Quantum Computing Inc S-1, filed May 21, 2020

Quantum Computing Inc. (QUBT)

S-1 2020-05-21

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Delaware		7371		82-4533053
(State of Incorporation)		(Primary Standard Industrial Classification Number)		(IRS Employer Identification Number)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

Title of Each Class of securities to be registered	Number of shares of common stock to be registered (1)		Proposed Maximum Offering Price Per Share			Proposed Maximum Aggregate Offering Price		Amount of Registration Fee(2)

Common Stock		12,820,513	$	0.78	(3)	$	10,000,000	$	1,298
Common Stock		170,871	$	0.78		$	133,279.38	$	17.30
Total		12,991,384				$	10,133,279.38	$	1,315.30

(1)	Pursuant to Rule 416 under the Securities Act of 1933, as amended, this registration statement shall be deemed to cover additional securities of the same class as the securities covered by this registration statement issued or issuable prior to completion of the distribution of the securities covered by this registration statement as a result of a split of, or a stock dividend on, the registered securities.

(2)	Calculated pursuant to Rule 457(a) based on a proposed maximum aggregate offering price.

(3)	Based on the lowest bid price for our common stock on May 18, 2020 of $0.78. The shares offered, hereunder, may be sold by the Selling Security Holder from time to time in the open market, through privately negotiated transactions, or a combination of these methods at market prices prevailing at the time of sale or at negotiated prices.

Prospectus Summary	1
Summary Consolidated Financial Information	5
Risk Factors	9
Cautionary Note Regarding Forward-Looking Statements	20
Use of Proceeds	21
Determination of Offering Price	21
Selling Security Holder	23
Plan of Distribution	24
Market for Our Common Stock and Related Stockholder Matters	26
Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Business	34
Directors, Executive Officers and Key Employees	41
Executive Compensation	44
Security Ownership of Certain Beneficial Owners and Management	46
Certain Relationships and Related Party Transactions	47
Description of Capital Stock	48
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	50
Interests of Named Experts and Counsel	51
Experts	51
Legal Matters	51
Additional Information	51
Index to Consolidated Financial Statements	F-1

	-	Software Applications to solve high value compute-intensive problems, and
	-	Software Stack that enables the Software Applications to run on a variety of Quantum Annealers and Gate Model Quantum Computers.

Shares currently outstanding (1):		7,934,917

Shares being offered:		12,991,384

Shares outstanding after the offering		20,926,301 assuming each share offered for resale hereby is sold.

Offering Price per share:		The Selling Security Holder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices and prevailing market prices at the time of sale, at varying prices or at negotiated prices.

Use of proceeds		We will not receive any proceeds from the sale of the Commitment Shares by the Selling Security Holder. However, we will receive proceeds from our initial sale of shares to Oasis, pursuant to the Equity Purchase Agreement. The proceeds from the initial sale of shares will be used for the purpose of working capital.

Trading symbol		Our common stock is currently quoted on the OTCQB under the trading symbol “QUBT”.

Risk factors		Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 9 before deciding to invest in our securities.

	Three Months Ended
	March 31,
	2020			2019
Total revenue	$	-		$	-
Cost of revenue		-			-
Gross profit		-			-
Salaries		164,823			115,646
Consulting		76,162			77,025
Research & Development		344,682			151,290
Stock Based Compensation		1,012,350			71,250
Selling General & Administrative -Other		140,375			167,928
Operating expenses		1,738,392			583,139

Loss from Operations		(1,738,392	)		(583,139	)
Interest Income – Money Market		25			2,875
Interest Expense – Promissory Notes		(26,644	)		(55,410	)
Interest Expense - Beneficial Conversion Feature		(100,000	)		0
Interest Expense – Warrant Repricing		237,124			-
Interest Expense – Derivative Mark to Market		504,708			-
Misc Income-Legal Settlement		425,000			-
Other income (expense)		1,040,213			(52,535	)

Federal income tax expense		-			-

Net loss	$	(698,179	)	$	(635,673	)

Weighted average shares - basic and diluted		7,934,917			4,749,161
Loss per share - basic and diluted	$	(0.09	)	$	(0.13	)

	Twelve Months Ended
	December 31,
	2019			2018
Total revenue	$	-		$	-
Cost of revenue		-			-
Gross profit		-			-
Salaries		495,143			520,327
Consulting		361,102			322,278
Research & Development		891,126			250,640
Stock Based Compensation		214,884			4,182,014
Selling General & Administrative -Other		585,397			523,694
Operating expenses		2,547,652			5,798,953

