Quantum Computing Inc 10-K/A, filed Apr 14, 2023
Quantum Computing Inc. (QUBT)
About this 10-K/A
Quantum Computing Inc filed this 10-K/A on April 14, 2023, covering the fiscal year ended December 31, 2022.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Amendment No. 1)
(Mark One)
For
the fiscal year ended
or
For the transition period from __________________ to __________________
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by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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The
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As of March 28, 2023, there were
Documents Incorporated by Reference
N/A
EXPLANATORY NOTE
Quantum Computing Inc. (the “Company,” “we,” “us,” “our” and other similar terms) is filing this Amendment No. 1 (this “Amendment”) to its Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 30, 2023 (the “Original Form 10-K”), for the purpose of (i) correcting a scrivener’s error in Item 7 of Part II of the Original Form 10-K to disclose that our net loss for the 12 months ended December 31, 2022 was $38,593,700, and not $36,593,700; (ii) correcting a scrivener’s error in the Summary Compensation Table in Item 11 of Part III of the Original Form 10-K to disclose that Christopher Roberts’ bonus in 2022 was $52,853; (iii) correcting a scrivener’s error in the Summary Compensation Table in Item 11 of Part III of the Original Form 10-K to disclose that William J. McGann’s total compensation in 2022 was $4,058,018 (iv) correcting our disclosure in the Outstanding Equity Awards at Fiscal Year End Table in Item 11 of Part III of the Original Form 10-K to disclose that there are no Stock Awards held by Robert Liscouski that have not yet vested; and (v) correcting our disclosure in the Outstanding Equity Awards at Fiscal Year End Table in Item 11 of Part III of the Original Form 10-K to disclose that there are no Stock Awards held by Christopher Roberts that have not yet vested.
Pursuant to the rules of the SEC, Part IV, Item 15 has also been amended to contain the currently dated certifications from the Company’s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The certifications of the Company’s principal executive officer and principal financial officer are attached to this Amendment as Exhibits 31.1 and 31.2. As no financial statements have been included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 4 and 5 of the certifications have been omitted. Additionally, we are not including the certificate required under Section 906 of the Sarbanes-Oxley Act of 2002 as no financial statements are being filed with this Amendment No. 1.
Accordingly, this Amendment consists only of the facing page, this explanatory note, Item 7 of Part II of Form 10-K, Item 11 of Part III of Form 10-K, Item 15 of Part III of Form 10-K, the signature pages to Form 10-K and the submitted exhibits. The Original Form 10-K is otherwise unchanged and has been omitted. This Amendment should be read in conjunction with the Original Form 10-K. Further, this Amendment does not reflect any subsequent events occurring after the original filing date of the Original Form 10-K and does not modify or update in any way the disclosures made in the Original Form 10-K except as described above.
TABLE OF CONTENTS
| PART II | 1 | |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. | 1 |
| PART III | 8 | |
| ITEM 11. | EXECUTIVE COMPENSATION. | 8 |
| PART IV | 12 | |
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. | 12 |
| i |
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2022 and 2021 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”
Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying condensed financial statements and provides additional information on Quantum Computing Inc.’s (“Quantum” or the “Company’) business, current developments, financial condition, cash flows and results of operations.
When we say “we,” “us,” “our,” “Company,” or “Quantum,” we mean Quantum Computing Inc.
Overview
At the present time, we are a development stage company with limited operations. The Company plans to enter the market for high performance computers and software applications, specifically focusing on what are known as “quantum computers”. The Company has assembled a team of experts in quantum computing software technology and quantum mathematics, which will focus on the design and development of several quantum software applications targeting solutions to non-deterministic polynomial applications. The Company’s development team has initially focused on addressing computational problems in the financial services, supply chain and logistics management; pharmaceutical design, heavy manufacturing, and computer security (cyber) market segments. The Company’s development team includes mathematicians, physicists, and software developers.
