Quantum Computing Inc.
For the period ended Dec 31, 2024. Filed Mar 20, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 20, 2025
QUBT$6.33+12.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-01.
0001213900-24-028799
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-20.
0001213900-25-025561
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 40 previous paragraphs and 56 current paragraphs.
15 unchanged; 12 reworded; 29 added; 13 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
Our results of operations for the years ended December 31, 2024 and 2023 is as follows (in thousands, except percentages):
Current report
The Company’s revenues during the years ended December 31, 2024 and 2023 consisted of (in thousands):
Current report
Cost of revenues, which consists of direct labor expenses, primarily salary costs for engineering and solutions staff delivering services, and other direct component costs for custom hardware on research and development contracts, was $261 thousand for the year ended December 31, 2024, compared to $196 thousand for the prior year, an increase of $65 thousand, or 33%. Cost of revenues for each of the years ended December 31, 2024 and 2023 consists primarily of salary expense. The increase for 2024 was predominantly driven by the increases in direct labor expenses and other direct costs required to perform on the contracts during 2024 compared to the prior year.
Current report
Operating expenses of approximately $26.0 million in 2024 decreased as compared to approximately $26.4 million in 2023 primarily as a result of a decrease in general and administrative expenses, partially offset by an increase in research and development expenses, as set forth in the below tables (in thousands, except percentages).
Current report
General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
Current report
General and administrative expenses in 2024 decreased $2.8 million or 27% compared with 2023 primarily due to lower employee- and advisor-related expenses, including stock-based compensation, payroll, bonus and travel expenses, as well as lower legal fees and consulting services driven by changes made within and by the Company’s management team, offset by increased audit fees driven by the Company retaining a new independent registered public accounting firm in May 2024and such firm’s re-audit of the Company’s consolidated financial statements for the years ended December 31, 2023 and 2022.
Current report
Research and development expenses consist primarily of compensation for employees that primarily engage in research and development efforts and fees for the development of hardware products and supporting software. We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
Current report
Research and development expenses in 2024 increased $2.4 million or 27% compared with 2023 primarily due to higher employee-related expenses, primarily as a result of higher stock-based compensation and bonus expenses to incentivize and retain key technologists, as well as higher depreciation for long-lived laboratory equipment, offset partially by lower professional and hosting services.
Current report
Selling and marketing expenses consist primarily of employee compensation as well as customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.
Current report
Net selling and marketing expenses in 2024 were largely unchanged as compared with 2023, with increases primarily due to higher stock-based compensation, offset by lower outsourced professional services costs, related marketing program costs, and lower trade show and travel-related costs in 2024.
Current report
Non-operating Income (Expense)
Current report
The following table summarizes our non-operating income (expense) for the years ended December 31, 2024 and 2023 (in thousands, except percentages).
Current report
Non-operating expense increased to $42.6 million for 2024 compared to $779 thousand for 2023, primarily as the result of a $40.5 million decrease in the change in fair value of the derivative liability for the QPhoton Warrants, as defined below, during 2024 compared to a $528 thousand increase in 2023.
Current report
The loss on change in value of warrant liability is entirely comprised of mark-to-market adjustments for the QPhoton Warrants, as defined below in the accompanying notes to our consolidated financial statements appearing elsewhere in this report, which had no carrying value as of December 31, 2023. Future mark-to-market adjustments may result in continued losses if the price of the Company’s common stock increases above the closing bid price of $16.55 per share at December 31, 2024; such adjustments may alternatively result in gains if the closing bid share price of the Company’s common stock decreases. See Note 10,Capital Stock, in the accompanying notes to our consolidated financial statements appearing elsewhere in this report for additional information on the QPhoton Warrants.
Current report
In addition, interest expense, net, which consists of interest on financial liabilities and amortization of debt issuance costs, increased $128 thousand or 43% in 2024 compared to 2023, which increase was primarily attributable to interest paid on the secured convertible promissory note in the original principal amount of $8.25 million that we issued to Streeterville Capital, LLC in August 2024 (the “Streeterville Convertible Note”), which we paid in full as of December 31, 2024. See Note 7,Financial Liabilities, in the accompanying notes to our consolidated financial statements appearing elsewhere in this report for additional information.
Current report
The following table summarizes our cash flow for the years ended December 31, 2024 and 2023 (in thousands):
Current report
Net cash used in investing activities for the years ended December 31, 2024 and 2023 was $6.0 million and $2.6 million, respectively, and was attributable to our purchase of TFLN Optical Chips manufacturing equipment for our AZ Chips Facility, as well as computer hardware and laboratory equipment. The increase in 2024 is primarily due to the purchase of additional equipment in connection with establishing the AZ Chip Facility.
Current report
Net cash provided by financing activities for the years ended December 31, 2024 and 2023 was $99.1 million and $17.7 million, respectively. Cash flows provided by financing activities during year ended December 31, 2024 were attributable to proceeds from our stock issuances in November and December 2024, and the proceeds from our sale of shares of common stock pursuant to the ATM facility and our issuance of the Streeterville Convertible Note, partially offset by repayments on the Streeterville Unsecured Note, as defined below, and the Streeterville Convertible Note as well as redemptions of shares of Series A Preferred Stock.
Current report
We recognize stock-based compensation expense for all share-based payment awards in accordance with ASC 718,Compensation – Stock Compensation. Stock-based compensation expense for expected-to-vest awards is valued under the single-option approach and amortized on a straight-line basis, accounting for actual forfeitures as they occur. We utilize the Black-Scholes pricing model in order to determine the fair value of stock-based option awards. The Black-Scholes pricing model requires various highly subjective assumptions including volatility, expected option life, and risk-free interest rate. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Current report
Fair Value of Warrant Liabilities and Derivatives
Current report
Determining the fair market value of the QPhoton Warrants, which were included in the merger consideration paid to the stockholders of QPhoton (the “QPhoton Merger Consideration”), is a critical accounting estimate. The QPhoton Warrants are comprised of warrants to purchase up to 7,028,337 shares of the Company’s common stock at an exercise price of $0.0001 per share (the “QPhoton Warrants”) and are exercisable when and if stock options and warrants issued by the Company and outstanding as of June 15, 2022 are exercised. The Merger Consideration for shareholders Yuping Huang and The Trustees of the Stevens Institute of Technology was issued in 2022. A third alleged shareholder, BV Advisory, rejected the Merger Consideration and commenced litigation in Delaware Chancery Court (see Note 8,Contingencies – Legal Proceedings, in this Form 10-K for additional information and Item 3,Legal Proceedings, in this Form 10-K for a full discussion), and to date that litigation has not been resolved. Accordingly, as of December 31, 2024 and 2023, we had only issued 6,325,503 of the QPhoton Warrants. In determining the fair market value of the QPhoton Warrants, the Company determines which underlying options and warrants are in-the-money or out-of-the-money at period end by comparing to the bid price of the Company’s common stock, then accounts for changes period-over-period by realizing a mark-to-market gain or loss for the period.
Current report
An additional critical accounting estimates involves determining the fair value of the conversion features ingerent in the Streeterville Convertible Note (the “Streeterville Derivative Liability”), which involves inherent uncertainties and the application of management judgement. The Streeterville Derivative Liability will be mark-to-market adjusted on a quarterly basis and accreted as interest expense while the Streeterville Convertible Note is outstanding.
Current report
Valuation Allowances for Deferred Taxes
Current report
Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s assessment of estimated current and future income taxes to be paid. We are subject to income taxes in the United States. Significant judgments and estimates are required in determining the consolidated income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits.
Current report
Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which are expected to result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, for all material jurisdictions, we consider all available positive and negative evidence, including scheduled reversals of deferred tax balances, projected future taxable income, tax-planning strategies and results of recent operations. In projecting future taxable income, we begin with historical results and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we use to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating results.
Current report
As of December 31, 2024, we had federal and state net operating loss (“NOL”) carryforwards of approximately $89.4 million, or $19.6 million on a tax-effected basis. We believe that it is more likely than not that the benefit from these NOL carryforwards will not be realized. Accordingly, we have provided a full valuation allowance on any potential deferred tax assets relating to these NOL carryforwards. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2024, will be accounted for as a reduction of income tax expense.