Loss from Operations		(2,547,652	)		(5,798,953	)
					-
Interest Income – Money Market		8,810			-
Interest Expense – Promissory Notes		(151,185	)		(87,307	)
Interest Expense - Beneficial Conversion Feature		(803,335	)		(3,995,500	)
Interest Expense – Promissory Notes		(4,887,726	)		(87,307	)
Asset Impairment Charge		-			(625,333	)
Other income (expense)		(5,833,436	)		(4,708,140

Federal income tax expense		-			-

Net loss	$	(8,381,088	)	$	(10,507,093	)

Weighted average shares - basic and diluted		7,362,046			4,724,161
Loss per share - basic and diluted	$	(1.14	)	$	(2.22	)

	March 31,			December 31
	2020			2019
ASSETS

Current assets
Cash and cash equivalents	$	199,331		$	101,100
Prepaid Expenses		14,321			21,549
Lease right-of-use		,			-
Fixed Assets (net of depreciation)		27,273			25,596
Total assets	$	240,925		$	148,245

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Accounts payable	$	207,453		$	218,261
Accrued Expenses		213,497			152,547
Lease Liability		-			-
Derivative Liability		476,022			980,730
Convertible promissory notes – related party		100,000			100,000
Convertible promissory notes		1,448,698			1,509,000
Total liabilities		2,445,670			2,960,538

Stockholders’ equity (deficit)
Common stock, $0.0001 par value, 250,000,000 shares authorized; 7,934,917 and 7,362,046 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		776			736
Additional paid-in capital		17,195,645			17,002,297
APIC-Beneficial Conversion Feature in Equity		4,898,835			4,798,835
APIC-Stock Based Compensation		5,259,132			4,246,794
Subscription Receivable		(100,000	)		(100,000
Accumulated deficit		(29,459,133	)		(28,760,955	)
Total stockholders’ equity (deficit)		(2,204,745	)		(2,812,293	)
Total liabilities and stockholders’ equity (deficit)	$	240,925		$	148,245

	●	changes in the market acceptance of our products;

	●	increased levels of competition;

	●	changes in political, economic or regulatory conditions generally and in the markets in which we operate;

	●	our relationships with our key customers;

	●	our ability to retain and attract senior management and other key employees;

	●	our ability to quickly and effectively respond to new technological developments;

	●	our ability to protect our trade secrets or other proprietary rights, operate without infringing upon the proprietary rights of others and prevent others from infringing on the proprietary rights of the Company; and

	●	other risks, including those described in the “Risk Factors” discussion of this prospectus.

(1)	Adam Long, Managing Partner of Oasis Capital, LLC exercises voting and dispositive power with respect to the shares of our common stock that are beneficially owned by Oasis Capital, LLC.

(2)	Represents: to (i) 170,871 shares of the Company’s common stock, consisting of (a) 133,334 Commitment Shares; and (b) 37,537 Inducement Shares; and (ii) 187,685 shares of the Company’s common stock issuable upon the exercise of the Oasis Warrant (the “Warrant Shares”)

(3)	Includes 12,820,513 shares of Common Stock to be issued in connection with the Equity Purchase Agreement (the “EPA Shares”) and the Beneficially Owned Shares. See the description under the heading “The Oasis Equity Purchase Agreement” for more information about the Equity Purchase Agreement.

(4)	Assumes the sale of the EPA Shares, Commitment Shares and Inducement Shares.

Plan Category		Number of securities to be issued upon exercise of outstanding options				Weighted-average exercise price of outstanding options				Number of securities available for future issuance under equity compensation plans
Equity compensation plan approved by security holders - 2019 Quantum Computing Inc. Equity Incentive Plan			1,030,000			$	1.55				470,000

	For the Three Months Ended March 31, 2020					For the Three Months Ended March 31, 2019
(In thousands)	Amount		Mix			Amount		Mix			Change

Products		0		0	%		0		0	%		0	%
Services		0		0	%		0		0	%		0	%
Total	$	0		100.0	%	$	0		100.0	%		0	%

	For the Twelve Months Ended December 31, 2019					For the Twelve Months Ended December 31, 2018
(In thousands)	Amount		Mix			Amount		Mix			Change
Products		0		0	%		0		0	%		0	%

Services		0		0	%		0		0	%		0	%
Total	$	0		100.0	%	$	0		100.0	%		0	%

	March 31, 2020			December 31, 2019			Increase/ (Decrease)
Current Assets	$	213,652		$	122,649		$	91,0003
Current Liabilities	$	2,445,670		$	2,960,537		$	(541,868	)
Working Capital (Deficit)	$	(2,204,745	)	$	(2,812,293	)	$	607,548

