Quantum Computing Inc 10-K/A for FY2023
Quantum Computing Inc. (QUBT)
About this 10-K/A
Quantum Computing Inc filed this 10-K/A on September 11, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $358K
- up 163.2% from $136K a year earlier
- Net loss
- $27.02M
- compared with a net loss of $25.98M a year earlier
- Diluted EPS
- -$0.42
- compared with -$0.73 a year earlier
UNITED STATES
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 __________________
Commission
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(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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| The |
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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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by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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The
aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2023 was $
As of September 9, 2024, there were
DOCUMENTS INCORPORATED BY REFERENCE
None
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, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2024 (the “Original Form 10-K”), to restate its consolidated financial statements, including the notes thereto, for the years ended December 31, 2023 and 2022, contained in the Original Form 10-K, and to replace the Report of Independent Registered Public Accounting Firm prepared by BF Borgers CPA PC (“BF Borgers”) included in the Original Form 10-K with the Report of Independent Registered Public Accounting Firm from BPM LLP (“BPM”) included in this Amendment, and to make certain other changes as described herein. This Amendment is being filed as a result of the SEC’s order of May 3, 2024 suspending BF Borgers from appearing and practicing as an accountant before the SEC and the Company’s subsequent retention of BPM to replace BF Borgers as its independent registered public accounting firm.
The following items have also been amended to reflect the above-referenced amendments:
| ● | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; |
| ● | Part III, Item 14. Principal Accountant Fees and Services; and |
| ● | Part IV, Item 15. Exhibits and Financial Statement Schedules. |
The Company’s Principal Executive Officer and Principal Financial Officer have provided new certifications dated as of the date of this filing in connection with this Amendment (Exhibits 31.1, 31.2, 32.1 and 32.2).
The restated and re-audited consolidated financial statements update and revise items in our consolidated financial statements and footnotes to the consolidated financial statements, including (1) expanding and revising certain disclosures; (2) changing the presentation of certain classifications, including the Series A Preferred Stock dividends and categorization of operating expenses; and (3) adjusting certain errors, omissions or changes in accounting policies, including (i) correcting the purchase accounting relating to the Company’s June 2022 merger with QPhoton, Inc., (ii) adjusting stock-based compensation expenses and related prior period retained earnings to reflect a change in our accounting policy election to account for forfeitures as they occur, (iii) adjusting the valuation of the Series A convertible preferred stock warrants, (iv) correcting the historical and subsequent accounting for debt and equity issuance costs, (v) reserving a collection risk for loans receivable; and (vi) adjusting the recognition period for certain operating expenditures.
Except as described above, no other portion of the Original Form 10-K is being amended and this Amendment does not reflect any events occurring after the filing of the Form 10-K.
The net effect of the adjustments on the consolidated statements of operations was to decrease net loss by $2.7 million and $12.6 million and loss per share, basic and diluted, by $0.04 and $0.04 for the years ended December 31, 2023 and 2022, respectively, as set forth below (in thousands, except percentages and per share data).
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||||||||||
| Amount | Change | % Change | Amount | Change | % Change | |||||||||||||||||||
| Revenue | $ | 358 | $ | - | - | $ | 136 | $ | - | - | ||||||||||||||
| Gross profit | 162 | - | - | 75 | - | - | ||||||||||||||||||
| Operating expenses | 26,405 | (979 | ) | (4 | )% | 28,720 | (7,934 | ) | (22 | )% | ||||||||||||||
| Other income and expense, net | (779 | ) | (1,730 | ) | (69 | )% | 2,667 | 4,682 | 232 | % | ||||||||||||||
| Net loss | (27,022 | ) | 2,709 | (9 | )% | (25,978 | ) | 12,616 | (33 | )% | ||||||||||||||
| Less: Series A convertible preferred stock dividends | 861 | 861 | 100 | % | 889 | 889 | 100 | % | ||||||||||||||||
| Net loss available to common stockholders | $ | (27,883 | ) | $ | 1,848 | (6 | )% | $ | (26,867 | ) | $ | 11,727 | (30 | )% | ||||||||||
| Loss per share – basic and diluted | $ | (0.42 | ) | $ | 0.04 | 11 | % | $ | (0.73 | ) | $ | 0.04 | 6 | % | ||||||||||
| Weighted average shares used in computing net loss per common share – basic and diluted | 66,611 | (10,840 | ) | (14 | )% | 36,680 | (19,283 | ) | (34 | )% | ||||||||||||||
The decrease to stockholder’s equity from the adjustments as of December 31, 2023 and 2022 is $4.6 million and $9.8 million, respectively, as set forth below (in thousands, except percentages).
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||||||||||
| Amount | Change | % Change | Amount | Change | % Change | |||||||||||||||||||
| Current assets | ||||||||||||||||||||||||
| Cash | $ | 2,059 | $ | - | - | $ | 5,308 | $ | - | - | ||||||||||||||
| Other current assets | 597 | (525 | ) | (88 | )% | 142 | (279 | ) | (68 | )% | ||||||||||||||
| Non-current assets | 71,699 | (3,848 | ) | (5 | )% | 73,061 | (10,511 | ) | (13 | )% | ||||||||||||||
| Total assets | $ | 74,355 | $ | (4,373 | ) | (6 | )% | $ | 78,511 | $ | (10,790 | ) | (12 | )% | ||||||||||
| Current liabilities | $ | 4,812 | $ | 193 | 4 | % | $ | 4,593 | $ | (727 | ) | (14 | )% | |||||||||||
| Long-term liabilities | 840 | - | - | 8,794 | (290 | ) | (3 | )% | ||||||||||||||||
| Total liabilities | 5,652 | 193 | 4 | % | 13,387 | (1,017 | ) | (7 | )% | |||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||||
| Common stock | 8 | - | - | 6 | - | - | ||||||||||||||||||
| Additional paid-in capital | 200,635 | (22,345 | ) | (10 | )% | 169,175 | (25,704 | ) | (13 | )% | ||||||||||||||
| Accumulated deficit | (131,940 | ) | 17,779 | (12 | )% | (104,057 | ) | 15,931 | (13 | )% | ||||||||||||||
| Total stockholders’ equity | 68,703 | (4,566 | ) | (6 | )% | 65,124 | (9,773 | ) | (13 | )% | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 74,355 | $ | (4,373 | ) | (6 | )% | $ | 78,511 | $ | (10,790 | ) | (12 | )% | ||||||||||
TABLE OF CONTENTS
Introductory Comments
Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “our Company,” “QCi” and “QUBT,” refer to Quantum Computing Inc., a Delaware corporation, and unless the context indicates otherwise, also includes our wholly-owned subsidiaries.
i
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The discussion and analysis set forth below in this Item 7 has been amended and restated to reflect the restatement of our consolidated financial statements as described in the Explanatory Note and in Note 3 of the Notes to Consolidated Financial Statements included elsewhere in this Amendment.
The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Amendment. 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.”
Overview
QCi is a development stage company with limited operations and revenue. The Company is developing quantum and ancillary non-quantum products for high-performance computing applications based on proprietary photonics technology. QCi’s products are designed to operate at room temperature and low power at an affordable cost in the areas of high-performance computing, sensing and imaging, and quantum cybersecurity. The Company has generated some revenue based on sales of products and related services to date and is expanding its sales and marketing efforts. The Company’s development team includes optical engineers, mathematicians, physicists, and software developers.
Results of Operations
The following table summarizes the Company’s consolidated net loss (in thousands, except percentages).
