The accompanying notes are an integral part of these Unaudited financial statements.

QUANTUM COMPUTING INC.

Statement of Operations

(Unaudited)

The accompanying notes are an integral part of these Unaudited financial statements.

QUANTUM COMPUTING INC.

Statement of Stockholders’ Deficit

For the Three MonthsNine months Ended March 31,September 30, 2020

(Unaudited)

The accompanying notes are an integral part of these Unaudited financial statements.

QUANTUM COMPUTING INC.

Statement of Stockholders’ Deficit

For the Three MonthsNine months Ended March 31,September 30, 2021

(Unaudited)

The accompanying notes are an integral part of these Unaudited financial statements.

QUANTUM COMPUTING INC.

Statement of Cash Flows

For the ThreeNine Months Ended March 31,September 30, 2021 and 2020

(Unaudited)

 

		Three Months Ended
		March 31,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(3,391,746	)		$	(698,179	)
Adjustments to reconcile net income (loss) to net cash
Prepaid Expenses			(250,809	)			7,228
Depreciation			2,016				1,581
Accounts Payable			(119,744	)			(10,807	)
Accrued Expenses			26,690				60,950
Derivative Mark to Market			-				(504,708	)
Stock Based Compensation			2,227,162				1,012,350
Warrant Expense			-				(237,124	)
Beneficial Conversion Feature			-				100,000
CASH USED IN OPERATING ACTIVITIES			(1,506,431	)			(268,709	)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed Assets – Computer Software and Equipment			(4,043	)			(3,258	)
CASH USED IN INVESTING ACTIVITIES			(4,043	)			(3,258	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance (repayment/conversion) of Convertible Promissory Notes			-				(60,302	)
Proceeds from loans			-				-
Subscription Receivable			-				-
Proceeds from stock issuance			80,000				430,500
CASH PROVIDED BY FINANCING ACTIVITIES			80,000				370,198
Net increase (decrease) in cash			(1,430,474	)			98,231
Cash, beginning of period			15,196,322				101,100
Cash, end of period		$	13,765,848			$	199,331
SUPPLEMENTAL DISCLOSURES
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-
NON-CASH INVESTING ACTIVITIES
Subscription receivable created from issuance of note payable		$	-			$	-
NON-CASH FINANCING ACTIVITIES
Common stock issued for compensation			2,227,162				229,250

The accompanying notes are an integral part of these financial statements.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies:

Organization:

Organization:

Quantum Computing Inc., formerly known as Innovative Beverage Group Holdings, Inc. a Delaware corporation (the “Company”) was the surviving entity as the result of a merger between Ticketcart, Inc. and Innovative Beverage Group, Inc., both Nevada corporations. Innovative Beverage Group, Inc. was the surviving entity as the result of a merger between Kat-A-Tonic Distributing, Inc., a Texas corporation and United European Holdings, Ltd., a Nevada Corporation. In 2021 the Company established three wholly owned subsidiaries, Qubitech, Inc., Qubittech Federal, Inc. and Qubittech International, Inc., all of which are Delaware corporations. At this time there are no personnel, assets or liabilities associated with any of the subsidiaries.

History

History

Quantum Computing Inc. (“QCI” or the “Company”), was incorporated in the State of Nevada on July 25, 2001 as Ticketcart, Inc. Ticketcart’s original business plan involved in the sale of ink-jet cartridges online. Ticketcart offered remanufactured and compatible cartridges for Hewlett-Packard, Epson, Lexmark, and Canon inkjet printers. On July 25, 2007, Ticketcart, Inc. acquired Innovative Beverage Group, Inc. and changed its name to Innovative Beverage Group Holdings, Inc. (“IBGH”) to better reflect its business operations at the time which was beverage distribution and product development. In 2013, IBGH ceased operations. On May 22, 2017, one of IBGH’s shareholders, William Alessi (the “Plaintiff”), filed suit against the Company alleging “(1) fraud; and (2) breach of fiduciary duties of care, loyalty and good faith to the Corporation’s shareholders.”   Mr. Alessi’s complaint alleged that the officers and directors of IBGH had abandoned it and allowed the Company’s assets to be wasted, causing injury to the Company and its shareholders.   Mr. Alessi sought damages of $30,000 for each claim, plus reimbursement of filing costs of $1,000, and the appointment of a Receiver for the Company. 

On August 28, 2017, the North Carolina Court, Superior Court Division (the “North Carolina Court”), entered a default judgment for Plaintiff and appointed an exclusive Receiver (the “Receiver”) over the Company. The default judgment provided that Innovative Beverage Group Holdings, Inc. was (i) to issue to the Plaintiff 18,500,000 shares of free-trading stock without registration under Section 3(a)(10) of the Securities Act of 1933, as amended, (ii) issue 100,000,000 shares of stock to Innovative Beverage Group Holdings, Inc.’s treasury, and (iii) that the receivership be terminated upon any change of control, and that any and all claims against Innovative Beverage Group Holdings, Inc. that were not submitted to the Receiver as of September 16, 2017, were disallowed. On October 4, 2017 the Receiver filed Articles of Incorporation in North Carolina for Innovative Beverage Group Holdings, Inc., a wholly-owned subsidiary of the Company, (“IBGH North Carolina”). On October 26, 2017, Innovative Beverage Group, redomiciled to North Carolina.

On January 22, 2018, while the Company was in receivership, the Company (acting through the court-appointed receiver in her capacity as CEO and sole Director of the Company) sold 500,000 shares (the “CRG Shares”) of its common stock to Convergent Risk Group (“CRG” or “Convergent Risk”), an entity owned and operated by the Company’s Chief Executive Officer, Robert Liscouski, for $155,000. On February 21, 2018, by written consent of the majority shareholder (Convergent Risk), Mr. Robert Liscouski (the Chief Executive Officer of Convergent Risk) and Mr. Christopher Roberts were elected as members of the Company’s Board of Directors. Mr. Liscouski was simultaneously elected as Chairman of the Board. The majority shareholder also directed the Company to take the necessary action to change its domicile from North Carolina to Delaware and change its name to Quantum Computing Inc. On February 21, 2018 the Company filed Articles of Conversion in North Carolina to convert the Company to a Delaware corporation with the name changed to Quantum Computing Inc. On February 22, 2018 the Company filed a Certificate of Conversion in Delaware to convert to a Delaware corporation with the name changed to Quantum Computing Inc. and re-domiciled to the state of Delaware on February 23, 2018.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Nature of Business

(Unaudited)

The Company is a developer of quantum computing software offering ready-to-run software for complex optimization computations. The Company was founded in 2018 by leaders in supercomputing, mathematics, and massively parallel programming to solve the enormous challenge with quantum computing in terms of the high cost and lengthy times required for quantum software development. While much of the market focuses on Quantum Processing Unit (QPU) hardware, QCI’s experts realized that the quantum marketplace and vendors were limiting access to quantum computers due to the complexity of programming them. At the present time, only a very limited number of highly specialized quantum experts are able to use software development toolkits (“SDKs”) to create these critical programs and applications.

