of the asset or asset group exceeds its fair value. Xanadu did not recognize any impairment losses on long-lived assets for the three and six months ended June 30, 2026 and 2025.

(g) Foreign currency translation and transactions:

Xanadu's reporting currency is the U.S. dollar and its functional currency is the U.S. dollar. The functional currency of Xanadu's subsidiary, Old Xanadu, is the Canadian dollar. The results and financial position of the subsidiaries whose functional currency is not the U.S. dollar are translated at exchange rates in effect as of the consolidated balance sheet dates for assets and liabilities and at average exchange rates for revenues and expenses for the respective periods. Translation adjustments are included as a cumulative translation adjustment in accumulated other comprehensive income (loss).

Monetary assets and liabilities that are denominated in a currency other than the functional currency of the entity in which they reside are translated into the respective entity's functional currency using the exchange rates as of the consolidated balance sheet dates, and revenues and expenses are translated at the exchange rates prevailing when the transactions occurred. Gains and losses resulting from such foreign currency transaction translations are recognized in other income, net in the consolidated statements of operations and comprehensive loss in the period in which they arise. Non-monetary assets and liabilities that are denominated in a currency other than the functional currency of the entity in which they reside are translated into the respective entity's functional currency at historical exchange rates.

(h) Revenue recognition:

Xanadu derives revenue primarily from: (i) professional services related to research projects, proof of concept development, and quantum education and (ii) compute and other services which includes provision of compute services, such as co-development and execution of quantum algorithms on Xanadu’s quantum computing systems, and provision, on a non-exclusive basis via access to its photonic-based hardware, of quantum-computing-as-a-service (“QCaaS”).

Revenue is recognized based on the following five step model in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers:

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•Identify the contract,

•Identify the performance obligations,

•Determine the transaction price,

•Allocate the transaction price to the performance obligations, and

•Recognize revenue when (or as) the entity satisfies a performance obligation.

Xanadu enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Payment terms on invoiced amounts are typically net 30 days or less. Contract durations generally range from six months to several years. A contract’s transaction price is allocated to each distinct performance obligation based on their estimated standalone selling price. Xanadu determines standalone selling price based on the observable price of a product or service when it sells the products or services separately in similar circumstances and to similar customers. Certain products and services have limited or no history of being sold on a standalone basis. In these instances, Xanadu determines standalone selling price by considering its overall pricing objectives and market conditions, including cost plus a reasonable margin. Significant pricing practices considered include Xanadu’s discounting practices, the value of the contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within the contracts.

Revenue is recognized net of taxes, which are remitted to governmental authorities.

Professional services arrangements often include a series of activities with progress billing milestones. Xanadu’s professional services constitute an activity that provides benefits that the customer receives and consumes as the services are performed. The transaction price is generally fixed and stated in the contract with the customer. Professional services revenue is recognized based on hours and, or costs incurred as appropriate. Revenue for partially completed professional service performance obligations deemed probable of being met is recognized using an input measure based on actual labor hours incurred to date relative to total estimated labor hours required to complete the project. For fixed price contracts, revenue is recognized based on the input measure noted above as control is expected to transfer over the period that the project is completed.

Xanadu has determined that its QCaaS, including non-exclusive access to photonic hardware, is a stand-ready performance obligation to provide ongoing access to its cloud-based quantum technology platform service. The transaction price generally consists of a fixed fee for a stated volume of usage to be made available over a defined period of access. Fixed fee arrangements may also include a variable component whereby customers pay additional fees for usage exceeding contractual volume as defined by the contractual agreements. The performance obligation related to the fixed fee is satisfied over time and revenue is recognized on a straight-line basis over the access period. Any additional fees relating to extra usage are recognized in the period they occur.

Xanadu’s compute services represent a performance obligation that is satisfied over-time. Revenue is recognized on a straight-line basis over the contract term.

The timing of revenue recognition, billings and cash collection may result in accounts receivable, contract assets, and deferred revenue on Xanadu’s consolidated balance sheets. A receivable is recorded in the period in which Xanadu provides services when it has an unconditional right to payment. Contract assets represent rights to consideration for services completed and revenue recognized for contracts that have not yet been invoiced to customers, which have been included within accounts receivable on the consolidated balance sheets.

Xanadu records deferred revenue when amounts are invoiced under contract terms or payments are received in advance of revenue recognition from products or services described above. Deferred revenue is recognized as and when the related performance obligations are satisfied.

Xanadu defers commission payments to employees or third parties that are direct and incremental to the acquisition of customer contracts in the period the contract is executed and are recognized into sales and marketing

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expense over a period consistent with the transfer of goods or services to the customer if that period is greater than one year. No such costs were incurred in the years presented.

(i) Cost of revenue:

Cost of revenue consists of direct expenses related to building specialized quantum hardware and delivering Xanadu’s services. Cost of revenue includes direct manufacturing costs, personnel-related expenses, including stock-based compensation, and overhead costs, including operating lease expenses, allocated to customer-facing functions. Depreciation and amortization of quantum systems and related software are excluded from cost of revenue.

(j) Research and development:

R&D expenses are charged to the consolidated statement of operations and comprehensive loss as incurred. R&D expenses are comprised of costs in performing research and development activities and include personnel-related costs, process development costs, chip fabrication costs, consulting fees, lab materials, software costs, cloud computing costs, and other related costs.

Where tangible assets or software to be used in R&D activities is constructed by Xanadu or acquired, the costs are expensed as incurred unless those assets have an alternative future use. When assets with alternative future use are consumed in R&D activities they are recorded as research and development expenses.

(k) Stock-based compensation:

Xanadu accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Equity-settled stock based payments to employees and others providing similar services are recognized as stock-based compensation expense based on the fair value of the equity instruments at the grant date. Stock-based compensation expense is recognized over the requisite service period on a straight-line basis, with a corresponding increase in additional paid-in capital within shareholders’ equity. Xanadu recognizes forfeitures as they occur.

(l) Investment tax credits and government assistance:

Refundable investment tax credits pursuant to the Scientific Research and Experimental Development program and other government assistance including grants and wage subsidies related to current expenditures are recorded as other operating income, net within the consolidated statements of operations and comprehensive loss. Non-refundable investment tax credits are recorded as a reduction in income tax expense. Xanadu accounts for investment tax credits and government grants and subsidies by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosures of Government Assistance. The investment tax credits, and government grants and subsidies are recognized in income in the period when the related expenditure is recognized as an expense provided there is reasonable assurance that Xanadu has complied with, and will continue to comply with, all conditions necessary to obtain the government assistance or credit. Government grants and assistance related to capitalized expenditures are recognized as a reduction to the carrying amount of the related asset.

(m) Net loss per share:

Basic net loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of Xanadu Class A Multiple Voting Shares and Xanadu Class B Subordinate Voting Shares (each, as defined below) outstanding during each period. Xanadu’s potentially dilutive securities include outstanding stock options and other equity compensation securities, Earn-out Shares and warrants. Diluted net loss per share gives effect to all potentially dilutive securities, assuming that such shares were outstanding and dilutive during each period, except when the inclusion of the potentially dilutive securities would have an anti-dilutive effect. Xanadu applies the two-class method when computing net loss per share, as Xanadu has issued shares that meet the definition of participating securities. The two-class method allocates earnings between common shareholders and holders of participating securities.

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(n) Fair value measurement:

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. The inputs to these methodologies consider market comparable information, taking into account the principal or most advantageous market in which Xanadu would transact. The fair value hierarchy prioritizes which inputs should be used in measuring fair value and requires the use of observable market data when available. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs, and a financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement:

● Level 1: Quoted market prices in active markets that the reporting entity has the ability to access at the date of the fair value measurement.

● Level 2: Inputs other than quoted market prices described in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value measurement of the assets or liabilities.

(o) Concentration of credit risk:

Financial instruments that potentially subject Xanadu to concentration of credit risk principally consist of cash and cash equivalents and accounts receivable. Xanadu’s policy is to place its cash and cash equivalents with major financial institutions to limit the amount of credit exposure. For Xanadu’s accounts receivable and grants receivable, credit risk is dependent upon the financial stability of individual customers or government entity. Xanadu performs ongoing evaluations of its customers’ and grantor’s financial condition and does not have a history of material credit losses. Refer to Note 12 for additional information about Xanadu’s significant customers. Other receivables represent an insignificant part of Xanadu’s financial position.

(p) Derivative and fair value liabilities:

The Company evaluates its financial instruments, including warrants, earn-outs, forward contracts and put options, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815 - "Derivatives and Hedging".

For standalone and bifurcated embedded derivative financial instruments, the instrument is initially recorded at fair value and re-measured at each reporting date, with changes in fair value reported in the consolidated statement of operations and comprehensive loss. Instruments meeting equity classification requirements are recorded at fair value at issuance and are not subsequently remeasured.

As discussed in Note 1, Xanadu entered into the Agreement on November 3, 2025 with SPAC and Old Xanadu. The Reverse Recapitalization closed on March 26, 2026 (the "Closing Date"). At the closing of the transactions contemplated by the Agreement (the "Closing"), Xanadu had three authorized classes of shares, multiple voting shares (“Xanadu Class A Multiple Voting Shares”), subordinate voting shares (“Xanadu Class B Subordinate Voting Shares”) and preferred shares (“Xanadu Preferred Shares”) issuable in series, of which only Xanadu Class A Multiple Voting Shares and Xanadu Class B Subordinate Voting Shares were issued and outstanding.

Immediately prior to the effective time of the Reverse Recapitalization, the following occurred:

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•Preferred Share Exchange: Each then issued and outstanding preferred share in the capital of Old Xanadu was converted into and exchanged for one voting common share in the capital of Old Xanadu (each, an "Old Xanadu Voting Common Share").

•Recapitalization and Share Exchange: Each outstanding Old Xanadu Voting Common Share (including those issued upon the preferred share exchange) was transferred to the Company in exchange for a multiple voting share in the capital of Xanadu (each, a "Xanadu Class A Multiple Voting Share") based on an exchange ratio of 11.28 (the "Exchange Ratio"). Each outstanding non-voting common share in the capital of Old Xanadu (each, an "Old Xanadu Non-Voting Common Share") was transferred to the Company in exchange for a subordinate voting share in the capital of Xanadu (each, a "Xanadu Class B Subordinate Voting Share") based on the same Exchange Ratio.

•Equity Award Exchange: Each Old Xanadu voting option outstanding (whether vested or unvested) was exchanged for an option to purchase Xanadu Class A Multiple Voting Shares (each, a “Xanadu Class A Multiple Voting Share Option”). Each Old Xanadu non-voting option outstanding (whether vested or unvested) was exchanged for an option to purchase Xanadu Class B Subordinate Voting Shares (each, a “Xanadu Class B Subordinate Voting Share Option"). The number of Xanadu shares subject to each new option was determined by multiplying the number of Old Xanadu common shares subject to the original option by the Exchange Ratio (rounded down to the nearest whole share). The per-share exercise price for the new options was determined by dividing the prior exercise price by the Exchange Ratio. The strike price was converted from Canadian dollars to U.S. dollars to align with the trading of the Xanadu Class B Subordinate Voting Shares on the Nasdaq market.

•Warrant Exercise and Exchange: The Old Xanadu SFTrust Warrants and RBC Warrants (each, as defined below) outstanding immediately prior to the closing of the Reverse Recapitalization were exchanged for warrants to purchase Xanadu Class A Multiple Voting Shares ("MVS Warrants") and Xanadu Class B Subordinate Voting Shares ("SVS Warrants") based on the Exchange Ratio and a U.S. dollar denominated strike price. The Old Xanadu SFTrust Warrants were exchanged for warrants exercisable for 383,645 Xanadu Class A Multiple Voting Shares at a price of $0.02 per share and 136,329 Xanadu Class A Multiple Voting Shares at a price of $0.15 per share. Subsequently, on March 30, 2026, holders exercised the SFTrust Warrants on a net basis, resulting in 517,527 of these warrants being exchanged for Xanadu Class A Multiple Voting Shares on a cashless basis. The Old Xanadu RBC Warrants were exchanged for 157,960 warrants to purchase Xanadu Class B Subordinate Voting Shares at a price of $1.15 per share warrants to purchase Xanadu Class B Subordinate Voting Shares. See Note 19.

•PIPE Financing: Xanadu issued and sold 27.5 million Xanadu Class B Subordinate Voting Shares to investors in the PIPE ("PIPE Investors") at a price of $10.00 per share for aggregate gross proceeds of $275,000.

•Sponsor Earn-out Shares: Crane Harbor Sponsor, LLC (the "SPAC Sponsor") subjected 1,100,000 Xanadu Class B Subordinate Voting Shares to an earn-out arrangement ("Earn-out Shares"), which were classified as a liability recognized at fair value.

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Below are the shares outstanding immediately following the Reverse Recapitalization and PIPE investment:

						Shares						% of Voting
Old Xanadu Shareholders						257,684,899						86.5		%
PIPE Investors						27,500,000						9.2		%
SPAC Public Shareholders						3,211,605						1.0		%
SPAC Private Placement Shareholders						2,264,000						0.8		%
SPAC Sponsor Shares (1)						7,333,333						2.5		%
Total Common Shares by Shareholder						297,993,837						100.0		%
Xanadu Class A Multiple Voting Shares						254,709,401						85.5		%
Xanadu Class B Subordinate Voting Shares (1)						43,284,436						14.5		%
Total Common Shares by Class						297,993,837						100.0		%

(1) Includes 1,100,000 Earn-out Shares subject to forfeiture as of the closing of the Reverse Recapitalization on March 26, 2026. Refer to the section below for additional information.

Shares on a fully-diluted basis immediately following the Reverse Recapitalization and PIPE investment were:

						Shares						% of Voting
Old Xanadu Shareholders						257,684,899						74.5		%
Old Xanadu Options						47,360,480						13.7		%
Old Xanadu Warrants						677,934						0.2		%
PIPE Investors						27,500,000						7.9		%
SPAC Public Shareholders						3,211,605						0.9		%
SPAC Private Placement Shareholders						2,264,000						0.7		%
SPAC Sponsor Shares (1)						7,333,333						2.1		%
Total Fully Diluted Shares						346,032,251						100.0		%

(1) Includes 1,100,000 Earn-out Shares subject to forfeiture as of the closing of the Reverse Recapitalization on March 26, 2026. Refer to the section below for additional information.

Gross proceeds from the Reverse Recapitalization were $301,646, which included $275,000 of PIPE financing and $26,646 from SPAC's trust account. The Company incurred $52,157 in total costs related to the Reverse Recapitalization and PIPE financing, of which $37,915 were costs directly related to the issuance of shares, of which $1,264 was allocated to the issuance of the Earn Out Shares, and thus expensed to the consolidated statement of operations and comprehensive loss, and the remaining $36,651 was recorded against share capital. These direct transaction costs consist primarily of legal, accounting, advisory, and other professional fees and were deducted from proceeds of the Reverse Recapitalization and PIPE financing, the net of which is recorded in common shares on the consolidated balance sheet. Total indirect and incremental transaction costs resulting from the Reverse Recapitalization were $15,506 of which $5,465 was expensed to the consolidated statement of operations and comprehensive loss during the three months ended March 31, 2026.

The Reverse Recapitalization was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, SPAC was treated as the 'acquired' company and Old Xanadu was treated as the accounting acquirer for financial reporting purposes. Accordingly, the consolidated financial statements represent the continuation of the financial statements of Old Xanadu, with the Reverse Recapitalization being treated as the equivalent of Xanadu issuing shares for the net assets of SPAC, accompanied by a recapitalization. The net assets of SPAC are stated at historical cost, with no goodwill or other intangible assets recorded. Historical retained earnings

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(accumulated deficit) were carried forward following completion of the Reverse Recapitalization and the shareholder's equity of Xanadu is presented based on historical equity of Old Xanadu, recast to reflect that Reverse Recapitalization.

Earn-Out Shares

Prior to the Reverse Recapitalization, the SPAC Sponsor was the holder of 7,333,333 Class B shares in SPAC (the "SPAC Class B Shares"). Pursuant to the terms of the Plan of Arrangement, the SPAC Class B Shares were exchanged for Xanadu Class B Subordinate Voting Shares. The SPAC Sponsor subjected 1,100,000 Xanadu Class B Subordinate Voting Shares it received in the transactions contemplated by the Reverse Recapitalization, to an earn-out based on the price of the Xanadu Class B Subordinate Voting Shares as follows:

Following the Closing, at any time during the period following the Closing and expiring on the fourth anniversary of the Closing Date (the “Vesting Term”),

(i) 550,000 of the Earn-Out Shares shall be forfeited by the SPAC Sponsor for no consideration if the share price of Xanadu Class B Subordinate Voting Shares is not at least $12.50 per Xanadu Class B Subordinate Voting Shares for 20 trading days within any 30 consecutive trading day period during the Vesting Term, and

(ii) 550,000 additional Earn-Out Shares shall be forfeited by the SPAC Sponsor for no consideration if the share price of Xanadu Class B Subordinate Voting Shares is not at least $15.00 per Xanadu Class B Subordinate Voting Shares for 20 trading days within any 30 consecutive trading day period during the Vesting Term provided.

Vesting is not subject to any employment conditions of the holder of the Earn-Out Shares. However, in the event of (A) a merger, amalgamation, arrangement, consolidation or other business combination involving Xanadu, (B) a sale of all or substantially all of the assets of Xanadu, or (C) any other transaction or series of related transactions as a result of which the holders of Xanadu Class B Subordinate Voting Shares immediately prior to such transaction cease to own at least a majority of the outstanding Xanadu Class B Subordinate Voting Shares or its successor entity, in any case, during the Vesting Term, then, immediately prior to the consummation of such transaction, any and all Earn-Out Shares shall become fully vested and shall no longer be subject to forfeiture under the Reverse Recapitalization Agreement and sponsor letter agreement entered into on November 3, 2025 between the SPAC Sponsor, SPAC, Old Xanadu and Xanadu.

At the Closing, the Earn-Out Shares had an initial fair value of $9,997. The Company allocated $1,264 of the transaction costs related to the Reverse Recapitalization to the issuance of the Earn-out Shares. These costs were expensed within general and administrative expenses in the consolidated statement of operations and comprehensive loss during the three months ended March 31, 2026.

As of March 31, 2026, the earn-out liability was carried at a fair value of $7,164. Subsequently, during the second quarter of 2026, the underlying price thresholds were achieved for both tranches of the Earn-Out Shares. Specifically, on May 7, 2026, the first tranche of 550,000 shares vested when the share price of the Company's Class B Subordinate Voting Shares equaled or exceeded the $12.50 target price for 20 trading days within a 30 consecutive trading day period, and the remaining tranche of 550,000 shares vested on May 13, 2026, when the share price equaled or exceeded the $15.00 price target under the same 20 out of 30 trading day framework during the Vesting Term. Accordingly, all 1,100,000 Earn Out Shares vested and are no longer subject to forfeiture. Upon vesting, the earn-out liability was remeasured to its fair value on the respective vesting dates. The cumulative change in fair value from the date of the closing of the Reverse Recapitalization through the final vesting date, resulted in a net loss of $7,764, within the loss on fair value of earn-out liabilities, net within the consolidated statements of operations and comprehensive loss. Following this final remeasurement, the corresponding liability balance was reclassified to shareholders’ equity on the consolidated balance sheet.

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The Company’s accounts receivable include trade and other receivables as of June 30, 2026 and December 31, 2025:

			June 30, 2026						December 31, 2025
Trade receivable			$	198					$	100
Other receivables			805						86
Grant receivable			—						5,011
Contract assets			1,084						1,499
Sales tax receivable			1,343						963
Deferred transaction costs			—						1,818
Total			$	3,430					$	9,477

Prepaid expenses and other current assets are comprised of the following as of June 30, 2026 and December 31, 2025:

			June 30, 2026						December 31, 2025
Prepaid materials and supplies			$	5,216					$	3,675
Prepaid professional services			94						154
Derivative asset			1,104						—
Other prepaid expenses and current assets			2,878						2,400
Total			$	9,292					$	6,229

Accrued expenses and other current liabilities are comprised of the following as of June 30, 2026 and December 31, 2025:

			June 30, 2026						December 31, 2025
Accrued salaries and other payroll liabilities			$	610					$	36
Accrued professional services			3,414						1,962
Other accrued expenses and current liabilities			2,699						193
Total			$	6,723					$	2,191

The majority of other accrued expenses and current liabilities relate to R&D consumables received by the Company but not yet billed by the suppliers.

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Property and equipment, net consisted of the following as of June 30, 2026 and December 31, 2025:

			June 30, 2026						December 31, 2025
Computer systems and servers			$	1,290					$	1,083
Test and computer equipment			17,239						16,988
Lab equipment			9,608						9,604
Furniture and fixtures			275						286
Leasehold improvements			3,880						3,637
Total			$	32,292					$	31,598
Less: Accumulated depreciation			(15,022)						(13,285)
Property and equipment, net			$	17,270					$	18,313

For the three months ended June 30, 2026 and 2025, the Company recognized depreciation expense of $1,149 and $927, respectively. For the six months ended June 30, 2026 and 2025, the Company recognized depreciation expense of $2,301 and $1,873, respectively.

As of June 30, 2026, the Company had $4,770 in equipment deposits for property and equipment, which are classified as long-term deposits on the consolidated balance sheets. When the underlying assets are delivered, installed, and placed in service, they will be reclassified to property and equipment, net.

