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Quantum Computing Inc Announces Full Year 2022 Financial Results

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Insider Brief

  • Quantum Computing Inc completes integration of QPhoton merger, more than doubling the size of the company and establishing its quantum hardware production capability.
  • Quantum Computing Inc. begins prototype fabrication of its own quantum photonic microchips and plans to expand into full scale manufacturing to support its quantum technologies in the marketplace.
  • Quantum Computing Inc. transitions from a developing R&D technology company to commercialization at start of 2023.

PRESS RELEASE — Quantum Computing Inc. (NASDAQ: QUBT), a first-to-market full-stack photonic-based quantum computing and solutions company, today reported financial results for the full year ending December 31, 2022.

“In 2022, we completed our product preparation and have entered the commercialization phase.  Combined with QCI’s technical success prior to, and as a result of, the merger with QPhoton, we doubled our technical personnel expertise, acquired unique patent assets and IP, and importantly, added photonic hardware and systems capability to our software expertise thereby becoming a full stack, comprehensive quantum enabling company,” commented Robert Liscouski, co-Founder and CEO of Quantum Computing Inc. “In addition, we scrutinized all budgets, solidified supply chain and funding relationships, realigned our leadership team with the expanded focus of the company, and established sales & marketing with a scalable go-to-market strategy for a 2023 commercial roll-out.  We have firmly established ourselves as an emerging leader in photonic quantum information processing, which is proving to be a highly effective methodology for high-speed, low cost and low power computing compared with alternative approaches being attempted today. There is growing industry and analyst recognition and acceptance that photonic based quantum computing is outperforming the initial quantum architectures such as matter-based gate models and quantum annealers. Universities such as Stanford UniversityStevens Institute of TechnologyPurdue UniversityArizona State University, and George Mason have begun to validate the superior capabilities of photonic processing platforms.”

Mr. Liscouski continues, “As we noted in our 2022 mid-year Shareholder Letter, we laid out an ambitious plan to launch commercialization within the year.  We have done so and are well positioned to take orders for our Entropy Quantum Computer, Quantum LiDAR, Quantum CyberSecurity products and subscriptions. Beginning in April 2023, our plan over the next 24-months is to roll out a series of products including a Quantum Random Number Generator, Quantum Optical Chips, Quantum Imaging, and Quantum Hybrid (a fully integrated quantum/classical computer hybrid).  During 2023 we expect to be well on our way to delivering material revenue growth with attractive gross margins and with disciplined cost controls.”

Full-Year 2022 Financial Highlights

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  • Revenue during 2022, the company’s first revenues, totaled approximately $136,000 (55% gross margin) and is attributed to multi-month, professional services contracts with several commercial and government customers. The services were paid proof of concepts engagements, which QCI utilized as a means to build customer awareness to solve operational needs with quantum-based solutions. The Company enters product commercialization in 2023.

  • Operating Expenses increased 114% during 2022 to $36.7 million due primarily to an increase in salaries and benefits totaling approximately $3.2 million and non-cash stock-based compensation expense of $8.4 million.  The total expenses incurred from the QPhoton merger, which resulted in the Company doubling in size and quantum engineering personnel, included $9.4 million of non-recurring, non-cash, stock-based compensation expense and $6.6 million in SG&A of non-recurring legal, audit and other related fees.

    The Company’s average monthly cash burn during 2022 was approximately $1.46 million, an increase of approximately $0.9 million over the prior year’s average primarily due to additional quantum engineers and other related merger closing costs.  The current monthly cash burn is expected to hold steady as spending on the transition from R&D to commercialization is expected to offset the decrease in non-recurring, merger-related costs.

  • Net loss for full year 2022 was $38.6 million, an increase of 38% year-over-year, which included $16.0 million in non-recurring merger-related operating expenses and $2.0 million of interest and financing costs, offset by decreases of $10.7 million in interest expense related to issuance of warrants in 2021 and $226,000 forgiveness of the SBA PPP 2021 loan.

  • Total Assets on December 31, 2022 were $89.3 million, an increase of approximately $72 million over the prior year due primarily to Goodwill and Intangibles, including IP, from the QPhoton merger.
    • Cash at year-end 2022 totaled approximately $5.3 million.  As of March 27, 2023, the Company’s current cash totals $7.5 million.

  • Total Liabilities at year-end 2022 were $14.4 million compared to $1.1 million the prior year-end. The $13.3 million increase was primarily attributed to $8.4 million of unsecured debt as well as approximately $3.6 million increase in accounts payable and non-cash accrued expenses related to the QPhoton merger, and a $1.3 million Right-of-Use (ROU) operating lease liability expense for the addition of the QPhoton R&D facility.
    • Debt totaled $8.4 million as of December 31, 2022, of which $536,000 was short-term, compared to no debt at prior year-end 2021.

  • Shareholders’ Equity totaled $74.9 million at year-end 2022, compared to $16.2 million the prior year-end.

  • Capitalization as of December 31, 2022, QCI had approximately 56.0 million shares of common stock outstanding, an increase of approximately 26.8 million shares from the prior year-end 2021. This is almost entirely attributed to the closing of the QPhoton merger.

    QCI’s fully diluted shares total approximately 74.3 million, including 9.6 million stock options of which approximately 70% have vested (average exercise price $3.35), 1.6 million warrants (average exercise price $6.93), 5.0 million cashless warrants to pre-merger shareholders of QPhoton, and 1.5 million shares underlying Series A Preferred stock. In the event that all options and warrants were to exercise, the Company would receive an additional $43.2 million in cash.

    Subsequent First Quarter 2023 Financial Developments:
    • The Company secured net proceeds totaling $6.4 million from the sale of 3.0 million shares through an At-The-Market (ATM) facility managed by Ascendiant Capital.

Full-Year 2022 Operational Highlights

  • Merger:
    • QPhoton relationship with QCI began in February 2022 as an exclusive marketing agreement. By May 2022, QCI announced a definitive agreement to merge with QPhoton, led by Dr. Yuping Huang, the Director of the Quantum Science and Engineering Center at Stevens Institute of Technology, whose ground-breaking quantum research over the last decade had gained the support from DARPA, NSF, NASA, DoD, and other prestigious federal funding agencies. On June 16, 2022, the merger closed and by year-end the two companies, who shared a common vision of democratizing quantum computing, were fully integrated and mission aligned. The combination of the two companies creates the first pure play commercially available, ready-to-run anywhere, affordable, full-stack quantum computing products and services designed to be easily deployed (turn-key), and accessible to operate seamlessly alongside classical computing technology.

  • Leadership Announcements:
    • Michael C. Turmelle, a public technology company C-Suite executive with extensive background in finance and operations proven to drive innovative go-to-market and product strategies, joins the QCI Board of Directors. Previously, Chairman of Ideal Power; Managing Director of Hayward Tyler (performance-critical electric motors); Chairman of Implant Sciences Corp; and CFO & COO of SatCon.

  • R&D Advancements and Product Launch
    • Quantum Computing Inc. launched QAmplify, a suite of quantum software technologies that expands the processing power of current quantum computers by as much as 20 times. Currently, there are two primary technology approaches that deliver a wide range of capabilities spanning the current Quantum Processing Unit (“QPU”) hardware landscape; gate model (e.g., IBM, IonQ, Rigetti, etc.) and annealing (e.g., D-Wave) quantum computers. Both are limited in the size of problems that can be processed (i.e., the number of variables and complexity of computations). Currently, gate models can typically process from 10-120 data variables, and annealing machines can process approximately 400 variables in a simple problem set. By contrast, it is important to note that QCI’s photonic quantum can process over 11,000 simultaneous variables – which are inherently coherent. This capability has proven to solve business relevant problems today in autonomous driving sensor placement, supply chain logistics and energy optimization applications.

    • QCI launched its subscription service for its Dirac-1 Entropy Quantum Computer (EQC), the Company’s first commercially available photonic EQC system to solve real world business problems with over 11,000 variables. Dirac-1 focuses on solving binary optimization problems. The Company plans to launch Dirac-2 during 2023, which will enable customers to run much larger integer-number optimization problems with a 64-qudit machine. QCI offers subscriptions to the EQC at various levels, from several hours per month to a fully dedicated system.
      • Important to note that in addition to solving real world problems that other quantum technologies cannot yet address, QCI’s photonic quantum computer, the Dirac-1, operates at much lower energy consumption levels than gate model quantum computers or other quantum annealers. For example, running a problem such as the BMW sensor optimization problem (see below) was done both using 96 core (GPUs) which consumed over 500 watts and did NOT yield an optimal solution. QCI ran the same problem on its Dirac-1 to achieve an optimal solution power consumption of less than 80 watts of power – a 6-fold reduction. QCI Dirac-1 is not just better computing performance, it is also more efficient power utilization and at scale would have significant cost and power savings.

  •  Paid Proof of Concept and Beta-tests
    •  BMW – Using its Entropy Quantum Computing System QCI Achieved Superior Results in BMW Sensor Optimization Challenge by solving a complex problem consisting of 3,854 variables containing over 500 constraints in 6 minutes.

    • VIPC (Virginia Innovation Partnership Corporation) selected QCI as its partner for risk-based flight trajectories. QCI successfully identified the optimal time, speed, and route for drone aircraft to traverse among destinations, while satisfying airspace constraints and minimizing risks related to weather, obstacles, and other aircraft through the use of QCI’s Entropy Quantum Computing systems.

    •  Rabobank – QCI is currently engaged in a project with Rabobank to demonstrate multiple strategies for the application of photonic quantum information technologies, including the Dirac-1 to detect fraudulent banking transactions. QCI’s Entropy Quantum Computer system and its application to machine learning processes have the potential improve fraud detection techniques through faster computation and increased accuracy.

    •  The Company is engaged in a number of beta-tests to demonstrate the effectiveness of its Dirac-1 to include:
      •  Portfolio Optimization to demonstrate the optimization of stock portfolios for trading,
      •  Optimization of windmill placement for energy production,
      •  Optimization of nuclear fuel rods for cost efficient replacement of fuel rods for nuclear power plants,
      •  Stock performance prediction using the Reservoir Quantum Computer

  • General Interest
    • June 27, 2022, Quantum Computing Inc announced inclusion in the Russell Microcap Index.
  • Subsequent First Quarter 2023 Operational Developments and Outlook
    New Subsidiary Announcement
    • Quantum Computing Inc. launched a wholly owned subsidiary, QI Solutions, Inc., to deliver quantum products and services to the US government and defense markets. Strategically headquartered in Arizona, the new initiative will be headed by Sean Gabeler, a 30-year US Army and Special Operations officer and highly decorated multi war combat veteran with a proven applied technology expertise in adapting commercial technology to government solutions.

  • Contract Announcement
    • The Company received a subcontract award from SSAI to support NASA to test quantum photonic sensing solutions for monitoring climate change. Under the subcontract, QCI will test an existing LiDAR system designed to remotely measure the physical properties of different types of snowpacks, including the density, particle size and depth. Upon successful completion of this testing, QCI may proceed with airborne testing with the ultimate goal to position the QCI LiDAR units on satellites to create a network for monitoring snow levels globally.

  • New Product Launch Announcement
    • The Company commenced its cyber security product launch as international patents were awarded addressing unconditional network security, including a method for quantum authentication. This breakthrough patent fills a critical security breach vulnerability by offering a way to effectively protect information in a zero-trust environment and thereby safeguarding the entire network at all points of slippage.

    • The Company announced its plans to manufacture its own photonic quantum computing microchips, which it currently produces in a contract lab facility at CUNY in New York City. The recent US government’s announcement of the CHIPs and Science Act, funding $52 billion to re-shore and develop new microchip technologies to increase and maintain US competitiveness, offers QCI the opportunity to obtain US government funding for its quantum photonic chip development. QCI and Qi Solutions are aggressively pursuing this opportunity and anticipates funding in 2023 to establish its fabrication facility.
  • Product Roadmap and Product Development
    • The Company continues to develop its Dirac-2 Entropy quantum computer to focus on integer-based problems using QUDITS (n=0-63 variables) for a 2023 launch.

    • The Company continues to develop its Reservoir Quantum Computer (RQC) which will address machine learning and AI problems for a 2023 launch.

    • The Company finalized its production of its Quantum Random Number Generator (uniform, arbitrary and correlated) to apply to cyber security and financial simulations for launch in 2023.

    • The Company continues to develop related quantum photonic capabilities for quantum imaging, quantum sensing, and quantum networks for commercialization in 2023.

    • Quantum Workforce Development – key to developing and applying quantum technologies across industries is the development of a prepared workforce capable of both developing quantum technologies as well as applying the technologies to real world problems. QCI is dedicated to developing the US quantum workforce by partnering with educational institutions at the university level but also at the community college and high school levels. QCI has developed curriculum to teach students in quantum technologies to enable US students to move into this new technology to maintain a competitive US workforce.
  • Leadership Announcements
    • Dr. Carl Weimer, a 30-year veteran of the aerospace industry focused on advanced technologies, including laser remote sensing and LiDAR, joins QCI Board of Directors as an independent member. Dr. Weimer currently serves as CTO with Ball Aerospace & Technologies Corp within the Ball Civil Business Unit. Previously, Dr. Weimer was the Principal Investigator for the NASA Earth Science Technology Office.

    • The Honorable James (Jim) Simon, Jr., a seasoned US intelligence community leader was appointed to create and lead QCI’s Technical Advisory Board as the Company commences product sales. A key role of the Technical Advisory Board is to help maintain a balance between competitive, technological development and profitable growth.

    • Dr. Brian LaMacchia, a recently retired Distinguished Engineer and head of the Security and Cryptography team within Microsoft Research, has joined the Technical Advisory Board.
  • Guidance
    • The Company has completed its discovery and research phase and is now transitioning to commercialization. QCI has developed and released several products in late 2022 and into early 2023 with a number of additional product rollouts planned this year. As the Company ramps up its sales and marketing efforts, it expects revenues to gradually increase in the first half of the year and progressively accelerate during the second half of 2023.

    • The Company estimates that it achieves EBITDA breakeven at roughly $30 million in annual revenue and projects cashflow breakeven within 2 years.

For additional information on the company’s suite of solutions, please visit our website or contact our team directly.

For more market insights, check out our latest quantum computing news here.

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Matt Swayne

With a several-decades long background in journalism and communications, Matt Swayne has worked as a science communicator for an R1 university for more than 12 years, specializing in translating high tech and deep tech for the general audience. He has served as a writer, editor and analyst at The Quantum Insider since its inception. In addition to his service as a science communicator, Matt also develops courses to improve the media and communications skills of scientists and has taught courses. [email protected]

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The Future of Materials Discovery: Reducing R&D Costs significantly with GenMat’s AI and Machine Learning Tools

When: July 13, 2023 at 11:30am

What: GenMat Webinar

Picture of Jake Vikoren

Jake Vikoren

Company Speaker

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Deep Prasad

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