| Year Ended December 31, | $ | % | ||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| (Restated) (1) | (Restated) (1) | |||||||||||||||
| Revenue: | ||||||||||||||||
| Total revenue | $ | 358 | $ | 136 | $ | 222 | 160 | % | ||||||||
| Gross profit | 162 | 75 | 887 | 116 | % | |||||||||||
| Gross profit margin | 45 | % | 55 | % | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 8,891 | 5,216 | 3,675 | 70 | % | |||||||||||
| Sales and marketing | 1,806 | 2,092 | (286 | ) | (14 | )% | ||||||||||
| General and administrative | 15,708 | 21,412 | (5,704 | ) | (27 | )% | ||||||||||
| Total operating expenses | 26,405 | 28,720 | (2,315 | ) | (8 | )% | ||||||||||
| Loss from operations | (26,243 | ) | (28,645 | ) | (2,402 | ) | (8 | )% | ||||||||
| Non-operating income and (expense): | ||||||||||||||||
| Interest and other income | 295 | 47 | 248 | 528 | % | |||||||||||
| Interest expense, net | (1,602 | ) | (772 | ) | (830 | ) | 108 | % | ||||||||
| Change in value of warrant liability | 528 | 3,392 | (2,864 | ) | (84 | )% | ||||||||||
| Total non-operating income (expense) | (779 | ) | 2,667 | (3,446 | ) | (129 | )% | |||||||||
| Net loss | $ | (27,022 | ) | $ | (25,978 | ) | $ | (1,044 | ) | 4 | % | |||||
| (1) | As described in Note 3 to the Consolidated Financial Statements appearing elsewhere in this Amendment, we have restated the Consolidated Financial Statements. |
1
Revenues
The Company’s revenues consist of (in thousands):
| Year Ended December 31, 2023 | Year Ended December 31, 2022 | |||||||||||||||||||
| Amount | Mix | Amount | Mix | Change | ||||||||||||||||
| Products | $ | 5 | 1 | % | $ | 0 | 0 | % | 0 | % | ||||||||||
| Services | 353 | 99 | % | 136 | 100 | % | 160 | % | ||||||||||||
| Total | $ | 358 | 100 | % | $ | 136 | 100 | % | 163 | % | ||||||||||
Revenues for the year ended December 31, 2023, were $358 thousand compared to $136 thousand for the year ended December 31, 2022, an increase of $222 thousand, or 163%. Revenue was derived from sales of hardware products and professional services in 2023, and solely from professional services in 2022. In each year, services were provided to multiple commercial and government customers under multi-month contracts; the year-over-year change was driven by increases in short-term contractual service revenue. In 2023, QCi continued to execute its business strategy to provide quantum-ready solutions for solving real-world problems. While we have made significant progress toward this overarching objective, 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 both providing professional services to introduce customers to quantum-based solutions for their operating needs and on customer education to build customer awareness as a means to generate sales. The Company continues to transition towards commercialization, having developed and released multiple products that we are now in the process of marketing. We expect revenues to increase meaningfully in the coming years as we continue to emphasize our hardware capability.
Cost of Revenues
Cost of revenues, which consists of labor consumed to fulfill our obligations under contractual service agreements as well as the component parts of finished goods sold, was $196 thousand for the year ended December 31, 2023 compared to $61 thousand for the prior year, an increase of $135 thousand, or 221%. Cost of revenues for each of the years ended December 31, 2023 and 2022 consists primarily of salary expense. The increase for 2023 was predominantly driven by the execution of new government service contracts. Cost of revenue for these services was contractually structured and limited to the direct salaries and actual hours worked to fulfill the work orders. Rates for these services remained materially unchanged year over year, with contract volume being the driver of growth.
Gross Margin
Gross margin for the year ended December 31, 2023 was $162 thousand compared to $75 thousand for the prior year, an increase of $87 thousand, or 116%. On a percentage basis, gross margin was 45%, a decrease of 10% year-over-year. The change was nearly entirely the result of the shift to contractual service revenue where the cost of goods sold was defined under the terms of our general professional services obligation. Our lack of a scaled and distributed base of revenue generation by product and sales channel can result in large swings in gross margin between reporting periods.
2
Operating Expenses
Information about our operating expenses for the years ended December 31, 2023 and 2022 is set forth in the below tables (in thousands, except percentages). Operating expenses for the year ended December 31, 2023 decreased primarily as a result of a decrease in general and administrative expenses, partially offset by an increase in research and development expenses.
| Year Ended December 31, | $ | % | ||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Research and development | $ | 8,891 | $ | 5,216 | $ | 3,675 | 70 | % | ||||||||
Research and development expenses consist primarily of employee compensation for employees that primarily engage in research and development efforts and fees for the development of hardware products and supporting software. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
Research and development expenses in 2023 increased compared with 2022 primarily due to higher headcount and related payroll costs and higher stock-based compensation to incentivize and retain key technologists, as well as higher recurring lab equipment and consumables costs.
| Year Ended December 31, | $ | % | ||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Sales and marketing | $ | 1,806 | $ | 2,092 | $ | (286 | ) | (14 | )% | |||||||
Selling and marketing expenses, which consist primarily of employee compensation as well as customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs, also contributed to the decrease in selling and administrative expenses.
Selling and marketing expenses in 2023 decreased compared with 2022 primarily due to lower outsourced professional services costs and gains for forfeited stock-based compensation, offset partially for higher trade show and travel-related costs in 2023.
| Year Ended December 31, | $ | % | ||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| General and administrative | $ | 15,708 | $ | 21,412 | $ | (5,704 | ) | (27 | )% | |||||||
General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
General and administrative expenses in 2023 decreased compared with 2022 primarily due to expenses related to the merger with QPhoton in 2022 (the “QPhoton Merger”), including an $8.4 million decrease in stock-based compensation and a $700 thousand decrease in legal fees, offset primarily by increases of $1.3 million for additional months of intangibles amortization, and $1.5 million in salaries and benefits driven by higher headcount, related payroll costs, and severance.
Non-operating Income (Expense)
The following table summarizes our non-operating income (expense) for the years ended December 31, 2023 and 2022 (in thousands, except percentages).
| Year Ended December 31, | $ | % | ||||||||||||||
| 2023 | 2022 | Change | Change | |||||||||||||
| Interest and other income | $ | 295 | $ | 47 | $ | 248 | 528 | |||||||||
| Interest expense | 1,602 | 772 | 830 | 108 | ||||||||||||
| Change in value of warrant liability | 528 | 3,392 | (2,864 | ) | (84 | ) | ||||||||||
| Other income (expense) | $ | (779 | ) | $ | 2,667 | $ | (3,446 | ) | (129 | ) | ||||||
The increase in other expense for 2023 compared to 2022 is primarily the result of an increase in interest expense, net, and a decrease in the change in value of the warrant liability during 2023 compared to 2022.
Interest expense, net consists of interest on financial liabilities and amortization of debt issuance costs. The increase in interest expense in 2023 compared to 2022 was attributable to borrowings outstanding under our $8.25 million unsecured promissory note that we issued to Streeterville Capital, LLC in September 2022 (the “Streeterville Unsecured Note”). See Note 8, Financial Liabilities, in the accompanying notes to our consolidated financial statements for additional information.
Gain on change in value of warrant liability is primarily comprised of mark-to-market adjustments for the QPhoton Warrants, as defined below, which have no carrying value as of December 31, 2023. Future mark-to-market adjustments may result in losses if the Company’s stock price increases above the exercise price of the Underlying Options, as defined below. See Note 12, Stock-based Compensation, for additional information on the QPhoton Warrants.
3
Liquidity and Capital Resources
We have incurred net losses and experienced negative cash flows from operations since inception. Through December 31, 2023, the Company has raised $57.4 million through private placements of equity and $12.6 million through private placements of convertible promissory notes and other debt for a total of $70.0 million. The Company has no lines of credit, and $2.1 million in short-term debt obligations outstanding when excluding the remaining debt issuance costs. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development and go-to-market programs. We have determined that additional financing will be required to fund our operations for the next 12 months and our ability to continue as a going concern is dependent upon obtaining additional capital and financing. As of December 31, 2023, the Company had cash and cash equivalents of $2.1 million.
Our primary uses of cash are to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures to fund business operations and continue to invest in ongoing research and development for our non-linear quantum optical products and photonics chips. Until such time as we can generate significant revenue from sales or subscriptions of our hardware offerings, we expect to finance our cash needs through public and/or private equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and loan programs. However, we may be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms, or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary pressures, rising interest rates, banking collapses, and financial and credit market fluctuations, could reduce our ability to access capital on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our product development and go-to-market efforts. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date of the issuance of the accompanying consolidated financial statements. There can be no assurances that the Company will be able to secure additional equity investments or achieve an adequate sales level.
The following table summarizes total consolidated current assets, liabilities and working capital at December 31, 2023, compared to December 31, 2022 (in thousands).
| December 31, 2023 | December 31, 2022 | Increase/ (Decrease) | ||||||||||
| Current assets | $ | 2,656 | $ | 5,450 | $ | (2,794 | ) | |||||
| Current liabilities | $ | 4,812 | $ | 4,593 | $ | 219 | ||||||
| Working capital (deficit) | $ | (2,156 | ) | $ | 857 | $ | (3,013 | ) | ||||
At December 31, 2023, we had a working capital deficit of $2.2 million as compared to working capital of $0.9 million at December 31, 2022, a decrease of $3.0 million. The decrease in working capital is primarily attributable to the use of cash to pay for operating expenses and capital investments in property and equipment, satisfaction of accrued expense liabilities and the Streeterville Unsecured Note becoming a current portion of long-term debt payable.
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2023, 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 12 months from the date of the issuance of the accompanying consolidated financial statements.
Cash Flows
The following table summarizes our cash flow for the years ended December 31, 2023 and 2022 (in thousands).
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (18,315 | ) | $ | (15,378 | ) | ||
| Net cash used in investing activities | (2,612 | ) | (2,226 | ) | ||||
| Net cash provided by financing activities | 17,678 | 6,173 | ||||||
| Net decrease in cash, cash equivalents, and restricted cash | (3,249 | ) | (11,431 | ) | ||||
| Cash, cash equivalents, and restricted cash, beginning of year | 5,308 | 16,739 | ||||||
| Cash, cash equivalents, and restricted cash, end of year | 2,059 | 5,308 | ||||||
Net cash used in operating activities for the years ended December 31, 2023 and 2022 was $18.3 million and $15.4 million, respectively, in each case primarily as a result of our net loss in each year offset by noncash adjustments for stock-based compensation, depreciation of property and equipment, amortization of intangibles, provision for credit losses, and change in fair value of our QPhoton Warrant liability, as defined below.
4
Net cash used in investing activities for the years ended December 31, 2023 and 2022 was $2.6 million and $2.2 million, respectively. Cash used in investing activities during the year ended December 31, 2023 was attributable to acquisition of laboratory equipment for $2.1 million and our $500 thousand loan to millionways, Inc. (“millionways”) in June 2023. On June 6, 2023, the Company entered into a Note Purchase Agreement with millionways pursuant to which the Company agreed to purchase from millionways up to three unsecured promissory notes in an aggregate principal amount of up to $2.0 million, subject to the terms and conditions thereof. On June 6, 2023, the Company purchased the notes from millionways and loaned it an aggregate principal amount of $500 thousand. This followed the Company’s entry into a Summary of Proposed Terms with millionways on May 16, 2023, to provide bridge loans to millionways and enter into due diligence to acquire up to 100% of the AI firm. The Company opted not to purchase further promissory notes from millionways. Cash used in investing activities during the year ended December 31, 2022 was attributable to acquisition of laboratory equipment for $870 thousand and our $2.5 million loan to QPhoton, consisting of two unsecured promissory notes, each in the principal amount of $1.25 million, per a Note Purchase Agreement with QPhoton on February 18, 2022 (the “QPhoton Loan”). Upon closing of the QPhoton Merger on June 16, 2022, the Company recouped approximately $1.1 million of the QPhoton Loan in cash, resulting in approximately $1.4 million net total cash used for the QPhoton Merger in our consolidated financial statements.
Net cash provided by financing activities for the year ended December 31, 2023, was $17.7 million compared to $6.2 million during the year ended December 31, 2022. Cash provided by financing activities during the year ended December 31, 2023 was attributable to net $24.7 million received from the sale of shares of our common stock through our At-The-Market (“ATM”) facility, partially offset by repayments of $6.2 million on the Streeterville Unsecured Note. During the year ended December 31, 2022, cash provided by financing activities was primarily attributable to the funds we received from the issuance of the Streeterville Unsecured Note.
On a long-term basis, our liquidity is dependent on continuation and expansion of operations and receipt of revenues. Demand for our 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. As most of our revenues will be from the sales of our products and services, our business operations may be adversely affected by the actions of our competitors and prolonged recession periods.
Critical Accounting Estimates
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. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. 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.
Fair Value of Stock-based Compensation and Derivatives
We recognize stock-based compensation expense for all share-based payment awards in accordance with Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation. Stock-based compensation expense for expected-to-vest awards is valued under the single-option approach and amortized on a straight-line basis, accounting for actual forfeitures as they occur. We utilize the Black Scholes pricing model in order to determine the fair value of stock-based option awards. The Black Scholes pricing model requires various highly subjective assumptions including volatility, expected option life, and risk-free interest rate. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Another area of critical accounting estimates involves determining the fair market value of the QPhoton Warrants, as defined below. The Company determines which underlying options and warrants are in-the-money or out-of-the-money at period end by comparing to the bid price of the Company’s common stock, then accounts for changes period-over-period by realizing a mark-to-market gain or loss for the period.
Fair Market Value and Useful Life of Intangible Assets
Determining the fair market value and useful life of the intangible assets acquired by the Company through the merger with QPhoton is another critical accounting estimate. In the absence of market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and 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.
Valuation Allowances for Deferred Taxes
Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid. We are subject to income taxes in the United States. Significant judgments and estimates are required in determining the consolidated income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.
5
Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which are expected to result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, for all material jurisdictions, we consider all available positive and negative evidence, including scheduled reversals of deferred tax balances, projected future taxable income, tax-planning strategies and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results.
As of December 31, 2023, we had federal and state net operating loss (“NOL”) carryforwards of $49 million, or $13 million on a tax-effected basis at an assumed tax rate of 25%. We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized. Accordingly, we have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2023, will be accounted for as a reduction of income tax expense.
The calculation of our tax liabilities involves evaluating uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740, Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals or litigation processes, on the basis of the technical merits.
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a tax payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is made available.
We believe that none of the unrecognized tax benefits may be recognized by the end of 2023.
Legal and Other Contingencies
The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. An estimated loss from a loss contingency such as a legal proceeding or claim is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements are contained in pages F-1 through F-29 which appear at the end of this Amendment.
6
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
BPM LLP served as our independent registered public accountants for the years ended December 31, 2023 and 2022.
Audit Fees
For the Company’s fiscal years ended December 31, 2023 and 2022, we were billed approximately $132 thousand and $112 thousand, respectively, for professional services rendered by BF Borgers for its original audit of our consolidated financial statements, including those appearing in the Original Form 10-K, and approximately $300 thousand by BPM for the re-audit of our consolidated financial statements contained in this Amendment.
Tax Fees
For the Company’s fiscal years ended December 31, 2023 and 2022, we were billed approximately $9 thousand each year for professional services rendered by BF Borgers for tax compliance, tax advice, and tax planning.
All Other Fees
For the Company’s fiscal years ended December 31, 2023 and 2022, we were billed approximately $27,500 and $49,500, respectively, for professional services rendered by BF Borgers related to the Company’s Registration Statements on Form S-3 and amendments thereto filed with the SEC in those years.
Pre-Approval Policies
All of the above services and fees were reviewed and approved by the entire Board. No services were performed before or without approval.
7
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
8
| * | Indicates a management contract or compensatory plan or arrangement. |
9
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: September 11, 2024 | Quantum Computing Inc. | |
| By: | /s/ Dr. William McGann | |
| Dr. Willan McGann | ||
| 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 | September 11, 2024 | ||
| Robert Liscouski | ||||
| /s/ Dr. William McGann | Chief Executive Officer | September 11, 2024 | ||
| Dr. Willan McGann | (Principal Executive Officer) | |||
| /s/ Christopher Boehmler | Chief Financial Officer, Treasurer | September 11, 2024 | ||
| Christopher Boehmler | (Principal Financial
Officer and Principal Accounting Officer) |
|||
| /s/ Dr. Yuping Huang | Chief Quantum Officer and Director | September 11, 2024 | ||
| Dr. Yuping Huang | ||||
| /s/ Michael Turmelle | Director | September 11, 2024 | ||
| Michael Turmelle | ||||
| /s/ Robert Fagenson | Director | September 11, 2024 | ||
| Robert Fagenson | ||||
| /s/ Dr. Carl Weimer | Director | September 11, 2024 | ||
| Dr. Carl Weimer | ||||
| /s/ Dr. Javad Shabani | Director | September 11, 2024 | ||
| Dr. Javad Shabani |
10
QUANTUM COMPUTING INC.
Index to the Consolidated Financial Statements
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Quantum Computing Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Quantum Computing Inc. (a Delaware Corporation) and its subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its consolidated cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s recurring losses from operations, available cash, and cash used in operations raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financing reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of intangible assets acquired in a business combination
As described in Note 4, on June 16, 2022, the Company merged with QPhoton, Inc., which was accounted for as a business combination using the acquisition method of accounting. The acquired intangible assets principally consisted of non-compete agreement with founder, trademarks, and patents, along with goodwill. The net carrying values of the identified intangible assets and goodwill as of December 31, 2023 were $12.1 million and $55.6 million, respectively.
The principal considerations for our determination that performing procedures relating to the valuation of intangible assets acquired in a business combination is a critical audit matter at due to the significant amount of judgment by management required in estimating their acquisition date fair values, including the use of valuation methodologies that were sensitive to significant assumptions, which were affected by expected future market or economic conditions, which in turn led to significant auditor judgment, subjectivity and effort in performing audit procedures and evaluating audit evidence relating to the analysis.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, assessing the appropriateness of the valuation methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company, including evaluating the reasonableness of assumptions used to determine the projected revenue growth rates by comparing the forecasted assumptions to historical performance, projected industry growth rates, and other factors considered by management in developing the model.
/s/
We have served as the Company’s auditor since 2024.
September 11, 2024
F-2
QUANTUM COMPUTING INC.
Consolidated Balance Sheets
(In thousands, except par value)
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Restated) (1) | (Restated) (1) | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Loans receivable, net of provision for credit losses of $279 and zero | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Financial liabilities, current, net of issuance costs | - | |||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Financial liabilities, net of issuance costs | ||||||||
| Warrant liability | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Contingencies (see Note 9) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
QUANTUM COMPUTING INC.
Consolidated Statements of Operations
(In thousands, except per share data)
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Restated) (1) | (Restated) (1) | |||||||
| Total revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Non-operating income (expense) | ||||||||
| Interest and other income | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Change in value of warrant liability | ||||||||
| Loss before income tax provision | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Less: Series A convertible preferred stock dividends | ||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | ( | ) | ||
| $ | ( | ) | $ | ( | ) | |||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
QUANTUM COMPUTING INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except par value)
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balances, January 1, 2022 | ||||||||||||||||||||||||||||
| As previously reported | $ | $ | | $ | $ | ( | ) | |||||||||||||||||||||
| Adjustments (1) | ( | ) | ( | ) | ||||||||||||||||||||||||
| As restated | ( | ) | ||||||||||||||||||||||||||
| Cancellation of shares | ( | ) | ||||||||||||||||||||||||||
| Conversion of preferred stock | ( | ) | ||||||||||||||||||||||||||
| Issuance of shares in conjunction with QPhoton Merger | ||||||||||||||||||||||||||||
| Preferred stock dividends | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Preferred OID Amortization | ||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock-based compensation for services | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balances, December 31, 2022 (Restated) (1) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of shares for cash | ||||||||||||||||||||||||||||
| Conversion of preferred stock | ( | ) | ||||||||||||||||||||||||||
| Preferred stock dividends | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock-based compensation for services | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balances, December 31, 2023 (Restated) (1) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
QUANTUM COMPUTING INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2023 and 2022
(In thousands)
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| (Restated) (1) | (Restated) (1) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||
| Depreciation and intangibles amortization | ||||||||
| Amortization of issuance costs | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Provision for credit losses | ||||||||
| Other recognized losses (gains) | ||||||||
| Stock-based compensation expense | ||||||||
| Stock-based compensation expense for services | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other non-current assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Other long-term liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Issuance of loan receivable | ( | ) | ||||||
| Net cash used for QPhoton, Inc. merger | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds raised from financial liabilities, net of issuance costs | ||||||||
| Payments of financial liabilities, net of interest | ( | ) | ||||||
| Series A Preferred dividend payments | ( | ) | ( | ) | ||||
| Proceeds from stock issuance related to ATM facility | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosures of Cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash operating activities | ||||||||
| Non-cash issuance of shares for services | $ | $ | ||||||
| Non-cash financing activities | ||||||||
| Common stock, preferred stock and warrants issued in connection with QPhoton Merger | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
QUANTUM COMPUTING INC.
Notes to Consolidated Financial Statements
December 31, 2023
Note 1 – Nature of the Organization and Business
Corporate History
Quantum
Computing Inc. (“QCi” or the “Company”) was formed in the State of Nevada on
Nature of Business
QCi is an American company utilizing integrated photonics and non-linear quantum optics to deliver quantum and ancillary non-quantum products for high-performance computing applications based on proprietary photonics technology. Quantum’s products are designed to operate at room temperature and low power. Our core photonics technology enables the execution of a go-to-market strategy which emphasizes accessibility and affordability. Our quantum systems enable subject matter experts (SMEs) and end users to deliver critical business solutions today.
The Company initially focused on providing software tools and applications for several commercially available quantum computers. However, following the June 2022 merger with QPhoton and its associated intellectual property and engineering team, the Company now offers integrated high-performance quantum systems, ancillary non-quantum products and services.
The core of our quantum offerings today is our Entropy Quantum Computing (“EQC”) technology. We have built room-temperature, photonic quantum information processing systems underpinned by a series of patented and patent pending technologies. Our technology, supported by professional services through our “Quantum Solutions” offering, enables our clients to solve complex optimization problems. In addition, our engineering teams are using our leading-edge photonics technology to continue to enhance and further develop quantum LIDAR sensing and imaging systems, quantum-secured network solutions, and photonic chips.
Going Concern
The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets, and the satisfaction
of liabilities in the normal course of business. Cash and cash equivalents on hand were $
Note 2 – Significant Accounting Policies:
Basis of Presentation and Principles of Consolidation:
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (the “FASB”), including ASC 810, Consolidation. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year end is December 31.
F-7
Risk and Uncertainties
The Company is subject to certain risks and uncertainties and believes changes in any of the following areas could have a material adverse effect on the Company’s future financial position or results of operations or cash flows: new product development, including market receptivity; litigation or claims against the Company based on intellectual property, patent, product regulation or other factors; competition from other products; general economic conditions; the ability to attract and retain qualified employees; and, ultimately, to sustain profitable operations.
Use of Estimates
These consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates required to be made by management include the valuation of goodwill and intangible assets, deferred tax assets, equity-based transactions and liquidity assessment. Actual results may differ from these estimates.
Cash and Cash Equivalents
Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. As of December 31, 2023 and 2022, there were no cash equivalents. The Company maintains its cash in deposit and money market accounts with high quality financial institutions which, at times, may exceed federally insured limits. The Company has not experienced any losses on these deposits and believes it is not exposed to significant credit risk on cash.
Revenue
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, by analyzing contracts with its customers using a five-step approach:
| 1. | Identify the contract | |
| 2. | Identify the performance obligations | |
| 3. | Determine the transaction price | |
| 4. | Allocate the transaction price to the performance obligations | |
| 5. | Recognize revenue when performance obligations are satisfied |
The Company recognized a small amount of revenue in 2023 and 2022, which was primarily derived from contracts to perform professional services. 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-plus type contracts at this time.
The Company includes depreciation and amortization expenses in manufacturing overhead, which is a component of cost of revenue. However, at the present time manufacturing overhead, including depreciation and amortization expense related to production equipment, is not material and the primary components of cost of revenue are direct labor and direct materials, with a small amount of shipping expenses.
Accounts Receivable
Accounts receivable consists of amounts due from customers for work performed on contracts. The Company records accounts receivable at their net realizable value. Periodically the Company evaluates its accounts receivable to establish a provision for credit losses, when deemed necessary, based on the history of past write-offs, collections and current credit conditions. Within 2022, certain accounts receivable, attributable to a single customer, were determined not to be collectible and management recorded a provision and wrote off the uncollectible receivables against that account. The customer accounts receivable as of December 31, 2023 are considered fully collectible and thus management has not recorded a provision for credit losses.
F-8
Provision for Credit Losses
The Company estimates losses on loans and other financial instruments in accordance with Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduces the current expected credit losses (“CECL”) methodology for estimating allowances for credit losses. The CECL framework requires the Company to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supporting forecasts. Under CECL, the allowance for credit losses is measured as the difference between the financial asset’s cost basis and the net amount expected to be collected on the financial asset. CECL allows us to use information about past events including historical loan loss experience, current conditions, and reasonable and supportable forecasts to assess the collectability of the financial assets. The receivables for financial assets as of December 31, 2023 are not considered fully collectible and thus management has recorded a provision for credit losses. Note 10, Loan Receivable, for additional information.
Inventory
Inventory is stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis which approximates actual cost on a first in-first out (“FIFO”) method. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory and are charged to cost of revenue. Once the cost of the inventory is reduced, a new lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Factors influencing these adjustments include changes in demand, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. Revisions to these adjustments would be required if these factors differ from our estimates.
Operating Leases
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets are included in right-of-use assets, net on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current operating lease liabilities and non-current operating lease liabilities, respectively, on the consolidated balance sheets.
Operating lease ROU assets and operating lease
liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s
leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement
date in determining the present value of future payments. Certain leases may include options to extend or terminate the lease. Lease
expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of
Business Combinations and Valuation of Goodwill
We account for business combinations under the acquisition method of accounting. This method requires the recording of acquired assets and assumed liabilities at their acquisition date fair values. The excess of the purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Results of operations related to business combinations are included prospectively beginning with the date of acquisition and transaction costs related to business combinations are recorded withing general and administrative expenses.
F-9
The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performs an annual impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. If the Company’s stock price continues to experience significant price and volume fluctuations, this will impact the fair value of the reporting unit and can lead to potential impairment in future periods. The Company performed its annual impairment test during the second quarter of fiscal 2023 and 2022 and determined that its goodwill was not impaired. As of December 31, 2023 and 2022, we had not identified any factors that indicated there was an impairment of our goodwill and determined that no additional impairment analysis was then required.
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. Maintenance and repairs are charged against expense as incurred.
Impairment of Long-Lived Assets
The Company has long-lived assets such as tangible property and equipment, identified intangible assets consisting of acquired patents and core technology. When events or changes in circumstances occur that could indicate the carrying value of long-lived assets may not be recoverable, the Company assesses recoverability by determining whether the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. If the undiscounted cash flow is less, an impairment charge is recognized for the excess of the carrying amounts of these assets over the fair values. Fair values are determined by discounted future cash flows, appraisals or other methods.
During the years ended December 31, 2023 and 2022, the Company did not record any impairment from long-lived assets.
Fair Value of Financial Instruments
The carrying amount of certain financial instruments held by the Company, such as cash equivalents, accounts receivable, contract assets and liabilities, accounts payable, and accrued and other current liabilities, approximate fair value due to their short maturities. The carrying amount of the liabilities for the convertible preferred stock warrants represent their fair value. The carrying amounts of the Company’s borrowings and lease liabilities approximate fair value due to the market interest rates that these obligations bear and interest rates currently available to the Company.
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:
| Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities; |
| Level 2 | Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices 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 related assets or liabilities; and |
| Level 3 | Unobservable inputs that are supported by little or no market activity for the related assets or liabilities. |
Research and Development Costs
Research and development costs include costs directly attributable to the conduct of research and development programs to enhance existing products and services and to develop future technologies, including the cost of services provided by outside contractors, and mandatory compliance fees and contractual obligations. All costs associated with research and development are expensed as incurred.
F-10
Software Development Costs
Software development costs incurred subsequent to the establishment of technological feasibility for software intended to be sold, licensed or otherwise marketed to customers will be capitalized, but development costs not meeting the criteria for capitalization are expensed as incurred. With respect to internal use software, the Company will capitalize such development costs incurred during the application development stage, but development costs incurred prior to that stage will be expensed as incurred. No amortization expense will be recorded until the software is ready for its intended use. To date the Company has not incurred any capitalizable software development costs.
Stock-Based Compensation
The Company has adopted ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of ASC 718, Share-Based Payment, to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of ASC 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards, and that ASC 718 does not apply to share based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606, Revenue from Contracts with Customers.
Stock-based compensation expense for expected-to-vest awards is valued under the single-option approach and amortized on a straight-line basis, accounting for actual forfeitures as they occur. We utilize the Black Scholes pricing model in order to determine the fair value of stock-based option awards. The Black Scholes pricing model requires various highly subjective assumptions including volatility, expected option life, and risk-free interest rate. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Loss Per Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the “If-Converted” method), unless the effect of such issuances would have been anti-dilutive.
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Series A convertible preferred stock dividends | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Denominator: | ||||||||
| $ | ( | ) | $ | ( | ) | |||
Net loss per share is based on the weighted average number of common shares and common share equivalents outstanding during the period.
In periods with a reported net loss, the effect
of anti-dilutive stock options, unvested restricted common stock and warrants are excluded and diluted loss per share is equal to basic
loss per share. Due to a net loss in the years ended December 31, 2022 and 2023, there were therefore no dilutive securities and hence
basic and diluted loss per share were the same.
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Warrants | ||||||||
| Options | ||||||||
| Unvested restricted common stock | ||||||||
| Total potentially dilutive shares | ||||||||
As all potentially dilutive securities are anti-dilutive as of December 31, 2023 and 2022, diluted net loss per share is the same as basic net loss per share for each period.
F-11
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. The Company has evaluated the recently implemented accounting standards and concluded that none currently apply to the Company.
Note 3 – Restatement of Previously Issued Financial Statements
Subsequent to the issuance of our Original Form 10-K and our subsequent retention of BPM to replace BF Borgers as our independent registered public accounting firm, management became aware of various adjustments to be recorded to our consolidated financial statements. Accordingly, our consolidated balance sheets as of December 31, 2023 and 2022, and our consolidated statements of operations, consolidated statements of stockholders’ equity, and our consolidated statements of cash flows for the years ended December 31, 2023 and 2022, have been restated for various errors, omissions, reclassifications or changes to accounting policy made primarily with regard to the purchase accounting of the QPhoton Merger, stock-based compensation accounting, financing costs, and other matters further described below. The restated consolidated financial statements also reflect the correction of certain previously-identified errors and out-of-period adjustments that were deemed immaterial to the annual or interim period in which they were recorded and have now been restated to properly reflect the corrections in the appropriate periods.
Disclosures
In Note 1, we expanded disclosures (i) for risks and uncertainties, valuation of goodwill, impairment of long-lived assets, income taxes, and net loss and (ii) to clearly indicate that depreciation and amortization expenses are included in cost of revenue, but that the amounts are not material.
In Note 2, we expanded and revised disclosures (i) to clarify (a) that software development costs incurred subsequent to the establishment of technological feasibility for software intended to be sold, licensed or otherwise marketed to customers will be capitalized, but development costs not meeting the criteria for capitalization are expensed as incurred, (b) that with respect to internal use software, the Company will capitalize such development costs incurred during the application development stage, and (c) that through December 31, 2023, the Company has not incurred any material capitalizable development costs, (ii) to appropriately detail the methodology and computation of basic and diluted loss per share and (iii) to reflect the Company’s change in accounting policy election for stock based compensation to no longer estimate forfeitures, but rather to account for forfeitures as they occur.
In Note 3, we explained the drivers of the restatements of the Previously Issued Financial Statements.
In Note 12, we clarified the basis for calculating the number of reported warrants to purchase shares of the Company’s common stock issued in connection with the QPhoton Merger.
In Note 14, we expanded the disclosure to clarify that the interest rates implicit in our leases are not readily determinable and therefore that is the basis for using our incremental borrowing rate as the discount rate for our leases.
Reclassifications
We have made certain reclassifications. In the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, we reclassified certain ATM facility-related financing fees and Series A Preferred Stock dividends, which were each previously presented as Interest Expense in Other Income and Expense and have been reclassified as direct deductions to equity and shown as cash used for financing activities. We additionally revised the presentation of operating expenses to classify expenses as (1) Research and Development, (2) Sales and Marketing, and (3) General and Administrative, as compared to previously-reported categories that included (1) Salaries and Benefits, (2) Professional Services, (3) Research & Development, (4) Stock Based Compensation, and (5) Selling General & Administrative. For the Consolidated Balance Sheets, we made certain reclassifications related to (1) right-of-use assets and operating liabilities and (2) other current liabilities for litigation reserves.
Adjustments
The following is a description of the areas in which the errors were identified and for which we made correcting adjustments to our consolidated financial statements.
(1) QPhoton purchase accounting – We adjusted the final purchase price accounting for identifiable intangibles and the value attributable to the QPhoton Warrants, as defined below, including associated mark-to-market quarterly adjustments.
(2) Stock-based compensation – We adjusted expenses and prior period retained earnings to reflect the change in our accounting policy election to account for forfeitures as they occur, as well as to refine assumptions used in calculating the fair value. We also ensured all such expenditures were accrued and accounted for in the appropriate periods based on vesting schedules and underlying agreements.
F-12
(3) Debt issuance costs – We corrected errors to appropriately accrete issuance costs for the Streeterville Unsecured Note, as defined below, over the life of the loan.
(4) Uncollectable reserve – We identified a reserve for collection risk related to notes receivable.
(5) Accrued Expenses – We identified and corrected errors to record liabilities for performance-based bonus expenditures and state franchise fees to reflect the expenses in the appropriate period.
(6) Financing Expenditures – We corrected the presentation of Series A Preferred Stock dividends and ATM proceeds and adjusted the valuation of the Series A convertible preferred stock warrants.
(7) Other - We corrected certain classifications, previously identified errors and out of period adjustments that were deemed immaterial to the annual or interim period in which they were recorded and restated prior periods to reflect these corrections in the appropriate periods.