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Results of Operations
Twelve Months Ended December 31, 2022 vs. December 31, 2021
Revenues
| For the Twelve Months Ended December 31, 2022 | For the Twelve Months Ended December 31, 2021 | |||||||||||||||||||
| (In thousands) | Amount | Mix | Amount | Mix | Change | |||||||||||||||
| Products | 0 | 0 | % | 0 | 0 | % | 0 | % | ||||||||||||
| Services | 135,648 | 100 | % | 0 | 0 | % | 100 | % | ||||||||||||
| Total | $ | 135,648 | 100 | % | $ | 0 | 100.0 | % | 100 | % | ||||||||||
Revenues for the Twelve Months ended December 31, 2022 were $135,648 as compared with $0 for the comparable prior year period, a change of $135,648, or 100%. There is no revenue comparison for the prior year period because the Company had not yet sold any products or services. All revenue in the current reporting period is derived from professional services provided to multiple commercial and government customers under multi-month contracts. In 2022, QCI continued to execute its business strategy to provide quantum-ready solutions for solving real-world problems. Much progress was made toward this overarching objective, but the generation of revenue from customers has been slow to develop, in part due to the fact that quantum computing is a cutting-edge technology for most potential customers, who are therefore proceeding cautiously with small, exploratory contracts to better understand its applicability to their requirements. Accordingly, the Company has focused on providing professional services to introduce customers to quantum-based solutions to their operating needs, and on customer education and building customer awareness as a means to generating sales. The Company has completed its discovery and research phase and is now transitioning towards commercialization. We have developed and released multiple products and are now in the process of marketing them. We expect revenues to increase meaningfully in 2023 as we emphasize our hardware capability.
Cost of Revenues
Cost of revenues for the twelve months ended December 31, 2022 was $60,934 as compared with $0 for the comparable prior year period, a change of $60,934, or 100%. There is no cost of revenues comparison for the prior year period because the Company had not yet sold any products or services. Cost of revenues for the current reporting period consists primarily of salary expense.
Gross Margin
Gross margin for the twelve months ended December 31, 2022 was $74,714 as compared with $0 for the comparable prior year period, a change of $74,714, or 100%. There is no gross margin comparison for the comparable prior year period because the Company had not yet sold any products or services in 2021.
Operating Expenses
Operating expenses for the twelve months ended December 31, 2022 were $36,654,056 as compared with $17,130,093 for the comparable prior year period, an increase of $19,523,963 or 114%. The increase in operating expenses is due in large part to a $1,837,856 increase in salary and benefits expense due to an increase in the number and composition of staff following the QPhoton Merger, a $201,269 increase in consulting expenses, a $1,975,998 increase in research and development expenses related primarily to hiring additional technical staff following the QPhoton Merger, a $8,360,122 increase in stock-based compensation, largely related to hiring additional staff and the QPhoton Merger, and a $7,148,718 increase in other SG&A costs compared with the comparable prior year period. The increase in other SG&A costs was largely due to increased legal, audit and other fees associated with the QPhoton Merger.
Net Loss
Our net loss for the twelve months ended December 31, 2022 was $38,593,700 as compared with a net loss of $27,898,847 for the comparable prior year period, an increase of $10,694,853 or 38%. The increase in net loss is primarily due to the increase in operating expenses, noted above, as well as $1,782,545 increase in interest expense related to preferred stock dividends, amortization of the Original Issue Discount for the Series A Convertible Preferred Stock, financing costs and accrued interest on term loans, offset by a $10,715,799 decrease in interest expense related to the warrant issuance that occurred in 2021. In addition, there was a decrease in other income of $178,860 in the current year, primarily related to the forgiveness of the SBA PPP Loan in 2021.
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Liquidity and Capital Resources
We fund our working capital with cash from investment. Since commencing operations as Quantum Computing in February 2018, the Company has raised $27,759,904 through private placement of equity and $12,633,000 through private placements of Convertible Promissory Notes and other debt for a total of $40,392,904 in new investment. The Company has no lines of credit, and $535,684 and $8,250,000 in short and long-term debt obligations outstanding, respectively. We believe that our current cash position and other available financing resources such as our ATM facility, coupled with our ongoing operating activities, will provide sufficient liquidity to fund our business needs over the next twelve months and beyond. To the extent the sources of capital described above are insufficient to meet our needs, we may also conduct additional public offerings of our securities, refinance debt, dispose of certain assets to fund our operating activities, or draw on existing or new debt facilities.