Current report
The calculation of our tax liabilities involves evaluating uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. ASC 740,Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including the resolution of any related appeals or litigation processes, on the basis of the technical merits.
Current report
We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a tax payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is made available.
Current report
We believe that none of the unrecognized tax benefits may be recognized by the end of 2024.
Removed paragraphs (13)
Previous report
When we say “we,” “us,” “our,” “Company,” or “QCi,” we mean Quantum Computing Inc.
Previous report
Years Ended December 31, 2023 vs. December 31, 2022
Previous report
Cost of revenues, which consists of labor consumed to fulfill our obligations under contractual service agreements as well as the component parts of finished goods sold, was $195,640 for the year ended December 31, 2023 compared to $60,934 for the prior year, an increase of $134,706, or 221%. Cost of revenues for each of the years ending December 31, 2023 and 2022 consists primarily of salary expense. The increase for 2023 was predominantly driven by the execution of new government service contracts. Cost of revenue for these services was contractually structured and limited to the direct salaries and actual hours worked to fulfill the work orders. Rates for these services remained materially unchanged year over year, with contract volume being the driver of growth.
Previous report
Operating expenses for the year ended December 31, 2023 were $27,383,684 compared to $36,654,056 for the year ended December 31, 2022, a decrease of $9,270,372 or 25%. The decrease in operating expenses was almost entirely driven by a $9,038,701 decrease in stock-based compensation expenses, which was driven mainly by higher value stock option awards in 2022 compared to 2023. Decreases of $1,399,208 in selling, general and administrative expenses, primarily as a result of $574,428 through stream-lining of marketing activities and sales roles, and $704,975 in professional services, primarily as a result of non-recurring legal expenses during 2022 related to the QPhoton Merger, also contributed to the decrease in operating expenses during 2023 compared to the prior year. These decreases were partially offset by an increase in research and development spending year-over-year of $1,885,909 driven by increased salary expenses as the Company expanded its capability to deliver commercialized hardware products.
Previous report
Net Loss
Previous report
Our net loss for the year ended December 31, 2023 was $29,730,672 compared to a net loss of $38,593,700 for the prior year, a decrease of $8,863,029 or 23%. The decrease in net loss is primarily due to the decrease in operating expenses, noted above, partially offset by $513,709 net increase in financing costs driven by amortization of the $750,000 original issue discount included in the principal balance of the unsecured promissory note (the “Streeterville Unsecured Note”) that we issued to Streeterville Capital, LLC in the initial principal amount of $8,250,000 in September 2022, which bears interest at 10% per annum.
Previous report
Our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2023, noting the existence of substantial doubt about our ability to continue as a going concern. This uncertainty arose from management’s review of our results of operations and financial condition and its conclusion that, based on our operating plans, we did not have sufficient existing working capital to sustain operations for a period of twelve months from the date of the issuance of these financial statements.
Previous report
Net cash used in investing activities for the years ended December 31, 2023 and 2022 was $2,617,990 and $2,225,758, respectively. Cash used in investing activities during the year ended December 31, 2023 was attributable to acquisition of laboratory and production equipment for $2,117,990 and our $500,000 loan to millionways, Inc (“millionways”). in June 2023. On June 6, 2023, the Company entered into a Note Purchase Agreement with millionways pursuant to which the Company agreed to purchase from millionways up to three unsecured promissory in an aggregate principal amount of up to $2,000,000, subject to the terms and conditions thereof. On June 6, 2023, the Company purchased the notes from millionways and loaned it an aggregate principal amount of $500,000. This followed the Company’s entry into a Summary of Proposed Terms with millionways on May 16, 2023, to provide bridge loans to millionways and enter into due diligence to acquire up to 100% of the AI firm.
Previous report
Net cash provided by financing activities for the year ended December 31, 2023 was $19,309,330 compared to $8,035,684 during the year ended December 31, 2022. Cash provided by financing activities during the year ended December 31, 2023 was attributable to $25,496,364 received from the sale of shares of our common stock through our At-The-Market (ATM) facility, managed by Ascendiant Capital Markets, LLC (net the 3% fee paid to Ascendiant Capital Markets, LLC), partially offset by repayments of $6,187,034 on the Streeterville Unsecured Note. During the year ended December 31, 2022, cash provided by financing activities was primarily attributable to the funds we received from the issuance of the Streeterville Unsecured Note.
Previous report
The Company has funded our operations primarily through the sale of our equity (or equity linked) and debt securities. As of March 28, 2024, we had cash on hand of approximately $6,554,651. We have approximately $74,977 in monthly lease and other mandatory payments, not including payroll, employee benefits and ordinary expenses which are due monthly.
Previous report
Fair Value of Options and Derivatives
Previous report
To the extent that any of these assumptions is not correct, that could result in the overpricing or underpricing of the stock options involved. The assumption that the risk-free rate (the Company uses the one-year U.S. Treasury Bill rate as a proxy for the risk-free rate) can vary over time, and if the T-Bill rate varies substantially over the life of the stock option that could affect the pricing. Similarly, the volatility of the Company’s common stock, also known as the Beta, has moved within a limited range over the past year, but the volatility of any security can change over time, which would affect the option pricing calculation. Another critical estimate relating to option pricing is the default rate, which means the estimate of granted options that will either expire unexercised, or be forfeited, over the life of the stock options. If the Company’s estimate of the default rate turns out to be substantially different from the actual, experienced default rate, that could result in over- or under-estimating the total option expense.
Previous report
The Black-Scholes model is not the only available approach for pricing stock options, the Company could have used a Binomial pricing model or a Monte Carlo simulation model. However, there is no assurance that either a Binomial or Monte Carlo pricing approach would be more accurate than the Black-Scholes model over time. Moreover, both the Binomial model, which calculates the price of an option at each point in time during the option period, or the Monte Carlo model, which simulates the possible movements in future stock prices and uses them to calculate the option value, rely on critical assumptions. The Binomial model assumes that stock markets are perfectly efficient, which may not hold for all periods of time. The Monte Carlo simulation model assumes changes in stock prices over time cannot be predicted from the historical trends (known as a “random walk”), which also may not hold for all periods.
Reworded paragraphs (12)
Previous wording
QCi is a development stage company with limited operations and revenue. The Company is developing quantum machines for high-performance computing applications based on proprietary photonics technology. QCi’s products are designed to operate at room temperature and low power at an affordable cost in the areas of high-performance computing, sensing and imaging, and quantum cybersecurity. The Company has generated some revenue based on sales of products and related services to date and is expanding its sales and marketing efforts. The Company’s development team includes optical engineers, mathematicians, physicists, and software developers.
Current wording
QCi is a development stage company with limited operations and revenue. The Company is developing quantum and ancillary non-quantum products for high-performance computing applications based on proprietary photonics technology. QCi’s products are designed to operate at room temperature and low power at an affordable cost in the areas of high-performance computing, sensing and imaging, and quantum cybersecurity. The Company has generated some revenue based on sales of products and related services to date and is expanding its sales and marketing efforts. The Company’s development team includes optical engineers, mathematicians, physicists, and software developers.* *
Previous wording
Revenues for the year ended December 31, 2023 were $358,047 compared to $135,648 for the year ended December 31, 2022, an increase of $222,399, or 164%. Revenue was derived from sales of hardware products and professional services in 2023, and solely from professional services in 2022, in each case provided to multiple commercial and government customers under multi-month contracts; the year-over-year change was riven by increases in short-term contractual service revenue. In 2023, QCi continued to execute its business strategy to provide quantum-ready solutions for solving real-world problems. While we have made significant progress toward this overarching objective, the generation of revenue from customers has been slow to develop, in part due to the fact that quantum computing is a cutting-edge technology for most potential customers, who are therefore proceeding cautiously with small, exploratory contracts to better understand its applicability to their requirements. Accordingly, the Company has focused on providing professional services to introduce customers to quantum-based solutions to their operating needs, and on customer education and building customer awareness as a means to generating sales. The Company has completed its discovery and research phase and is now transitioning towards commercialization. We have developed and released multiple products and are now in the process of marketing them. We expect revenues to increase meaningfully in 2024 as we continue to emphasize our hardware capability.
Current wording
Revenues for the year ended December 31, 2024 were $373 thousand compared to $358 thousand for the year ended December 31, 2023, an increase of $15 thousand, or 4%. Revenue was derived from sales of hardware products and professional services in 2024 and 2023, in each case provided to multiple commercial and government customers under multi-month contracts. The year-over-year change was driven by changes in the number of, size of and level of effort performed on active customer proof of concept and research and development services and customer hardware contracts. In 2024, the Company continued to execute its business strategy to provide quantum-ready solutions for solving real-world problems. While we have made significant progress toward this overarching objective, the generation of revenue from customers has been slow to develop, in part due to the fact that quantum computing is a cutting-edge technology for most potential customers, who are therefore proceeding cautiously with small, exploratory contracts to better understand its applicability to their requirements. Accordingly, the Company has focused on providing professional services and research and development offerings to introduce customers to quantum-based solutions to their operating needs as well as on customer education and building customer awareness as a means to generating sales. We have developed and released multiple products, including commercial and research and development offerings and foundry services for TFLN Optical Chips manufacturing that we are now in the process of marketing. As a result, we expect product revenues to continue to increase going forward.
Previous wording
Gross margin for the year ended December 31, 2023 was $162,407 compared to $74,714 for the prior year, an increase of $87,693, or 117%. On a percentage basis, gross margin was 45%, a decrease of 10% year-over-year. The change was nearly entirely the result of the shift to contractual service revenue where the cost of goods sold was defined under the terms of our general professional services obligation. Our lack of a scaled and distributed base of revenue generation by product and sales channel can result in large swings in gross margin between reporting periods.
Current wording
Gross margin for the year ended December 31, 2024 was $112 thousand compared to $162 thousand for the prior year, a decrease of $50 thousand, or 31%. On a percentage basis, gross margin was 30%, a decrease of 15% year-over-year. The change was the result of a new custom hardware contract that had lower margins due to its cost of revenues being comprised of other direct component costs in addition to direct labor expenses. Our lack of a scaled and distributed base of revenue generation by product and sales channel can result in significant differences in gross margin between reporting periods.
Previous wording
We have incurred net losses and experienced negative cash flows from operations since inception. To date, since February 2018, the Company has raised $57,424,924 through private placements of equity and $12,633,000 through private placements of Convertible Promissory Notes and other debt for a total of $70,057,924 through December 31, 2023. The Company has no lines of credit, and $2,496,480 in short-term debt obligations outstanding. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development and go-to-market programs. We have determined that additional financing will be required to fund our operations for the next 12 months and our ability to continue as a going concern is dependent upon obtaining additional capital and financing. As of December 31, 2023, the Company had cash and cash equivalents of $2,059,285.
Current wording
We have incurred net losses and experienced negative cash flows from operations since inception. Through December 31, 2024, the Company has raised $167.8 million through its issuance of common stock and $20.1 million through its issuance of convertible promissory notes and other debt for a total of $187.9 million. The Company has no lines of credit or short-term debt obligations outstanding. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development and go-to-market programs. As of December 31, 2024, the Company had cash and cash equivalents of $78.9 million.
Previous wording
Our primary uses of cash are to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and non-linear quantum optical chips and fund business operations. Until such time as we can generate significant revenue from sales or subscriptions of our hardware offerings, we expect to finance our cash needs through public and/or private equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and loan programs. However, we may be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms, or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary pressures, rising interest rates, banking collapses, and financial and credit market fluctuations, could reduce our ability to access capital on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our quantum computing development and go-to-market efforts.
Current wording
Our primary uses of cash are to fund and invest in our operations as we continue to grow our business. We will require a significant amount of cash for continued investment in our Foundry Services offering, including but not limited to our AZ Chips Facility and any future-identified space for expansion, as well as ongoing research and development for our non-linear quantum optical products and photonics chips. Until such time as we can generate significant revenue from sales or subscriptions of our hardware offerings, we expect to finance our operating and investing needs through our cash and cash equivalents and, equity and/or debt financings or other capital sources, including but not limited to U.S. government grant and loan programs. We may, however, be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms, or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary pressures, rising interest rates, bank failures, and financial and credit market fluctuations, could reduce our ability to access capital on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our product development and go-to-market efforts. There can be no assurances that the Company will be able to secure additional equity and/or debt investments or achieve an adequate sales level. We believe, however, that the Company’s existing cash and cash equivalents, together with any cash generated from operations and the proceeds from any additional equity or debt issuances will be sufficient to meet the Company’s liquidity needs for at least the next 12 months.
Previous wording
The following table summarizes total current assets, liabilities and working capital at December 31, 2023, compared to December 31, 2022:
Current wording
The following table summarizes total current assets, liabilities and working capital at December 31, 2024, compared to December 31, 2023 (in thousands):
Previous wording
At December 31, 2023, we had a working capital deficit of $2,546,788 as compared to working capital of $409,29 at December 31, 2022, a decrease of $1,847,180. The decrease in working capital is primarily attributable to the use of cash to pay for operating expenses and capital investments in property and equipment, satisfaction of accrued expense liabilities and the Streeterville Unsecured Note becoming a current portion of long-term debt payable.
Current wording
At December 31, 2024, we had working capital of $74.6 million as compared to working capital deficit of $2.2 million at December 31, 2023, an increase of $76.8 million. The increase in working capital is primarily attributable to an increase in cash from the net proceeds of our sales of 16 million shares of common stock for an aggregate of $40 million in November 2024 and 10 million shares of common stock for an aggregate of $50 million in December 2024, and our issuance of 23.7 million shares of common stock for an aggregate of $23.8 million through the Company’s ATM, as defined below, managed by Ascendiant Capital Markets, LLC during 2024, offset by the use of cash to pay for operating expenses and capital investments in property and equipment. For more information on the November and December issuances, please see Note 10,Capital Stock, in the accompanying notes to our consolidated financial statements appearing elsewhere in this report.
Previous wording
Net cash used in operating activities for the years ended December 31, 2023 and 2022 was $19,940,521 and $17,240,117, respectively, in each case primarily as a result of our net loss in each year offset by noncash adjustments for stock-based compensation, depreciation of property, plant and equipment and amortization of intangibles.
Current wording
Net cash used in operating activities for the years ended December 31, 2024 and 2023 was $16.2 million and $18.3 million, respectively, in each case primarily as a result of our net loss in each period offset by noncash adjustments for stock-based compensation, mark-to-market valuation adjustments on financial liabilities, and depreciation and amortization.
Previous wording
On a long-term basis, our liquidity is dependent on continuation and expansion of operations and receipt of revenues. Demand for the products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature. In as much as a major portion of our activities will be the receipt of revenues from the sales of our products and services, our business operations may be adversely affected by our competitors and prolonged recession periods.
Current wording
On a long-term basis, our liquidity is dependent on continuation and expansion of operations and receipt of revenues. Demand for the Company’s products and services will be dependent on, among other things, market acceptance of our products and services, the technology market in general, and general economic conditions, which are cyclical in nature. As much revenues will be derived from the sales of our products and services, our business operations may be adversely affected by the products and services offered by our competitors and any prolonged recession periods.
Previous wording
Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our condensed consolidated financial statements. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our condensed consolidated financial statements.
Current wording
Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying these policies, our management uses judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our consolidated financial statements.
Previous wording
The Company uses the Black-Scholes model to calculate the fair value of stock options and derivatives. The Black-Scholes model, developed in 1973, is a differential equation which requires five input variables, the strike price of an option, the current stock price, the time to expiration, the risk-free rate, and the volatility of the Company common stock. The Black-Scholes model is widely used for pricing options but it does rely on certain assumptions about the market which may not be correct over time. Specifically,
Current wording
Fair Value of Stock-based Compensation
Previous wording
Another area of critical accounting estimates involves determining the fair market value and useful life of the intangible assets acquired by the Company through the merger with QPhoton. In the absence of market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and comparison with similar transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is too high or too low.
Current wording
Determining the fair market value and useful life of the intangible assets acquired by the Company through the QPhoton Merger is another critical accounting estimate. In the absence of market pricing for the intangible assets, the Company relied on independent third-party appraisal experts and comparison with similar transactions to arrive at estimates of value as well as useful life. The Company will perform periodic assessments of the intangible assets for impairment, but if any of the initial estimates are incorrect, that could result in a calculation of amortization expense that is too high or too low.