| Year Ended December 31, 2023 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||
| Accounts receivable | ||||||||||||||||
| Inventory | ||||||||||||||||
| Loans receivable, net of provision for credit losses | ( | ) | (4 | ) | ||||||||||||
| Prepaid expenses and other current assets | ( | ) | (7 | ) | ||||||||||||
| Total current assets | ( | ) | ||||||||||||||
| Property and equipment, net | ||||||||||||||||
| Operating lease right-of-use assets | (7 | ) | ||||||||||||||
| Intangible Assets, net | (1 | ) | ||||||||||||||
| Goodwill | ( | ) | (1 | ) | ||||||||||||
| Other non-current assets | ||||||||||||||||
| Total assets | $ | $ | ( | ) | $ | |||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable | $ | $ | $ | |||||||||||||
| Accrued expenses | (2)(5 | ) | ||||||||||||||
| Financial liabilities, current, net of issuance costs | ( | ) | (3 | ) | ||||||||||||
| Other current liabilities | (7 | ) | ||||||||||||||
| Total current liabilities | ||||||||||||||||
| Operating lease liabilities | ||||||||||||||||
| Total liabilities | ||||||||||||||||
| Stockholders’ equity | ||||||||||||||||
| Preferred stock | ||||||||||||||||
| Common stock | ||||||||||||||||
| Additional paid-in capital | ( | ) | (1)(2)(6)(7 | ) | ||||||||||||
| Accumulated deficit | ( | ) | (1)(2)(3)(4)(5)(6)(7 | ) | ( | ) | ||||||||||
| Total stockholders’ equity | ( | ) | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ( | ) | $ | |||||||||||
F-13
| Year Ended December 31, 2022 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||
| Accounts receivable | ||||||||||||||||
| Prepaid expenses and other current assets | ( | ) | (7 | ) | ||||||||||||
| Total current assets | ( | ) | ||||||||||||||
| Property and equipment, net | ||||||||||||||||
| Operating lease right-of-use assets | (7 | ) | ||||||||||||||
| Intangible assets, net | ( | ) | (1 | ) | ||||||||||||
| Goodwill | ( | ) | (1 | ) | ||||||||||||
| Other non-current assets | ||||||||||||||||
| Total assets | $ | $ | ( | ) | $ | |||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable | $ | $ | $ | |||||||||||||
| Accrued expenses | ( | ) | (2)(5 | ) | ||||||||||||
| Financial liabilities, current | ( | ) | (7 | ) | ||||||||||||
| Other current liabilities | (6)(7 | ) | ||||||||||||||
| Total current liabilities | ( | ) | ||||||||||||||
| Financial liabilities, net of issuance costs | ( | ) | (3 | ) | ||||||||||||
| Warrant liability | (1 | ) | ||||||||||||||
| Operating lease liabilities | ( | ) | (7 | ) | ||||||||||||
| Total liabilities | ( | ) | ||||||||||||||
| Stockholders’ equity | ||||||||||||||||
| Preferred stock | ||||||||||||||||
| Common stock | ||||||||||||||||
| Additional paid-in capital | ( | ) | (1)(2)(6)(7 | ) | ||||||||||||
| Accumulated deficit | ( | ) | (1)(2)(3)(4)(5)(6)(7 | ) | ( | ) | ||||||||||
| Total stockholders’ equity | ( | ) | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ( | ) | $ | |||||||||||
F-14
| Year Ended December 31, 2023 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Total revenue | $ | $ | $ | |||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ( | ) | (2)(5 | ) | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||
| Non-operating income (expense) | ||||||||||||||||
| Interest and other income | ||||||||||||||||
| Interest expense, net | ( | ) | (3)(6 | ) | ( | ) | ||||||||||
| Change in value of warrant liability | (1 | ) | ||||||||||||||
| Loss before income tax provision | ( | ) | ( | ) | ||||||||||||
| Income tax provision | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||
| Less: Series A convertible preferred stock dividends | ( | ) | (6 | ) | ( | ) | ||||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | $ | ( | ) | |||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| ( | ) | |||||||||||||||
| Year Ended December 31, 2022 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Total revenue | $ | $ | $ | |||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ( | ) | (2 | )(5) | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||||||
| Non-operating income (expense) | ||||||||||||||||
| Interest and other income | ||||||||||||||||
| Interest expense, net | ( | ) | (3 | )(6) | ( | ) | ||||||||||
| Change in value of warrant liability | (1 | ) | ||||||||||||||
| Loss before income tax provision | ( | ) | ( | ) | ||||||||||||
| Income tax provision | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||
| Less: Series A convertible preferred stock dividends | ( | ) | (6 | ) | ( | ) | ||||||||||
| Net loss available to common stockholders | $ | ( | ) | $ | $ | ( | ) | |||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| ( | ) | |||||||||||||||
F-15
| Year Ended December 31, 2023 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | ( | ) | ( | ) | |||||||||||
| Adjustments to reconcile net loss to net cash from operations | ||||||||||||||||
| Depreciation and intangibles amortization | (1 | ) | ||||||||||||||
| Amortization of issuance costs | (3 | ) | ||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | (1 | ) | ( | ) | ||||||||||
| Provision for credit losses | (4 | ) | ||||||||||||||
| Other recognized losses (gains) | (7 | ) | ||||||||||||||
| Stock-based compensation expense | ( | ) | (2 | ) | ||||||||||||
| Stock-based compensation expense for services | (2 | ) | ||||||||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||||||
| Inventory | ( | ) | ( | ) | ||||||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | (7 | ) | ( | ) | ||||||||
| Other non-current assets | ( | ) | (7 | ) | ||||||||||||
| Accounts payable | ||||||||||||||||
| Accrued expenses and other current liabilities | ( | ) | (2)(7 | ) | ||||||||||||
| Other long-term liabilities | ( | ) | (7 | ) | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | (7 | ) | ( | ) | ||||||||
| Issuance of loan receivable | ( | ) | ( | ) | ||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Payments of financial liabilities, net of interest | ( | ) | ( | ) | ||||||||||||
| Series A Preferred dividend payments | ( | ) | (6 | ) | ( | ) | ||||||||||
| Proceeds from stock issuance related to ATM facility | ( | ) | (6 | ) | ||||||||||||
| Net cash provided by financing activities | ( | ) | ||||||||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | $ | |||||||||||||
F-16
| Year Ended December 31, 2022 | ||||||||||||||||
| As Previously | Description of | |||||||||||||||
| Reported | Adjustments | Adjustments | As restated | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net loss | $ | ( | ) | ( | ) | |||||||||||
| Adjustments to reconcile net loss to net cash from operations | ||||||||||||||||
| Depreciation and amortization | ( | ) | (1 | ) | ||||||||||||
| Amortization of issuance costs | (3 | ) | ||||||||||||||
| Change in fair value of warrant liabilities | ( | ) | (1 | ) | ( | ) | ||||||||||
| Other recognized losses (gains) | (7 | ) | ||||||||||||||
| Stock-based compensation expense | ( | ) | (2 | ) | ||||||||||||
| Stock-based compensation expense for services | (2 | ) | ||||||||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||||||
| Prepaid expenses and other current assets | ( | ) | (7 | ) | ( | ) | ||||||||||
| Other non-current assets | ( | ) | ( | ) | (7 | ) | ( | ) | ||||||||
| Accounts payable | ||||||||||||||||
| Accrued expenses and other current liabilities | ( | ) | (2)(7 | ) | ( | ) | ||||||||||
| Other long-term liabilities | ( | ) | (7 | ) | ||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||||||||||
| Net cash used for QPhoton, Inc. Merger | ( | ) | ( | ) | ||||||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Proceeds raised from financial liabilities, net of issuance costs | ( | ) | (3 | ) | ||||||||||||
| Series A Preferred dividend payments | ( | ) | (6 | ) | ( | ) | ||||||||||
| Net cash provided by financing activities | ( | ) | ||||||||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | $ | |||||||||||||
F-17
Note 4 – Business Combinations
Merger with QPhoton, Inc.
On May 19, 2022, the Company, QPhoton, and Yuping Huang, the principal stockholder of QPhoton, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which the Company agreed to acquire QPhoton through a series of merger transactions (collectively with the other transactions contemplated by the Merger Agreement, the “Transaction”). On June 16, 2022, all conditions precedent having been met or waived by the Parties, the Company closed the Transactions. The merger with QPhoton adds to the Company’s portfolio of quantum computing products and enables the Company to offer a wider range of quantum information services. The Company accounted for the Transactions using the acquisition method in accordance with ASC 805, Business Combinations, with the purchase price being allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. Fair values were determined using management estimates. The results of QPhoton are included within the consolidated financial statements commencing on the acquisition date.
Pursuant to
the Merger Agreement, immediately following the closing of the Transactions contemplated by the Merger Agreement (the “Closing”),
Merger Sub I (a wholly owned subsidiary of the Company) merged with and into QPhoton, with QPhoton surviving the merger as a wholly-owned
subsidiary of the Company, immediately after which the surviving corporation merged with and into Merger Sub II (also a wholly owned
subsidiary of the Company), with Merger Sub II surviving the merger as a wholly-owned subsidiary of the Company (the “Surviving
Company”). The merger consideration payable to the stockholders of QPhoton (the “Merger Consideration”) consisted of
(i)
and the remaining Merger Consideration for the other stockholder of QPhoton will be issued upon presentation of certain required documents and surrender of their QPhoton shares.
The purchase
price was approximately $
The fair value of the prepaid expenses and security deposits was set at book value, and the fair value of the property and equipment was written up to the purchase cost to reflect the recent purchase dates of the equipment relative to the closing date of the Transactions. To estimate the fair value of the identifiable intangible assets, the Company engaged a third-party valuation expert (the “Third-Party Valuation Expert”), to conduct an independent analysis in line with purchase price accounting standards. The Third-Party Valuation Expert concluded:
| ● | that there was no fair value attributable to customer relationships due to the lack of current customer contracts; |
F-18
| ● | a fair value of $ |
| ● | a fair value of $ |
| ● | a fair value of $ |
The Company accepted the Third-Party Valuation Expert’s valuation. Although the valuation analysis was performed in 2023, for the purposes of the consolidated financial statements in this Amendment, the Company has recorded and reported the results of the valuation as of the Closing date, June 16, 2022.
| Purchase price | ||||
| Common stock | $ | |||
| Series B convertible preferred | ||||
| Contingently issuable warrants | ||||
| Purchase price | ||||
| Less: cash acquired | ( | ) | ||
| Purchase price, net of cash acquired | ||||
| Less: | ||||
| Prepaid expenses | ||||
| Property and equipment at cost | ||||
| Security deposits | ||||
| Non-compete agreement with founder | ||||
| Trade names and trademarks | ||||
| Developed Technology and licensed patents | ||||
| Accounts payable and other current liabilities | ( | ) | ||
| Goodwill | $ | |||
F-19
The amount allocated to goodwill and intangible assets reflects the benefits the Company expected to realize from the growth of the acquisition’s operations.
