10-K/A: Quantum Computing Inc. Restates 2022 and 2023 Financials Following SEC Order

Quantum Computing Inc. has filed an amended annual report to restate its 2022 and 2023 financial statements due to an SEC order suspending its previous auditor.

Summary

• Quantum Computing Inc. (QCi) has restated its consolidated financial statements for the years ended December 31, 2023 and 2022.
• The restatement was prompted by an SEC order suspending BF Borgers CPA PC, QCi's previous auditor, and the subsequent engagement of BPM LLP as the new auditor.
• The restatement includes adjustments to purchase accounting related to the June 2022 merger with QPhoton, Inc., stock-based compensation expenses, debt and equity issuance costs, and other items.
• The net effect of the adjustments decreased the net loss by $2.7 million for 2023 and $12.6 million for 2022.
• The loss per share was reduced by $0.04 for both 2023 and 2022.
• The decrease to stockholders' equity from the adjustments was $4.6 million as of December 31, 2023, and $9.8 million as of December 31, 2022.
• QCi's revenue increased from $136 thousand in 2022 to $358 thousand in 2023, primarily from services.
• The company's operating expenses decreased by $2.3 million, or 8%, from 2022 to 2023.
• QCi has raised $57.4 million through private placements of equity and $12.6 million through private placements of convertible promissory notes and other debt.
• The company had a working capital deficit of $2.2 million as of December 31, 2023.
• QCi's independent auditor has raised substantial doubt about the company's ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The document reveals significant financial challenges, including a going concern warning from the auditor, a working capital deficit, and a history of losses. While there is some revenue growth, the overall sentiment is negative due to the company's financial instability and dependence on future funding.

Positives

• The company's revenue increased significantly by 163% year-over-year.
• Operating expenses decreased by 8% year-over-year.
• The restatement resulted in a decrease in net loss for both 2022 and 2023.
• The company has developed and released multiple products that it is now marketing.

Negatives

• The company has a working capital deficit of $2.2 million.
• The independent auditor has raised substantial doubt about the company's ability to continue as a going concern.
• The company has incurred net losses and negative cash flows from operations since inception.
• The company's revenue generation from customers has been slow to develop.
• The company is dependent on additional financing to fund its operations.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional capital and financing.
• Uncertain and unfavorable macroeconomic conditions could reduce the company's ability to access capital.
• The company may be required to delay, limit, or substantially reduce its product development and go-to-market efforts if it cannot raise additional funds.
• The company's business operations may be adversely affected by the actions of competitors and prolonged recession periods.
• The company is subject to risks related to new product development, litigation, competition, and general economic conditions.

Future Outlook

The company expects revenues to increase meaningfully in the coming years as it continues to emphasize its hardware capability. The company will require additional financing to fund its operations for the next 12 months.

Management Comments

• Management believes that additional financing will be required to fund operations for the next 12 months.
• Management is focused on providing professional services to introduce customers to quantum-based solutions and on customer education to build awareness.
• Management expects revenues to increase as the company continues to emphasize its hardware capability.

Industry Context

The document highlights the challenges faced by a development-stage quantum computing company in generating revenue and securing funding. The cautious approach of potential customers towards adopting cutting-edge quantum technology is also noted. The company is transitioning towards commercialization, which is a common trend in the quantum computing industry.

Comparison to Industry Standards

• The company's revenue of $358 thousand is low compared to established technology companies, but is not unusual for a development-stage quantum computing company.
• The company's net loss of $27 million is significant, but is also not uncommon for companies in the early stages of developing complex technologies.
• The company's reliance on private placements and debt financing is typical for companies in this sector that have not yet achieved profitability.
• The auditor's going concern opinion is a significant concern and is not typical for companies with strong financial health.
• The company's focus on hardware development and commercialization is aligned with the broader industry trend of moving beyond theoretical research to practical applications.

Legal Proceedings

• BV Advisory filed a complaint against the company and certain of its directors and officers seeking monetary damages for an alleged breach of contract.
• The company believes that BV Advisory's claims have no merit and intends to defend itself vigorously.

Stakeholder Impact

• Shareholders face the risk of dilution if the company raises additional capital through the sale of equity or convertible debt securities.
• Employees may be impacted by potential delays or reductions in product development and go-to-market efforts if the company cannot secure additional funding.
• Customers may be impacted by the company's financial instability and potential delays in product delivery.
• Creditors face the risk of non-payment if the company is unable to continue as a going concern.

Next Steps

• The company will need to secure additional equity investments or achieve an adequate sales level.
• The company will continue to invest in research and development for its non-linear quantum optical products and photonics chips.
• The company will continue to emphasize its hardware capability to increase revenues.

Key Dates

Keywords

quantum computing, financial restatement, auditor change, going concern, revenue growth, operating expenses, working capital, private placement, debt financing, stock-based compensation