The Company’s flagship software solution, Qatalyst, is the industry’s only quantum application accelerator. It ensures that today’s SMEs can continue to create and solve the complex computations demanded by organizations to optimize supply chains, logistics, emergency responses, clinical trials, and more. Qatalyst software masks the complexity of quantum programming via the Q API (Qatalyst Application Programming Interface), a powerful API comprised of six function calls for complex computations. Instead of spending months or years developing new applications and workflows requiring complex and extremely low-level coding, users or applications can submit a problem to Qatalyst after licensing the software, via the Q API. In practice, users have utilized Qatalyst’s simple API and familiar constructs to solve their first complex problem within a week, as compared to the 6-12 months or more associated with writing a single quantum software program using vendor toolkits.

Company

The Company is focused on providing software toolssolving real-world problems with Qatalyst, including supply chain and logistics optimization and crisis management, as well as community detection opportunities such as drug discovery and fraud detection.

The Company is actively partnering with quantum computing leaders in both hardware and software. As an Amazon AWS partner, the Company uses the AWS Braket service to connect to multiple quantum computers, including Rigetti, DWave, and IonQ. The same problem can be submitted to any of these QPUs or classical processing units (CPUs) with no need for API call changes. Users seamlessly can submit the same problem to diverse quantum computers (QPUs) to determine which QPU will provide the best answers to their complex problem.

The Company believes that the development of real-world use cases, not just science projects, is critical to the forward momentum of quantum computing as a practical technology. To that end, the Company has created an internally funded program called QikStart. It will provide access to Qatalyst and cloud-based resources, experts, and funding to explore quantum applications to push the boundaries of quantum computing for quantum computers. We believe there is significantdelivering practical business opportunity inresults, right now. 

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Strategy

While the majority of the quantum computing industry, and that the quantum computer has the potential to disrupt several global industries. Independent of whenmarket is focused on quantum computing delivers compelling performance advantage over classical computing,hardware, the Company realized the traditional software tools and applications necessary for accelerating real-world problems must be developeddevelopment toolkit (“SDK”) approach to deliver on quantum computing’s full promise.

Quantum computing is a fundamentally new paradigm compared with conventional silicon-based computing, requiring a new and highly technical set of skills to create the software that will drive quantum results. Organizations seeking to gain advantage from the promise of quantum technology must acquire and develop skills in quantum mechanics, mathematics and physics, and a deep knowledge of the ever-changing quantum hardware. The pool of people with those skills today is limited and in high demand.

In order to address the steep learning curve and highly particular skillset associated withcreating quantum computing software is poorly suited for non-quantum experts, given the Company is developing “quantum ready” software applications and solutionscompletely new programming paradigm.

This represents a significant barrier to entry for commercial and government entitiescompanies looking to leverage the expected future performance of quantum computing. We are focused on being an enabler – creating software that provide the advantages of advanced computing hardware for forward thinking clients.

By reducing the barriers to adoption for commercial and government entities in usingnovel quantum computing technologiescapabilities for their business needs. Utilizing quantum computers for real-world problems requires an abstract blend of a wide range of computing and non-computing expertise, including:

As one would expect given the dramatic differences in quantum computer hardware architectures currently under development, quantum software requires a dramatic shift from classic software. A user would have to solve their most complex problems, we believe our products will accelerate quantum technology adoption similarliterally have to create every single circuit, gate, algorithm, action and process in low level software. Moreover, the adoption curve that has been witnessed with artificial intelligence. To this end, we are leveraging our collective expertise in finance, computing, mathematics and physics to develop a suite of applications that may enable global industriesrequirements imposed upon companies looking to utilize quantum computers can require a training period of a year or longer, even for a highly qualified subject matter expert. Consequently, the time, difficult and expense of hiring such a diverse and deeply knowledgeable team to create quantum annealersapplications and digital simulatorsworkflows limits any organization’s ability to improve their processes, profitability, and security.move forward quickly with the power of quantum computing.

The Company’s strategic goals are as follows:

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

The Company’s technical leadership intends to leverage industry expertise and innovative methods to develop quantum computer application solutions capable of solving increasingly complex problems in a more rapid and thorough manner.  The Company will initially focus on addressing computational problems in the financial services, and cybersecurity quantum-secure encryption markets, followed later by addressing problems in the AI and genetics marketplaces. 

The Company’s fiscal year end is December 31.

Basis of Presentation:

The accompanying Balance Sheet as of March 31,September 30, 2021, which was derived from audited financial statements, and the unaudited interim financial statements of the Company, has been prepared in accordance with U.S. GAAP for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the accompanying unaudited, financial statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31,September 30, 2021, and the cash flows and results of operations for the three and threenine months then ended. Such adjustments consisted only of normal recurring items. The results of operations for the threenine months ended March 31,September 30, 2021 are not necessarily indicative of the results for subsequent periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements contained in the Company’s 2020 Form 10-K, filed with Securities and Exchange Commission, and it is suggested that these financial statements be read in conjunction therewith.

Accounting Changes

Except for the changes discussed below, Quantum has consistently applied the accounting policies to all periods presented in these unaudited financial statements. The Company has evaluated all recently implemented accounting standards and concluded that none currently apply to the Company.

Use of Estimates:

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of assets and liabilities, and correspondingly revenues and expenses, depends on future events, the preparation of financial statements for any period necessarily involves the use of estimates and assumption an example being assumptions in valuation of stock options. Actual amounts may differ from these estimates. These financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the accounting policies summarized below.

Cash and Cash Equivalents

The Company’s policy is to present bank balances under cash and cash equivalents, which at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Operating Leases - ASC 842

On January 1, 2019, we adopted FASB Accounting Standards Codification, or ASC, Topic 842, Leases (“ASC 842”) which requires the recognition of the right-of-use assets and relating operating and finance lease liabilities on the balance sheet. As permitted by ASC 842, we elected the adoption date of January 1, 2019, which is the date of initial application. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC Topic 840, Leases (“ASC 840”), which did not require the recognition of operating lease liabilities on the balance sheet, and is therefore not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference in our results of operations presented in our consolidated income statement and consolidated statement of comprehensive income for each period presented.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

We lease substantially all our office space used to conduct our business. For contracts entered into on or after the effective date, at the inception of a contract we assess whether the contract is, or contains, a lease. Our assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases entered into prior to January 1, 2019 are accounted for under ASC 840 and were not reassessed.

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria. Substantially all our operating leases are comprised of office space leases and as of December 31, 2020 and September 30, 2021 we had no finance leases.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The Company is currently leasing space in three locations, Leesburg, VA, Minneapolis, MN and Vancouver, BC, and we have recognized right-of-use assets and lease liabilities accordingly.

The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For our real estate and other operating leases, we use our secured incremental borrowing rate. For our finance leases, we use the rate implicit in the lease or our secured incremental borrowing rate if the implicit lease rate cannot be determined.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term.

Property and Equipment

Property and equipment are stated at cost or contributed value. Depreciation of furniture, software and equipment is calculated using the straight-line method over their estimated useful lives, and leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment.