	As Reported December 31, 2018		Adoption of ASC 842 Increase (Decrease)		Revised Balance January 1, 2019
Other Current Assets		1,767,080				1,767,080
Operating Lease right-of-use assets		-		2,491		2,491
Total assets		1,797,156		2,491		1,799,647
Other current liabilities		3,314,102				3,314,102
Lease Liability-current		-		2,491		2,491
Long-term Liabilities		-		-		-
Total Liabilities and equity		1,797,156		2,491		1,799,647

Name	Current Age	Position
Robert Liscouski	65	Chairman of the Board of Directors, President, and Chief Executive Officer (Principal Executive Officer)
Christopher Roberts	65	Chief Financial Officer, (Principal Financial Officer) (Principal Accounting Officer), Director
Bertrand Velge	60	Director
Justin Schreiber	36	Director

	●	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

	●	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

	●	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

	●	been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

	●	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

	●	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Angela Collete	2019		—														0
(Receiver)	2018		0		0		0		0		0		0		0		0
	2017

Robert Liscouski	2019		360,000														360,000
Chief Executive	2018		300,000		0		504,000		0		0		0		0		804,000
Officer (PEO)	2017		—		—		—		—		—		—		—		—

Christopher Roberts	2019		184,650														184,650
Treasurer (PFO)	2018		165,763		0		1,512,000		0		0		0		0		1,677,763
	2017		—		—		—		—		—		—		—		—

Name and Address of Beneficial Owner	Common Stock Owned Beneficially		Percent of Class
Named Executive Officers and Directors
Robert Liscouski, Chief Executive Officer and Chairman (1)		612,500		7.72
Christopher Roberts, Chief Financial Officer (2)		325,000		4.096
Bertrand Velge (3)		1,774,888		20.37
Justin Schreiber (4)		415,750		5.24
All directors and officers as a group (4 persons)		3,128,138		39.42
5% or greater shareholders
Peter Schultz (5)		1,002,422		12.63
Gordon Rudolph (6)		635,090		8.00
Total		4,765,650		60.06

	●	Special Meetings of Stockholders. Our corporate bylaws provide that special meetings of stockholders may be called only by our Chief Executive Officer or by a majority of the directors of our Board of Directors. Stockholders are not permitted to call a special meeting of stockholders, to require that the Chairman call such a special meeting, or to require that our board request the calling of a special meeting of stockholders.

	●	Blank Check Preferred Stock. Our Amended and Restated Certificate of Incorporation contain provisions that permit us to issue, without any further vote or action by the stockholders, up to 10 million shares of preferred stock in one or more series and, with respect to each such series, to fix the number of shares constituting the series and the designation of the series, the voting powers (if any) of the shares of the series, and the preferences and relative, participating, optional and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of such series.

Description		Page

Report of Independent Registered Public Accounting Firm		F-2
Audited Balance Sheets as of December 31, 2019 and December 31, 2018		F-3
Audited Statement of Operations for the Three and Twelve Months Ended December 31, 2019 and 2018		F-4
Audited Statement of Stockholders’ Deficit for the Twelve Months Ended December 31, 2019		F-5
Audited Statement of Cash Flows for the Twelve Months Ended December 31, 2019 and 2018		F-7
Notes to the Audited Financial Statements		F-8

Description		Page

Unaudited Balance Sheets as of March 31, 2020 and December 31, 2019		F-21
Unaudited Statement of Operations for the Three Months Ended March 31, 2020 and 2019		F-22
Unaudited Statement of Stockholders’ Deficit for the Three Months Ended March 31, 2019		F-23
Unaudited Statement of Stockholders’ Deficit for the Three Months Ended March 31, 2020		F-24
Unaudited Statement of Cash Flows for the Three Months Ended March 31, 2020 and 2019		F-25
Notes to the Unaudited Financial Statements		F-26

	Common Stock				Additional Paid			Accumulated
	Shares		Amount		in Capital			Deficit			Total

BALANCES, December 31, 2017		943,735	$	94	$	9,871,180		$	(9,872,774	)	$	(1,500	)

Issuance of shares for cash		2,980,426		298		1,063,849			-			1,064,147
Beneficial Conversion Feature						3,995,500						3,995,500
Subscription Receivable						(100,000	)					(100,000	)
Stock based compensation		800,000		80		4,031,920						4,032,000
Net loss		-		-		-			(10,507,093	)		(10,507,093	)
BALANCES, December 31, 2018		4,724,161	$	472	$	18,862,449		$	(20,379,867	)	$	(1,516,946	)