Note Purchase Agreement – the Company and QPhoton
On February
18, 2022, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with QPhoton, pursuant to which
the Company agreed to loan money to QPhoton using two unsecured promissory notes (each, a “Note”), each in the principal
amount of $
The Note Purchase
Agreement contains customary representations and warranties by QPhoton and the Company, as well as a “most favored nations”
provision for the benefit of the Company. The Notes issued under the Note Purchase Agreement, including the Notes issued on February
18, 2022 and April 1, 2022, provide that the indebtedness evidenced by the applicable Note bears simple interest at the rate of
Note 5 – Intangible Assets and Goodwill
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| Non-compete agreement with founder | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Website domain name and trademark | ( | ) | ( | ) | ||||||||||||||||||||
| Technology and licensed patents | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
F-20
The amortization
expense of the Company’s intangible assets for the years ended December 31, 2023 and 2022 was $
| Amortization | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
The
Company recorded goodwill resulting from the Transactions, calculated as the difference between the total purchase price and the value
of tangible and intangible assets acquired less the liabilities assumed. The Company recorded goodwill of $
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Goodwill, at beginning of year | $ | $ | ||||||
| Goodwill additions | ||||||||
| Goodwill, at end of year | $ | $ | ||||||
The Company tested the intangible assets and goodwill for impairment as of December 31, 2023 and concluded there was no impairment of intangible assets or goodwill at that time.
Note 6 – Income Taxes:
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets where, based upon the available evidence, management concludes that it is more-likely-than-not that the deferred tax assets will not be realized. Realization of deferred tax assets is also dependent upon future earnings, if any, the timing and amount of which are uncertain.
The Company records a liability for the uncertain tax positions taken or expected to be taken on the Company’s tax return when it is more-likely-than-not that the tax position might be challenged despite the Company’s belief that the tax return positions are fully supportable, and additional taxes will be due as a result. To the extent that the assessment of such tax positions changes, for example, based on the outcome of a tax audit, the change in estimate is recorded in the period in which the determination is made. The provision for income taxes includes the impact of provisions for uncertain tax positions.
F-21
Income tax expense
attributable to pretax loss from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate
of
As of December 31, 2023, the Company had federal
and state net operating loss carryforwards of approximately $
As of December 31, 2023, in addition to the
$
The Company
has federal R&D credit carryforwards of approximately $
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, with varying statutes of limitations. The tax years from inception through 2023 remain open to examination due to the carryover of unused net operating losses that are being carried forward for tax purposes.
F-22
Note 7 – Property and Equipment
| December 31, | ||||||||
| Classification | 2023 | 2022 | ||||||
| Computer and lab equipment | $ | $ | ||||||
| Network equipment | ||||||||
| Furniture and fixtures | ||||||||
| Software | ||||||||
| Leasehold improvements | ||||||||
| Total cost of property and equipment | ||||||||
| Accumulated depreciation | ||||||||
| Property and equipment, net | $ | $ | ||||||
| Estimated Useful Life (Years) | |||
| Computer and laboratory equipment | |||
| Network equipment | |||
| Furniture and fixtures | |||
| Software | |||
| Leasehold improvements |
Maintenance and repairs are charged to operations when incurred. When property and equipment are sold or otherwise disposed, the asset account and related accumulated depreciation and amortization accounts are relieved, and any gain or loss is included in other income or expense.
Note 8 – Financial Liabilities
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Remaining loan balances | $ | $ | ||||||
| Remaining unamortized debt issuance costs | ( | ) | ( | ) | ||||
| Financial liabilities, net | $ | $ | ||||||
Additionally,
the Company has accrued interest of $
Unsecured Promissory Note
On
September 23, 2022, the Company entered into a note purchase agreement (the “Unsecured NPA”) with Streeterville Capital,
LLC (“Streeterville”), pursuant to which Streeterville purchased an unsecured promissory note (the “Note” or
the “Streeterville Unsecured Note”) in the initial principal amount of $
Beginning on
the date that was six months after the issuance date of the Note, Streeterville has the right to redeem up to $
F-23
Pursuant to the terms of the Unsecured NPA, the parties provided customary representations and warranties to each other. Also, until amounts due under the Note are paid in full, the Company agreed, among other things, to: (i) timely make all filings under the Securities Exchange Act of 1934, (ii) ensure the Company’s common stock continues to be listed on the Nasdaq, (iii) ensure trading in the Company’s common stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease trading on Company’s principal trading market, (iv) ensure the Company will not make any Restricted Issuance (as defined in the Note) without Streeterville’s prior written consent, which consent may be granted or withheld in Streeterville’s sole and absolute discretion, (v) ensure the Company will not enter into any agreement or otherwise agree to any covenant, condition, or obligation that locks up, restricts in any way or otherwise prohibits the Company from entering into certain additional transactions with Streeterville, and (vi) with the exception for Permitted Liens (as defined in the Note) ensure the Company will not pledge or grant a security interest in any of its assets without Streeterville’s prior written consent, which consent may be granted on withheld in Streeterville’s sole and absolute discretion.
The
Note sets forth certain standard events of default (such event, an “Event of Default”) that generally, if uncured within
Note 9 – Contingencies
Indemnification Arrangements
We enter into standard indemnification arrangements in our ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless, and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties (generally our business partners or customers) in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to our products. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these agreements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal.
We have entered into indemnification agreements with our directors and officers that may require us to indemnify our directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature. These agreements also require us to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified and to make good faith determination whether or not it is practicable for us to obtain directors and officers insurance. We currently have directors and officers liability insurance.
Legal Proceedings
From time to time, we may be involved in legal proceedings arising in the ordinary course of business. In general, management believes that ordinary course of business matters will not have a material adverse effect on our financial position or results of operations and are adequately covered by our liability insurance. However, it is possible that consolidated cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one of more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.
As part of our
business combination with QPhoton in June 2022, we acquired a payable to BV Advisory Partners, LLC (“BV Advisory”). On March
1, 2021, QPhoton entered into a Note Purchase Agreement with BV Advisory. Under the Note Purchase Agreement, on March 1, 2021, March
23, 2021 and July 9, 2021, BV Advisory purchased convertible promissory notes from QPhoton for $
On
June 16, 2022, QPhoton tendered a cashier’s check to BV Advisory in the amount of $
Note 10 – Loan Receivable
On May 16, 2023,
the Company entered into a Summary of Proposed Terms (the “Letter of Intent”) with millionways to provide bridge loans to
millionways and enter into due diligence to acquire up to
F-24
The MW Agreement
contains customary representations and warranties by millionways and the Company, as well as a “most favored nations” provision
for the benefit of the Company. The MW Notes issued under the MW Agreement, including the MW Notes issued on June 6, 2023, provide that
the indebtedness evidenced by the applicable MW Note bears simple interest at the rate of
The Company
reserved $
Note 11 – Capital Stock:
Series A Convertible Preferred Offering
From
November 10, 2021 through November 17, 2021, the Company conducted a private placement offering (the “Private Placement”)
pursuant to securities purchase agreements with 7 accredited investors (the “Series A Investors”), whereby the Series A Investors
purchased from the Company an aggregate of
The
Series A Preferred Stock ranks senior to common stock with respect to the payment of dividends and liquidation rights. Each holder of
Series A Preferred Stock is entitled to receive, with respect to each share of Series A Preferred Stock then outstanding and held by
such holder, dividends at the rate of
The
number of shares of the Company’s common stock issuable upon conversion of any share of Series A Preferred Stock shall be determined
by dividing (x) the Conversion Amount of such share of Series A Preferred Stock by (y) the Conversion Price. “Conversion Amount”
means, with respect to each share of Series A Preferred Stock, as of the applicable date of determination, the sum of (1) the stated
value thereof plus (2) any accrued dividends. “Conversion Price” means, with respect to each share of Series A Preferred
Stock, as of any optional conversion date, Mandatory Conversion Date or other date of determination, $
The
Preferred Warrants are -year warrants to purchase shares of the Company’s common stock at an exercise price of $
In connection with the Purchase Agreement, the Company and the Series A Investors entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to file a registration statement to register the shares of common stock underlying the Series A Preferred Stock and warrants within 180 days. Pursuant to the Registration Rights Agreement, the Series A Investors received certain rights, including but not limited to piggyback registration rights, providing that the holder be given notice of any proposed registration of securities by the Company, and requiring that the Company register all or any portion of the registrable securities that the holders request to be registered, in each case, subject to the terms and conditions of the Registration Rights Agreement.
On April 27, 2022, the Company filed a Resale Form S-3 as required by the Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement to register the shares of common stock underlying the Series A Preferred Stock and warrants within 180 days from the closing of the Private Placement. The Resale Form S-3 went effective on June 2, 2022.
On
June 13, 2022, one of the Series A Investors, Falcon Capital Partners, converted
On
February 9, 2023, one of the Series A Investors, Greenfield Children, LLC, converted
Authorized Classes of Stock
As of September
9, 2024, the Board has authorized two classes of preferred stock. The Board has authorized
F-25
At-the-Market Facility
From January 19,
2023 through December 31, 2023, the Company sold
Warrants
| Issuance Date | Expiration Date | Exercise Price | Issued | Exercised | Forfeited / Canceled | Warrants Outstanding | ||||||||||||||||
| August 18, 2020 | $ | ( | ) | |||||||||||||||||||
| November 15, 2021 | $ | ( | ) | |||||||||||||||||||
| June 16, 2022 | $ | ( | ) | |||||||||||||||||||
In connection with a restricted stock units
offering in June 2020, the Company issued warrants in August 2020 to purchase
In connection with the offering of Series
A Preferred Stock in November 2021, the Company issued warrants to purchase
In connection with the QPhoton Merger on June
16, 2022, the Company issued warrants to purchase
Note 12 – Stock-based Compensation
Incentive Plans
The
Company’s 2019 Equity and Incentive Plan, as amended in 2021 (the “2019 Plan”) enabled the Company to grant incentive
stock options or nonqualified stock options and other equity awards to employees, directors and consultants of the Company up to a total
of
On
July 5, 2022, the Board of Directors adopted the Company’s 2022. Equity and Incentive Plan (the “2022 Plan”), which
provides for the issuance of up to
Options
| Year Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Exercise price | $ |
$ |
||||||
| Risk-free interest rate | ||||||||
| Expected volatility | ||||||||
| Expected dividend yield | ||||||||
| Expected life of options (in years) | ||||||||
F-26
| Weighted Average Number of Shares (in thousands) | Weighted Average Exercise Price | Contractual Term (in years) | ||||||||||
| Outstanding as of December 31, 2021 | ||||||||||||
| As previously reported | $ | |||||||||||
| Adjustments (1) | ( | ) | ( | ) | ||||||||
| As restated | ||||||||||||
| Granted | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding as of December 31, 2022 | ||||||||||||
| Granted | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding as of December 31, 2023 | $ | |||||||||||
| Vested as of December 31, 2022 | $ | |||||||||||
| Vested as of December 31, 2023 | $ | |||||||||||
| Exercise Price | Outstanding Options | Exercisable Options | ||||||||
| $ | |
|
||||||||
| $ | |
|
||||||||
| $ | |
|
||||||||
| $ | |
|
||||||||
| $ | |
|
||||||||
| $ | |
|
||||||||
The weighted average grant-date fair value
of stock options granted during the years ended December 31, 2023 and 2022 was $
Stock-based compensation
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Research and development | ||||||||
| Selling and marketing | ( | ) | ||||||
| General and administrative | ||||||||
| Total stock-based compensation | $ | $ | ||||||
For the years ended December 31, 2023 and
2022, the statement of stockholders’ equity was lower by $
In terms of new issuances, the Company issued
F-27
Stock-based compensation for services
The Company recognized $
In 2022, the Company issued
Note 13 – Related Party Transactions
There were no related party transactions during the years ended December 31, 2023 and 2022.
Note 14 – Operating Leases:
The Company has use of space in five different locations, Hoboken, NJ, Tempe, AZ, Leesburg, VA, Arlington, VA, and Minneapolis, MN, under lease or membership agreements, which expire at various dates through October 31, 2028. The Company’s leases do not provide an implicit rate, and the rates implicit in our leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease assets and liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s leases all contain options to extend or renew the lease or membership term.
| Year | Lease Payments Due | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total minimum payments | ||||
| Less: imputed Interest | ( | ) | ||
| Present value of operating lease liabilities | ||||
| Less: current portion included in other current liabilities | ( | ) | ||
| Long-term operating lease liabilities | ||||
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for operating lease liabilities (in thousands) | $ | $ | ||||||
| Weighted average remaining lease term in years | ||||||||
| Weighted average discount rate | % | % | ||||||
F-28
Note 15 – License Agreement – Stevens Institute of Technology
Effective December 17th, 2020, QPhoton signed a License Agreement with the Stevens Institute. The License Agreement enables the Company to commercially use technology such as licensed patents, licensed patent applications and licensed “Know-How”. QPhoton is also able to issue sublicenses for the technology under the agreement. The agreement is effective until the later of: (i) the 30-year anniversary of the effective date, or (ii) the expiration of the licensed patent or licensed patent application that is last to expire. As part of the merger of the Company and QPhoton, the Stevens License Agreement was assigned to the Company.
During the term of the agreement and prior to any commercialization or sublicensing of the technology by the Company, the Company shall be required to submit annual reports to the Stevens Institute reporting on all research, development, and efforts toward commercialization and/or sublicensing made during the year. Once any commercialization and/or sublicensing has been initiated, the Company shall deliver quarterly reports to the Stevens Institute reporting on the revenue received by the Company, all sublicenses derived from the sale of licensed products, and the net sales price associated with each transaction. The Company will be responsible for reimbursing Stevens for any costs associated with the prosecution and maintenance of the licensed patents and licensed patent applications moving forward.
Consideration for the agreement
As of December 31, 2023, the Company has begun to commercialize some of the licensed technology, though the Company has not recorded any related revenue and hence has not incurred any royalty expenses payable to the Stevens Institute.
Note 16 – Subsequent Events
On January 31, 2024, BV Advisory and its chief executive officer, Keith Barksdale (the “BV Defendants”), alleged stockholders of and claimants against the Company, filed a motion for reconsideration of his original 2023 motion to dismiss. The motion and our opposition were argued before the Superior Court of New Jersey (the “NJ Court”) on February 15, 2024. On March 7, 2024, the NJ Court issued an order, granting the BV Defendant’s motion dismissing the Company’s case on procedural grounds because, according to the NJ Court, the Company can assert its claims. On April 1, 2024, the Company filed a motion in New Jersey Superior Court for reconsideration of the Court’s March 7, 2024 order dismissing the Company’s defamation and fraud complaint (the “QCi v BV Complaint in NJ Court”) against the BV Defendants on procedural grounds. On May 1, 2024, the NJ Court affirmed its initial order dismissing the case with prejudice and directed the Company to file its claims in Delaware. The Company, as plantiff on the QCi v BV Complaint in NJ Court, is currently evaluating whether it should file the claims in Delaware. On May 28, 2024, the Delaware Court of Chancery issued rulings dismissing the BV Advisory petition to appoint a receiver for the Company without prejudice and granting in part the Company’s motion to dismiss the BV Advisory lawsuit for breach of contract and related claims, dismissing eight of the ten counts in the complaint. The Parties are working with the Court to schedule briefing and resolution of the two remaining counts.
From January 1, 2024, through March 1, 2024,
the Company repaid $
On March 19, 2024, the Company entered into
a Redemption and Waiver Agreement (the “Redemption Agreement”) with the current holders (the “Series A Holders”)
of its Series A Preferred Stock. Pursuant to the Redemption Agreement, the Company agreed to redeem all outstanding shares of the Series
A Preferred Stock for an aggregate cash purchase price of $
On August 6, 2024, the Company entered into
a Securities Purchase Agreement with Streeterville, pursuant to which the Company issued and sold to Streeterville a Secured Convertible
Promissory Note (the “Streeterville Secured Convertible Note”) in the original principal amount of $
There are no other events of a subsequent nature that in management’s opinion are reportable.
F-29
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-269063, 333-268064 and 333-264518) of Quantum Computing Inc. of our report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 1 to the consolidated financial statements) dated September 11, 2024 relating to the consolidated financial statements, which appears in this Amendment No. 1 to the Annual Report on Form 10-K.
/s/ BPM LLP
San Jose, California
September 11, 2024
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Dr. William McGann, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K/A 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; |
| 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; |
| 4. | [Omitted]; and |
| 5. | [Omitted]. |
| Date: September 10, 2024 | By: | /s/ Dr. William McGann |
| Dr. William McGann | ||
| Principal Executive Officer Quantum Computing, Inc. |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Christopher Boehmler, certify that:
| 1. | I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K/A 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; |
| 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; |
| 4. | [Omitted]; and |
| 5. | [Omitted]. |
| Date: September 10, 2024 | By: | /s/ Christopher Boehmler |
| Christopher Boehmler | ||
| Principal Financial Officer Quantum Computing, Inc. |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Amendment No. 1 to the Annual Report of Quantum Computing, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Dr. William McGann, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: September 10, 2024 | By: | /s/ Dr. William McGann |
| Dr. William McGann | ||
| Principal Executive Officer Quantum Computing, Inc. |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this Amendment No. 1 to the Annual Report of Quantum Computing, Inc. (the “Company”) on Form 10-K/A for the period ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Boehmler, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: September 10, 2024 | By: | /s/ Christopher Boehmler |
| Christopher Boehmler | ||
| Principal Financial Officer Quantum Computing, Inc. |