Intangible assets, net consisted of the following as of June 30, 2026 and December 31, 2025:

			As of June 30, 2026
			Cost						Accumulated Amortization						Net Book Value
Patents			$	2,519					$	(1,560)					$	959
Internally developed software			7,773						(3,907)						3,866
External software licenses			263						(142)						121
Total			$	10,555					$	(5,609)					$	4,946

			As of December 31, 2025
			Cost						Accumulated Amortization						Net Book Value
Patents			$	2,226					$	(1,383)					$	843
Internally developed software			7,586						(3,352)						4,234
External software licenses			180						(129)						51
Total			$	9,992					$	(4,864)					$	5,128

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As of June 30, 2026 and December 31, 2025, the Company’s debt is comprised of the SIF Loan (as defined below) and the FedDev Loan (as defined below) as follows:

			June 30, 2026						December 31, 2025
SIF Loan			$	30,168					$	27,536
FedDev Loan			2,371						2,462
Total debt			32,539						29,998
Less: current portion			132						—
Total long-term debt			32,407						29,998

SIF Loan

Under the Strategic Innovation Fund Agreement, by and between Old Xanadu and His Majesty the King in Right of Canada as represented by the Minister of Industry, as amended (the "SIF Loan"), SIF is committed to provide the Company contributions up to C$40,000 contingent on the Company incurring defined eligible expenditures. Contributions from SIF shall be used for the development of photonic-based, fault-tolerant quantum computers, including projects involving the adaptation of research findings for commercial applications, development of current products through the implementation of new or incremental technology, and development of process improvements which reduce the environmental footprint of current production. During the second quarter of 2026, the Company received the remaining C$4,000 in funding from SIF, resulting in all C$40,000 of the program's funding being fully received. As of December 31, 2025, the Company had received C$35,682 in total funding from SIF.

Principal and interest amounts to be repaid under the SIF Loan are determined using a revenue-based formula and are capped at 150% of the principal amount. Repayments are due in up to 20 annual installments, commencing on April 30, 2028. If the total of the 20 revenue-based annual installments is less than the principal amount, any remaining repayment obligation will be forgiven.

The SIF Loan includes certain covenants requiring the Company to support high-skilled jobs in Canada, collaborate with Canadian institutions and small and medium-sized Canadian-based enterprises, and invest in R&D within Canada. Repayments of the SIF Loan can also be triggered upon default on loan covenants in the agreement, termination of the agreement, or upon a change of control that has not been approved by the Government of Canada. Old Xanadu determined the Reverse Recapitalization did not constitute a change in control as defined in the SIF Loan and no approvals were required by the Government of Canada. As of June 30, 2026, the Company was in compliance with all events that would trigger default or termination of the agreement.

The Company accounts for the SIF Loan as a liability on the Company’s consolidated balance sheets in accordance with ASC 470-10-25, Sales of Future Revenues. The SIF Loan is initially measured at face value and subsequently amortized using the effective interest method, which includes accrued interest expense over the estimated term of the SIF Loan. The amortization schedule is based on projected cash flows derived from the Company’s long-term revenue forecast. Subsequent changes in forecasted cash flows will be accounted for under the retrospective method, which entails a new effective interest rate being computed each period based on the original proceeds received, actual cash flows to date, and the revised estimate of remaining cash flows. The new discount rate is then used to adjust the carrying value of the debt to the present value of the revised cash flows, discounted at the new effective interest rate. The offset is recognized in interest income (expense), net. As the SIF Loan originated through a government program, a market rate of interest is not imputed in accordance with the scope limitations of ASC 835.

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As of June 30, 2026 and December 31, 2025, the Company determined a weighted average effective interest rate for the SIF Loan of 4.64% and 4.69%, respectively, based on the most recent revenue projections at each reporting date.

The following table summarizes interest expense for the three and six months ended June 30, 2026 and 2025 related to the SIF Loan, inclusive of foreign exchange, within interest income (expense), net in the consolidated statements of operations and comprehensive loss:

			Three Months Ended June 30,												Six Months Ended June 30,
			2026						2025						2026						2025
Interest Expense			$	322					$	256					$	634					$	454

The following table summarizes the changes in the carrying value of the SIF Loan for the six months ended June 30, 2026:

Balance as of December 31, 2025						$	27,536
Contributions received, net of changes due to foreign exchange rates						2,073
Interest expense, net of changes in foreign exchange rates						559
Balance as of June 30, 2026						$	30,168

As of June 30, 2026, the Company has classified the SIF Loan as non-current as repayments will not commence within the 12 months following the balance sheet date.

FedDev Loan

Under the Regional Quantum Initiative Contribution Agreement between Old Xanadu and His Majesty the King in Right of Canada as represented by the Minister of Federal Economic Development Agency for Southern Ontario (the “FedDev Loan"), an aggregate principal amount of C$3,750 is made available to the Company based on the Company’s incurrence of eligible expenditures. Proceeds from the FedDev Loan shall be used to advance and commercialize the Company’s quantum products. The Company has received C$3,375 in gross proceeds from the FedDev Loan at June 30, 2026 and December 31, 2025.

The FedDev Loan is repayable in 60 monthly installments commencing on April 1, 2027. As the FedDev Loan originated through a government program with regulated interest, a market rate of interest is not imputed in accordance with the scope exclusions of ASC 835.

The FedDev Loan includes certain event of defaults, including if the Company fails to meet the objectives or milestones outlined in the agreement. Repayment of the FedDev Loan can also be triggered upon default of the agreement. As of June 30, 2026, the Company is not aware of any events that would trigger default of the agreement.

The following table summarizes the changes in the carrying value of the FedDev Loan for the six months ended June 30, 2026:

Balance as of December 31, 2025			$	2,462
Changes due to foreign exchange rates			(91)
Balance as of June 30, 2026			$	2,371

No contributions were received on the FedDev Loan during the three and six months ended June 30, 2026. As of June 30, 2026, the Company has reclassified $132 of the outstanding balance to current portion of long-term debt

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to reflect maturities coming due within the next 12 months. The remaining balance of the FedDev Loan continues to be classified as long-term, as those principal repayments will not commence within the 12 months following the balance sheet date.

As of December 31, 2025, the Company’s warrant liabilities were comprised of the SFTrust Warrants (as defined below) and RBC Warrants (as defined below). The carrying value of the warrant liabilities as of June 30, 2026 and December 31, 2025 are as follows:

			June 30, 2026						December 31, 2025
MVS Warrants (previously SFTrust Warrants)			$	—					$	915
SVS Warrants (previously RBC Warrants)			—						959
Total warrant liabilities			$	—					$	1,874

The fair value of the Company’s warrant liabilities is estimated using a Black-Scholes option pricing model. Inherent in a Black-Scholes option pricing model are assumptions related to the fair value of the underlying common shares, expected stock-price volatility, expected term, risk-free interest rate and dividend yield.

Remeasurement and Reclassification to Equity

Upon the Closing, the Company re-evaluated both the MVS and SVS warrants under ASC 815-40, Contracts in Entity’s Own Equity. Management determined that following the exchange modifications, both instruments met the criteria for equity classification as they are now considered indexed to the Company’s own shares and as such were reclassified from liability to equity on the date of the Reverse Recapitalization.

Accordingly, on the March 26, 2026 reclassification date, the outstanding warrant liabilities were remeasured to their fair values using the Black-Scholes option pricing model, resulting in a net loss of $895 recorded within other operating income, net. Following this final remeasurement, the cumulative warrant liability balance of $2,769 was reclassified to additional-paid-in capital on the condensed consolidated balance sheet.

Refer to the MVS and SVS warrant exchange and reclassification equity sections below for additional information by warrant.

MVS Warrants (previously SFTrust Warrants)

Background

In 2018, 34,000 warrants were issued to Silicon Valley Bank ("2018 SFTrust Warrants"). The 2018 SFTrust Warrants were issued with an exercise price of C$0.29 per share and a ten year term from their original issuance. The fair value of the 2018 SFTrust Warrants on their respective grant dates were recognized within additional paid-in capital with an offset to debt issuance costs.

In connection with the 2021 amendment, Silicon Valley Bank was issued warrants to purchase 24,164 voting common shares of Old Xanadu representing 0.1% of the fully diluted shares, post Series B financing in 2021, per the terms of the Silicon Valley Bank loan agreement, on the same terms and conditions as established for other common shareholders ("2021 SFTrust Warrants", and together with the 2018 SFTrust Warrants, "SFTrust Warrants"). Half of the 2021 SFTrust Warrants vested immediately upon entering into the amendment with the other half vesting upon the draw of the Silicon Valley Bank term loan (the "SVB Term Loan") exceeding $5,000. Upon issuance, all 12,082 vested SFTrust Warrants had an exercise price of $1.69 per share and a 12-year term from their original issuance. 12,082 of the SFTrust Warrants have expired because Old Xanadu did not draw more than $5,000 of the SVB Term Loan prior to its full repayment and extinguishment on April 30, 2023.

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Warrant Exchange and Reclassification to Equity

As of December 31, 2025 and immediately prior to the Reverse Recapitalization on March 26, 2026, there were 46,082 SFTrust Warrants issued and outstanding classified as liabilities on the consolidated balance sheets. Immediately prior to the Reverse Recapitalization, these SFTrust Warrants were exchanged for 519,974 warrants to purchase Xanadu Class A Multiple Voting Shares based on the Exchange Ratio established in the Reverse Recapitalization and a U.S. dollar denominated strike price. Upon exchange, Xanadu issued MVS Warrants exercisable for 383,645 Xanadu Class A Multiple Voting Shares at a price of $0.02 per share and MVS Warrants exercisable for 136,329 Xanadu Class A Multiple Voting Shares at a price of $0.15 per share.

Following the exchange, the MVS warrants now qualified for equity classification under ASC 815-40 and the MVS Warrant liability balance was remeasured to its fair value and then subsequently reclassified to additional paid-in capital on the condensed consolidated balance sheet.

Warrant Exercise

On March 30, 2026, following the reclassification to equity, the holder of the outstanding MVS Warrants elected to settle the instruments through a cashless net exercise feature. Pursuant to the terms of the warrant agreement, the holder surrendered 2,447 MVS Warrants to cover the aggregate exercise price, resulting in the issuance of 517,527 Xanadu Class A Multiple Voting Shares. In connection with this exercise, $1,397 was reclassified from additional paid in capital to share capital.

As of June 30, 2026, all MVS Warrants were exercised. As of December 31, 2025, the MVS Warrants had a fair value of $915, which was included as a current liability on the consolidated balance sheets.

SVS Warrants (previously RBC Warrants)

Background

On May 23, 2023, the Company signed a credit agreement with the Royal Bank of Canada (“RBC”) for a maximum principal amount of $25,000 (the “RBC Term Loan”). In connection with the RBC Term Loan, RBC was issued warrants to purchase 13,999 non-voting common shares of the Company on the same terms and conditions as established for other common shareholders (the “RBC Warrants”). The RBC Warrants were issued with an exercise price of $12.94 per share and a 12-year term from their original issuance.

Warrant Exchange and Reclassification to Equity

As of December 31, 2025 and immediately prior to the Reverse Recapitalization on March 26, 2026, there were 13,999 RBC Warrants issued and outstanding. Upon the Closing, these RBC Warrants were exchanged for 157,960 SVS Warrants to purchase Xanadu Class B Subordinate Voting Shares based on the Exchange Ratio established in the Reverse Recapitalization and a U.S. dollar denominated strike price of $1.15 per share.

Following the exchange, the SVS Warrants qualified for equity classification under ASC 815-40 and the SVS warrant liability balance was remeasured to its fair value and then subsequently reclassified to additional paid-in capital on the condensed consolidated balance sheet.

As of June 30, 2026, the 157,960 SVS Warrants remain classified within additional paid-in capital and are no longer subject to remeasurement.

Warrant Exercise

Subsequent to the end of the period, the SVS Warrants were exercised. See Note 19 for additional information.

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The carrying amounts and estimated fair values of the following assets and liabilities and where they are classified within the fair value hierarchy as of June 30, 2026 and December 31, 2025 are as follows:

			June 30, 2026												December 31, 2025
			Fair value						Carrying amount						Fair value						Carrying amount
Warrant liabilities – Level 3			$	—					$	—					$	1,874					$	1,874
SIF Loan – Level 3			26,646						30,168						23,609						27,536
FedDev Loan – Level 2			2,371						2,371						2,462						2,462
Derivative asset - Level 3 (1)			1,104						1,104						—						—

(1) Refer to Note 13 for information related to this derivative asset.

The following summarizes the change in fair value of the Company’s warrant liability, Earn-Out Share liabilities, and derivative asset for the six months ended June 30, 2026:

						Warrant Liability						Earn-out Share Liability						Derivative Asset						Total
Fair value as of December 31, 2025						$	1,874					$	—					$	—					$	1,874
Establishment of asset and liabilities						—						9,997						1,350						11,347
Change in estimated fair value, net of changes in foreign exchange rates (1)						895						7,764						(246)						8,413
Reclassification of liability to equity						(2,769)						(17,761)						—						(20,530)
Fair value as of June 30, 2026						$	—					$	—					$	1,104					$	1,104

(1) Changes in fair value of warrant liabilities have been recognized within other operating income, net on the consolidated statement of operations and comprehensive loss. Changes in derivative assets and earn-out liabilities have been recognized in loss on derivative instruments, net and loss on fair value of earn-out share liabilities, net respectively in the consolidated statements of operations and comprehensive loss. In addition to the above, during the three and six months ended June 30, 2026, we recorded a loss of $1,661 on forward contracts related to the SATM. There were no forward contracts outstanding as of June 30, 2026.

The fair values of the Company’s long-term debt, including the SIF Loan and FedDev Loan, are estimated based on discounting future cash flows at currently available interest rates with comparable terms. The fair value measurement of the SIF Loan is considered a Level 3 valuation as it is based on a significant unobservable input related to the projected timing and amount of future revenues which determine expected future repayments.

Valuation of the Earn-out Share Liability

In accordance with ASC 815, unvested Earn-out Shares are classified as a liability if they do not meet the criteria to be considered indexed to the Company’s common shares. During the second quarter of 2026, the Earn-out Shares became fully vested and were no longer subject to forfeiture. Tranche 1 (550,000 shares) and Tranche 2 (550,000 shares) achieved their target price milestones and therefore became fully vested on May 7, 2026, and May 13, 2026, respectively. Consequently, the Earn-out Shares were remeasured to their fair value on these dates, and the final fair value adjustment was recognized in loss on the fair value of earn-out liabilities, net on the consolidated statement of operations and comprehensive loss. Following this final remeasurement, the corresponding liability balance was reclassified to shareholders’ equity on the consolidated balance sheet. As of June 30, 2026, the Earn-out Shares are included in share capital and no longer classified as a liability.

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The Company utilized a Monte Carlo simulation model to determine the fair value of the earn-out share liabilities at closing of the Reverse Recapitalization, at each subsequent reporting period, and immediately prior to vesting.