The following table summarizes total current assets, liabilities and working capital at December 31, 2022, compared to December 31, 2021:
| December 31, 2022 | December 31, 2021 | Increase/(Decrease) | ||||||||||
| Current Assets | $ | 5,587,647 | $ | 17,221,654 | $ | (11,634,007 | ) | |||||
| Current Liabilities | $ | 6,545,320 | $ | 1,082,298 | $ | 5,436,022 | ||||||
| Working Capital (Deficit) | $ | (957,673 | ) | $ | 16,139,357 | $ | (17,097,030 | ) | ||||
At December 31, 2022, we had a working capital deficit of $957,673 as compared to working capital of $16,139,357 at December 31, 2021, a decrease of $17,097,030. The decrease in working capital is primarily attributable to the use of cash to pay for operating expenses, capital investments, including the Note Purchase Agreement with QPhoton, and the costs relating to the merger with QPhoton.
Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2022, noting the existence of substantial doubt about our ability to continue as a going concern. This uncertainty arose from management’s review of our results of operations and financial condition and its conclusion that, based on our operating plans, we did not have sufficient existing working capital to sustain operations for a period of twelve months from the date of the issuance of these financial statements.
Net Cash
Net cash used in operating activities for the twelve months ended December 31, 2022 and 2021 was $17,557,368 and $6,804,960, respectively. The net loss for the twelve months ended December 31, 2022 and 2021, was $38,593,700 and $27,898,847, respectively.
Net cash used in investing activities for the twelve months ended December 31, 2022 and 2021 were $2,227,257 and $40,584, respectively. The increase in investment in the current period is primarily due to acquisition of laboratory equipment and the merger with QPhoton.
Net cash provided by financing activities for the twelve months ended December 31, 2022 was $8,354,434 compared with $8,387,879 during the twelve months ended December 31, 2021. Cash flows provided in financing activities during the twelve months ended December 31, 2022 were attributable to the amortization of the original issue discount for the Series A Convertible Preferred stock, conversion of some shares of Series A Convertible Preferred stock to common stock, the returned payoff of the BV Advisory loan, and the funds received from the Streeterville Unsecured Note. The cash flow provided by financing activities during the period ended December 31, 2021 was primarily attributable to the issuance of Series A Convertible Preferred stock, the issuance of common stock for the exercise of options and the exercise of warrants.
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Previously, we have funded our operations primarily through the sale of our equity (or equity linked) and debt securities. During the twelve months ended December 31, 2022, we have funded our operations primarily through the use of cash on hand. As of March 28, 2023, we had cash on hand of approximately $7,423,898. We have approximately $104,772 in monthly lease and other mandatory payments, not including payroll, employee benefits and ordinary expenses which are due monthly.
On a long-term basis, our liquidity is dependent on continuation and expansion of operations and receipt of revenues. Demand for the products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature. In as much as a major portion of our activities will be the receipt of revenues from the sales of our products and services, our business operations may be adversely affected by our competitors and prolonged recession periods.
Critical Accounting Policies
Basis of Presentation:
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonably based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.
Accounting Changes
Except for the changes discussed below, Quantum has consistently applied the accounting policies to all periods presented in these consolidated financial statements. The Company has evaluated all recently implemented accounting standards and concluded that none currently apply to the Company.
Use of Estimates:
These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our condensed consolidated financial statements. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depends on future events, the preparation of financial statements for any period necessarily involves the use of estimates and assumption an example being assumptions in valuation of stock options. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our condensed consolidated financial statements. These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized below.
Cash and Cash Equivalents
The Company’s policy is to present bank balances under cash and cash equivalents, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
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Revenue
The Company recognizes revenue in accordance with ASC 606 – Revenue from Contracts with Customers. Revenue from time and materials-based contracts is recognized as the direct hours worked during the period times the contractual hourly rate, plus direct materials and other direct costs as appropriate, plus negotiated materials handling burdens, if any. Revenue from units-based contracts is recognized as the number of units delivered or performed during the period times the contractual unit price. Revenue from fixed price contracts is recognized as work is performed with estimated profits recorded on a percentage of completion basis. The Company has no cost reimbursement (“cost-plus”) type contracts at this time.
Off Balance Sheet Arrangements
During the twelve months ended December 31, 2022 and 2021, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.
Critical Accounting Estimates
We have identified the following critical accounting estimates. An accounting estimate is “critical” if it (a) requires Company management to make assumptions about matters that are highly uncertain at the time of the estimate, and also (b) Company management reasonably could have used different estimates in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, would have a material impact on the presentation of the Company’s financial condition, changes in financial condition or results of operations.
The Company uses the Black-Scholes model to calculate the fair value of stock options and derivatives. The Black-Scholes model, developed in 1973, is a differential equation which requires five input variables, the strike price of an option, the current stock price, the time to expiration, the risk-free rate, and the volatility of the Company common stock. The Black-Scholes model is widely used for pricing options but it does rely on certain assumptions about the market which may not be correct over time. Specifically,
| ● | No dividends are paid out during the life of the option. | |
| ● | Markets are random (i.e., market movements cannot be predicted). | |
| ● | There are no transaction costs in buying the option. | |
| ● | The risk-free rate and volatility of the underlying asset are known and constant. | |
| ● | The returns of the underlying asset are normally distributed. | |
| ● | The option is European and can only be exercised at the expiration date. |
To the extent that any of these assumptions is not correct, that could result in the over or under pricing of the stock options involved. The assumption that the risk-free rate (the Company uses the one-year US Treasury Bill rate as a proxy for the risk-free rate) can vary over time, and if the T-Bill rate varies substantially over the life of the stock option that could affect the pricing. Similarly, the volatility of the Company’s common stock, also known as the Beta, has moved within a limited range over the past year, but the volatility of any security can change over time, which would affect the option pricing calculation. Another critical estimate relating to option pricing is the default rate, which means the estimate of granted options that will either expire unexercised, or be forfeited, over the life of the stock options. If the Company’s estimate of the default rate turns out to be substantially different from the actual, experienced default rate, that could result in over or under estimating the total option expense.
The Black-Scholes model is not the only available approach for pricing stock options, the Company could have used a Binomial pricing model or a Monte Carlo simulation model. However, there is no assurance that either a Binomial or Monte Carlo pricing approach would be more accurate than the Black-Scholes model over time. Moreover, both the Binomial model, which calculates the price of an option at each point in time during the option period, or the Monte Carlo model, which simulates the possible movements in future stock prices and uses them to calculate the option value, rely on critical assumptions. The Binomial model assumes that stock markets are perfectly efficient, which may not hold for all periods of time. The Monte Carlo simulation model assumes changes in stock prices over time cannot be predicted from the historical trends (known as a “random walk”), which also may not hold for all periods.
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Another area of critical accounting estimates involves determining the fair market value and useful life of the intangible assets acquired by the Company through the merger with QPhoton. In the absence of market pricing for the intangible assets, the Company relied on comparison with similar transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is too high or too low.
Operating Leases - ASC 842
On January 1, 2019, we adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases (“ASC 842”) which requires the recognition of the right-of-use assets and relating operating and finance lease liabilities on the balance sheet. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense.
We lease substantially all our office space used to conduct our business. For contracts entered into on or after the effective date, at the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. Substantially all our operating leases are comprised of office space leases and as of December 31, 2022 and 2021 we had no finance leases.
For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The Company is currently leasing space in four , Leesburg, VA, Arlington, VA, Minneapolis, MN and Hoboken, NJ, and we have recognized right-of-use assets and lease liabilities accordingly.
The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate. For our finance leases, we use the rate implicit in the lease or our secured incremental borrowing rate if the implicit lease rate cannot be determined.
Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term.
Property and Equipment
Property and equipment are stated at cost or contributed value. Depreciation of furniture, software and equipment is calculated using the straight-line method over their estimated useful lives, and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment.
Net Loss Per Share:
Net loss per share is based on the weighted average number of common shares and common shares equivalents outstanding during the period.
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PART III
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2022 and 2021.