Net Loss Per Share:

Net loss per share is based on the weighted average number of common shares and common shares equivalents outstanding during the period.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Note 2 – Federal Income Taxes:

The Company has made no provision for income taxes because there have been no operations to date causing income for financial statements or tax purposes.

The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards Number 109 (“SFAS 109”). “Accounting for Income Taxes”, which requires a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities.

At March 31,September 30, 2021, the Company had net operating loss carry forwards of approximately $3,209,535.$4,185,540.

The Company experienced a change in control during the 2018, 2019 and 2020 calendar years and therefore no more than an insignificant portion of this net operating allowance will ever be used against future taxable income.

In early 2020, an outbreak of the novel strain of coronavirus (COVID-19) emerged globally. In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic, which continues to spread throughout the United States. Subsequently, federal, state and local authorities issued mandates for social distancing and working from home to delay the spread of the coronavirus, resulting in an overall decline in economic activity.  The ultimate impact of COVID-19 on the Company is not reasonably estimable at this time.  Management is currently evaluating the recent introduction of the COVID-19 virus vaccines and the related government mandates, and their impact on the software industry and has concluded that while it is reasonably possible that the virus and the associated government mandates restricting activity could have a negative effect on the ability of the Company to meet with potential customers and to raise additional capital, the specific impact is not readily determinable as of the date of these financial statements.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty, and the Company has not recorded any reserves relating to potential COVID-19 financial impacts.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), administered by the U.S. Small Business Administration (the "SBA"“SBA”) as a response to the economic uncertainty resulting from COVID-19. Congress amended the CARES Act on December 27, 2020. The CARES Act established the Paycheck Protection Program (the “PPP”) to loan money to small businesses to enable them to continue to meet payroll obligations in the face of business interruptions and loss of revenue due to COVID-19 related restrictions. The CARES Act also includes modifications for net operating loss carryovers and carrybacks, limitations of business interest expense deductions, immediate refund of alternative minimum tax (AMT) credit carryovers as well as a technical correction to the Tax Cuts and Jobs Act of 2017, referred to herein as the U.S. Tax Act, for qualified improvement property. The CARES Act also provides for deferred payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021 and the remaining 50% due December 31, 2022. As of March 31,September 30, 2021, the Company expects that the carryback of NOL'sNOL’s will not have an impact on its current tax attributes.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

The Company elected not to implement the payroll tax deferral program under the CARES Act, but did applyapplied for a PPP loan.loan in April 2020. On May 6, 2020, the Company executed an unsecured promissory note (the “Note”) with BB&T/Truist&T Bank N.A. to evidence a loan to the Company in the amount of $218,371 under the Paycheck Protection Program (the “PPP”) established under the CARES Act.

In accordance with the requirements of the CARES Act, the Company used the proceeds from the loan exclusively for qualified expenses under the PPP, including payroll costs and employee benefits. Interest will accrue onThe Company applied for forgiveness of the outstandingentire PPP loan balance and in June 2021 the SBA informed the Company that the full balance of the Note at a rate of 1.00% per annum. The Company expects to apply for forgiveness of up toPPP loan had been forgiven, along with accrued interest. Upon notification from the entire amount of the Note. Notwithstanding the Company’s eligibility to apply for forgiveness, no assurance can be givenSBA that the PPP loan balance had been forgiven, the Company will obtain forgiveness of all or any portion ofreclassified the amounts due under the Note. The amount of forgiveness under the Note is calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, subjectloan balance to limitations and ongoing rule-making by the SBA and the maintenance of employee and compensation levels.other income.

QUANTUM COMPUTING INC.

Notes to any forgiveness granted under the PPP, the Note is scheduled to mature two years from the date of first disbursement under the Note. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default, including, among others, those relating to failure to make payments, bankruptcy, and significant changes in ownership. The occurrence of an event of default may result in the required immediate repayment of all amounts outstanding and/or filing suit and obtaining judgment against the Company. The Company’s obligations under the Note are not secured by any collateral or personal guarantees. Financial Statements

(Unaudited)

Note 3 – Financial Accounting Developments:

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.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Note 4 – Subscription Receivable

TheIn 2018 the Company assumedrecorded a subscription receivable relating to a convertible promissory note from one of the Initial Investors to Convergent Risk Group, LLC (see Note 9 – Related Parties)(as defined below) in the amount of $100,000, which is payable by the Initial Investor on or before December 31, 2020. The promissory note was issued in payment for a promissory note from Convergent to the Initial Investor, which has also been assumed by the Company in exchange for a Convertible Promissory Note in the amount of $100,000, convertible to Company common shares at a conversion price of $0.10 per share. If the promissory note was paid in full on or before December 31,$100,000. During 2020, the Company’s Convertible Promissory Note would convert and shares will be issued. If the promissory note was not paid in full on or before December 31, 2020, the Company’s Convertible Promissory Note held by this investor would be cancelled, and no shares would be issued.

In 2019 the Company engaged the Initial Investor as a consultant to provide advisory services for a one-year period. Upon satisfactory completion of the agreed services in July 2020, the Company deemed the services to be sufficiently valuable that in lieu of cash payment of invoice submitted the Company offset the invoice against the balance of the promissory note, which has been deemed paid in full. The Initial Investor converted the full $100,000 of its Convertible Promissory Notehis promissory note into 1,000,000 shares of common stockstock. The Company had no subscription receivable outstanding as of December 31, 2020.

Note 5 – Property and Equipment

The Company made Property and Equipment acquisitions of $4,043$8,306 during the threeNine months ended March 31,September 30, 2021. The Company depreciates computer equipment over a period of five years.

Note 6 – Convertible Promissory Notes and Loans

In June 2019,May 2020 the Company refunded $26,000raised $30,000 from three stockholders in the form of short term, non-interest bearing, promissory notes, each in the amount of $10,000. The promissory notes were repaid by the Company prior to a convertible promissory note investor. The accrued interest on that promissory note was written off by agreement with the investor.December 31, 2020 maturity date.

In August 2019July 2020 the Company converted $1,994,500$100,000 principal amount of Convertible Promissory Notes convertible at $1.00 plus $124,997 of accrued interest$0.10 into 2,119,5251,000,000 restricted shares of common stock per the terms of the Convertible Note subscription agreementsagreement the Company entered into in 2018 with 59the accredited investors. Accrued interest oninvestor, currently a member of the Notes was rounded up toCompany’s Board of Directors.

In December 2020, two of the next whole dollar soCompany’s Initial Investors converted the Company did not issue fractional shares. Also, in August,remaining principal balance of their promissory notes, $159,000, into 1,590,000 shares of the Company converted $21,000 principal amount of Convertible Promissory Notes (non-interest bearing) convertibleCompany’s common stock at $0.10 per share. In addition, one of the investors in the 2018 Convertible Note Offering converted the principal balance of his note plus accrued interest into 210,000893,000 shares of the Company’s common stockstock.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Auctus Securities Purchase Agreement

In October 2019 the Company entered into a Securities Purchase Agreement (the “SPA”“Auctus SPA”), dated October 14, 2019 and effective October 16, 2019 (the “Issuance Date”), by and between the Company and Auctus Fund, LLC, a Delaware limited liability company (“Auctus”), pursuant to which Auctus purchased from the Company, for a purchase price of $500,000 (the “Purchase Price”): (i) a Convertible Promissory Note in the principal amount of $500,000.00 (the “Auctus Note”); (ii) a common stock purchase warrant permitting Auctus to purchase up to 500,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at an exercise price of $2.75 per share (the “First Warrant”); (iii) a common stock purchase warrant permitting Auctus to purchase up to 350,000 shares of the Company’s Common Stockcommon stock at an exercise price of $3.75 per share (the “Second Warrant”); and (iv) a common stock purchase warrant permitting Auctus to purchase up to 275,000 shares of the Company’s Common Stock at an exercise price of $4.75 per share (the “Third Warrant” and together with the First Warrant and the Second Warrant, the “Warrants”, and together with the Auctus Note, the “Securities”“Auctus Securities”).

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

The Auctus Note accrues interest at a rate of ten percent (10%) per annum and matures on October 14, 2020 (the “Maturity Date”). If the Company prepays the Auctus Note, the Company shall pay all of the principal and interest, together with a prepayment penalty ranging from 125% to 150% depending upon the date of such prepayment. The Auctus Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, all outstanding obligations owing under the Auctus Note will become immediately due and payable in cash or Common Stock at Auctus’ election. Any outstanding obligations owing under the Auctus Note which is not paid when due shall bear interest at the rate of twenty four percent (24%) per annum.

The Auctus Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The conversion price (the “Conversion Price”) shall equal the lesser of: (i) $1.50, and (ii) 50% multiplied by the lowest trading price for the Common Stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion date (representing a discount rate of 50%). Notwithstanding anything contained in the Auctus Note to the contrary, prior to the occurrence of an Event of Default, the Conversion Price shall not be less than $1.50 per share (the “Floor Price”). The Floor Price is subject to adjustment at the six (6) and nine (9) month anniversary of the Issuance Date. In the event that the Floor Price as of such dates is less than 70% multiplied by the volume weighted average price (VWAP) of the Common Stock during the five (5) trading day period immediately prior to such dates, the Floor Price is adjusted to such lesser amount.

Under the terms of the Auctus SPA, subject to certain conditions, upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) registering all of the shares of Common Stock underlying the Auctus Note and the Warrants, Auctus agreed to provide the Company with an additional investment of up to $1,000,000 through the issuance of an additional note or notes, as applicable (the “Additional Notes” together with the Note, the “Notes”).

The Auctus Notes and Warrants were not registered under the Securities Act, but qualified for exemption under Section 4(a)(2) and/or Regulation D of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, the investor had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since the investor agreed to, and received, the securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.

In connection with the Auctus SPA, the Company entered into a Registration Rights Agreement (the “RRA”) pursuant to which it committed (i) use its best efforts to file with the Commission the Registration Statement within ninety (90) days of the Issuance Date; and (ii) have the Registration Statement declared effective by the Commission within one hundred fifty (150) days of the Issuance Date. The Company filed a Registration Statement with the Commission in November 2019 and it was declared effective in December 2019, registering 1,625,000 shares.

In January 2020 the Auctus Fund LLC exercised its option to convert $21,305 of the principal of its Convertible Note and accrued interest and fees of $8,695 (a total of $30,000) into 20,000 shares of the Company’s common stock.Common Stock. The principal balance remaining on the Auctus Note following this conversion was $478,695.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

In February 2020 the Auctus Fund LLC exercised its option to convert $138,998 of the principal of its Convertible Notenote and accrued interest and fees of $11,002 (a total of $150,000) into 100,000 shares of the Company’s common stock.Common Stock. The principal balance remaining on the Auctus Note following this conversion was $339,698.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

In February 2020, the Company entered into an agreement with the Auctus Fund LLC to reduce the exercise price of the $2.75 per share Warrants to $1.50 per share. No other changes were made to the terms of the Warrants or the Convertible Note held by the Auctus Fund. InNote. Also in February the2020, Auctus Fund LLC exercised 167,000 warrants at $1.50 per share, resulting in total proceeds to the Company of $250,500.

In February 2020, the Board authorized a private placement of convertible promissory notes in the aggregate amount up to $5,000,000 at a conversion price of $1.50 per share (the “2020 Convertible Note Offering”).  The Notes accrue interest at eight percent (8%) per annum and are convertible into common stock of the Company at any time prior to or at the Maturity Date, twelve months from the Issuance Date.  In connection with the 2020 Convertible Note Offering, the Company has received funds of $100,000 as of June 30, 2020. The Board closed the 2020 Convertible Note Offering to further investment in June 2020.

On May 8, 2020 the Company repaid the outstanding principal balance of the Auctus convertible note,Note, including accrued interest and prepayment penalty interest, for a total of $462,691.

On May 8, 2020, the Company entered into an agreement with Auctus to reduce the exercise price of the Amended First Warrants from $1.50 per share to $1.00 per share, and to reduce the exercise price of the Second Warrants from $3.75 to $2.50 per share. No other changes were made to the terms of the Auctus Warrants or the Auctus Note. In May 2020 Auctus exercised 50,000 warrants at $1.00 per share, resulting in total proceeds to the Company of $50,000. In June 2020, Auctus exercised 183,000 warrants at $1.00 per share, resulting in total proceeds to the Company of $183,000.

Oasis Securities Purchase Agreement

On May 6, 2020 (the “Issuance“Oasis Issuance Date”), Quantum Computing Inc., a Delaware corporation (the “Company”) the Company entered into a Securities Purchase Agreement (the “SPA”“Oasis SPA”) by and between the Company and Oasis Capital, LLC, a Puerto Rico limited liability company (“Oasis”), pursuant to which Oasis purchased from the Company, for a purchase price of $500,000 (the “Purchase Price”):$500,000: (i) a Convertible Promissory Note in the principal amount of $563,055.00 (the “Note”“Oasis Note”); and (ii) a common stock purchase warrant (the “Warrant”“Oasis Warrant” and together with the Oasis Note, the “Securities”“Oasis Securities”) permitting Oasis to purchase up to 187,685 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”),Common Stock, at an exercise price of $1.50 per share (the “Exercise“Oasis Warrant Exercise Price”). The Company received the Purchase Pricegross proceeds of $500,000 on May 8, 2020.

The Oasis Note accrues interest at a rate of eight percent (8%) per annum and matures on the nine (9) months anniversary of the Oasis Issuance Date (the “Maturity Date”). In the event that the Company prepays the Oasis Note, the Company shall pay all of the principal and interest, together with a prepayment penalty ranging from 105% to 135% depending upon the date of such prepayment. The Oasis Note contains customary events of default (each an “Event of Default”). If an Event of Default occurs, all outstanding obligations owing under the Oasis Note will become immediately due and payable in cash or Common Stock at Oasis’ election. Any outstanding obligations owing under the Oasis Note which are not paid when due shall bear interest at the rate of eighteen percent (18%) per annum.

The Oasis Note is convertible into shares of the Company’s Common Stock, subject to the adjustments described therein. The conversion price (the “Conversion“Oasis Note Conversion Price”) per share shall be (i) $1.50 during the six month period immediately following the Oasis Issuance Date, and (ii) after the six month period immediately following the IssueOasis Issuance Date, the lower of: (a) $1.50, and (b) 70% multiplied by the lowest volume weighted average price for the Common Stock during the twenty-five (25) trading day period ending on the latest complete trading day prior to the conversion date (representing a discount rate of 30%).

The Oasis Warrant is exercisable for a term of five-years from the date of issuance. The Warrants provideOasis Warrant provides for cashless exercise to the extent that there is no registration statement available for the underlying shares of Common Stock. Until such time as there no longer an outstanding balance on the Oasis Note, if the Company shall, at any time while the Oasis Warrant is outstanding, sell any shares of Common Stock or securities entitling any person or entity to acquire shares of Common Stock at a price per share that is less than the Oasis Warrant Exercise Price (a “Dilutive Issuance”), than the Oasis Warrant Exercise Price shall be reduced to equal the Base Share Price (as defined in the Oasis Warrant) and the number of shares of Common Stock issuable under the Oasis Warrant shall be increased such that the aggregate exercise price payable under the Oasis Warrant, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment.

On May 7, 2020, in connection with its entry into the Securities Purchase Agreement,Oasis SPA, the Company issued 37,537 Inducement Shares (as defined in the Securities Purchase Agreement)Oasis SPA) to Oasis.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Oasis Equity Purchase Agreement

On May 6, 2020 (the “Execution Date”), the Company entered into an Equity Purchase Agreement (“Equity Purchase Agreement”) and a Registration Rights Agreement (“Registration Rights Agreement”) with Oasis. Under the terms of the Equity Purchase Agreement, Oasis agreed to purchase from the Company up to $10,000,000 of the Company’s Common Stock upon effectiveness of a registration statement on Form S-1 (the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “Commission”) and subject to certain limitations and conditions set forth in the Equity Purchase Agreement.

Following effectiveness of the Registration Statement, and subject to certain limitations and conditions set forth in the Equity Purchase Agreement, the Company shall havehad the discretion to deliver put notices to Oasis and Oasis will bewas then obligated to purchase shares of the Company’s Common Stock based on the investment amount specified in each put notice. The maximum amount that the Company shall beis entitled to put to Oasis in each put notice shall not exceed the lesser of $500,000 or two hundred and fifty percent (250%) of the average daily trading volume of the Company’s Common Stock during the ten (10) trading days preceding the put notice. Pursuant to the Equity Purchase Agreement, Oasis and its affiliates will not be permitted to purchase and the Company may not put shares of the Company’s Common Stock to Oasis that would result in Oasis’s beneficial ownership of the Company’s outstanding Common Stock exceeding 9.99%. The price of each put share shall be equal to ninety percent (90%) of the Market Price (as defined in the Equity Purchase Agreement). Puts may be delivered by the Company to Oasis until the earlier of (i) the date on which Oasis has purchased an aggregate of $10,000,000 worth of Common Stock under the terms of the Equity Purchase Agreement; (ii) April 26, 2023; or (iii) written notice of termination delivered by the Company to Oasis, subject to certain equity conditions set forth in the Equity Purchase Agreement. As of the date hereof, the Registration Statement is no longer effective and the Company is not utilizing the Equity Purchase Agreement.

On May 7, 2020, in connection with its entry into the Equity Purchase Agreement and the Registration Rights Agreement, the Company issued 133,334 Commitment Shares (as defined in the Equity Purchase Agreement) to Oasis.

The Registration Rights Agreement provides that the Company shall (i) file with the Commission the Registration Statement by June 1, 2020; and (ii) use its best efforts to have the Registration Statement declared effective by the Commission at the earliest possible date (and in any event, within sixty (60) days of the Execution Date).

In July 2020 the Company converted $100,000 principal amount of Convertible Promissory Notes convertible at $0.10 into 1,000,000 restricted shares of common stock per the terms of the Convertible Note subscription agreement the Company entered into in 2018 the accredited investor, currently a member of the Company’s Board of Directors.

In December 2020, Oasis converted the principal balance of its promissory note plus accrued interest into 596,869 shares of common stock.

As of December 31, 2020, all of the Warrants held by Auctus and Oasis have been exercised, resulting in total proceeds to the Company of $1,458,500.

Paycheck Protection Program Loan

On May 6, 2020, Quantum Computing Inc. (the “Company”)the Company executed an unsecured promissory note (the “Note”“PPP Loan”) with BB&T/Truist Bank N.A. to evidence a loan to the Company in the amount of $218,371 under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), administered by the U.S. Small Business Administration (the "SBA"“SBA”). 

In accordance with the requirements of the CARES Act, the Company expects to useused the proceeds from the loanPPP Loan exclusively for qualified expenses under the PPP, including payroll costs, mortgage interest, rent and utility costs. Interest will accrue on the outstanding balance of the Note at a rate of 1.00% per annum. The Company expects to applyapplied for forgiveness of up to the entire amount of the Note. Notwithstanding the Company’s eligibility to apply for forgiveness, no assurance can be given that the Company will obtain forgiveness of all or any portion of the amounts due under the Note. The amount of forgiveness under the Note is calculatedPPP Loan balance, and in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, subject to limitations and ongoing rule-making by the SBA and the maintenance of employee and compensation levels.

Subject to any forgiveness granted under the PPP, the Note is scheduled to mature two years from the date of first disbursement under the Note. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default, including, among others, those relating to failure to make payments, bankruptcy, and significant changes in ownership. The occurrence of an event of default may result in the required immediate repayment of all amounts outstanding and/or filing suit and obtaining judgment against the Company. The Company’s obligations under the Note are not secured by any collateral or personal guarantees. 

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

On May 8, 2020, the Company entered into an agreement with the Auctus Fund LLC to reduce the exercise price of the Amended First Warrants from $1.50 per share to $1.00 per share, and to reduce the exercise price of the Second Warrants from $3.75 to $2.50 per share. No other changes were made to the terms of the Warrants or the Convertible Note held by the Auctus Fund. In May, the Auctus Fund LLC exercised 50,000 warrants at $1.00 per share, resulting in total proceeds to the Company of $50,000. In June the Auctus Fund LLC exercised 183,000 warrants at $1.00 per share, resulting in total proceeds to the Company of $183,000.

In April 2020 the Company applied to the US Small Business Administration (the “SBA”) for a loan under the Economic Injury Disaster Loan (EIDL) program. In May2021 the SBA informed the Company that the EIDL loan applicationfull balance of the PPP Loan had been declined, butforgiven, along with accrued interest. Upon notification from the SBA that the SBA would provide a $10,000 forgivable advance under the EIDL program.

In May 2020PPP Loan balance had been forgiven, the Company raised $30,000 from three stockholders inreclassified the form of short term, non-interest bearing, promissory notes, each in the amount of $10,000. The promissory notes were repaid by the Company priorPPP Loan balance to the December 31, 2020 maturity date.other income.

As of December 31, 2020, all of the Warrants held by Auctus and Oasis have been exercised, resulting in total proceeds to the Company of $1,458,500.

In December 2020, two of the Company’s Initial Investors converted the remaining principal balance of their promissory notes, $159,000, into 1,590,000 shares of the Company’s common stock at $0.10 per share. In addition, one of the investors in the 2018 Convertible Note Offering converted the principal balance of his note plus accrued interest into 893,000 shares of the Company’s common stock.

Note 7 – Capital Stock:

In June 2020,On July 13, 2021 the Company entered into twelve month Lock Up – Leak Out agreementsa three-month agreement with fifty holders of approximately 2 million shares of restricted stock in exchange for 443,273 incentive shares. Under the Lock Up-Leak Out agreements the stockholders are precluded from selling, granting, lending, pledging, offering or in any way, directly or indirectly disposing of their shares until June 11, 2021 and after that date they agreed to limit daily sales to no more than ten percent (10%) of the average daily trading volume of the Company’s stock for the previous three trading days. Two additional holders of a total of 50,000 shares also entered into 12-month LockUp-Leak Out agreements, however, due to an administrative oversight, the Company did not issue their incentives shares, totaling 10,000 shares, until September 2020.

On June 10, 2020 the Board authorized a private placement of common stock with fifty percent (50%) warrant coverage at an exercise price of $2.00 in the aggregate amount up to $3,000,000 at a stock price of $1.00 per share (the “2020 Units Offering”). In connection with the 2020 Units Offering, the Company received funds of $342,000 as of August 24, 2020, and issued 342,000 shares of Common Stock and Warrants to purchase 171,000 shares of Common Stock. The Board closed the 2020 Units Offering to further investment in August 2020.

In June 2020 the Company issued 300,000 shares of common stock to Capital Market Access, LLC, an investor relations firm, as compensation for services pursuant to the terms of an agreement the Company entered into with Capital Market Access, LLC in May 2020.

On July 24, 2020, the Company entered into Restricted Stock Agreements (the “Restricted Stock Agreements”) with certain of its senior managers, including certain directors and officers, listed in the table below (each, a “Grantee” and together, the “Grantees”), pursuant to the 2019 Quantum Computing Inc. Equity and Incentive Plan (the “Incentive Plan”). Pursuant to the terms of the Restricted Stock Agreements, the stock grants are one hundred percent (100%) vested as of the date of grant, but are subject to the Company’s right to recoup or “clawback” a portion of the shares if the Grantee terminates their employment prior to the second anniversary of the date of grant, in accordance with the following schedule: (i) the Company can recoup 100% of the shares until May 31, 2021, and (ii) the Company can recoup 50% of the shares between June 1, 2021 and May 31, 2022. As of June 1, 2022, the Company has no further recoupment rights to the shares. The stock grants are also subject to LockUp agreements for three years from the Grantee’s date of employment. The Lock Up Agreements preclude the Grantees from selling, granting, lending, pledging, offering or in any way, directly or indirectly disposing of the shares in the Restricted Stock Agreements. In the aggregate the Company issued 2,000,000 shares to its senior managers, including the directors and officers listed below. The shares were granted at $3.16 per share.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

In August 2020 the Board authorized a private placement of common stock in the aggregate amount up to $4,500,000 at a stock price of $1.00 per share (the “2020 $1.00 Equity Offering”).  The Company entered into Stock Purchase Agreements (the “SPA”) with approximately 94 accredited investors (the “Investors”), whereby the Investors purchased from the Company shares of the Company’s common stock in an aggregate amount of 4,237,500 (the “Shares”), for a purchase price of $1.00 per share (the “Per Share Purchase Price”) resulting in gross proceeds to the company of $4,237,500.

Under the terms of the SPA, the Investors shall have piggy-back registration rights to have the shares issued pursuant to the SPA included as part of any registration of securities filed by the Company (other than pursuant to Form S-4, Form S-8, or any equivalent form).

In connection with the Offering the Company issued an advisor 100,000 shares of the Company’s common stock and warrants to purchase an additional 325,000 shares of the Company’s common stock, at an initial exercise price) of $3.40- per share, subject to adjustment (the “Warrants”).   Warrants will expire on September 11, 2025. The Board closed the 2020 Units Offering to further investment in September, 2020.

In September 2020 the Company issued 20,000 shares of common stock to Capital Market Access, LLC, an investor relations firm, as compensation for services pursuant to the terms of an agreement the Company entered into with Capital Market Access, LLC in May 2020.

In September 2020 the Company issued 50,000 shares of common stock and warrants to purchase an additional 150,000 shares of the Company’s common stock, at an initial exercise price of $1.00 per share, subject to adjustment (the “Warrants”), to Bridgewater Capital Corp, a financial and business strategy consulting firm, as compensation for services pursuant to the terms of an agreement the Company entered into with Bridgewater Capital in August 2020. The Warrants will expire on September 11, 2025.

In October 2020 the Board authorized a private placement of common stock in the aggregate amount up to $12,500,000 at a stock price of $2.50 per share (the “2020 $2.50 Equity Offering”).  As of December 31, 2020, the Company has raised approximately $14.4 million in the 2020 $2.50 Equity Offering. The Board closed the 2020 $2.50 Equity Offering to further investment effective December 31, 2020.

In connection with the 2020 $2.50 Equity Offering the Company issued an advisor 367,678 shares of the Company’s common stock and warrants to purchase an additional 367,678 shares of the Company’s common stock, at an initial exercise price) of $3.00 per share, subject to adjustment (the “Warrants”).   Warrants will expire on December 23, 2025.

In December 2020 the Company issued 10,000 shares of common stock to Capital Market Access, LLC, an investor relations firm, as compensation for services pursuant to the terms of an agreement the Company entered into with Capital Market Access, LLC in May 2020.

In December 2020 the Company issued 170,000 shares of common stock to Bridgewater Capital Corp, a financial and business strategy consulting firm, as compensation for services pursuant to the terms of an agreement the Company entered into with Bridgewater Capital in October, 2020.

In December 2020 the Company issued 250,000 shares each to its two independent directors as compensation for their services on the Company’s Board of Directors from September 2018 through December 2020.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

In January 2021 the Company issued 10,000 shares of common stock to Axis Partners, Inc., an investor relations firm, as compensation for services pursuant to which the termsfirm will receive monthly payments of an agreement the Company entered into with Axis Partners, Inc. in January 2021.

In January 2021 holders$20,000 and a grant of warrants for 842,678 shares of common stock requested a cashless exercise of their warrants, resulting in the issuance of 616,273 shares of common stock.

In February 2021 the Company issued 5,556 shares of common stock to a consultant as compensation for business development services pursuant to an agreement the Company entered into in January 2021.

In February 2021 the Company issued options for 450,000 shares of common stock, vesting over twelve months, to two investor relations consultants pursuant to agreements the Company entered into in February 2021.

In February 2021 an advisor exercised options to purchase 30,00015,000 shares of the Company’s common stock at $1.00 per share, resulting in proceeds tostock.

On July 14, 2021 the Company of $30,000.

In February 2021 an investor exercised warrants for 25,000entered into a one year consulting agreement with a business development professional, pursuant to which the Company issued the consultant 86,113 shares of the Company’s common stockstock. These shares will vest at $2.00the rate of 5,000 shares per share, resulting in proceedsmonth over the term of the agreement.

Stock issuance pursuant to settlement agreement

In May 2021, the Company entered into settlement agreements with two former executives of $50,000.Innovative Beverage Group Holdings, Inc. (IBGH), Mr. Peter Bianchi and Mr. Jan Bonner (collectively the “IBGH Executives”), pursuant to which the Company received a release from any and all claims or potential claims the IBGH Executives might have had against the Company, in exchange for facilitating the replacement of lost stock certificates in IBGH and the removal of any restrictions on transfer of the shares represented by said certificates.  The IBGH Executives each held the equivalent of 91,659 shares of stock in the Company, for a total of 183,318 shares.  In addition, the IBGH Executives agreed to a three week Leak Out agreement once the restrictions on their shares were removed. No new shares were issued as a result of the settlement agreements.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

Note 8 – Related Party Transactions

Convergent Risk Group, LLC

To finance the acquisition of the control block of shares in IBGH, an investor group (the “Initial Investors.”), loaned Convergent Risk Group, LLC (Convergent) $275,000, in exchange for Promissory Notes from Convergent (the “Promissory Notes”) in the total amount of $275,000. Convergent, a Virginia limited liability company, is owned 100% by Mr. Robert Liscouski, who is the CEO and currently the majority shareholder of the Company. To induce Mr. Liscouski to serve as CEO of the Company, the Company assumed the “Promissory Notes” in the total amount of $275,000 and certain liabilities (the “Liabilities”). The Liabilities and the Promissory Notes are collectively the “Convergent Liabilities.” The Convergent Liabilities assumed by the Company were exchanged for Convertible Promissory Notes issued by the Company for $275,000 (the same amount that Convergent had issued them for).    The Convertible Promissory Notes accrue interest at eight percent (8%) per annum and are convertible into common stock of the Company at a conversion price of $0.10 per share at any time prior to or at August 10, 2019.    The Company also assumed a promissory note from one of the Initial Investors to Convergent in the amount of $100,000, which is payable on or before June 30, 2019.   All of the Initial Investors havehad converted their Convertible Promissory Notes tointo shares of the Company’s common stockCommon Stock as of December 31, 2020. 

REMTC, Inc.

To provide the Company with a highly secure development environment and intra-company data management and communication system, the Company contracted with REMTC, Inc. (“REMTC”), an entity wholly owned by Richard Malinowski, who was the Company’s Chief Technology and Operations Officer at the time, to acquire the necessary hardware and software, configure and install the REMTC proprietary security system, known as “PASS.” The total cost of the PASS System was approximately $670,000 which the Company paid to REMTC. In November 2018, Mr. Richard Malinowski informed the Company of his decision to resign as Chief Technology and Operations Officer and the Board accepted his resignation and that of Mr. Thomas Kelly. The Company and REMTC have unwound the PASS agreement and the Company expects to receive approximately $670,000 back from Mr. Malinowski and REMTC. The Company determined that the PASS System was unusable and therefore impaired, and wrote off the remaining undepreciated value of the PASS system as of December 31, 2018. In March 2019 the Company commenced litigation in New Jersey state court against REMTC, Mr. Malinowski and Mr. Kelly to recover the cost of the PASS System. In January 2020 the Company entered into a settlement of its claims against REMTC, Mr. Malinowski and Mr. Kelly and the litigation in New Jersey was dismissed.

QUANTUM COMPUTING INC.

Notes to Financial Statements

(Unaudited)

JLS Ventures

To provide the Company with advertising and marketing services, the Company verbally contracted with JLS Ventures LLC. (“JLS”), an entity wholly owned by Justin Schreiber, a member of the Company’s board of directors, to procure and manage the advertising services. The agreement with JLS was terminated in October 2020 and no further expenses are anticipated under this contract. During the year ending December 31, 2020 the Company paid JLS $140,698 for advertising services.

Note 9 – Employee Benefits:

The Company offers a health and welfare benefit plan to current full time employees that provides medical, dental, vision, life and disability benefits. The Company also offers a 401K retirement savings plan to all full time employees. There are no unpaid liabilities under the Company’s benefit plans, and the Company has no obligation to pay for post-retirement health and medical costs of retired employees.

Note 10 – Subsequent Events:

In April 2021 an investor exercised warrants for 125,000 shares of the Company’s common stock at $2.00 per share, resulting in proceeds to the Company of $250,000.

In April 2021 the Company entered into employment agreements with two executive officers, Mr. Robert Liscouski and Mr. Christopher Roberts, listed in the table below (each, a “Officer” and together, the “Officers”). Pursuant to the terms of the Employment Agreements, the Officers were granted options to purchase shares of the Company’s common stock. The options were granted at $6.40 per share.

There are no other events of a subsequent nature that in management’s opinion are reportable.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,

Management’s discussion and analysis of results of operations and financial condition (“MD&A”) is a supplement to the accompanying condensed financial statements and provides additional information on Quantum Computing Inc.’s (“Quantum” or the “Company’) business, current developments, financial condition, cash flows and results of operations.

When we say “we,” “us,” “our,” “Company,” or “Quantum,” we mean Quantum Computing Inc.

This section should be read in conjunction with other sections of this Quarterly Report, specifically, Selected Financial Statements and Supplementary Data.

This quarterly report on Form 10-Q and other reports filed Quantum Computing, Inc. (the “Company” “we”, “our”, and “us”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management.  Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof.  When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements.  Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire.  Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements.  Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statementsOverview

At the present time, we are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

Overview

development stage company.  The Company is focused on providingcurrently developing “quantum ready” software toolsapplications and applicationssolutions for companies that want to leverage the promise of quantum computers. We believe there is significant business opportunity in the quantum computing industry, and that the quantum computer has the potential to disrupt several global industries.computing. Independent of when quantum computing delivers compelling performance advantage over classicalclassic computing, the software tools and applications necessary for acceleratingto accelerate real-world problems must be developed to deliver on quantum computing’s full promise. We specialize in quantum computer-ready software application, analytics, and tools, with a mission to deliver differentiated performance using non-quantum processors in the near-term.

Quantum computing is a fundamentally new paradigm compared with conventional silicon-based computing, requiring a new and highly technical set of skills to create the software that will drive quantum results. Organizations seeking to gain advantage from the promise of quantum technology must acquire and develop skills in quantum mechanics, mathematics and physics, and a deep knowledge of the ever-changing quantum hardware. The pool of people with those skills today is limited and in high demand.

In order to address the steep learning curve and highly particular skillset associated with quantum computing, the Company is developing “quantum ready” software applications and solutions for commercial and government entities looking to leverage the expected future performance of quantum computing. We are focused on being an enabler – creating software that provide the advantages of advanced computing hardware for forward thinking clients.

By reducing the barriers to adoption for commercial and government entities in usingto use quantum computing technologies to solve their most complex problems, we believe our products will accelerate quantum technology adoption similar to the adoption curve that has been witnessed with artificial intelligence. To this end, we are leveraging our collective expertise in finance, computing, mathematics and physics to develop a suite of applications that may enable global industries to utilize quantum computers, quantum annealers and digital simulators to improve their processes, profitability, and security.

Products and Products in Development

QatalystQATALYST

The Company’s primary offering is the Qatalyst (formerly Mukai) is our answer to the current state of the quantum computing industry. As the industry’s first publicly available Quantum Application Accelerator,platform. Qatalyst enables developers to create and execute quantum-ready applications on conventionalclassical computers, while being ready to run on quantum computers where those systems achieve performance advantage. Qatalyst performs the complex problem transformations necessary to be executed on a variety of quantum platforms today, and users can call upon the same Qatalyst APIs (Application Programming Interfaces) to achieve optimization performance advantages on conventional computers using our cloud-based solution.

Qatalyst is the only quantum acceleration platform available today, dramatically reducesreducing the time-to-quality results and the associated costs for both conventionalclassical and quantum computers. Unlike more common toolsets that require deep level quantum expertise to build new quantum problems and workflows, Qatalyst is not a tool kit, but a complete platform. It accelerates performance and results on classic and quantum computers, with no additional quantum programming or quantum computing expertise required. This is why it is unique in its approach to the quantum computing industry. Instead of invoking a team of quantum specialists to transform an optimization problem, an SMEa subject matter expert (“SME”) or programmer submits their current problem via a software API to the Qatalyst cloud-based platform. Qatalyst manages the workflow, optimizations, and results, without any further intervention by the user. Qatalyst provides a unique advantage to reduce applications development risks and costs by eliminating the need for scarce high-end quantum programmers.

Qatalyst is integrated with the Amazon Cloud BRAKET API, offering access to multiple Quantum Processing Units (“QPUs”) including DWave, Rigetti, and IonQ. Qatalyst also integrates directly with IBM’s QPUs.

By using Qatalyst, application developers can run their applications on any or all of the available QPUs by merely selecting which QPU they prefer to run on based on the desired performance results of the application. We believe this provides a substantialThis is an enormous advantage over any other toolkit or platform in the market today. These advantages are significant not just for application developers but for any company that is considering using or exploring quantum computing technology for business applications.

Qatalyst also eliminates the need for the low-level hardware programming expertise required by toolkits. This programming is time consuming and must be updated constantly as QPUs evolve and change, resulting in significant development costs. Qatalyst automatically optimizes the same problem submitted by a SME for multiple Quantum and ConventionalClassical Processors. The SME or programmer selects one, or many, processing resources and the problem will be submitted by Qatalyst. This is an enormous advantage over any tool set in the market today. These advantages are significant not just for application developers but for any company that is considering using or exploring quantum computing technology for business applications.

SOLVERS

Built into Qatalyst are several solvers, primarily “QBSolv.” QBSolv addresses time-bound optimization problems where the outcome is driven by a hard time constraint. QBSolv is a highly optimized classical application that has demonstrated significant performance advantages over current solvers in the market today. The QBsolv application expands the range of solution option outcomes for optimization problems, presenting organizations with the capability to make better decisions. Furthermore, because of QBSolv’s performance advantages it is able to uncover new solution options for problems that are currently unattainable with today’s solvers.

It is important to note that our solvers deliver these performance advantages while running on today’s conventional computers and will significantly improve performance as better QPU technology becomes available. To that end, the Company is beginning to seek marketing and distribution partnerships where our current solver technologies can be deployed to enable industry-specific application performance.

The Company is also working on software products to address community detection to aid researchers in discovering correlations that may not have been imagined. Community detection holds significant promise in pharmaceutical applications such as evaluating client trial outcomes, and in epidemiology to enable detection of common factors among a population.

In addition to commercial markets, the Company is pursuing a number of US government funded opportunities.

The US Government, through the National Quantum Initiative Act of 2018 (Public Law No: 115-368 - 12/21/2018) directed the President to implement a National Quantum Initiative Program to, among other things, establish the goals and priorities for a 10-year plan to accelerate the development of quantum information science and technology applications. (Sec. 103) The National Science and Technology Council shall establish a Subcommittee on Quantum Information Science, including membership from the National Institute of Standards and Technology (NIST) and the National Aeronautics and Space Administration (NASA), to guide program activities. (Sec. 104) The President must establish a National Quantum Initiative Advisory Committee to advise the President and subcommittee on the program and trends and developments in quantum information science and technology. Significant government funding has been allocated for research initiatives including a recent Department of Energy initiative of $625 million over the next five years to establish two to five multidisciplinary Quantum Information Science (QIS) Research Centers in support of the National Quantum Initiative. The Quantum Economic Development Consortium (QED-C), a consortium of stakeholders that aims to enable and grow the U.S. quantum industry. QED-C was established with support from the National Institute of Standards and Technology (NIST) as part of the Federal strategy for advancing quantum information science and as called for by the National Quantum Initiative Act enacted in 2018. Quantum Computing Inc. is one of the founding members of the QED-C.

The Company is pursuing a number of research areas funded by the government that directly relate to its capabilities. To strengthen its technology base, the Company has entered into a Technology Alliance Partnership agreement with Splunk, Inc. (NASDAQ: SPLK). The Company will partner with Splunk to do both fundamental and applied research and develop analytics that exploit conventional large-data cybersecurity stores and data-analytics workflows, combined with quantum-ready graph and constrained-optimization algorithms. These algorithms will initially be developed using the Company’s innovative Qatalyst software masksplatform, which enables quantum-ready algorithms to execute on classical hardware and also to run without modification on QC hardware when ready. Once proofs of concept are completed, The Company and Splunk will develop new analytics with these algorithms in the complexitySplunk data-analytics platform, to evaluate quantum analytics readiness on real-world data. The Splunk platform/toolkits help customers address challenging analytical problems via neural nets or custom algorithms, extensible to Deep Learning frameworks through an open source approach that incorporates existing and custom libraries. The initial efforts of quantum programming via the Q API, a powerful six call API that users can learn in a day. Instead of spending months or years developing new applicationsour partnership with Splunk will focus on three key challenges; network security and workflows requiring complexdynamic logistics and extremely low-level coding, users, workflows or applications can immediately submit a problem to Qatalyst within a day, using the same familiar constructs they use right now, via the Q API. Users have utilized Qatalyst’s simple API and familiar constructs to solve their first complex problem within a week, as compared to the 6-12 months associated with quantum software toolkits.

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Qatalyst Features

Today, SMEs can leverage the power of Qatalyst to solve high-value discrete optimization problems present in finance, bio/pharma, and cybersecurity. Currently, Qatalyst offers the following features:

Results of Operations

Three Months Ended March 31,September 30, 2021 vs. March 31,September 30, 2020

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