The following table summarizes the significant inputs:

			At Closing (March 26, 2026)						Tranche 1 Vesting (May 7, 2026)						Tranche 2 Vesting (May 13, 2026)
Shares subject to fair value			1,100,000						550,000						550,000
Share price (1)			$	10.00					$	12.50					$	15.00
Expected volatility			80		%				80		%				80		%
Risk-free interest rate			4.00		%				3.95		%				4.01		%
Remaining term (in years)			4.00						3.89						3.87
Fair value			9,997						$	9,562					$	8,199

Disaggregation of revenue

The Company’s revenue disaggregated by revenue source is as follows for the three and six months ended June 30, 2026 and 2025:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Professional services			$	1,511					$	883					$	4,343					$	1,415
Compute and other services			—						174						—						340
Total revenue			$	1,511					$	1,057					$	4,343					$	1,755

The following summarizes the Company’s revenue by geography for the three and six months ended June 30, 2026 and 2025, based on customer location:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Canada			$	1					$	313					$	73					$	691
United States			1,362						630						3,874						854
Rest of world (1)			148						114						396						210
Total revenue			$	1,511					$	1,057					$	4,343					$	1,755

(1) Rest of world includes countries where revenue from a single country is not greater than 10% of the Company’s total consolidated revenue for the three and six months ended June 30, 2026 and 2025, respectively.

Contract balances

The Company had contract assets totaling $1,084 and $1,499 as of June 30, 2026 and December 31, 2025, respectively, which are included within accounts receivable in the consolidated balance sheets.

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The Company had deferred revenue (or contract liabilities) totaling $303 and $544 as of June 30, 2026 and December 31, 2025, respectively, all of which was current.

During the six months ended June 30, 2026 and 2025, we recognized $479 and $309, respectively of revenue, which was included in deferred revenue at the beginning of the respective periods.

Transaction price allocated to remaining performance obligations

As of June 30, 2026, approximately $1,628 of revenue is expected to be recognized from remaining performance obligations on existing contracts, all of which is expected to be recognized in the next 12 months.

Significant customers

The following summarizes the percentage of revenue from significant customers which accounted for 10% or more of total revenue for the three and six months ended June 30, 2026 and 2025:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Customer 1			56		%				32		%				66		%				20		%
Customer 2			19		%				20		%				13		%				16		%
Customer 3			—		%				30		%				—		%				32		%

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Common shares

Authorized Capital

As of June 30, 2026, the Company had two classes of common shares - Xanadu Class A Multiple Voting Shares and Xanadu Class B Subordinate Voting Shares. Our authorized share capital consists of an unlimited number of Class A Multiple Voting Shares and an unlimited number of Xanadu Class B Subordinate Voting Shares, each without a par value.

Voting Rights

Holders of Xanadu Class A Multiple Voting Shares are entitled to ten votes per share and holders of Xanadu Class B Subordinate Voting Shares are entitled to one vote per share on all matters upon which shareholders are entitled to vote.

Conversion Rights

Each Xanadu Class A Multiple Voting Share is convertible at any time, at the option of the holder, into one Xanadu Class B Subordinate Voting Share. Additionally, Xanadu Class A Multiple Voting Shares will automatically convert into Xanadu Class B Subordinate Voting Shares upon any transfer (as defined in the articles of incorporation), subject to certain limited exceptions for permitted holders as outlined in the Company's articles of incorporation (as amended).

Dividend and Liquidation Rights

The Xanadu Class A Multiple Voting Shares and Xanadu Class B Subordinate Voting Shares rank pari passu with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution, or winding up of the Company. No dividend may be declared or paid on the Xanadu Class A Multiple Voting Shares unless a dividend of the same amount and type is simultaneously declared or paid on the Xanadu Class B Subordinate Voting Shares.

The following table summarizes the number and amount of each class of common shares issued and outstanding as of June 30, 2026 and December 31, 2025:

			June 30, 2026
			Issued and Outstanding						Amount
Class A Multiple Voting shares			251,555,764						$	217,372
Class B Subordinate Voting shares			52,668,260						348,795
Total Common Shares			304,224,024						$	566,167

			December 31, 2025 As Adjusted (1)
			Issued and Outstanding						Amount
Old Xanadu Convertible Preferred Shares			199,930,069						$	213,002
Old Xanadu Voting and Non-Voting Common Shares			55,964,876						7,585
Total Old Xanadu Preferred and Common Shares			255,894,945						$	220,587

(1) Shares have been recast to reflect the Exchange Ratio.

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The following table summarizes the changes in issued and outstanding common shares and share capital by class for the six months ended June 30, 2026:

						Old Xanadu Convertible Preferred Shares												Old Xanadu Common Shares												Class A Multiple Voting Shares												Class B Subordinate Voting Shares												Total Common Shares and Share Capital
						Number						Amount						Number						Amount						Number						Amount						Number						Amount						Number						Amount
Balance as of December 31, 2025 as adjusted (1)						199,930,069						$	213,002					55,964,876						$	7,585					—						$	—					—						$	—					255,894,945						$	220,587
Issuance of common shares upon exercise of stock options and vesting of RSU's						—						—						—						—						—						—						1,935,116						1,153						1,935,116						1,153
Issuance of common shares upon exchange of Old Xanadu's preferred and common shares						(199,930,069)						(213,002)						(55,964,876)						(7,585)						254,709,401						220,098						1,185,544						489						—						—
Reverse Recapitalization and PIPE transaction, net of transaction costs						—						—						—						—						—						—						40,308,912						265,006						40,308,912						265,006
Earn-out share liability at Closing of Reverse Recapitalization						—						—						—						—						—						—						—						(9,997)						—						(9,997)
Conversion of Earn-out Share liability to equity						—						—						—						—						—						—						—						17,761						—						17,761
Issuance of common shares in connection with synthetic at-the-market facility, net of issuance costs						—						—						—						—						—						—						5,467,524						68,815						5,467,524						68,815
Issuance of common shares for advisor fees related to the Reverse Recapitalization						—						—						—						—						—						—						100,000						1,445						100,000						1,445
Warrant exercise						—						—						—						—						517,527						1,397						—						—						517,527						1,397
Class A Multiple Voting Shares converted to Class B Subordinate Voting Shares						—						—						—						—						(3,671,164)						(4,123)						3,671,164						4,123						—						—
Balance as of June 30, 2026						—						$	—					—						$	—					251,555,764						$	217,372					52,668,260						$	348,795					304,224,024						$	566,167

(1) Refer to note in the table above for information related to the prior period recast.

Preferred Shares

We have an unlimited amount of authorized Xanadu Preferred Shares, with no par value. As of June 30, 2026 and December 31, 2025 there were no Xanadu Preferred Shares issued and outstanding.

SATM Facility

On May 20, 2026, the Company entered into a synthetic at-the-market equity facility with YA II PN, LTD. ("YA"), a Cayman Islands exempt limited company, through its investment manager, Yorkville Advisors Global, LP (“Yorkville Investor”), pursuant to a standby equity purchase agreement (the “Yorkville Agreement”), pursuant to which, the Yorkville Investor has committed to purchase up to 30 million Xanadu Class B Subordinate Voting Shares with an aggregate value of up to $300 million over 36 months ("SATM Facility") in private placements over a term of three years, subject to certain limitations and conditions in the Yorkville Agreement. The Company maintains sole discretion over the timing and amount of any share issuances and retains the right to terminate the SATM Facility at any time. There is no mandatory minimum amount for any advance and no non-usage fee for not utilizing the full commitment amount or any part thereof. Additionally, at mutual consent of both the Company and the Yorkville Investor, the Yorkville Investor may provide up to $100 million in capital through the issuance of promissory notes to the Company.

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The Company evaluated the SATM Facility that includes the right to require the Yorkville Investor to purchase Class B Subordinate Voting Shares in the future ("put option") in accordance with ASC 815, Derivatives and Hedging, and specifically ASC 815-40, Contracts on an Entity's Own Equity. The Company determined that the SATM Facility does not meet the derivative scope exception and therefore, is accounted for as a derivative. Specifically, the SATM Facility contains provisions that cause the settlement amounts that are not considered to be indexed to the Company's own shares. Since the SATM Facility meets the definition of a derivative under ASC 815, the Company recorded an initial derivative asset of $1,350 in May 2026 related to a put option of the SATM Facility, within prepaid expenses and other current assets on the condensed consolidated balance sheets. Upon settlement of share issuances under the SATM Facility, the derivative asset is drawn down on a proportionate basis of the share issuance as a loss on derivative instruments, net in the statement of operations and comprehensive income. As of June 30, 2026, the derivative asset had a balance of $1,104. Additionally, each time a put option is exercised, the Company recognizes a forward contract representing the Company's obligation and right to exchange Class B Subordinate Voting Shares for cash consideration. The forward contracts are measured at fair value each time the put option is exercised, and subsequently re-measured to fair value at each reporting date and upon settlement, with the change in fair value recognized on the consolidated statement of operations and comprehensive loss in loss on derivative instruments. The fair value is measured as the difference between the cash proceeds receivable from the forward contract and the market price of the shares on the measurement date. For the three and six months ended June 30, 2026, the Company recorded a net loss of $1,907 related to the put option and forward contracts under the SATM Facility, of which $1,661 relates to the forward contracts. As of June 30, 2026, there were no forward contracts under the SATM Facility that were outstanding.

During the three and six months ended June 30, 2026, the Company received $67,154 from the Yorkville Investor in net cash proceeds, through the issuance of 5,467,524 Class B Subordinate Voting Shares under the SATM Facility. As of June 30, 2026, the Company had remaining share issuance capacity under the SATM Facility of up to 24,532,476 shares, or up to $232,846.

Warrants to Purchase Common Shares

In connection with the Closing on March 26, 2026, the SFTrust Warrants were exchanged for warrants to purchase Xanadu Class A Multiple Voting Shares and the RBC Warrants were exchanged for warrants to purchase Xanadu Class B Subordinate Voting Shares.

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Old Xanadu Long Term Incentive Plan

Upon the Closing of the Reverse Recapitalization, each outstanding option to purchase Old Xanadu Voting Common Shares, under the Company's 2017 Equity Incentive Plan (the "2017 Plan") and the 2018 Equity Incentive Plan (the "2018 Plan"), was exchanged for a Xanadu Class A Multiple Voting Share Option, and each option to purchase Old Xanadu Non-Voting Common Shares was exchanged for a Xanadu Class B Subordinate Voting Share Option.

The number of Xanadu shares subject to each assumed option was determined by multiplying the number of Old Xanadu common shares subject to the original option by the Exchange Ratio (rounded down to the nearest whole share). The per-share exercise price was determined by dividing the prior exercise price by the Exchange Ratio and rounded pursuant to the Plan of Arrangement. All other terms and conditions, including vesting schedules and expiration terms, remain unchanged. As of the Closing, the strike price was converted from Canadian dollars to U.S. dollars to align with the trading of the Xanadu Class B Subordinate Voting Shares on the Nasdaq market.

The Board of Directors of Old Xanadu authorized the grant of restricted shares and stock options for up to 1,393,773 non-voting common shares under the Company’s 2017 Plan and 5,749,323 non-voting common shares under the 2018 Plan. After giving effect to the Exchange Ratio, these authorizations represent 15,726,911 and 64,873,614 adjusted shares, respectively.

The options granted to date under the 2017 Plan and 2018 Plan have a service condition with the following vesting terms: (a) 25% of the options granted vest on a date that is one year after the date the service period begins and (b) the remaining unvested options vest in equal monthly installments for an additional 36 months.

Options generally expire 10 years from the original grant date or 90 days from an employee’s termination date. However, the Company has granted expiration extensions to certain terminated employees to June 30, 2026 and in one instance, to November 27, 2026.

With the Closing of the Reverse Recapitalization on March 26, 2026, no new equity awards will be granted under the 2017 Plan and the 2018 Plan. In connection with the Reverse Recapitalization, new grants are issued under the Omnibus Long Term Incentive Plan described below.

Omnibus Long Term Incentive Plan

The Company’s Board of Directors adopted the Xanadu Omnibus Long Term Incentive Plan (the "Omnibus Plan") in connection with the Closing of the Reverse Recapitalization. The Omnibus Plan reserves an amount of Xanadu shares for grant equal to 15% of the Xanadu shares issued and outstanding from time to time. The Company's equity awards corresponding to Old Xanadu equity awards do not reduce the number of shares available for issuance under the Omnibus Plan. The Omnibus Plan permits the grant of several award types, including:

•Stock Options (Incentive Stock Options and Non-Qualified Stock Options).

•Share Appreciation Rights (SARs),

•Restricted Share Units (RSUs) and Performance Share Units (PSUs) and;

•Deferred Share Units (DSUs).

Refer to the Restricted Share Units table below for awards granted under the Omnibus Plan for the three and six months ended June 30, 2026.

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Stock Options

The following is a summary of the Company’s stock options activity (as adjusted for the Exchange Ratio established in the Reverse Recapitalization) during the six months ended June 30, 2026):

			Number of Options						Weighted average exercise price (USD)						Weighted average remaining contractual term (years)						Aggregate intrinsic value (USD)
Balance as of December 31, 2025			49,486,556						$	1.19					6.65						$	290,074
Granted			—						—
Exercised			2,065,434						0.67
Expired and forfeited			454,619						1.44
Balance as of June 30, 2026			46,966,503						$	1.21					7.01						$	511,916
Exercisable as of June 30, 2026			32,745,059						$	0.72					7.18						$	373,068
Unvested as of June 30, 2026			14,221,444						$	2.35					5.29						$	138,848

As of June 30, 2026 there were 3,261,109 options to purchase Xanadu Class A Multiple Voting Shares and 43,705,394 options to purchase Xanadu Class B Subordinate Voting shares issued and outstanding. There were no options granted during the three and six months ended June 30, 2026 and 2025.

For the six months ended June 30, 2026 and 2025, the total intrinsic value of stock options exercised was C$23,626 and C$307, respectively.

Restricted Share Units ("RSUs")

The following is a summary of the Company’s RSU activity during the six months ended June 30, 2026:

			Number of RSU's						Weighted Average Grant Date Fair Value (USD)
Balance as of December 31, 2025			—						$	—
Granted			3,017,276						14.28
Expired and forfeited			6,976						12.52
Balance as of June 30, 2026			3,010,300						$	14.29
Vested as of June 30, 2026			55,896						$	16.93
Unvested as of June 30, 2026			2,954,404						$	14.24

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Stock-based Compensation Expense

The following table summarizes the stock-based compensation expense related to stock options and RSUs classified in the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2026 and 2025:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Cost of revenue			$	5					$	8					$	42					$	17
Research and development			2,544						677						3,588						1,320
General and administrative			2,088						145						2,394						285
Sales and marketing			41						18						62						36
Total stock-based compensation expense			$	4,678					$	848					$	6,086					$	1,658

Stock-based compensation capitalized to intangible assets for the three months ended June 30, 2026 and 2025 was $80 and $48, respectively. Stock-based compensation capitalized to intangible assets for the six months ended June 30, 2026 and 2025 was $111 and $101, respectively.

As of June 30, 2026, total unrecognized stock-based compensation cost related to unvested stock options and RSUs was $53,252. This amount will be recognized over a weighted-average period of approximately 2.8 years.

Xanadu enters into operating leases for its office and operational purposes. As of June 30, 2026 and December 31, 2025, Xanadu’s leases had a weighted average remaining lease term of 13 years and eight years, respectively.

Xanadu’s leases are subject to annual operating costs that may change from time to time during the lease term. These costs are accounted for as variable lease payments and are recognized in the consolidated statements of operations and comprehensive loss in the year in which the obligation for these payments is incurred. These annual operating costs are a non-lease component, which are accounted for separately in the determination of lease costs.

The following table presents the components of lease costs:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Components of lease costs:
Operating lease cost			361						287						646						566
Variable lease cost (not included in the measurement of lease liabilities)			273						194						548						445
Total lease costs			$	634					$	480					$	1,194					$	1,010
Total additions to operating right-of-use assets			$	19,119					$	—					$	19,119					$	—

The weighted average discount rate used to measure Xanadu’s operating lease liabilities was 5.9% and 3.6% as of June 30, 2026 and December 31, 2025, respectively.

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Xanadu’s future minimum operating lease payments as of June 30, 2026 are as follows:

Remainder of 2026						$	622
2027						2,160
2028						3,166
2029						3,212
2030 and Thereafter						31,743
Total future minimum lease payments						40,903
Less: imputed interest						(14,296)
Total operating lease liabilities						26,607
Less: current portion of operating lease liabilities						(1,051)
Long-term portion of operating lease liabilities						$	25,556

2026 Commenced Operating Leases

On May 28, 2026, the Company entered into a new operating lease in Toronto, Ontario to service its future operations. The lease commencement date was determined to be June 17, 2026 and as a result a right-of use ("ROU") asset of $19,119 and a corresponding long-term lease liability were recognized on the consolidated balance sheet for the period ended June 30, 2026. The lease has an initial term of approximately 16 years.

Unrecognized Lease Commitments

In May 2026, the Company entered into a new three-year lease for Toronto office space commencing August 1, 2026 and expiring July 31, 2029.

Lease Obligations

Refer to Note 15 for information on Xanadu's lease obligations as of June 30, 2026.

Litigation

From time to time, the Company may become a party to various legal proceedings in the ordinary course of business. Management believes that there are currently no claims or actions pending against the Company, the ultimate disposition of which could have a material adverse effect on the Company’s results of operations, financial condition, or cash flows, including third party infringement claims, labor and employment claims and threatened claims, tax and other matters.

In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for certain losses suffered or incurred by the indemnified party. It is not possible to reasonably estimate the overall maximum amount of these indemnification obligations. Historically, the Company has not been required to make payments under these obligations and, therefore, no liabilities have been recorded for these obligations in the Company’s consolidated balance sheets.

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As of June 30, 2026 and December 31, 2025, the Company was not subject to any material litigation or material pending litigation claims.

The following table presents the computation of basic and diluted net loss per share attributable to common shareholders for the three and six months ended June 30, 2026 and 2025:

			Three months ended June 30,												Six months ended June 30,
			2026						2025 (1)						2026						2025 (1)
Numerator:
Net loss attributable to common shareholders, basic and diluted			$	(42,051)					$	(15,140)					$	(62,655)					$	(27,345)
Denominator:
Weighted average common shares outstanding			299,964,510						55,786,865						186,551,397						55,718,926
Net loss per share attributable to common shareholders, basic and diluted			$	(0.14)					$	(0.27)					$	(0.34)					$	(0.49)

(1) Net loss per share has been recast to reflect the exchange of the Company's convertible preferred shares and common shares and the equivalent number of shares reflecting the Exchange Ratio established in the Reverse Recapitalization. Refer to Note 3 for additional information.

The Company has two classes of common shares, Xanadu Class A Multiple Voting Shares and Xanadu Class B Subordinate Voting Shares. These shares rank pari passu with respect to participation rights to dividends, liquidation preferences, and therefore, the calculation of net loss per share as described above is identical to the calculation under the two-class method.

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Potentially dilutive securities (upon conversion) that were not included in the diluted per share calculations because they would be anti-dilutive were as follows :

									As of June 30,
															2026						2025 (1)
Warrants as exercisable to common shares															157,960						677,934
Stock options issued and outstanding															46,966,503						42,936,552
Preferred shares as convertible to common shares															—						199,930,069
Total															47,124,463						243,544,555

(1) Shares have been recast to reflect the Exchange Ratio established in the Reverse Recapitalization. Refer to Note 3 for additional information.

Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s CODM is its Chief Executive Officer. The CODM has determined that the Company operates in a single operating and reportable segment and manages segment performance and resource allocation based upon

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consolidated net loss. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. Significant expenses reviewed by the CODM include those that are presented in the consolidated statement of operations and comprehensive loss. The CODM evaluates actual results compared to forecasted results for consolidated net loss, including significant expenses, when making decisions about allocating resources.

Substantially all of the Company’s long-lived assets are located in Canada. Refer to Note 12 for additional information about the Company’s revenue by geography.

The following table sets forth the Company’s segment information of revenue, significant expenses and net loss:

			Three months ended June 30,												Six months ended June 30,
			2026						2025						2026						2025
Revenue			$	1,511					$	1,057					$	4,343					$	1,755
Less:
Operating expenses excluding salaries and share-based compensation:
Cost of revenue (exclusive of depreciation and amortization below)			82						3						129						5
Research and development			7,405						5,458						15,777						8,563
General and administrative			6,976						1,186						14,964						2,077
Sales and marketing			302						207						1,510						231
Salaries and share-based compensation expense			16,684						8,774						27,688						16,950
Depreciation and amortization			1,639						1,259						3,256						2,535
Interest (income) expense, net			(2,319)						(342)						(2,129)						(894)
Other segment items(1)			12,793						(348)						5,803						(367)
Net loss			$	(42,051)					$	(15,140)					$	(62,655)					$	(27,345)

(1) Other segment items include other operating income, net, loss on fair value of earn out share liabilities, net, loss on derivative instruments, net and other (income) expense, net which are reflected in the consolidated statements of operations and comprehensive loss.

The Company has evaluated all events occurring through August 5, 2026, the date on which the condensed consolidated financial statements were issued, and during which time, nothing has occurred outside the normal course of business operations that would require disclosure except the following:

Warrant Exercise

On July 27, 2026, RBC, the holder of the Company’s 157,960 outstanding SVS Warrants elected to exercise the warrants in full through a net cashless exercise feature. Pursuant to the terms of the warrant agreement, 17,671 SVS Warrants were surrendered to satisfy the aggregate strike price of $1.15 per share, resulting in the net issuance of 140,289 Class B Subordinate Voting Shares. Following this transaction, the Company has no outstanding SVS Warrants.

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