2022 EXECUTIVE OFFICER COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All
Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
| Robert Liscouski | 2022 | 402,839 | 180,000 | 0 | 4,510,500 | 0 | 0 | 0 | 5,093,339 | |||||||||||||||||||||||||||
| Chief Executive Officer (PEO) | 2021 | 361,900 | 190,000 | 0 | 1,712,500 | 0 | 0 | 0 | 2,264,400 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Christopher Roberts | 2022 | 303,810 | 52,853 | 0 | 1,185,000 | 0 | 0 | 0 | 1,541,663 | |||||||||||||||||||||||||||
| Treasurer (PFO) | 2021 | 214,170 | 0 | 0 | 2,740,000 | 0 | 0 | 0 | 2,954,170 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| William J. McGann | 2022 | 403,768 | 250 | 0 | 3,654,000 | 0 | 0 | 0 | 4,058,018 | |||||||||||||||||||||||||||
| Chief Operating Officer and | 2021 | 0 | 0 | 0 | 0 | 0 | 22,903 | 0 | 22,903 | |||||||||||||||||||||||||||
| Chief Technology Officer | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
| David Morris, | 2022 | 416,415 | 69,578 | 0 | 118,500 | 0 | 0 | 0 | 604,493 | |||||||||||||||||||||||||||
| Chief Revenue Officer | 2021 | 263,945 | 0 | 0 | 1,340,000 | 0 | 0 | 0 | 1,603,945 | |||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Dr. Yuping Huang, | 2022 | 216,830 | 0 | 0 | 948,000 | 0 | 0 | 0 | 1,164,830 | |||||||||||||||||||||||||||
| Chief Quantum Officer (1) | ||||||||||||||||||||||||||||||||||||
| (1) | Dr. Huang was appointed as Chief Quantum Officer of the Company on June 15, 2022. |
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Employment Agreements and Change-in-Control Provisions
Executive Employment Agreements
Mr. Liscouski Employment Agreement
On April 26, 2021, Quantum Computing Inc. (the “Company”) entered into an amended and restated employment agreement (the “Liscouski Amended and Restated Employment Agreement”) with Mr. Robert Liscouski, the Company’s Chief Executive Officer. The Liscouski Amended and Restated Employment Agreement supersedes and replaces Mr. Liscouski’s prior employment agreement with the Company. The Liscouski Amended and Restated Employment Agreement is for an initial term of three years and it will be automatically renewed for consecutive one-year terms at the end of the initial term. The Liscouski Amended and Restated Employment Agreement may be terminated with or without cause. Mr. Liscouski will receive an annual base salary of $400,000.00 and shall be eligible to earn a performance bonus of up to fifty percent (50%) of his base salary. Mr. Liscouski shall also receive 150,000 stock options per annum to purchase shares of common stock of the Company, beginning on the first anniversary of the Liscouski Amended and Restated Employment Agreement (the “Liscouski Equity Compensation”). The Liscouski Equity Compensation will vest over three years from date of its grant with one-third of the Liscouski Equity Compensation vesting on the date of grant, and the remainder of the Liscouski Equity Compensation vesting in equal monthly installments thereafter. To induce Mr. Liscouski to enter into the Liscouski Amended and Restated Employment Agreement, Mr. Liscouski received (i) 250,000 stock options to purchase shares of common stock of the Company (the “Liscouski Inducement Options”); and (ii) 250,000 stock options to purchase shares of common stock of the Company pursuant the Company’s listing on Nasdaq.
Upon termination of Mr. Liscouski without cause, or as a result of Mr. Liscouski’s resignation for Good Reason (as such term is defined in the Liscouski Amended and Restated Employment Agreement) the Company shall pay or provide to Mr. Liscouski severance pay equal to his then current monthly base salary for 12 months from the date of termination and all stock options granted by the Company and then held by Mr. Liscouski shall be accelerated and become fully vested and exercisable as of the date of Mr. Liscouski’s termination.
As a full-time employee of the Company, Mr. Liscouski will be eligible to participate in the Company’s benefit programs.