	As Reported December 31, 2018		Adoption of ASC 842 Increase (Decrease)		Revised Balance January 1, 2019
Other Current Assets		1,767,080				1,767,080
Operating Lease right-of-use assets		-		2,491		2,491
Total assets		1,797,156		2,491		1,799,647
Other current liabilities		3,314,102				3,314,102
Lease Liability-current		-		2,491		2,491
Long-term Liabilities		-		-		-
Total Liabilities and equity		1,797,156		2,491		1,799,647

	December 31,		December 31,
Classification	2019		2018
Hardware & Equipment	$	28,353	$	7,014
Software		0		0
Total cost of property and equipment		28,353		7,014
Accumulated depreciation		2,757		117
Property and equipment, net	$	25,596	$	6,897

	As Reported December 31, 2018		Adoption of ASC 842 Increase (Decrease)		Revised Balance January 1, 2019
Other Current Assets		1,767,080				1,767,080
Operating Lease right-of-use assets		-		2,491		2,491
Total assets		1,797,156		2,491		1,799,647
Other current liabilities		3,314,102				3,314,102
Lease Liability-current		-		2,491		2,491
Long-term Liabilities		-		-		-
Total Liabilities and equity		1,797,156		2,491		1,799,647

Securities and Exchange Commission registration fee	$	1,315.30
Accounting fees and expenses *	$	2,500	*
Legal fees and expenses	$	25,000
Transfer agent and registrar fees *	$	2,500	*
Printing expenses *	$	5,000	*
Miscellaneous *	$	2,500	*
Total	$	38,815.30	*

		Incorporated by
Exhibit		Reference		Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith

3.1(i)	Articles of Incorporation, as amended through April 17, 2018	10-12(g)	3.1(i)	01/09/2019
3.2(i)	By-laws	10-12(g)	3.2(i)	01/09/2019
4.1	Common Stock Specimen	10-12(g)	4.1	01/09/2019
4.2	Form of 8% Convertible Promissory Note	10-12(g)	4.2	01/09/2019
4.3	Form of Promissory Note, dated October 14, 2019 and effective October 16, 2019	8-K	10.2	10/18/2019
5.1*	Opinion of Lucosky Brookman LLP
10.1**	Robert Liscouski Employment Agreement dated February 15, 2018	10-12(g)	10.1	01/09/2019
10.2**	Christopher Roberts Employment Agreement dated March 1, 2018	10-12(g)	10.2	01/09/2019
10.3**	Sergey Shuster Employment Agreement dated February 28, 2018	10-12(g)	10.3	01/09/2019
10.4**	Richard Malinowski Employment Agreement dated July 23, 2018	10-12(g)	10.4	01/09/2019
10.5	Form of Subscription Agreement	10-12(g)	10.6	01/09/2019
10.6	Form of Subscription Agreement	10-12(g)	10.7	01/09/2019
10.7	Form of Subscription Agreement	10-12(g)	10.8	01/09/2019
10.8	2019 Quantum Computing Inc. Equity and Incentive Plan	S-1	10.8	11/22/2019
10.9	Securities Purchase Agreement, dated October 14, 2019 and effective October 16, 2019	8-K	10.1	10/18/2019
10.10	Form of Common Stock Purchase Warrant, dated October 14, 2019 and effective October 16, 2019	8-K	10.3	10/18/2019
10.11	Form of Registration Rights Agreement, dated October 14, 2019 and effective October 16, 2019	8-K	10.4	10/18/2019
10.12	Securities Purchase Agreement	8-K	10.1	05/08/2020
10.13	Convertible Promissory Note	8-K	10.2	05/08/2020
10.14	Common Stock Purchase Warrant	8-K	10.3	05/08/2020
10.15	Equity Purchase Agreement	8-K	10.4	05/08/2020
10.16	Registration Rights Agreement	8-K	10.5	05/08/2020
10.17	Paycheck Protection Program Note, dated May 6, 2020, issued to BB&T/Truist Bank N.A.	8-K	10.1	05/08/2020
16.1	Letter from Thayer O’Neal Company, LLC dated March 1, 2019 to the Securities and Exchange Commission.	8-K	16.1	03/01/2019
21.1	List of Subsidiaries	10-12(g)	21.1	01/09/2019
23.1	Consent of BF Borgers PC				X
23.3*	Consent of Lucosky Brookman LLP

	(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

	(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

	(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

	(2)	That for the purpose of determining any liability under the Securities Act of 1933 each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

	(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

	(4)	That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

	(5)	That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

		The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

	(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

	(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

	(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

	(iv)	Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

	(6)	The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

	(7)	Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

	(8)	The undersigned Registrant hereby undertakes: