Business Context and Reporting Period
Quantum Computing Inc. (QUBT) filed a Form 8-K on August 6, 2024, regarding a non-reliance on previously issued financial statements for the years ended December 31, 2023, and 2022. This action follows a cease-and-desist order against the former auditor, BF Borgers CPA PC, and the subsequent engagement of BPM LLP to conduct a re-audit.
Key Financial Metrics and Restatement Impact
The filing details estimated accounting errors requiring a restatement of the 2022 and 2023 periods. The filing does not provide current period revenue, profit, or cash flow figures, but outlines the following estimated aggregate impacts on historical statements:
- Net Loss: Estimated increase of approximately $1 million for 2023 and a decrease of approximately $8 million for 2022.
- Total Assets: Estimated decrease of approximately $4 million for 2023 and $11 million for 2022, including a material decrease to goodwill.
- Liabilities: Estimated decrease of approximately $1 million for 2022; materially unchanged for 2023.
- Stockholders' Equity: Estimated decrease of approximately $4 million for 2023 and $10 million for 2022.
- Cash Balances: No impact on cash balances resulting from these restatements.
Material Changes and Accounting Errors
The restatement is driven by non-cash accounting errors identified during the re-audit. Key adjustments include:
- Correction of purchase accounting related to the June 2022 merger with QPhoton, LLC.
- Correction of historical and subsequent accounting for Series A Preferred Stock dividends.
- Correction of historical and subsequent accounting for debt and equity issuance costs.
- Establishment of a reserve for collection risk on notes receivable.
- Adjustment of the recognition period for certain operating expenditures.
Outlook, Risks, and Management Commentary
Management and the Audit Committee concluded that previously issued financial statements and related communications can no longer be relied upon. The company anticipates filing amended annual reports (Form 10-K/A) for the period ended December 31, 2023, in the coming weeks. The filing reiterates a previously disclosed material weakness in internal controls over financial reporting regarding the accounting treatment of significant unusual transactions, including complex debt and equity transactions. The estimated restatement amounts are subject to change as the review continues.
Investor Verification Checklist
- Verify the final restated figures in the upcoming Form 10-K/A filings.
- Confirm the specific impact of the goodwill impairment on the balance sheet.
- Review the updated internal control remediation plan regarding complex transactions.
- Monitor for any further disclosures regarding the former auditor, BF Borgers.