Mr. Roberts Employment Agreement
We entered into an employment agreement with Christopher Roberts, our Chief Financial Officer, on April 26, 2021 (the “Roberts Employment Agreement”) whereby Mr. Roberts is to provide the Company with financial and accounting and business strategy services. The agreement is for an indefinite term, subject to periodic review by the Board of Directors, stipulates a base salary of $300,000 per year. For the fiscal year ending December 31, 2021 and for subsequent fiscal years, the Roberts Employment Agreement allows for an annual incentive bonus in the amount up to $150,000 per year, subject to Mr. Roberts achieving certain performance based milestones that are established by the Board of Directors. In connection with the Roberts Employment Agreement, Mr. Roberts was issued options for 400,000 restricted shares of the Company’s common stock in 2021.
Upon termination of Mr. Roberts without cause, or as a result of Mr. Roberts’ resignation for Good Reason (as such term is defined in the Roberts Employment Agreement) the Company shall pay or provide to Mr. Roberts severance pay equal to his then current monthly base salary for 12 months from the date of termination and all stock options granted by the Company and then held by Mr. Roberts shall be accelerated and become fully vested and exercisable as of the date of Mr. Roberts’ termination.
As a full-time employee of the Company, Mr. Roberts will be eligible to participate in the Company’s benefit programs.
Mr. McGann Employment Agreement
We entered into an employment agreement with William J. McGann, our Chief Operating Officer and Chief Technology Officer. Mr. McGann’s employment agreement is for an indefinite term and may be terminated with or without cause.
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Pursuant to the McGann Employment Agreement, Mr. McGann will receive an annual base salary of $400,000. Mr. McGann shall be eligible to earn an annual cash bonus in an amount of up to thirty seven and one half percent (37.5%) of Base Salary, subject to achieving certain performance milestones that are to be established and approved by the Board. Pursuant to the McGann Employment Agreement, Mr. McGann was granted a stock option to purchase up to 535,000 shares of the Company’s common stock (the “McGann Stock Options”). The McGann Stock Options shall vest as follows (i) 178,333 options shall vest immediately upon grant (ii) 178,333 options shall vest on the 12-month anniversary of the date of grant (iii), 178,334 options shall vest on the 24-month anniversary of the date of grant. Upon termination of Mr. McGann without cause, the Company shall pay or provide to Mr. McGann severance pay equal to his then current monthly base salary for twelve (12) months from the date of termination. As a full-time employee of the Company, Mr. McGann will be eligible to participate in all of the Company’s benefit programs.
Mr. Morris Employment Agreement
We entered into an employment agreement with David Morris, our Chief Revenue Officer. Mr. Morris’s employment agreement (the “Morris Employment Agreement”) is for an initial term of three years and it may be terminated with or without cause.
Pursuant to the Morris Employment Agreement, Mr. Morris will receive an annual base salary of $415,000.00 and shall be eligible to earn a performance bonus subject to Mr. Morris achieving the performance milestones set forth in the Morris Employment Agreement. Mr. Morris shall also receive 200,000 stock options to purchase shares of common stock of the Company (the “Morris Options”), which shall vest as follows: (i) 50,000 options shall vest on the first anniversary of the Morris Employment Agreement (ii) 50,000 shall vest on the second anniversary of the Morris Employment Agreement (iii), 100,000 options shall vest on the third anniversary of the Morris Employment Agreement. Upon termination of Mr. Morris within twelve (12) months after a Change of Control (as such term is defined in the Morris Employment Agreement), the Company shall pay or provide to Mr. Morris severance pay equal to his then current monthly base salary for 6 months from the date of termination. On February 6, 2023 the Company eliminated the position of Chief Revenue Officer. Mr. Morris is no longer employed by the Company. The Company intends to drive sales revenue through its Quantum Solutions group going forward.
Dr. Huang Employment Agreement
We entered into an employment agreement with Dr. Yuping Huang, our Chief Quantum Officer. Dr. Huang’s employment agreement (the “Huang Employment Agreement”) is for an initial term of three years and it may be terminated with or without cause.
Pursuant to the Huang Employment Agreement, Dr. Huang will receive an annual base salary of $400,000.00 and shall be eligible to earn a performance bonus subject to Dr. Huang achieving the performance milestones set forth in the Huang Employment Agreement. Dr. Huang shall also receive 400,000 stock options to purchase shares of common stock of the Company (the “Huang Options”), which shall vest as follows: (i) 100,000 options shall vest immediately upon grant (ii) 100,000 options shall vest on the first anniversary of the Huang Employment Agreement (iii) 100,000 shall vest on the second anniversary of the Huang Employment Agreement (iv) 100,000 options shall vest on the third anniversary of the Huang Employment Agreement. Upon termination of Dr. Huang within twelve (12) months after a Change of Control (as such term is defined in the Huang Employment Agreement), the Company shall pay or provide to Dr. Huang, in addition to any severance, an additional sum equal to his then current monthly base salary for twelve (12) months from the date of termination.
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding equity awards held by the Named Executive Officers as of December 31, 2022:
| Option Awards(1) | Stock Awards | |||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options, Exercisable (#) | Number of Securities Underlying Unexercised Options, Not Exercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||||||
| Robert Liscouski | 50,000 | 25,000 | 1.00 | May 22 2025 | 0 | 0 | ||||||||||||||||
| Robert Liscouski | 250,000 | 0 | 6.85 | April 26, 2026 | ||||||||||||||||||
| Robert Liscouski | 83,325 | 166,675 | 2.40 | January 24, 2027 | ||||||||||||||||||
| Robert Liscouski | 1,572,224 | 77,776 | 2.37 | October 17, 2027 | ||||||||||||||||||
| Christopher Roberts | 30,000 | 15,000 | 1.00 | May 1, 2025 | 0 | 0 | ||||||||||||||||
| Christopher Roberts | 233,333 | 166,667 | 6.85 | April 26, 2026 | ||||||||||||||||||
| Christopher Roberts | 500,000 | 0 | 2.37 | October 17, 2027 | ||||||||||||||||||
| William J. McGann | 178,333 | 356,667 | 2.40 | January 3, 2027 | 0 | 0 | ||||||||||||||||
| William J. McGann | 1,000,000 | 0 | 2.37 | October 17, 2027 | ||||||||||||||||||
| David Morris | 50,000 | 200,000 | 6.70 | April 29, 2026 | 0 | 0 | ||||||||||||||||
| David Morris | 0 | 50,000 | 2.37 | October 17, 2027 | 0 | 0 | ||||||||||||||||
| Dr. Yuping Huang | 100,000 | 300,000 | 2.37 | October 12, 2027 | 0 | 0 | ||||||||||||||||
Director Compensation
The Company’s independent directors each received compensation of $13,000 per quarter for their services as directors in fiscal year 2022.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
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| * | Indicates a management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: April 14, 2023 | Quantum Computing Inc. | |
| By: | /s/ Robert Liscouski | |
| Robert Liscouski | ||
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.
| Name | Capacity | Date | ||
| /s/ Robert Liscouski | Chairman of the Board
of Directors and Chief Executive Officer, Treasurer |
April 14, 2023 | ||
| Robert Liscouski | (Principal Executive Officer) | |||
| /s/ Christopher Roberts | Chief Financial Officer | April 14, 2023 | ||
| Christopher Roberts | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Dr. Yuping Huang | Chief Quantum Officer and Director | April 14, 2023 | ||
| Dr Yuping Huang | ||||
| /s/ Michael Turmelle | Director | April 14, 2023 | ||
| Michael Turmelle | ||||
| /s/ Bertrand Velge | Director | April 14, 2023 | ||
| Bertrand Velge | ||||
| /s/ Robert Fagenson | Director | April 14, 2023 | ||
| Robert Fagenson | ||||
| /s/ Dr. Carl Weimer | Director | April 14, 2023 | ||
| Dr. Carl Weimer |
14
Exhibit 31.3
CERTIFICATION
I, Robert Liscouski, certify that:
| 1. | I have reviewed this amendment no. 1 on Form 10-K/A to the annual report on Form 10-K for the fiscal year ended December 31, 2022 of Quantum Computing Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and |
| 3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| Date: April 14, 2023 | /s/ Robert Liscouski |
| Robert Liscouski | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.4
CERTIFICATION
I, Christopher Roberts, certify that:
| 1. | I have reviewed this amendment no. 1 on Form 10-K/A to the annual report on Form 10-K for the fiscal year ended December 31, 2022 of Quantum Computing Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and |
| 3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| Date: April 14, 2023 | /s/ Christopher Roberts |
| Christopher Roberts | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |