UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

 

Commission file number ______

 

QUANTUM COMPUTING INC.

(Exact Name of Registrant as specified in its charter)

 

Delaware   82-4533053
(State of Incorporation)   (IRS Employer ID No.)

 

215 Depot Court SE, Suite 212

Leesburg, VA 20175

(Address of principal executive offices)

 

(703) 596-1023

(Registrant’s telephone number, including area code)

 

Securities to be registered under Section 12(b) of the Act: None

 

Securities to be registered under Section 12(g) of the Act:

 

Common Stock, $0.0001 par value per share

(Title of each class to be so registered)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   Accelerated filer
Non-accelerated filer   Smaller reporting Company
      Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

  

Table of Contents

 

The cross-reference table below identifies where the items required by Form 10 can be found in the statement.

 

Item No.   Item Caption   Page
1   Business.   1
1A   Risk Factors.   6
2   Financial Information.   18
3   Properties.   23
4   Security Ownership of Certain Beneficial Owners and Management.   23
5   Directors and Executive Officers.   24
6   Executive Compensation.   26
7   Certain Relationships and Related Transactions, and Director Independence.   28
8   Legal Proceedings.   28
9   Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.   29
10   Recent Sale of Unregistered Securities.   31
11   Description of Registrant’s Securities to be Registered.   32
12   Indemnification of Directors and Officers.   33
13   Financial Statements and Supplementary Data.   F-1
14   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.   34
15   Financial Statements and Exhibits.   34

 

i

 

 

EXPLANATORY NOTE

 

You should rely only on the information contained in this registration statement or in a document referenced herein. We have not authorized anyone to provide you with any other information that is different. You should assume that the information contained in this registration statement is accurate only as of the date hereof except where a different specific date is set forth.

 

As used in this registration statement, unless the context otherwise requires, the terms the “Company,” “Registrant,” “we,” “us,” “our,” “Quantum,” or “QCI” refer to Quantum Computing Inc., a Delaware corporation.

 

FORWARD-LOOKING STATEMENTS

 

Except for statements of historical fact, some information in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this registration statement because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The factors listed in the sections captioned “Risk Factors” and “Description of Business,” as well as other cautionary language in this registration statement and events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this registration statement are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

 

WHERE YOU CAN FIND MORE INFORMATION ABOUT US

 

When this registration statement becomes effective, we will begin to file reports, proxy statements, information statements and other information with the United States Securities and Exchange Commission (the “SEC”). You may read and copy this information, for a copying fee, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its Public Reference Room. Our SEC filings will also be available to the public from commercial document retrieval services, and at the Web site maintained by the SEC at http://www.sec.gov.

 

When this registration statement is effective, we will make available, through a link to the SEC’s Web site, electronic copies of the materials we file with the SEC (including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports). To receive paper copies of our SEC filings, please contact us by mail addressed to Investor Relations, Quantum Computing Inc., 215 Depot Court SE, Suite 212, Leesburg, VA 20175.

 

ii

 

 

Item 1. Business.

 

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. to better reflect its business operations at the time which was beverage distribution and product development. In 2013, Innovative Beverage Group Holdings, Inc. ceased operations. On May 22, 2017, one of Innovative Beverage Group Holdings, Inc.’s. shareholders, a North Carolina resident (the “Plaintiff”), filed suit against 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. 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, Inc. redomiciled to North Carolina.

 

On January 22, 2018, while the Company was in receivership, the Company sold 500,000 shares (the “CRG Shares”) of its common stock to Convergent Risk Group (“CRG”), 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.

 

Our Company

 

QCI focuses on quantum computing software development. We believe the quantum computer might be one of the most significant technological achievements in history, and may have the capacity to disrupt global industries. QCI intends to develop heterogeneous software that can run on the platforms that are under development by the quantum computer hardware industry. We intend to leverage our collective expertise in finance, computing, mathematics and physics to develop a suite of quantum software applications, and possibly hardware that may enable global industries to utilize quantum computers and simulators to improve their processes, profitability, and security. Our initial focus will be on the security and financial services sectors. Other potential markets for quantum computing include artificial intelligence (“AI”), machine learning, genetics and pharmaceuticals. QCI intends to be a leading provider of software that can run on multiple quantum platforms.

 

Initially, the Company is focused on two main development efforts. First, we plan to focus on the development of quantitative financial related products such as financial portfolio optimization. The financial services industry has used quantitative financial software applications for several decades with some success. However, those existing products are limited in their performance due to the lack of computing power to solve these classes of optimization problems, which are known as “NP Complete Problems”. NP Complete Problems are a class of mathematical problems that can be solved in polynomial increments of time using a non-deterministic method. These NP Complete Problems require complex calculations, which cannot currently be performed in reasonable amounts of time using conventional, binary computer systems, with the exception of simple cases. These problems are intractable because of the inability of bit-based systems to handle complex non-deterministic problems. The recent developments in quantum annealing and other quantum hardware suggests that these problems will soon be solvable using these new technologies. The Company’s goal is to develop and implement quantum related algorithms to provide solutions to these NP Complete Problems in the area of financial optimization. Optimization algorithms are ideally suited to run on a class of quantum computers, known as “annealers,” that are currently becoming made available in the market by various manufacturers.

 

Our secondary market focus will be the field of cybersecurity, specifically encryption and decryption algorithms. Current encryption algorithms, such as DES (widely used in banking transactions), use codes based on the product of two very large prime numbers. To decrypt the message requires finding the factors of a very large number, which can be done with current computers, but takes unacceptably long amounts of time. The factorization process can be performed much more rapidly using algorithms running on a quantum computer. The other aspect of cybersecurity that we will work on is development of encryption algorithms that are either “quantum resistant”, i.e. difficult for quantum computer to crack, or “quantum based”, i.e., that use principals of quantum physics to create a quantum based code that is difficult for both conventional and quantum computers to break. Information security has a number of components, of which encryption is an important tool. Encryption is vital to e-commerce, banking, cellular communication, and protecting email, websites and online identities because unprotected data can be stolen and misused. . The cyber security market, is expected to reach $170 billion by 2020 according to Forbes. The Research and Markets report “Global Quantum Cryptography Market Report 2017” dated March 21, 2018, estimates that the global quantum sector of the cryptography market will grow from $285.7 Million in 2017 to $943.7 Million by 2022. This report states that growing adoption of cloud computing and next generation wireless networks is driving the interest in quantum encryption solutions to data security concerns.

 

To achieve these goals, we have assembled a team with a combined over 100 years of experience in the financial services, quantitative and applied mathematics, quantum physics, AI and machine learning fields. We plan to file patents for new technology we may develop over the coming months based on our current progress, but we cannot guarantee this timeline or that we will be awarded any such patents. While true general purpose quantum computing is still several years from being practical, special purpose quantum computers, known as annealers, are becoming available, as are some quantum simulators.

 

1

 

 

Our Strategy

 

QCI plans to enter the market for high performance computers and software applications, specifically focusing on what are known as “quantum computers”. The Company has assembled a team of experienced engineers in super computing technology and quantum mathematics, which will focus on both design and development of a quantum computer simulator (a “quantum annealer”) and several quantum software applications that target solutions to non-deterministic polynomial applications.

 

The Company has hired physicists, applied mathematicians (algorithm developers) and software developers to support the technical team in developing and designing a quantum annealer and related quantum software applications.  Applied mathematicians develop the algorithms and algorithm/software developers design software solutions utilizing the algorithms provided to them by mathematicians. Software engineers test the algorithm code to ensure reliable and accurate performance of the software product.

 

In addition, the Company has retained outside leading industry experts from well-known institutions from the financial services industry and leading financial institutions, and expects to retain additional advisors from cybersecurity firms and government agencies to serve as technical advisors to the Company. We have formed an advisory board of additional subject matter experts, which is expected to assist us to shape our business strategy and direction as well as work with us to establish our market approach. QCI is also pursuing US Government initiatives in quantum computing and AI, including grants and funding, that are fostering U.S. innovation in those domains.

 

QCI does not currently intend to be a hardware manufacturer. However, due to the cutting-edge nature of quantum computing and the high cost and limited availability of quantum computers, as well as limitations on the capabilities of existing quantum simulators, we may find it necessary over the next two years to develop our own quantum simulators upon which we can develop and test our quantum software products. If such development becomes necessary, our simulators are expected to emulate the characteristics and capabilities of a quantum computer such as superposition and quantum entanglement. Our plan is to license our software as a cloud based service, but we are not ruling out selling turn-key hardware systems that would incorporate and support our own quantum inspired computing solutions.

 

QCI’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. 

 

Initial Products in Development

 

Financial Applications

 

QCI’s initial product currently in design is a financial Portfolio Optimizer. This software will evaluate the potential return, risks, market volatility and transaction costs of different portfolios to help financial advisors and investment managers decide on the optimal investment approach. The planned functionality of this product will include real-time optimized portfolio construction and rebalancing, scenario analysis and stress testing, and “efficient frontier” derivation (calculation of the theoretically optimal balance within a portfolio of the maximum possible return at a given level of risk). Other features such as real-time market and credit risk exposure calculation and machine learning can be added later in a modular fashion. This product is intended to assist asset managers and investment firms balance portfolios, assess the risks of different strategies and plan trades. One of the most significant developments in financial markets in the past several decades has been the introduction of computerized trading based on highly sophisticated algorithms that monitor streams of financial data (primarily the trading prices, ranges and volumes of different stocks, options, bonds and derivatives, and even some commodities, in multiple markets around the world), compute the optimal time and price at which to make a purchase or sale, and instructs the trading desk to execute the trade. Computerized trading is fast, highly accurate, unburdened by human emotion or delays, and nearly instantaneous. Computerized securities trading, known as “algorithmic trading” or “high frequency trading” now comprises the majority of security trades on most exchanges according to CNBC, and the latest financial algorithms enable computers to make decisions and implement trades in microseconds, faster than a person is capable of achieving. A well designed financial algorithm and trading system can provide investors, whether private or institutional, with a competitive advantage enabling them to earn sizable profits.

 

We believe that implementation of machine learning and AI into financial algorithms, aided by quantum computing, could drive improvements in algorithmic trading, making it less susceptible to herd behavior and dramatic fluctuations in market prices. In addition, quantum computing may be able to solve some of the complex problems of multi-security portfolio optimization and trade optimization that so far have eluded algorithms on conventional computers.

 

2

 

 

Cybersecurity Applications

 

The security or privacy of data on a computer is typically protected by passwords or encryption (codes) or multi-factor authentication or biometrics, or a combination of several of these techniques. Encryption is the process of converting readable data by means of a mathematical formula into a jumble of letters and numbers that can only be converted back to readable data by means of a related mathematical formula or key.

 

The Company intends to develop a proprietary approach to use early analysis of quantum key distribution and quantum encryption to discover advantageous security measures for our products. We intend to research the potential for the development of “data specific” quantum security packages. The goal of this product will be to offer data security solutions optimized for specific data formats and transactions.

 

Industry Overview

 

Conventional computers, whether they are in laptops, smartphones or large computer networks, all process “bits” of information coded as 1’s and 0’s in sequence, controlled by software. To increase the performance of a conventional computer, computer system designers have largely followed one of two paths, (i) increasing the size, speed and working memory of the central processor (the Cray supercomputer is an example of this approach) or (ii) linking large numbers of servers together through a high-speed, low-latency network and using special software to break the problem into large number of parts, each of which can be assigned to one of the servers for calculation, and then the software combines all the individual server outputs (this architecture is common in large “server farms”). Both architectures enable conventional high performance computers to perform billions of calculations per second. Super computers are used in a wide range of applications, including weather forecasting, pharmaceutical design, financial analysis and encryption/decryption.

 

The difference between a conventional super computer and a quantum computer is that a quantum computer uses quantum bits or “QBITS”, which are not limited in the way that conventional computer circuits are. A QBIT can be in any of three states, 1, 0 or a “superposition state” a quantum physics phenomenon in which the QBIT exists in multiple states simultaneously. Another quantum physics phenomenon, known as “entanglement” links the data in multiple QBITS. The superposition property of QBITS enables a quantum computer to process large amounts of data in a “parallel” fashion because the quantum QBITS are inherently able to exist in multiple states simultaneously, and are therefore able to evaluate multiple outcomes at the same time, instead of one at a time the way a conventional computer would. QBIT structure and quantum superposition allow for parallel processing, however this parallel processing is not what would be replicated by running several bit based computers in parallel. Instead, superposition allows us to assume a piece of data is in both the on and off state simultaneously. Therefore, for each QBIT in superposition in a quantum calculation, the complexity of the problems the calculation can solve increases exponentially by a power of two instead of having a linear progression. The combination of the entanglement and superposition properties theoretically enables a quantum computer to process massive numbers of calculations in parallel and thereby solve problems that are not solvable by conventional high performance computers in any realistic period of time.

 

Building a true quantum computer is not yet feasible with today’s technology because the most advanced QBITS are able to maintain a quantum state only for short periods of time, on the order of milliseconds, before outside interference from thermal vibration or electromagnetic fields causes them to “decohere” and lose the information they are processing. This decoherence process can be controlled in part by keeping the QBITS immersed in liquid helium at close to absolute zero temperature, and enclosing the entire computer in an electromagnetic shield or Faraday Cage, but these dramatically increase the cost of a quantum computer. Thus, improvements are needed in the QBITS themselves before quantum computing can become a reality.

 

Venture investors have placed $241 million into startups developing hardware or software worldwide per CB Insights as reported by WIRED Magazine in August of 2018. In the same article, reporting on the status of quantum development, it was also reported $1.3 billion in proposed new funding for quantum research was introduced to Congress in 2018. QCI is working with advisors to review the quantum research program and determine where the Company can bid on government quantum research and development procurements.

 

Competition

 

There are over 130 companies and research universities who are known to be engaged in research and development relating to quantum computing. In the area of quantum computer hardware systems, competitors include privately funded startups such as D-Wave, ATOS, and Rigetti Computing, as well as large IT firms such as Microsoft, IBM, and Google who have all announced laboratory projects focusing on developing quantum computers. Since 2013 Google has been working with NASA and the Universities Space Research Association to establish the Quantum Artificial Intelligence Laboratory, using quantum computers built by D-Wave. In March 2017 IBM announced a 17 QBIT prototype commercial processor and made accessible (via the IBM cloud) a 16 QBIT quantum computer for use by developers, programmers and researchers. In 2018 Intel announced a superconducting quantum test chip with 49 QBITS. Also in March 2018, Google announced it had a new quantum processor, codenamed “Bristlecone”. Microsoft has been active in quantum research since 2005 when the company established a research lab to study topological quantum computing. In December 2017 Microsoft released a preview version of its Quantum Development Kit. The National Security Agency has funded some research into quantum computing and encryption algorithms, but much of this work is classified so the nature of the work and the companies performing it are not known. D-Wave has been developing quantum computers since 2004 and has several computer products on the market.

 

Competition in quantum software applications is likely to come from established IT firms such as Microsoft and Google, but there are also several private companies such as 1Qbit, a startup venture focused on developing quantum computing applications for the finance industry. Rigetti Computing, a US based quantum computing startup, announced in late 2017 that it was working on a hybrid quantum algorithm, one that would use conventional computers to handle much of the computation, and hand off parts of the computation to specialized quantum hardware when that additional power was needed.

 

3

 

 

Competition in quantum encryption is expected from ID Quantique (Switzerland), MagiQ Technologies (US), Nucrypt (US), Infineon Technologies (Germany), Qutools (Germany), Quintessence Labos (Australia), Crypta Labs (UK), PQ Solutions (U), and Qubitekk (US). These companies currently offer quantum cryptography solutions to commercial clients around the world.

 

Companies such as Bra-ket Science (Austin, TX) and BraneCell (Cambridge, MA) are focusing on developing quantum hardware that will allow quantum hardware to operate at room temperature, thus dramatically reducing costs to build and operate quantum computers. However, those technologies are not yet commercially available. To date, the only commercially available quantum computers on the market are those manufactured by D-Wave. However, the D-Wave computer, which is a quantum annealer not a general purpose quantum computer, is currently only capable of solving one specific class of optimization problems. According to CNBC, D-Wave has sold quantum computers to customers including Temporal Defense Systems, Lockheed Martin, Google and NASA. Temporal Defense was the first customer for D-Wave’s latest model the D-Wave 2000Q, a $15 million quantum annealer capable of computations utilizing 2,048 QBITS. 

 

For those wishing to develop and test quantum algorithms, companies such as D-Wave, Google, Microsoft, IBM, Rigetti, Fujitsu (Japan) and Alibaba (China) offer developers access to their quantum hardware via cloud based development platforms. While the computers at all of the aforementioned firms are relatively limited in their capability due to their low number of operational QBITS, developers can not only test quantum algorithms, but can determine the scope of the speed increase that the quantum systems offer over conventional computers.

 

According to BCC Research, as of October 1, 2017, 63% percent of all quantum computing-related patents filed were hardware related. Software and applications account for nearly 20 percent of the quantum computing related patents. Also according to BCC Research, 599 patents relating to quantum computing have been issued between 2008 and 2017. The top three holders for patents are, in descending order, D-Wave, IBM, and Microsoft. D-Wave has been issued 159 US patents and has filed for an additional 79. IBM holds 83 patents and has filed for an additional 42. Microsoft holds 41 and has filed for 43 more.

 

Government Regulation and Incentives

 

Encryption

 

The U.S. government has historically tightly regulated the export of cryptographic technologies under the Arms Export Control Act and the associated International Traffic in Arms regulations (ITAR) as a form of munition. The logic behind the export restrictions is that the ability to secure information has great value to the military and intelligence agencies, and the US Government does not want those technologies sold or distributed to foreign adversaries. These regulations were relaxed in 1996 by executive order, but restrictions are still in place under the Export Administration Act that limit the export of some advanced encryption methods and technologies. Export of commercial encryption products to certain designated countries and terrorist groups is restricted, as are exports of military quality encryption technologies. Restrictions on encryption technology are in place in many other countries but the extent of regulation varies widely from country to country. Domestically, encryption technology is largely unregulated but law enforcement, intelligence and investigative agencies work closely with encryption technology developers to enable the US government to access encrypted data under certain conditions. We believe that the quantum encryption and decryption products that QCI plans to develop can be marketed to government agencies seeking to unlock encrypted data or to encrypt and protect sensitive government data from unauthorized exposure.

 

Financial Algorithms

 

US firms and FINRA members that use financial algorithms to conduct high frequency trading are subject to SEC and FINRA regulations that govern their trading activities under long standing rules governing supervision and control practices to reduce the likelihood of market disruptions and ensure effective communication between the firm’s compliance staff and its trading strategy personnel. Additional regulation on financial algorithms has been proposed by the Commodity Futures Trading Commission (“CFTC”) aimed at limiting the potential for financial algorithms and high frequency trading to disrupt markets. The proposed regulations would require firms using such algorithms to implement pre-trade risk controls, limit self-trading and make the source code of the software programs available to the government upon request. To the Company’s knowledge, these regulations, especially the mandatory source code disclosure provisions, have been vigorously opposed by the industry and have not yet been implemented.

 

The government agencies charged with regulating financial markets in the US and around the world have so far not closely regulated financial algorithms or algorithmic trading, but that could change in response to future market events. The benefit of algorithmic trading is that it can bring greater liquidity, transparency and accountability to markets, and also reduces price variations between global markets. Financial markets in many developing countries have benefited from implementation of algorithmic trading. There are, of course, limitations to what financial algorithms can accomplish today with conventional super computers, and when multiple algorithms trade in lockstep a single price fluctuation can trigger a cascade of downward trades that can crash a market very quickly, before human intervention can stop the downward spiral. This phenomenon is known as a “Flash Crash” and regulators have imposed some regulations to slow down or suspend trading when a market drops more than a fixed percentage in a short period of time.

 

4

 

 

Incentives

 

In 2018, Congress authorized $1.3 billion to fund quantum related research projects. This funding is being administered by the U.S. Department of Defense which will solicit proposals for research. The Company intends to submit proposals for funding, but there can be no guarantee the Company will be chosen or that the Company will receive any government funding. In addition, in 2018 President Trump announced the formation of a National Quantum Initiative consisting of key technology companies working in the field of quantum computing. The Company has applied to become a member of that Initiative.

 

In December 2018 Congress passed the National Quantum Initiative Act, the purpose of which is to develop a unified national strategy for researching quantum information science. The bill proposes to establish a National Quantum Coordination Office inside the White House’s Office of Science and Technology Policy to help coordinate research between agencies, serve as the federal point of contact and promote private commercialization of federal research breakthroughs over the next decade.

 

The bill also would create:

 

A National Quantum Information Science Research Centers within the Department of Energy.
     
Research and education centers in the National Science Foundation.
     
A “workshop of stakeholders” administered by the National Institute of Standards and Technology “to discuss the future measurement, standards, cybersecurity, and other appropriate needs for supporting the development of a robust quantum information science and technology industry in the United States.”
     
A Subcommittee on Quantum Information Science (“QIS”) under the National Science and Technology Council.
     
A National Quantum Initiative Advisory Committee to advise the President.

 

The overall goals of the bill include the eventual creation of industry standards for QIS development, new research grant funding and increased collaboration with the private sector. Quantum technology, including quantum computing, has drawn significant attention from Congress and the White House in 2018 for its theoretical potential to increase computing power and disrupt encryption standards. Rival countries like China and Russia are pushing hard to improve their own QIS capabilities. President Trump is expected to sign the bill into law. We do not know at this time when the National Quantum Initiative Act will begin soliciting industry proposals and awarding contracts.

  

Employees

 

QCI currently has four full time and four part time employees. The employees are not part of a collective bargaining agreement and labor relationships are good.

 

Other Corporate Information

 

General information

 

Our business address is 215 Depot Court SE, Suite 212, Leesburg, VA 20175. Our phone number is (703) 596-1023. The information contained in, or that can be accessed through, our website is not part of this registration statement.

 

Reports to Security Holders.

 

The Company will file reports with the SEC. The Company will be a reporting company and will comply with the requirements of the Exchange Act.

 

The public may read and copy any materials the Company files with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.

 

5

 

 

Item 1A. Risk Factors.

 

You should carefully consider the risks described below together with all of the other information included in this registration statement before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment. In addition to other information in this registration statement and in other filings we make with the Securities and Exchange Commission, the following risk factors should be carefully considered in evaluating our business as they may have a significant impact on our business, operating results and financial condition. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected. Because of the following factors, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or trends in future periods.

 

Risks Related to Our Business

 

We have a limited operating history.

 

The Company was incorporated under the laws of the State of Delaware on February 22, 2018 and has engaged in limited operations to date. Accordingly, the Company has only a limited operating history with which you can evaluate its business and prospects. An investor in the Company must consider its business and prospects in light of the risks, uncertainties and difficulties frequently encountered by early-stage companies, including limited capital, delays in product development, possible marketing and sales obstacles and delays, inability to gain customer and merchant acceptance or inability to achieve significant distribution of our products and services to customers. The Company cannot be certain that it will successfully address these risks. Its failure to address any of these risks could have a material adverse effect on its business.

 

We are not profitable and may never be profitable.

 

Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including its ability to develop and commercialize our websites. There can be no assurance that we will ever achieve any significant revenues or profitable operations.

 

Our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future.

 

We are in an early stage of our development and we have not generated any revenues to offset our operating expenses. Our operating expenses will likely continue to exceed our operating income for the foreseeable future, until such time as we are able to monetize our brands and generate substantial revenues, particularly as we undertake payment of the increased costs of operating as a public company.

 

We will need additional capital, which may be difficult to raise as a result of our limited operating history or any number of other reasons.

 

We expect that we will have adequate financing for the next 8-10 months. However, in the event that we exceed our expected growth, we would need to raise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be on terms or conditions which are not acceptable. In the event that we are not able to secure financing, we may have to scale back our growth plans or cease operations.

 

We have not adopted various corporate governance measures, and as a result stockholders may have limited protections against interested director transactions, conflicts of interest and similar matters.

 

Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of corporate management and the securities markets. Because our securities are not yet listed on a national securities exchange, we are not required to adopt these corporate governance measures and have not done so voluntarily in order to avoid incurring the additional costs associated with such measures. Among these measures is the establishment of independent committees of the Board of Directors. However, to the extent a public market develops for our securities, such legislation will require us to make changes to our current corporate governance practices. Those changes may be costly and time-consuming. Furthermore, the absence of the governance measures referred to above with respect to our Company may leave our shareholders with more limited protection in connection with interested director transactions, conflicts of interest and similar matters.

 

FAILURE TO IDENTIFY ERRORS IN THE QUANTITATIVE MODELS WE UTILIZE TO MANAGE ITS BUSINESS COULD ADVERSELY IMPACT PRODUCT PERFORMANCE AND CLIENT RELATIONSHIPS.

 

We employ various quantitative models. Any errors in the underlying models or model assumptions could have unanticipated and adverse consequences on our business and reputation.

 

6

 

 

WE MAY BE UNABLE TO DEVELOP NEW PRODUCTS AND SERVICES AND THE DEVELOPMENT OF NEW PRODUCTS AND SERVICES MAY EXPOSE US TO ADDITIONAL COSTS OR OPERATIONAL RISK.

 

Our financial performance depends, in part, on its ability to develop, market and manage new products and services. The development and introduction of new products and services require continued innovative efforts and may require significant time and resources as well as ongoing support and investment. Substantial risk and uncertainties are associated with the introduction of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting client and market preferences, the introduction of competing products or services and compliance with regulatory requirements.

 

Our proprietary technology may be subject to claims for infringement or misappropriation of intellectual property rights of others, or may be infringed or misappropriated by others.

 

We rely, and may rely in the future, upon a combination of license agreements, confidentiality policies and procedures, confidentiality provisions in employment agreements, confidentiality agreements with third parties and technical security measures to maintain the confidentiality, exclusivity and trade secrecy of our proprietary information. We also rely, and most likely will rely in the future, on trademark and copyright laws to protect our intellectual property rights in the United States and abroad. Despite our protective measures and intellectual property rights, we may not be able to adequately protect against theft, copying, reverse engineering, misappropriation, infringement or unauthorized use or disclosure of our intellectual property, which could have an adverse effect on our competitive position.

 

We may become subject to legal proceedings that could have a material adverse impact on our financial position and results of operations.

 

From time to time and in the ordinary course of our business, we and certain of our subsidiaries may become involved in various legal proceedings. All such legal proceedings are inherently unpredictable and, regardless of the merits of the claims, litigation may be expensive, time-consuming and disruptive to our operations and distracting to management. If resolved against us, such legal proceedings could result in excessive verdicts, injunctive relief or other equitable relief that may affect how we operate our business. Similarly, if we settle such legal proceedings, it may affect how we operate our business. Future court decisions, alternative dispute resolution awards, business expansion or legislative activity may increase our exposure to litigation and regulatory investigations. In some cases, substantial noneconomic remedies or punitive damages may be sought. Although we maintain liability insurance coverage, there can be no assurance that such coverage will cover any particular verdict, judgment or settlement that may be entered against us, that such coverage will prove to be adequate or that such coverage will continue to remain available on acceptable terms, if at all. If we incur liability that exceeds our insurance coverage or that is not within the scope of the coverage in legal proceedings brought against us, it could have an adverse effect on our business, financial condition and results of operations.

 

  Certification, licensing or regulatory requirements;
     
  Unexpected changes in regulatory requirements;
     
  Changes to or reduced protection of intellectual property rights in some countries.

 

Our success depends upon the recruitment and retention of key personnel. To remain competitive in our industries, we must attract, motivate and retain highly skilled managerial, sales, marketing, consulting and technical personnel, including executives, consultants, programmers and systems architects skilled in quantum computing, computing, and the technical environments in which our solutions, devices and services are needed. Competition for such personnel in our industries is intense in both the United States and abroad. Our failure to attract additional qualified personnel to meet our needs could have a material adverse effect on our prospects for long-term growth. In addition, we invest significant time and expense in training our associates, which increases their value to clients and competitors who may seek to recruit them and increases the cost of replacing them. Our success is dependent to a significant degree on the continued contributions of key management, sales, marketing, consulting and technical personnel. The unexpected loss of key personnel could have a material adverse impact on our business and results of operations, and could potentially inhibit development and delivery of our solutions, devices and services and market share advances.

 

We intend to continue strategic business acquisitions and other combinations, which are subject to inherent risks.

 

In order to expand our solutions, services, and grow our market and client base, we may continue to seek and complete strategic business acquisitions and other combinations that we believe are complementary to our business. Acquisitions have inherent risks which may have a material adverse effect on our business, financial condition, operating results or prospects, including, but not limited to: 1) failure to successfully integrate the business and financial operations, services, intellectual property, solutions or personnel of an acquired business and to maintain uniform standard controls, policies and procedures; 2) diversion of management’s attention from other business concerns; 3) entry into markets in which we have little or no direct prior experience; 4) failure to achieve projected synergies and performance targets; 5) loss of clients or key personnel; 6) incurrence of debt or assumption of known and unknown liabilities; 7) write-off of software development costs, goodwill, client lists and amortization of expenses related to intangible assets; 8) dilutive issuances of equity securities; and, 9) accounting deficiencies that could arise in connection with, or as a result of, the acquisition of an acquired company, including issues related to internal control over financial reporting and the time and cost associated with remedying such deficiencies. If we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.

 

7

 

 

If we are unable to manage our growth in the new markets in which we offer solutions or services, our business and financial results could suffer.

 

Our future financial results will depend in part on our ability to profitably manage our business in the new markets that we enter. Difficulties in managing future growth in new markets could have a significant negative impact on our business, financial condition and results of operations.

 

We rely heavily on our management, and the loss of their services could adversely affect our business.

 

Our success is highly dependent upon the continued services of our management including our Chief Executive Officer, Robert Liscouski, and our Chief Financial Officer, Mr. Christopher Roberts. The loss of Mr. Liscouski’s and/or Mr. Roberts’ services would have a material adverse effect on the Company and its business operations.

 

OUR CHIEF FINANCIAL OFFICER IS NOT A FULL-TIME EMPLOYEE.

 

Our Chief Financial Officer, Mr. Christopher Roberts, is an independent contractor and shares time with other clients. The inability to retain a full-time Chief Financial Officer, Principal Financial Officer or governor of the financial responsibilities of the Company may impair our ability to meet our reporting obligations and implement financial controls to protect the Company.

 

WE MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH AND MARKETING STRATEGY SUCCESSFULLY OR ON A TIMELY BASIS OR AT ALL.

 

Our future success depends, in large part, on our ability to implement our growth strategy of expanding distribution and sales of our product portfolio, attracting new consumers and introducing new product lines and product extensions.

 

Our sales and operating results will be adversely affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.

 

CYBER SECURITY RISKS AND THE FAILURE TO MAINTAIN THE INTEGRITY OF DATA BELONGING TO OUR COMPANY COULD EXPOSE US TO DATA LOSS, LITIGATION AND LIABILITY, AND OUR REPUTATION COULD BE SIGNIFICANTLY HARMED.

 

We may from time to time collect and retain large volumes of data relating to our business and from our customers for business purposes, including for transactional and promotional purposes, and our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data is critical to our business. Maintaining compliance with the evolving regulations and requirements applicable to data security and information privacy protection could be difficult and may increase our expenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of data relating to our company or our employees, independent distributors or preferred customers, which could harm our reputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits.

 

COMPUTER MALWARE, VIRUSES, HACKING, PHISHING ATTACKS AND SPAMMING COULD HARM OUR BUSINESS AND RESULTS OF OPERATIONS.

 

Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse or theft of data. Computer malware, viruses, computer hacking and phishing attacks against online networking platforms have become more prevalent and may occur on our systems in the future.

 

8

 

 

Any attempts by hackers to disrupt our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation or brand. Our network security business disruption insurance may not be sufficient to cover significant expenses and losses related to direct attacks on our website or internal systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our products and services and technical infrastructure may harm our reputation, brand and our ability to attract customers. Any significant disruption to our website or internal computer systems could result in a loss of customers and could adversely affect our business and results of operations.

 

We have previously experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, third-party service providers, human or software errors and capacity constraints. If our mobile application is unavailable when customers attempt to access it or it does not load as quickly as they expect, customers may seek other services.

 

Our platform functions on software that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time or difficultly maintaining and improving the performance of our platform, particularly during peak usage times, could result in damage to our reputation or brand, loss of revenues, or liability for damages, any of which could adversely affect our business and financial results.

 

We expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed.

 

GROWING OUR CUSTOMER BASE DEPENDS UPON THE EFFECTIVE OPERATION OF OUR APPLICATIONS WITH OPERATING SYSTEMS, NETWORKS AND STANDARDS THAT WE DO NOT CONTROL.

 

We will be dependent on the interoperability of our applications with operating systems that we do not control, and any changes in such systems that degrade our potential products’ functionality or give preferential treatment to competitive products could adversely affect the usage of our applications on mobile devices. Additionally, in order to deliver high quality products, it is important that our products work well with a range of mobile technologies, systems, networks and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks or standards.

  

9

 

 

WE MAY NEVER DEVELOP ANY PRODUCTS TO COMMERCIALIZE.

 

We have invested a substantial amount of our time and resources in developing various new products and computing technologies. Commercialization of these products will require additional development, clinical evaluation, significant marketing efforts and substantial additional investment before they can provide us with any revenue. Despite our efforts, these products may not become commercially successful products for a number of reasons, including but not limited to:

 

  our products or technologies may not prove to be effective in trials;

 

  we may experience delays in our development program;

 

  any products or technologies that are approved may not be accepted in the marketplace;

 

  we may not have adequate financial or other resources to complete the development or to commence the commercialization of our products or will not have adequate financial or other resources to achieve significant commercialization of our products;

 

  we may not be able to manufacture any of our products in commercial quantities or at an acceptable cost;

 

  rapid technological change may make our products obsolete;

 

  we may be unable to effectively protect our intellectual property rights or we may become subject to claims that our activities have infringed the intellectual property rights of others; and

 

  we may be unable to obtain or defend patent rights for our products or technologies.

 

THE MARKET OPPORTUNITY FOR OUR PRODUCTS AND TECHNOLOGIES MAY NOT DEVELOP IN THE WAYS THAT WE ANTICIPATE.

 

The demand for our products and technologies can change quickly and in ways that we may not anticipate because the market in which we operate is characterized by rapid, and sometimes disruptive, technological developments, evolving industry standards, frequent new product introductions and enhancements, changes in customer requirements and a limited ability to accurately forecast future customer orders. Our operating results may be adversely affected if the market opportunity for our products and services does not develop in the ways that we anticipate or if other technologies or products become more accepted or standard in our industry or disrupt our technologies and products.

 

WE FACE SIGNIFICANT COMPETITION AND MANY OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO.

 

Some of our product offerings and technologies compete and will compete with other similar products from our competitors. These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distributional, personnel and other resources than we possess. In certain instances, competitors with greater financial resources also may be able to enter a market in direct competition with us offering attractive marketing tools to encourage the sale of products that compete with our products or present cost features that our target end users may find attractive.

 

OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD IMPAIR OUR COMPETITIVE ADVANTAGE, REDUCE OUR REVENUE, AND INCREASE OUR COSTS.

 

Our success and ability to compete depends and will depend in part on our ability to obtain and maintain the proprietary aspects of our technologies and products. We rely on a combination of trade secrets, patents, copyrights, trademarks, confidentiality agreements, and other contractual provisions to protect our intellectual property, but these measures may provide only limited protection. We may not always be able to enforce these agreements and may fail to enter into any such agreement in every instance when appropriate. We may from time to time license from third party’s their brands or certain technology used in and for our products. These third-party licenses are granted with restrictions; therefore, such third-party technology may not remain available to us on terms beneficial to us. Our failure to enforce and protect our intellectual property rights or obtain from third parties the right to use necessary technology could have a material adverse effect on our business, operating results, and financial condition. In addition, the laws of some foreign countries do not protect proprietary rights as fully as do the laws of the United States.

 

10

 

 

Patents may not issue from the patent applications that we have filed or may file in the future. Our issued patents may be challenged, invalidated, or circumvented, and claims of our patents may not be of sufficient scope or strength, or issued in the proper geographic regions, to provide meaningful protection or any commercial advantage. We have registered certain of our trademarks in the United States and other countries. We cannot assure you that we will obtain registrations of principal or other trademarks in key markets in the future. Failure to obtain registrations could compromise our ability to protect fully our trademarks and brands, and could increase the risk of challenge from third parties to our use of our trademarks and brands.

 

WE MAY NOT BE ABLE TO PROTECT OUR SOURCE CODE FROM COPYING IF THERE IS AN UNAUTHORIZED DISCLOSURE OF SOURCE CODE.

 

Source code, the detailed program commands for our operating systems and other software programs, is critical to our business. Although we license portions of our application and operating system source code to several licensees, we take significant measures to protect the secrecy of large portions of our source code. If a significant portion of our source code leaks, we might lose future trade secret protection for that source code. It may become easier for third parties to compete with our products by copying functionality, which could adversely affect our revenue and operating margins. Unauthorized disclosure of source code also could increase the security risks described in the next paragraph.

 

OUR FAILURE TO KEEP PACE WITH RAPID TECHNOLOGY CHANGES COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS, FINANCIAL CONDITION AND FINANCIAL RESULTS.

 

The markets for our products and services are characterized by rapid technological developments and frequent changes in customer requirements. We must continually improve the performance, features and reliability of our products and services, particularly in response to competitive offerings, to keep pace with these developments. We must ensure that our products and services address evolving operating environments, devices, industry trends, certifications and standards. We also may need to develop products that are compatible with new operating systems while remaining compatible with existing, popular operating systems. Our business could be harmed by our competitors announcing or introducing new products and services that could be perceived by customers as superior to ours. We spend considerable resources on technology research and development, but our research and development resources are more limited than many of our competitors.

 

Our failure to introduce new or enhanced products on a timely basis, to keep pace with rapid industry, technological or market changes or to gain customer acceptance for our new and existing products and services, such as mobile device data protection, could have a material adverse effect on our business, financial condition and financial results.

 

IMPROVEMENTS TO PUBLIC KEY CRYPTOGRAPHY TECHNOLOGY COULD REDUCE DEMAND FOR OUR PRODUCTS AND SERVICES AND COULD NEGATIVELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FINANCIAL RESULTS.

 

Our business will employ encryption technologies to encrypt and decrypt sensitive data. The security afforded by encryption depends on the integrity of the private key, which is predicated on the assumption that it is very difficult to mathematically derive the private key from the related public key with conventional computers. Our business plan calls for the development and marketing of quantum based encryption and decryption technologies, which are based on different mathematical principals than public key encryption and should be more difficult to break. Successful decryption of intercepted encrypted email, or public reports of successful decryption, whether or not true, could reduce demand for our products and services. If new methods or technologies, make it easier to derive the private key from the related public key, or to break quantum encryption algorithms, the security of encryption services could be impaired and our products and services could become less marketable. That could require us to make significant changes to our services, which could increase our costs, damage our reputation, or otherwise harm our business. Any of these events could reduce our revenues, increase our expenses and materially adversely affect our business, financial condition and financial results.

 

11

 

 

WE FACE STRONG COMPETITION, WHICH COULD NEGATIVELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FINANCIAL RESULTS.

 

The markets in which we compete are characterized by rapid change and converging technologies and are very competitive. There is strong competition for encryption products and services. Our business competes with products and services offered by companies such as ID Quantique (Switzerland), MagiQ Technologies (US), Nucrypt (US), Infineon Technologies (Germany), Qutools (Germany), Quintessence Labs (Australia), Crypta Labs (UK), PQ Solutions (U), and Qubitekk (US). These companies currently offer quantum cryptography solutions to commercial clients around the world. Strong competition requires us to develop new technology solutions and service offerings to expand the functionality and value that we offer to our customers. Our competitors may develop products and services that are perceived by customers as equivalent to, or having advantages over, our products and services. Competitors could capture a significant share in our markets, causing our sales and revenue to decline or grow more slowly. Barriers to entry are relatively low, and new ventures are often formed that create products competitive with our products. Competitive pressures could lead to price discounting or to increases in expenses such as advertising and marketing costs. Increased competition could also decrease demand for our products and services. Competition could reduce our revenues and net income and materially adversely affect our business, financial condition and financial results.

 

GOVERNMENTAL RESTRICTIONS ON THE SALE OF OUR PRODUCTS AND SERVICES IN NON-U.S. MARKETS COULD NEGATIVELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FINANCIAL RESULTS.

 

Exports of software solutions and services using advanced encryption technology such as ours are generally restricted by the U.S. government. Although we are confident that we can obtain U.S. government approval to export our solutions to almost all countries, the list of countries to which we (and our distributors) cannot export our products and services could be expanded in the future. In addition, some countries impose restrictions on the importation and use of encryption solutions and services such as ours. The cost of compliance with U.S. and other export laws, or our failure to obtain governmental approvals to offer our products and services in non-U.S. markets, could affect our ability to sell our products and services and could impair our international expansion. We face a variety of other legal and compliance risks. If we or our distributors fail to comply with applicable law and regulations, we may become subject to penalties, fines or restrictions that could materially adversely affect our business, financial condition and financial results.

 

WE MAY FAIL TO RECRUIT AND RETAIN KEY PERSONNEL, WHICH COULD IMPAIR OUR ABILITY TO MEET KEY OBJECTIVES.

 

Our success depends on our ability to attract and retain highly-skilled technical, managerial, sales, and marketing personnel. Changes in key personnel may be disruptive to our business. It could be difficult, time consuming and expensive to replace key personnel. Integrating new key personnel may be difficult and costly. Volatility, lack of positive performance in our stock price or changes to our overall compensation program including our stock incentive program may adversely affect our ability to retain key employees, many of whom are compensated, in part, based on the performance of our stock price. The loss of services of any of our key personnel, the inability to retain and attract qualified personnel in the future or delays in hiring required personnel could make it difficult to meet key objectives. Any of these impairments related to our key personnel could negatively affect our business, financial condition and financial results.

 

VARIOUS REGULATIONS BY THE SEC, CFTC AND OTHER REGULATORY AGENCIES MAY ADOPT REGULATIONS RELATING TO HIGH FREQUENCY TRADING.

 

Congress, regulators and some media have been increasingly scrutinizing electronic trading, the structure of equity markets and high frequency trading in recent years. The SEC continues to consider various potential market structure changes, which could result in reduced trading volumes, or which could negatively affect our business. To the extent the SEC adopts regulatory changes, our business, financial condition and operating results could be negatively impacted. In addition, the continued growth of high frequency trading has been the subject of private litigation and regulatory enforcement actions alleging that high frequency trading firms have received unfair advantages at the expense of other traders. High frequency trading accounts for a meaningful percentage of the daily volume in the U.S. and European equity markets, and these actions and other efforts to slow trading could lead to a reduction in trading volumes, negatively impacting all trading markets, including our business.

 

12

 

 

IF WE FAIL TO ESTABLISH AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS ACCURATELY OR PREVENT FRAUD. ANY INABILITY TO REPORT AND FILE OUR FINANCIAL RESULTS ACCURATELY AND TIMELY COULD HARM OUR REPUTATION AND ADVERSELY IMPACT THE TRADING PRICE OF OUR COMMON STOCK.

 

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operations and access to capital.

 

Risks Related to Our Common Stock

 

OUR STOCK PRICE MAY BE VOLATILE OR MAY DECLINE REGARDLESS OF OUR OPERATING PERFORMANCE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

 

The market price of our common stock may fluctuate widely in response to various factors, some of which are beyond our control, including:

 

  market conditions or trends in the dietary supplement industry or in the economy as a whole;

 

  actions by competitors;

 

  actual or anticipated growth rates relative to our competitors;

 

  the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;

 

  economic, legal and regulatory factors unrelated to our performance;

 

  any future guidance we may provide to the public, any changes in such guidance or any difference between our guidance and actual results;

 

  changes in financial estimates or recommendations by any securities analysts who follow our common stock;

 

  speculation by the press or investment community regarding our business;

 

  litigation;

 

  changes in key personnel; and

 

  future sales of our common stock by our officers, directors and significant shareholders.

 

13

 

 

In addition, the stock markets, including the over-the-counter markets where we are quoted, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These broad market fluctuations may materially affect our stock price, regardless of our operating results. Furthermore, the market for our common stock historically has been limited and we cannot assure you that a larger market will ever be developed or maintained. The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

 

FUTURE SALES OF SHARES OF OUR COMMON STOCK, OR THE PERCEPTION IN THE PUBLIC MARKETS THAT THESE SALES MAY OCCUR, MAY DEPRESS OUR STOCK PRICE.

 

The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock. In addition, if our significant shareholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Any issuance of additional common stock by us in the future, or warrants or options to purchase our common stock, if exercised, would result in dilution to our existing shareholders. Such issuances could be made at a price that reflects a discount or a premium to the then-current trading price of our common stock. Moreover, the perception in the public market that shareholders might sell shares of our stock or that we could make a significant issuance of additional common stock in the future could depress the market for our shares. These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

 

We have issued shares of common stock, options and convertible notes which are convertible into shares of our common stock in connection with our private placements and certain employment, director and consultant agreements. In addition, we issued shares of our common stock, options and convertible notes which are convertible into shares of our common stock, in financing transactions and pursuant to employment agreements that are deemed to be “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act. From time to time, certain of our shareholders may be eligible to sell all or some of their restricted shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, subject to certain limitations. The resale pursuant to Rule 144 of shares acquired from us in private transactions could cause our stock price to decline significantly.

 

“PENNY STOCK” RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT.

 

If the market price for our common stock is below $5.00 per share, trading in our common stock may be subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules would require that any broker-dealer that would recommend our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations would require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.

 

14

 

 

SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES OF OUR COMMON STOCK.

 

A substantial majority of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months (one year after filing Form 10 information with the SEC for shell companies and former shell companies) may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule does not apply to companies quoted on the OTC Bulletin Board). Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the Company and who has satisfied a one-year holding period. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of our shares of common stock in any active market that may develop.

 

POTENTIAL FUTURE FINANCINGS MAY DILUTE THE HOLDINGS OF OUR CURRENT SHAREHOLDERS.

 

In order to provide capital for the operation of our business, in the future we may enter into financing arrangements. These arrangements may involve the issuance of new shares of common stock, preferred stock that is convertible into common stock, debt securities that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result in a material increase in the number of shares of common stock outstanding, which would in turn result in a dilution of the ownership interests of existing common shareholders. In addition, these new securities could contain provisions, such as priorities on distributions and voting rights, which could affect the value of our existing common stock.

 

WE CURRENTLY DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK. AS A RESULT, YOUR ONLY OPPORTUNITY TO ACHIEVE A RETURN ON YOUR INVESTMENT IS IF THE PRICE OF OUR COMMON STOCK APPRECIATES .

 

We currently do not expect to declare or pay dividends on our common stock. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare or pay dividends on our common stock. As a result, your only opportunity to achieve a return on your investment will be if the market price of our common stock appreciates and you sell your shares at a profit.

 

YOU MAY EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST DUE TO THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK.

 

We are in a capital intensive business and we do not have sufficient funds to finance the growth of our business or the costs of our development projects or to support our projected capital expenditures. As a result, we will require additional funds from future equity or debt financings, including tax equity financing transactions or sales of preferred shares or convertible debt, to complete the development of new projects and pay the general and administrative costs of our business. We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common stock. We are currently authorized to issue 250,000,000 shares of common stock. The potential issuance of such additional shares of common stock or preferred stock or convertible debt may create downward pressure on the trading price of our common stock. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in future public offerings or private placements for capital raising purposes or for other business purposes. The future issuance of a substantial number of common shares into the public market, or the perception that such issuance could occur, could adversely affect the prevailing market price of our common shares. A decline in the price of our common shares could make it more difficult to raise funds through future offerings of our common shares or securities convertible into common shares.

 

15

 

 

OUR SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.

 

Our shares of common stock are very thinly traded, and the price, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to increase awareness of our Company with investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for loans.

 

WE HAVE A SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK ISSUABLE UPON CONVERSION OF CERTAIN OUTSTANDING OPTIONS, AND CONVERTIBLE NOTES, AND THE ISSUANCE OF SUCH SHARES UPON EXERCISE OR CONVERSION WILL HAVE A SIGNIFICANT DILUTIVE IMPACT ON OUR STOCKHOLDERS. SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK FOLLOWING THE EXPIRATION OF LOCK-UPS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND THE ISSUANCE OF ADDITIONAL SHARES WILL DILUTE ALL OTHER STOCKHOLDERS.

 

As of January 9, 2019, there are 6,770,500 shares of Common Stock issuable upon conversion of our convertible notes.

 

In addition, our articles of incorporation, as amended, permits the issuance of up to 250 million shares of Common Stock. Thus, we have the ability to issue substantial amounts of Common Stock in the future, which would dilute the percentage ownership held by stockholders.

 

FUTURE ISSUANCE OF OUR COMMON STOCK, PREFERRED STOCK, OPTIONS AND WARRANTS COULD DILUTE THE INTERESTS OF EXISTING STOCKHOLDERS.

 

We may issue additional shares of our common stock, preferred stock, options and warrants in the future. The issuance of a substantial amount of common stock, options and warrants could have the effect of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of common stock or preferred stock in the public market, or the exercise of a substantial number of warrants and options either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement could have an adverse effect on the market price of our common stock.

 

16

 

 

WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND YOU MUST RELY ON INCREASES IN THE MARKET PRICES OF OUR COMMON STOCK FOR RETURNS ON YOUR INVESTMENT.

 

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our Board and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors the Board deems relevant.

 

OUR EXECUTIVE OFFICERS AND DIRECTORS POSSESS SIGNIFICANT VOTING POWER WITH RESPECT TO OUR COMMON STOCK, WHICH WILL LIMIT YOUR INFLUENCE ON CORPORATE MATTERS.

 

As of January 9, 2019, our directors and executive officers collectively beneficially own approximately 55.31% of the shares of our common stock including the beneficial ownership of Mr. Liscouski and his affiliates of 12.44% of the shares of our common stock.

 

As a result, our insiders have the ability to significantly influence our management and affairs through the election and removal of our Board and all other matters requiring stockholder approval, including any future merger, consolidation or sale of all or substantially all of our assets. This concentrated voting power could discourage others from initiating any potential merger, takeover or other change-of-control transaction that may otherwise be beneficial to our stockholders. Furthermore, this concentrated control will limit the practical effect of your influence over our business and affairs, through any stockholder vote or otherwise. Any of these effects could depress the price of our common stock.

 

OUR ARTICLES OF INCORPORATION GRANTS OUR BOARD THE POWER TO ISSUE ADDITIONAL SHARES OF COMMON AND PREFERRED SHARES AND TO DESIGNATE OTHER CLASSES OF PREFERRED SHARES, ALL WITHOUT STOCKHOLDER APPROVAL.

 

Our authorized capital consists of 260,000,000 shares of capital stock of which 10,000,000 shares are authorized as preferred stock. Our Board, without any action by our stockholders, may designate and issue shares of preferred stock in such series as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights, provided it is consistent with Delaware law.

 

The rights of holders of our preferred stock that may be issued could be superior to the rights of holders of our shares of common stock. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock. Furthermore, any issuances of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital stock and may dilute our book value per share.

 

17

 

 

Item 2. Financial Information.

 

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

 

This registration statement on Form 10 and other reports filed by the Company from time to time with the SEC (collectively, the “Filings”) 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 relating to the Company’s business, industry, and the Company’s operations and results of operations. 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 statements 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.

 

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.

 

Overview

 

At the present time, we are a development stage company with limited operations.  The Company plans to enter the market for high performance computers and software applications, specifically focusing on what are known as “quantum computers”. The Company is assembling a team of experts in super computing technology and quantum mathematics, which will focus on both design and development of a quantum computer simulator (a “quantum annealer”) and several quantum software applications targeting solutions to non-deterministic polynomial applications. During the nine months ended September 30, 2018 the Company recruited a management and technical team to begin developing and designing the quantum annealer and related quantum software applications.  Much of the time during the nine months ended September 30, 2018 was spent starting the Company’s business and operations. The Company is assembling a development team which will initially focus on addressing computational problems in the financial services, defense, heavy manufacturing, and computer security (cyber) market segments.  The Company’s development team includes world class mathematicians, high performance computer hardware designers, and software developers. 

 

Critical Accounting Policies

 

Our significant accounting policies are summarized in Note 1 to our audited financial statements for the years ended December 31, 2017. 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.

 

Results of Operations

 

Three Months Ended September 30, 2018 vs. September 30, 2017

 

Revenues

 

    For the Three Months Ended September 30, 2018     For the Three Months Ended September 30, 2017        
(In thousands)   Amount     Mix     Amount     Mix     Change  
Products     0       0 %     0       8.5 %     0 %
Services     0       0 %     0       1.3 %     0 %
Total   $ 0       100.0 %   $ 0       100.0 %     0 %

  

Revenues for the three months ended September 30, 2018 were $0 as compared with $0 for the comparable prior year period, a change of $0, or 0%. The lack of revenue is due to the fact that the Company has not yet completed the development and testing of any products for sale, or offered services to any customers.

 

18

 

 

Cost of Revenues

 

Cost of revenues for the three months ended September 30, 2018 was $0 as compared with $0 for the comparable prior year period, a change of $0 or 0%. There was no cost of revenues recorded because the Company has not yet commenced marketing and selling products or services.

 

Gross Margin

 

Gross margin for the three months ended September 30, 2018 was $0 as compared with $0 for the comparable prior year period. There was no gross margin because the Company has not yet commenced marketing and selling products or services.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2018 were $605,729 as compared with $0 for the comparable prior year period, an increase of $605,729 or 100%. The increase in operating expenses is due to the commencement of business operations in 2018, resulting in a $257,505 increase in salary expenses, a $62,133 increase in payroll taxes and benefits, a $103,962 increase in consulting fees, a $18,292 increase in travel costs, a $53,859 increase in legal and audit fees, a $48,000 increase in stock based compensation and a $30,684 increase in interest expense compared to the comparable prior year period.

 

Net Income (Loss)

 

Our net loss for the three months ended September 30, 2018 was $605,729 as compared with a net loss of $0 for the comparable prior year period, an increase of $605,729. The increase in net loss is primarily due to the increase in operating expenses recorded in the current period compared to the comparable prior year period.

 

Nine Months Ended September 30, 2018 vs. September 30, 2017

 

Revenues

 

    For the Nine Months Ended September 30, 2017     For the Nine Months Ended September 30, 2017        
(In thousands)   Amount     Mix     Amount     Mix     Change  
Products     0       0 %     0       0 %     0 %
Services     0       0 %     0       0 %     0 %
Total   $ 0       100.0 %   $ 0       100.0 %     0 %

 

Revenues for the nine months ended September 30, 2018 were $0 as compared with $0 for the comparable prior year period, a change of $0, or 0%. The lack of revenue is due to the fact that the Company has not yet completed the development and testing of any products for sale, or offered services to any customers.

 

Cost of Revenues

 

Cost of revenues for the nine months ended September 30, 2018 was $0 as compared with $0 for the comparable prior year period, a change of $0 or 0%. There was no cost of revenues recorded because the Company has not yet commenced marketing and selling products or services.

 

Gross Margin

 

Gross margin for the nine months ended September 30, 2018 was $0 as compared with $0 for the comparable prior year period. There was no gross margin because the Company has not yet commenced marketing and selling products or services.

 

Operating Expenses

 

Operating expenses for the nine months ended September 30, 2018 were $1,304,787 as compared with $0 for the comparable prior year period, an increase of $1,304,787, or 100%. The increase in operating expenses is due to the commencement of business operations in 2018, resulting in a $575,266 increase in salary expenses, a $93,457 increase in payroll taxes and benefits, a $233,083 increase in consulting fees, a $28,201 increase in travel costs, a $68,859 increase in legal and audit fees, a $48,000 increase in stock based compensation, a $30,684 increase in interest expense, and a $175,000 increase in executive recruiting fees compared to the comparable prior year period.

 

19

 

 

Net Loss

 

Our net loss for the nine months ended September 30, 2018 was $1,304,787 as compared with a net loss of $0 for the comparable prior year period, an increase of $1,304,787 or 100%. The increase in net loss is primarily due to the increase in operating expenses recorded in the current period compared to the comparable prior year period.

 

Professional Fees

 

Legal fees for the three months ended September 30, 2018 were $48,859 and for the nine months ended September 30, 2018 were $58,859. Audit fees for the three months ended September 30, 2018 were $5,000 and for the nine months ended September 30, 2018 were $10,000. No professional fees were incurred during the nine months ended September 30, 2017.

 

Selling, General and Administrative Expenses

 

Operating expenses for the three months ended September 30, 2018 were $605,729 as compared with $0 for the comparable prior year period, an increase of $605,729 or 100%. The increase in operating expenses is due to the commencement of business operations in 2018, resulting in a $257,505 increase in salary expenses, a $62,133 increase in payroll taxes and benefits, a $103,962 increase in consulting fees, a $18,292 increase in travel costs, a $53,859 increase in legal and audit fees, a $48,000 increase in stock based compensation and a $30,684 increase in interest expense compared to the comparable prior year period. Operating expenses for the nine months ended September 30, 2018 were $1,304,787 as compared with $0 for the comparable prior year period, an increase of $1,304,787, or 100%. The increase in operating expenses is due to the commencement of business operations in 2018, resulting in a $575,266 increase in salary expenses, a $93,457 increase in payroll taxes and benefits, a $233,083 increase in consulting fees, a $28,201 increase in travel costs, a $68,859 increase in legal and audit fees, a $48,000 increase in stock based compensation, a $30,684 increase in interest expense, and a $175,000 increase in executive recruiting fees compared to the comparable prior year period.

 

Interest Expense

 

Interest expense of $30,684 was accrued during the three and nine months ended September 30, 2018, compared with $0 interest expense accrued during the comparable periods in 2017. As of January 9, 2018, the Company had accrued $73,714 of interest on the Convertible Promissory Notes, of which $19,133 has been converted to shares of common stock.

 

Net Loss

 

Our net loss for the three months ended September 30, 2018 was $605,729 as compared with a net loss of $0 for the comparable prior year period, an increase of $605,729 or 100%. The increase in net loss is primarily due to the increase in operating expenses recorded in the current period compared to the comparable prior year period. Our net loss for the nine months ended September 30, 2018 was $1,304,787 as compared with a net loss of $0 for the comparable prior year period, an increase of $1,304,787 or 100%. The increase in net loss is primarily due to the increase in operating expenses recorded in the current period compared to the comparable prior year period.

  

Liquidity and Capital Resources

 

Since commencing operations as Quantum Computing in February 2018, the Company has raised $75,000 through private placement of equity and $3,995,500 through private placements of Convertible Promissory Notes for a total of $4,070,500 in new investment. The Company has no bank loans or lines of credit, and no long term debt obligations. As of January 9, 2019 the Company has cash and equivalents of $1.757 Million on hand.

 

Financings

 

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, the Company’s CEO. 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 December 31, 2018. 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 is paid in full on or before December 31, 2018, the Company’s Convertible Promissory Note will convert and shares will be issued. If the promissory note is not paid in full on or before December 31, 2018, the Company’s Convertible Promissory Note held by this investor will be cancelled, and no shares will be issued. While the conversion of the Convertible Promissory Notes is mandatory prior to August 10, 2019, the election to convert is at the option of the Initial Investor. The Company has no obligation to repay the Initial Investors in cash. However, the conversion of the Convertible Promissory Notes will result in dilution of other shareholders once the Initial Investors convert their notes into the Company’s common stock.

 

20

 

 

On March 1, 2018 the Board authorized the Company to raise up to $500,000 of equity capital at price of $0.40 per share of common stock (the “Initial Raise”). In connection with the Initial Raise, the Company has to date received subscriptions for $75,000, of which $70,000 was received prior to October 31, 2018. The Board formally closed the Initial Raise to further investment on September 5, 2018.

 

On April 13, 2018, The Company’s board of directors authorized a 1:200 reverse stock split on the shares of the Company’s common stock. Accordingly, all references to numbers of shares of common stock and per-share data in the accompanying financial statements have been adjusted to reflect the stock split on a retroactive basis. The Board and the majority stockholder also amended the Company’s Articles of Incorporation to increase the authorized capital of the company to 260,000,000 shares, consisting of 250,000,000 shares of common stock and 10,000,000 shares of preferred stock.

 

On May 24, 2018 the Board authorized a private placement of convertible promissory notes in the aggregate amount up to $15,000,000 at a conversion price of $1.00 per share (the “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 Convertible Note Offering, the Company has received funds of $3,245,000 as of October 31, 2018. Of that amount, $725,000 of the Convertible notes plus accrued interest of $16,711, has been converted to shares of common stock, pursuant to the terms of the Convertible Notes.

 

Going Concern

 

The ability of the Company to continue its operations as a going concern is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

 

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2018, the Company had no off-balance sheet arrangements.

 

Critical Accounting Policies

 

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

21

 

 

Revenue Recognition

 

We have not yet recognized any revenue from the sale of products or services, but at the appropriate time we expect to do so in compliance with the most recent FASB Standards. In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”. The FASB issued ASU 2014-09 to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The core principle of this updated guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new rule also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein, which is effective for our fiscal year beginning January 1, 2018, the first day of our 2018 fiscal year. We are currently evaluating the impact of this accounting guidance and do not expect any significant impact on our financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

The Company’s significant accounting estimates and assumptions affecting the consolidated financial statements were the estimates and assumptions used in valuation of equity and derivative instruments. Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

 

Stock Based Compensation

 

All stock-based payments to employees, non-employee consultants, and to nonemployee directors for their services as directors, including any grants of restricted stock and stock options, are measured at fair value on the grant date and recognized in the statements of operations as compensation or other expense over the relevant service period. Stock- based payments to nonemployees are recognized as an expense over the period of performance. Such payments are measured at fair value at the earlier of the date a performance commitment is reached or the date performance is completed. In addition, for awards that vest immediately and are non-forfeitable the measurement date is the date the award is issued.

 

Fair Value of Financial Instruments

 

We follow paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of our financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of our financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (“U.S. GAAP”), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.

 

22

 

 

Item 3. Properties.

 

We maintain our current principal office at 215 Depot Court SE #212, Leesburg, VA 20175. Our telephone number at this office is (703) 596-1023. The Company leases approximately 350 square feet on a month-to-month basis in a multi-tenant facility that provides conference room space, 24/7 co-working space, and other services on an as-needed basis in Leesburg, VA. The facility lease can be terminated upon 30 days written notice by the Company. The Company also leases dedicated space for transmission equipment and 40 square feet of dedicated collocation space on a raised floor area in a data center building in Middletown, VA through a Master License and Service Agreement (MLSA). The Experis Data Center facility provides 24/7 support services for the Company’s secure development environment and intra-company communications and data storage servers. The MLSA can be terminated upon 30 days’ notice by the Company.

 

Item 4. Security Ownership of Certain Beneficial Owners And Management.

 

(a) Security ownership of certain beneficial owners.

 

The following table sets forth, as of January 9, 2019, the number of shares of common stock owned of record and beneficially by our executive officers, directors and persons who hold 5% or more of the outstanding shares of common stock of the Company.

 

The amounts and percentages of our common stock beneficially owned are reported on the basis of SEC rules governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days through the exercise of any stock option, warrant or other right. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Unless otherwise indicated, each of the shareholders named in the table below, or his or her family members, has sole voting and investment power with respect to such shares of our common stock. Except as otherwise indicated, the address of each of the shareholders listed below is: c/o Quantum Computing Inc., 215 Depot Court SE #212, Leesburg, VA 20175.

 

Applicable percentage ownership is based on 4,924,161 shares of Common Stock outstanding as of January 9, 2019. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Common Stock as held by that person or entity that are currently exercisable or that will become exercisable within 60 days of January 9, 2019.

 

23

 

 

Name and Address of Beneficial Owner   Common Stock Owned Beneficially     Percent of Class  
Named Executive Officers and Directors            
Robert Liscouski, Chief Executive Officer and Chairman (1)     612,500       12.44   
Christopher Roberts, Chief Financial Officer (2)     325,000       6.6   
Bertrand Velge (3)     1,774,888       31.28   
Justin Schreiber (4)     258,001       4.99   
All directors and officers as a group (4 persons)    

2,970,389

      55.31   
5% or greater shareholders                
Peter Schultz (5)     1,002,422       20.36   
Sergey Schuster (6)     400,000       8.12  
Total    

4,372,811

      83.79   

 

* Less than 1%

 

(1) Includes 612,500 shares of common stock.

 

(2) Includes 325,000 shares of common stock.

 

(3) Includes 1,024,888 shares of common stock and 750,000 shares of common stock underlying convertible notes.

 

(4) Mr. Schreiber has voting and investment control of the following shares: 1,000,000 shares of common stock underlying convertible notes which JOJ Holdings, LLC holds, however the convertible promissory notes are not exercisable to the extent that the shares of common stock issuable upon the exercise of the convertible notes would result in a beneficial ownership of Mr. Schreiber above 4.99% of the Company’s outstanding share amount. Mr. Schreiber is the President of JOJ Holdings, LLC and is the beneficial owner of these securities.

 

(5) Includes 1,002,422 shares of common stock.

 

(6) Includes 400,000 shares of common stock.

 

Changes in Control

 

We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.

 

Item 5. Directors, Executive Officers.

 

The following table contains information with respect to our directors and executive officers. To the best of our knowledge, none of our directors or executive officers have an arrangement or understanding with any other person pursuant to which he or she was selected as a director or officer. There are no family relationships between any of our directors or executive officers. Directors serve one year terms. Our executive officers are appointed by and serve at the pleasure of the board of directors.

 

Name   Current Age   Position
Robert Liscouski   62   Chairman of the Board of Directors, President, and Chief Executive Officer (Principal Executive Officer)
Christopher Roberts   64   Chief Financial Officer, (Principal Financial Officer) (Principal Accounting Officer), Director
Bertrand Velge   58   Director
Justin Schreiber   35   Director

 

24

 

 

Robert Liscouski, President, Chief Executive Officer and Chairman of the Board

 

Mr. Liscouski, age 62, is the Chairman and CEO of Quantum Computing. Mr. Liscouski is CEO and Founder of Convergent Risk Group LLC and a proven security professional, thought leader and successful entrepreneur with over 35 years of senior level security operational and company leadership experience in government and public and private companies.

 

Mr. Liscouski is a recognized Security Industry leader in assessing, mitigating and managing physical and cyber security risk in private sector enterprises and state and federal government agencies. Mr. Liscouski has extensive experience in leading innovative start up and turn around companies as well as building programs for large government organizations and is recognized as a leader in identifying emerging security technologies. He serves as a “Trusted Advisor” to senior officials within government and private sector, providing guidance in areas such as physical and cyber security, crisis management, organizational development and strategic planning. Mr. Liscouski’s career has spanned local law enforcement, senior government and private sector positions from operations to senior leadership and Boards of Directors. He started his career as an undercover and homicide investigator, and Special Agent with the Diplomatic Security Service and progressed to senior federal government positions where he served as a senior advisor to the intelligence community and was appointed by President George W. Bush as the first Assistant Secretary for Infrastructure Protection at the Department of Homeland Security. He most recently was President of a public company that became a leader in the explosive trace detection industry culminating in the sale of the technology to L3 Communications. Mr. Liscouski is a frequent contributor to CNBC, CNN, Fox News, and other business and security media on Homeland Security and Terrorism issues.

 

Christopher Roberts, Chief Financial Officer and Director

 

Mr. Roberts, age 64, is the Company’s Chief Financial Officer. Mr. Roberts has a law degree from the University of Virginia Law School and a B.S, in Electrical Engineering and an M.B.A., both from the Massachusetts Institute of Technology. His M.B.A. was concentrated in Finance and Management of Technology. He started his career working for Raytheon Co. (a Fortune 500 company). Thereafter, he practiced law at two large NYC law firms. Since leaving the private practice of law, Mr. Roberts has worked primarily in financial management roles with a number of government contractors in the aerospace, defense and Information technology sectors.

 

Mr. Roberts has more than 30 years’ experience in public and private corporate finance and government contracting, including professional services, software products, and hardware manufacturing businesses. Mr. Roberts has served as the Chief Financial Officer of both public and private companies during the course of his career, including Secure Point Technologies, Systems Made Simple, Inc. (now a subsidiary of Leidos), Integral Systems Inc. (a publicly company traded on NASDAQ under the symbol “ISYS.” now a subsidiary of Kratos), and Pearson Analytic Solutions (now a subsidiary of General Dynamics). From 2012 to November 2016, he worked first as the CFO, and later as the President of Systems Made Simple, Inc., a wholly owned subsidiary of Leidos. Mr. Roberts is a co-author of Antitrust for Business, and has published articles on antitrust and patent law, space policy, information technology, and corporate finance.

 

Justin Schreiber, Director

 

Mr. Schreiber, age 35, is the President and founder of JLS Ventures, a venture capital and capital markets advisory firm that partners with entrepreneurs and emerging growth companies to build disruptive products and technologies in the technology, healthcare and consumer products verticals. Mr. Schreiber is also the President, CEO and a Director of Conversion Labs Inc., a publicly traded direct to consumer e-commerce company. Prior to founding JLS Ventures, Mr. Schreiber ran a consulting business that provided investor relations, advisory services and capital raising solutions to small publicly traded companies. In addition to his capital markets experience, Mr. Schreiber previously worked for a global healthcare consulting firm as well as in the foreign currency trading business. He holds a BS in International Business from Elizabethtown College and a BA in International Management from the ICN École de management in Nancy, France

 

Bertrand Velge, Director

 

Mr. Velge, age 58, is the Managing Director of Graftyset, Ltd., a privately held company based in the United Kingdom. Graftyset is a wholesale distributor of wine, beer and other alcoholic and non-alcoholic beverage, based in Sidcup, Kent (UK). Mr. Velge has served as Managing Director since the company was incorporated in 2003 under the name of Otterden Vintners, Ltd. Mr. Velge also served as Director for Aliunde Ltd. since 2005. Mr. Velge has over twenty years experience in multi-disciplinary venture investing and was managing director and co-founder of a fund that trades equities in Europe, Asia and the US focusing on IPOs. He speaks English, Flemish and French, and is a graduate of the Universite Catholique de Louvain.

 

Key Employee

 

Sergey Schuster, Quantitative Data Scientist and Systems Architect

 

Sergey Shuster, age 55, has over 25 years of experience in the design and implementation of high performance computer systems and financial algorithms which have been used in most major financial markets. Mr. Shuster has 20 years of derivatives pricing and market and credit risk experience (risk neutral, supply/demand, fundamental/technical); Fixed Income, MBS, CMO, ABS, FX, Muni, Emerging Markets, Equity, Commodities, Credit Derivatives, Algorithmic trading and Cyber Currencies. Mr. Shuster has developed more than 200 quantitative models which have been implemented in C++, Java, SCALA, R, C#, C, FORTRAN, VB, Excel, SQL, Matlab, S-Plus and Stata trading and risk management systems, and has experience utilizing the best software development practices. Sergey has designed, developed and implemented multiple client systems which delivered multiples of competitors’ returns. Prior to immigration to the United States, Mr. Shuster performed research in Russia in Artificial Intelligence and Quantum Computing. Mr. Shuster was a winner in the Mathematical and Physics Olympiad in 1986. Sergey’s work in financial algorithms is now considered standard in applied quantitative mathematics. Mr. Shuster received a Masters Degree in Economics from Queens College, City University of New York, in 2007 and has taught college courses in Macro, Micro and Advanced Financial Economics, Corporate Finance and Investment Analysis. 

 

25

 

 

Family Relationships.

 

There are no family relationships between any of our directors or executive officers.

 

Involvement in Certain Legal Proceedings.

 

Other than as disclosed below, there have been no events under any bankruptcy act, any criminal proceedings and any judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of the Company during the past five years.

 

Our Chief Executive Officer, Mr. Robert Liscouski, was President of Implant Sciences Corporation, which filed a petition for bankruptcy on October 11, 2016 in the Delaware Bankruptcy Court.

  

Item 6. Executive Compensation.

 

Summary Compensation Table

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2017 and 2016.

 

2018 EXECUTIVE OFFICER COMPENSATION TABLE

 

Name and Principal Position   Year   Salary
($)
    Bonus
($)
    Stock Awards
($)
    Option Awards
($)
    Non-Equity Incentive Plan Compensation
($)
   

Non-Qualified Deferred Compensation
Earnings

($)

    All Other Compensation
($)
    Total
($)
 
Angela Collete   2018     0       0       0       0                    0                   0                  0       0  
(Receiver)   2017     0       0       0       0       0       0       0       0  
    2016                                                                
Robert Liscouski   2018     360,000       0       1,000       0       0       0       0       361,000  
Chief Executive   2017                                                
Officer (PEO)   2016                                                
Christopher Roberts   2018     148,688       0       3,000       0       0       0       0       151,688  
Treasurer (PFO)   2017                                                
    2016                                                

 

26

 

 

Outstanding Equity Awards at the End of the Fiscal Year

 

We do not have any equity compensation plans and therefore no equity awards are outstanding as of December 31, 2017.

 

2017 DIRECTOR COMPENSATION TABLE

 

The following table provides information on outstanding equity awards as of December 31, 2017 to the named executive officers.

 

    Option Awards     Stock Awards  
Name   Number of securities underlying unexercised options exercisable     Number of securities underlying unexercised options unexercisable     Equity incentive plan awards: Number of securities underlying unexercised unearned options     Option exercise price     Option expiration date     Number of shares or units of stock that have not vested     Market value of shares of units that have not vested     Equity incentive plan awards: Number of unearned shares, units or other rights vested     Equity incentive plan awards: Market or payout value of unearned shares, units or other not vested  
                                                       
N/A                                                                                       
N/A                                                                        
N/A                                                                        

 

None of the members of the board of directors of the Company were compensated for services in such capacity.

 

Bonuses and Deferred Compensation

 

We do not have any bonus, deferred compensation or retirement plan. All decisions regarding compensation are determined by our board of directors.

 

Options and Stock Appreciation Rights

 

As of January 9, 2019, no options have been issued.

 

Payment of Post-Termination Compensation

 

We do not have change-in-control agreements with our director or executive officer, and we are not obligated to pay severance or other enhanced benefits to our executive officer upon termination of his employment.

 

Employment Agreements

 

Mr. Liscouski Employment Agreement

 

We entered into an employment agreement with Robert Liscouski, our Chief Executive Officer, on February 15, 2018 (the “Liscouski Employment Agreement”). The agreement is for an indefinite term, subject to periodic review by the Board of Directors, stipulates a base salary (the “Base Salary”) of $360,000 per year. For the fiscal year ending December 31, 2019 and for subsequent fiscal years, the Liscouski Employment Agreement allows for an annual incentive bonus in the amount up to $150,000 per year, subject to Mr. Liscouski achieving certain performance based milestones that are established by the Board of Directors. In connection with the Liscouski Employment Agreement, Mr. Liscouski was issued 100,000 restricted shares of the Company’s common stock.

 

As a full-time employee of the Company, Mr. Liscouski will be eligible to participate in the Company’s benefit programs.

 

Mr. Liscouski’s employment may be terminated by the Company with or without “Cause”. “Cause” shall mean (i) conviction or entry of nolo contendere to any felony or a crime involving moral turpitude, fraud or embezzlement of Company property; (ii) dishonesty, gross negligence or gross misconduct that is materially injurious to the Company or material failure to perform her/his duties under this Agreement which has not been cured by Mr. Liscouski within 10 days after he shall have received written notice from the Company stating with reasonable specificity the nature of such failure to perform; and (iii) illegal use or use of drugs, alcohol, or other related substances that is materially injurious to the Company. If the Company terminates Mr. Liscouski’s employment without “Cause” the Company will continue payment of Mr. Liscouski’s Base Salary for an additional twelve (12) months from the date Mr. Liscouski is terminated.

 

27

 

 

Mr. Roberts Consulting Agreement

 

We entered into a consulting agreement with Christopher Roberts, our Chief Financial Officer, on March 1, 2018 (the “Roberts Agreement”) whereby Mr. Roberts is to provide the Company with financial and accounting and business strategy services. Mr. Roberts is to be paid $150.00 on an hourly basis. In connection with the Roberts Agreement, Mr. Roberts was issued 300,000 restricted shares of the Company’s common stock.

 

The Roberts Agreement may be terminated by either party at will, for any reason or no reason, upon fourteen (14) days prior written notice.

 

Mr. Schuster Employment Agreement

 

We entered into an employment agreement with Sergey Schuster, an employee of the Company, on February 28, 2018 (the “Schuster Employment Agreement”). Mr. Schuster is entitled to a monthly salary of $25,000. In connection with the Schuster Employment Agreement, Mr. Schuster also received 400,000 restricted shares of the Company’s common stock.

 

As a full-time employee of the Company, Mr. Schuster will be eligible to participate in the Company’s benefit programs.

 

The Schuster Employment Agreement may be terminated by either party upon thirty (30) days written notice. The Company may also terminate Mr. Schuster immediately if Mr. Schuster engages in serious misconduct or dishonesty.

  

Director Agreements

 

The Company has not currently entered into any formal written agreements with members of its Board of Directors.

 

Board of Directors

 

Our directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Our officers are elected by and serve at the discretion of the board of directors.

 

The board of directors acts as the Audit Committee and the board of directors has no separate committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. The Company intends to continue to search for a qualified individual for hire.

 

Item 7. Certain Relationships and Related Transactions, and Director Independence.

 

Other than as disclosed below, there have been no transactions involving the Company since the beginning of the last fiscal year, or any currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000 or one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.

 

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. Since that time, the Company, Mr. Malinowski and REMTC have unwound this agreement, and Mr. Malinowski has left the Company. The Company expects to receive approximately $670,000 back from Mr. Malinowski and REMTC.

 

Item 8. Legal Proceedings.

 

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

28

 

 

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

 

Market Information.

 

Our common stock is qualified for quotation on the OTC Markets-OTC Pink under the symbol “QUBT” and has been quoted on the OTC Pink since August 2018. Previously, our common stock was quoted on the OTC Markets-OTC OTC Pink, under the symbol “IBGH.” The following table sets forth the range of the high and low bid prices per share of our common stock for each quarter as reported in the over-the-counter markets. These quotations represent interdealer prices, without retail markup, markdown or commission, and may not represent actual transactions. There currently is no liquid trading market for our common stock. There can be no assurance that a significant active trading market in our common stock will develop, or if such a market develops, that it will be sustained.

 

    2019  
    High     Low  
First Quarter (through January 9)   $ 3.05     $ 2.85  

 

    2018  
    High     Low  
First Quarter (through March 31)   $ 39.6     $ 0.60  
Second Quarter (through June 30)     15.80       2.22  
Third Quarter (through September 30)     14.96       0.26  
Fourth Quarter (through December 31)     12.50       2.85  

 

    2017  
    High     Low  
First Quarter (through March 31)   $ 0.76     $ 0.12  
Second Quarter (through June 30)     0.66       0.12  
Third Quarter (through September 30)     0.54       0.18  
Fourth Quarter (through December 31)     1.20       0.38  

 

    2016  
    High     Low  
First Quarter (through March 31)   $ 0.175     $ 0.10  
Second Quarter (through June 30)     0.175       0.12  
Third Quarter (through September 30)     0.228       0.12  
Fourth Quarter (through December 31)     0.20       0.02  

 

The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer’s securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state. Further, our shares may be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock” rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer’s net tangible assets; or exempted from the definition by the SEC. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000 by an individual, or $300,000 together with his or her spouse), are subject to additional sales practice requirements.

 

29

 

 

For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such securities and must have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent to clients disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

 

We have not previously filed a registration statement under the Securities Act. Shares sold pursuant to exemptions from registration are deemed to be “restricted” securities as defined by the Securities Act. As of January 9, 2019, out of a total of 260,000,000 shares authorized, 4,722,483 shares are issued as restricted securities and can only be sold or otherwise transferred pursuant to a registration statement under the Securities Act or pursuant to an available exemption from registration. Of such restricted shares, 2,964,775, (83.78%) shares are held by affiliates (directors, officers and 10% holders), with the balance of 1,757,708 (16.22%) shares being held by non-affiliates.

 

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned restricted shares of a reporting company for at least six months, including any person who may be deemed to be an “affiliate” of the company (as the term “affiliate” is defined under the Securities Act), is entitled to sell, within any three-month period, an amount of shares that does not exceed the greater of (i) the average weekly trading volume in the company’s common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale or (ii) 1% of the shares then outstanding. In order for a stockholder to rely on Rule 144, adequate current public information with respect to the company must be available. A person who is not deemed to be an affiliate of the company and has not been an affiliate for the most recent three months, and who has held restricted shares for at least one year is entitled to sell such shares without regard to the various resale limitations under Rule 144. Under Rule 144, the requirements of paragraphs (c), (e), (f), and (h) of such Rule do not apply to restricted securities sold for the account of a person who is not an affiliate of an issuer at the time of the sale and has not been an affiliate during the preceding three months, provided the securities have been beneficially owned by the seller for a period of at least one year prior to their sale. For purposes of this registration statement, a controlling stockholder is considered to be a person who owns 10% or more of the company’s total outstanding shares, or is otherwise an affiliate of the Company. No individual person owning shares that are considered to be not restricted owns more than 10% of the Company’s total outstanding shares.

  

Holders

 

As of January 9, 2019, we had 872 shareholders of common stock per transfer agent’s shareholder list.

 

Dividends

 

The Company has not paid any cash dividends to date and does not anticipate or contemplate paying any dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the growth of the Registrant’s business.

 

Equity Compensation Plan Information

 

The Company has not yet adopted an equity compensation plan, but plans to do so in the near future.

 

30

 

 

Item 10. Recent Sales of Unregistered Securities.

 

Except where noted, all of the securities discussed below were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.

 

The Company sold 500 000 shares (post reverse split) of common stock to Convergent Risk Group, LLC (the “CRG Shares”), an entity owned by the Company’s now Chief Executive Officer and Chairman of the Board, Mr. Robert Liscouski, for an aggregate purchase price of $155,000.00. Financing for the purchase of the CRG Shares was provided to Convergent Risk Group, LLC by a group of accredited investors (the “Original Investors”), in exchange for promissory notes from CRG (the “CRG Liabilities”). In order to further induce the Mr. Liscouski to accept his position as the Company’s Chief Executive Officer, the Company agreed to assume the CRG Liabilities in exchange for the Company’s issuance of convertible promissory notes to the Original Investors in the principal aggregate amount of $400,000 (the “January Quantum Notes”). The January Quantum Notes can be converted to shares of the Company’s common stock at a conversion price of $0.10 per share at any time prior to, or at, the maturity date of August 10, 2019.

 

December 24, 2017 - 92,500 shares issued to William Alessi pursuant to Court order settling litigation against the Company. Shares to be free trading and without a restrictive legend. This block of shares was issued subject to a 5 year non dilution provision enabling Alessi to maintain a 4.95% equity position in the Company. These shares were issued in reliance on the exemption under Section 3(a)(10) of the Securities Act.

 

December 24, 2017 - 500,000 shares issued to Company Treasury pursuant to Court order settling litigation against the Company.

 

January 22, 2018 - 500,000 Treasury shares sold to Convergent Risk Group, LLC for $155,000 and proceeds of the sale were remitted to William Alessi pursuant to Court order settling litigation against the Company.

 

In January 2018 the Company issued an aggregate of $400,000 in the principal amount of Convertible Promissory Notes, convertible at $0.10 per share (after a 1:200 reverse stock split), to a group of accredited investors. These notes are due August 10, 2019 and as of September 30, 2018 the notes had not been converted and no shares have been issued relating to these Notes.

 

During the period March 1-September 30, 2018 the Company accepted subscriptions for $75,000 of common stock at $0.40 per share (after a 1:200 reverse stock split), to a group of accredited investors. The Company issued 187,500 shares of common stock pursuant to these Subscription Agreements in October, 2018.

 

In March 2018 the Company commenced an offering of up to $15,000,000 of Convertible Promissory Notes, convertible at $1.00 per share (after a 1:200 reverse stock split), to a group of accredited investors. One Convertible Promissory Note in the amount of $250,000 was made convertible at $0.25 per share in exchange for the investor agreeing to serve on the Board. Another Convertible Promissory Note was made convertible at $0.10 per share in exchange for the investor providing certain investor relations services. These Convertible Promissory Notes mature twelve (12) months from the date of issuance and as of October 31, 2018, investments had been received for $3,245,500 in this offering. As of October 31, 2018, $725,00 of the Notes had been converted and 1,475,000 shares have been issued relating to these Notes.

 

In September 2018 the Company issued a total of 4,800,000 shares of common stock to senior management and research and development executives as grants, pursuant to their respective employment agreements, which were effective March 1, 2018. The shares are restricted, and subject to a lockup agreement, and a three year recoupment provision whereby the shares are forfeited to the Company if the employee’s employment is terminated before the end of the third year of employment (February 28, 2021). The number of shares subject to recoupment declines over time. In November 2018 two senior managers resigned and to date 3,800,00 shares of these grants have been cancelled as of December 10,2018

 

We issued 130,000 shares in October 2018 to a shareholder of the Company pursuant to the non-dilution covenant contained in a court order. The shares were issued under Section 3(a)(10) of the Securities Act.

  

In October 2018 the Company issued 150,000 shares of common stock to Cascade IR, LLC, an investor relations firm, as compensation for services pursuant to the terms of a consulting agreement the Company entered into with Cascade IR, LLC in September 2018.

 

Also in October 2018, the Company converted $725,000 principal amount of convertible promissory notes, plus $16,711 of accrued interest into 1,510,377 shares of common stock.

 

In December 2018 the Company converted $100,000 principal amount of convertible promissory notes, plus $2,422 of accrued interest, into 1,002,422 shares of common stock.

 

31

 

 

Item 11. Description of Registrant’s Securities to be Registered.

 

The following is a summary of the rights of our Common Stock and certain provisions of our articles of incorporation and bylaws which will be in effect after the completion of this offering. This summary does not purport to be complete and is qualified in its entirety by the provisions of our articles of incorporation, bylaws and the Certificates of Designation (as defined below) of our preferred stock, copies of which are filed as exhibits to the registration statement, and to the applicable provisions of Delaware law.

 

The Company is authorized by its Certificate of Incorporation to issue an aggregate of 260,000,000 shares of common stock, $0.0001 par value per share (the “Common Stock”), and 10,000,000 shares of blank check preferred. As of January 9, 2019, 4,924,161 shares of Common Stock were issued and outstanding.

 

Common Stock

 

Dividend Rights

 

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Common Stock may, receive dividends out of funds legally available if our Board, in its discretion, determines to issue dividends and then only at the times and in the amounts that our Board may determine. We have not paid any dividends on our Common Stock and do not contemplate doing so in the foreseeable future.

 

Voting Rights

 

Each stockholder is entitled to one vote for each share of common stock held by such shareholder.

 

Right to Receive Liquidation Distribution

 

Holders of common stock are entitled to dividends when, and if, declared by the Board of Directors out of funds legally available therefore; and then, only after all preferential dividends have been paid on any outstanding Preferred Stock. The Company has not had any earnings and it does not presently contemplate the payment of any cash dividends in the foreseeable future.

 

Preferred Stock in General

 

The preferred stock of the Company may be issued from time to time by the board of directors in one or more series. The description of shares of each series of preferred stock will be set forth in resolutions adopted by the board of directors and a Certificate of Designation to be filed as required by Delaware law prior to issuance of any shares of the series. The Certificate of Designation will set the number of shares to be included in each series of preferred stock and set the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distribution, qualifications, or terms and conditions of redemption relating to the shares of each series. However, the board of directors is not authorized to change the right of the common stock to vote one vote per share on all matters submitted for shareholder action. The authority of the board of directors with respect to each series of preferred stock includes, but is not limited to, setting or changing the following:

 

  The designation of the series and the number of shares constituting the series, provided that the aggregate number of shares constituting all series of preferred stock may not exceed 10,000,000;
     
  The annual distribution rate on shares of the series, whether distributions will be cumulative and, if so, from which date or dates;
     
  Whether the shares of the series will be redeemable and, if so, the terms and conditions of redemption, including the date or dates upon and after which the shares will be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
     
  The obligation, if any, of the Company to redeem or repurchase shares of the series pursuant to a sinking fund;
     
  Whether shares of the series will be convertible into, or exchangeable for, shares of stock of any other class or classes and, if so, the terms and conditions of conversion or exchange, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;
     
  Whether the shares of the series will have voting rights, in addition to the voting rights provided by law, and, if so, the terms of the voting rights;

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our Common Stock is Empire Stock Transfer Inc. with an address at 1859 Whitney mesa Dr., Henderson, NV 89014. Their phone number is (702) 818-5898.

 

32

 

 

Item 12. Indemnification of Directors and Officers.

 

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. Our amended certificate of incorporation provides that, to the maximum extent permitted by law, no director shall be personally liable to us or our shareholders for monetary damages for breach of fiduciary duty as director.

 

Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the corporation. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise. Our bylaws provide for indemnification by us of our directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law.

 

Insofar as indemnification for liabilities arising under the Securities Act may be provided for directors, officers, employees, agents or persons controlling an issuer pursuant to the foregoing provisions, the opinion of the SEC is that such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Subject to the operation of Section 4 of Article V of the Company’s By-laws, each Director and Officer shall be indemnified and held harmless by the Company to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment) against any and all expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Director or Officer or on such Director’s or Officer’s behalf in connection with any threatened, pending or completed Proceeding or any claim, issue or matter therein, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

33

 

 

Item 13. Financial Statements and Supplementary Data.

  

QUANTUM COMPUTING INC.

(FORMERLY INNOVATIVE BEVERAGE GROUP HOLDINGS, INC.)

UNAUDITED FINANCIAL STATEMENTS

   

September 30, 2018 and 2017

 

 

Index to the Financial Statements

(Unaudited)

 

Description   Page
     
Unaudited Balance Sheets as of September 30, 2018 and December 31, 2017   F-2
     
Unaudited Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017   F-3
     
Unaudited Statements of Stockholders’ Deficit for the Nine Months Ended September 30, 2018   F-4
     
Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017   F-5
     
Notes to the Unaudited Financial Statements   F-6

 

F- 1  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Balance Sheets

(Unaudited)

 

    September 30,     December 31  
    2018     2017  
ASSETS            
             
Current assets            
Cash and cash equivalents   $ 1,677,185     $ -  
Note receivable     100,000       -  
Prepaid Expenses     1,692       -  
Fixed Assets (net of depreciation)     658,833       -  
Total assets   $ 2,437,710     $ -  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
Current liabilities                
Accounts payable   $ 71,877     $ 1,500  
Accrued Expenses     73,020       -  
Loan from Officer     100       -  
Convertible promissory notes – related party     275,000       -  
Convertible promissory notes     3,206,000       -  
Total liabilities     3,625,997       1,500  
                 
Stockholders' equity (deficit)                
Common stock, $0.0001 par value, 250,000,000 and 247,000,000 shares authorized; 5,918,862 and 943,735 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively     592       94  
Additional paid-in capital     9,988,682       9,871,180  
Accumulated deficit     (11,177,561 )     (9,872,774 )
Total stockholders' equity (deficit)     (1,188,287 )     (1,500 )
Total liabilities and stockholders' equity (deficit)   $ 2,437,710     $ -  

 

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

 

F- 2  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Statements of Operations

(Unaudited)

 

    Nine Months Ended     Three Months Ended  
    September 30,     September 30,  
    2018     2017     2018     2017  
Total revenue   $ -     $ -     $ -     $ -  
Cost of revenue     -       -       -       -  
Gross profit     -       -       -       -  
Operating expenses     1,304,787       -       605,729       -  
Loss from Operations     (1,304,787 )     -       (605,729 )     -  
Other income (expense)     -       -       -       -  
Federal income tax expense     -       -       -       -  
Net loss   $ (1,304,787 )   $ -     $ (605,729 )   $ -  
                                 
Weighted average shares - basic and diluted     5,918,862       351,235       5,918,862       351,235  
Loss per share - basic and diluted   $ (0.22 )   $ (0.00 )   $ (0.10 )   $ (0.00 )

 

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

 

F- 3  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Statements of Stockholders’ Deficit

For the Nine Months Ended September 30, 2018

(Unaudited)

 

                Additional              
    Common Stock     Paid in     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
                               
BALANCES, December 31, 2017     943,735     $ 94     $ 9,871,180     $ (9,872,774 )   $ (1,500 )
                                         
Issuance of shares for stock subscription     175,127       18       69,982       -       70,000  
Stock based compensation     4,800,000       480       47,520               48,000  
Net loss     -       -       -       (1,304,787 )     (1,304,787 )
BALANCES, September 30, 2018     5,918,862     $ 592     $ 9,988,682     $ (11,177,561 )   $ (1,188,287 )

 

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

 

F- 4  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Statements of Cash Flows

(Unaudited)

 

    Nine Months Ended  
    September 30,  
    2018     2017  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (1,304,787 )   $ -  
Adjustments to reconcile net income (loss) to net cash                
Prepaid Expenses     (1,692 )     -  
Share Based Compensation     223,000       -  
Depreciation     11,167       -  
Accrued Expenses     73,020       -  
Accounts payable     70,377       -  
CASH USED IN OPERATING ACTIVITIES     (928,915 )     -  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Fixed Assets – Computer Software and Equipment     (670,000 )     -  
CASH USED IN INVESTING ACTIVITIES     (670,000 )     -  
CASH FLOWS FROM FINANCING ACTIVITIES                
Loan from Officer     100       -  
Issuance of Convertible Promissory Notes     3,206,000       -  
Proceeds from stock issuance     70,000       -  
CASH PROVIDED BY FINANCING ACTIVITIES     3,276,100       -  
                 
Net increase in cash     1,677,185       -  
                 
Cash, beginning of period     -       -  
                 
Cash, end of period   $ 1,677,185     $ -  
 
SUPPLEMENTAL DISCLOSURES
Cash paid for interest   $ -     $ -  
Cash paid for income taxes   $ -     $ -  
NON-CASH INVESTING ACTIVITIES                
Note receivable created from issuance of note payable   $ 100,000     $ -  
                 
NON-CASH FINANCING ACTIVITIES                
Note payable issued in exchange for a note receivable   $ 100,000     $ -  
Common stock issued for compensation   $ 48,000     $ -  
Convertible Promissory Notes issued as Compensation – related party   $ 175,000     $ -  

 

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

 

F- 5  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 1 – Organization and Summary of Significant Accounting Policies:

 

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.

 

Quantum Computing Inc. had only limited operations as of September 30, 2018 but is in the process of raising capital and recruiting staff to become a software application and quantum computer development company.

 

Quantum Computing plans to enter the market for high performance computers and software applications, specifically focusing on what are known as “quantum computers”. The Company is assembling a team of experts in super computing technology and quantum mathematics, which will focus on both design and development of a quantum computer simulator (a “quantum annealer”) and several quantum software applications targeting solutions to non-deterministic polynomial applications. During the Nine Month Period ended September 30, 2018 the Company recruited five individuals to support the technical team in developing and designing the quantum annealer and related quantum software applications. Much of the time during the fiscal quarter ended September 30, 2018 was spent starting the Company’s business and operations.

 

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 is assembling a development team which will initially focus on addressing computational problems in the financial services, defense, heavy manufacturing, and computer security (cyber) market segments. The Company’s development team includes world class mathematicians, high performance computer hardware designers, and software developers.

 

The Company’s fiscal year end is December 31.

 

Basis of Presentation:

 

The accompanying Balance Sheet as of September 30, 2018, which was derived from audited financial statements, and the unaudited interim financial statements of the Company have been prepared in accordance with U.S. GAAP for interim financial information. 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 September 30, 2018, and the cash flows and results of operations for the Nine months then ended. Such adjustments consisted only of normal recurring items. The results of operations for the nine months ended September 30 are not necessarily indicative of the results for the full year. 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 2017 Annual Disclosure, filed with OTCMarkets.com, and it is suggested that these financial statements be read in conjunction therewith.

 

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.

 

F- 6  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Property and Equipment

 

Property and equipment is 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 (which is 5 years). 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.

 

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.

 

    September 30,  
    2018     2017  
Net operating loss carry-forwards   $ 310,755     $ -  
Valuation allowance     (310,755 )     -  
Net deferred tax assets   $ -     $ -  

 

At September 30, 2018, the Company had net operating loss carry forwards of approximately $1,479,787.

 

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

 

Note 3 – Going Concern

 

The Company’s financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has earned no revenue from operations in the nine-month periods ended September 30, 2018 and 2017, and has an accumulated deficit of $11,177,561 and $9,872,774 respectively. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital or ultimately acquire an entity which the Company hopes will become profitable at some time in the near future. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Management is seeking new capital to revitalize the Company.

 

F- 7  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 4 – 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.

 

Note 5 – Note Receivable

 

The Company assumed a promissory note from one of the Initial Investors to Convergent in the amount of $100,000, which is payable by the Initial Investor on or before December 31, 2018. 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 is paid in full on or before December 31, 2018, the Company’s Convertible Promissory Note will convert and shares will be issued. If the promissory note is not paid in full on or before December 31, 2018, the Company’s Convertible Promissory Note held by this investor will be cancelled, and no shares will be issued.

 

Note 6 – Property and Equipment

 

    September 30,     December 31,  
Classification   2018     2017  
Hardware & Equipment   $ 64,780     $             -  
Software     605,220       -  
Total cost of property and equipment     670,000       -  
Accumulated depreciation     11,167       -  
Property and equipment, net   $ 658,833     $ -  

 

The Company had Property and Equipment acquisitions of $670,000 for the nine months ended September 30, 2018.

 

Note 7 – Convertible Promissory Notes

 

In March 2018 the Board authorized the Company to issue non-interest bearing convertible promissory notes at a conversion price of $0.10 per share to the Initial Investors and others and $500,000 of these convertible notes have been issued, for which only $225,000 has been received by the Company in cash.

 

On May 24, 2018 the Board authorized a private placement of convertible promissory notes in the aggregate amount up to $15,000,000 at a conversion price of $1.00 per share (the “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 $1.00 Convertible Note Offering, the Company has received funds of $2,981,000 as of September 30, 2018.

 

In total, the Company has issued convertible promissory notes of principal value $3,481,000, for which the Company has received a total of $3,206,000 in funds.

 

F- 8  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 8 – Capital Stock:

 

On March 1, 2018 the Board authorized the Company to raise up to $500,000 of equity capital at price of $0.40 per share of common stock (the "Initial Raise"). In connection with the Initial Raise, the Company has to date received subscriptions for $70,000, but has not yet issued shares of common stock pursuant to the Subscription Agreements. The Company plans to issue shares of its common stock now that FINRA has approved the 1:200 reverse stock split in accordance with the terms and conditions of the Subscription Agreements. On September 5, 2018 the Board formally concluded the Initial Raise and ceased accepting investments.

 

On April 13, 2018, The Company’s board of directors authorized a 1:200 reverse stock split on the shares of the Company’s common stock. Accordingly, all references to numbers of common shares and per-share data in the accompanying financial statements have been adjusted to reflect the stock split on a retroactive basis. The Board and the majority stockholder also amended the Company’s Articles of Incorporation to increase the authorized capital of the company to 260,000,000 shares, consisting of 250,000,000 shares of common stock and 10,000,000 shares of preferred stock.

 

In September 2018, the Company issued 4,800,000 shares of common stock to key management and technical personnel, pursuant their respective employment agreements which were entered into and effective March 1, 2018. The shares vest with the employees but are subject to a Company repurchase provision which will diminish over a three-year period starting March 1, 2018. If any of the management or technical personnel leave the company prior to February 28, 2021 the company can recover a portion of those shares.

 

Note 9 – 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 December 31, 2018. While the conversion of the Convertible Promissory Notes is mandatory prior to August 10, 2019, the election to convert is at the option of the Initial Investor. The Company has no obligation to repay the Initial Investors in cash. However, the conversion of the Convertible Promissory Notes will result in dilution of other shareholders once the Initial Investors convert their notes into the Company’s common stock.

 

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. to acquire the necessary hardware and software, configure and install the REMTC proprietary security system, known as “PASS.” REMTC is wholly owned by Richard Malinowski, the Company’s Chief Information and Operations Officer, who is currently the majority shareholder of the Company. The total cost of the PASS System will be approximately $705,000 and the system has been installed and in is currently in operation at the Company.

 

F- 9  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 10 – Subsequent Events:

 

In October 2018 the Company issued 150,000 shares of common stock to Cascade IR, LLC, an investor relations firm, as compensation for services pursuant to the terms of a consulting agreement the Company entered into with Cascade IR in September 2018.

 

Also in October 2018, the Company converted $725,000 principal amount of Convertible Promissory Notes, plus $16,711 of accrued interest into 1,510,377 shares of common stock.

 

In November 2018, Mr. Richard Malinowski informed the Company of his decision to resign as Chief Technology and Operations Officer and the Board has accepted his resignation. During his tenure, Mr. Malinowski recruited the Company’s technical team leader, Serge Shuster, who is leading the development of the Company’s planned products and who will fulfill the technology leadership role for the Company. Mr. Shuster has over 25 years’ experience in the design, development and implementation of sophisticated financial algorithms and high frequency trading systems and has worked for some of the largest banking institutions and hedge funds.

 

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

 

F- 10  

 

 

Audited financials

 

INNOVATIVE BEVERAGE GROUP HOLDINGS, INC.

FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

 

Description   Page
     
Report of Independent Registered Public Accounting Firm   F-12
     
Balance Sheets at December 31, 2017 and 2016   F-13
     
Statements of Operations for the Fiscal Years Ended December 31, 2017 and 2016   F-14
     
Statements of Stockholders’ Deficit for the Fiscal Years Ended December 31, 2017 and 2016   F-15
     
Statements of Cash Flows for the Fiscal Years Ended December 31, 2017 and 2016   F-16
     
Notes to the Financial Statements   F-17

 

F- 11  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Innovative Beverage Group Holdings, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Innovative Beverage Group Holdings, Inc. (the “Company”) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ equity, and cash flows, for each of the years in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Emphasis of Matter

 

The accompanying financial statements have been prepared assuming that the Company will become a going concern. As described in Note 3 to the financial statements, the Company has no operations nor business plans, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Thayer O’Neal Company, LLC

 

Thayer O’Neal Company, LLC

We have served as the Company’s auditor since 2018.

Houston, Texas

August 15, 2018

 

F- 12  

 

 

INNOVATIVE BEVERAGE HOLDINGS GROUP, INC.

BALANCE SHEETS

December 31, 2017 and 2016

 

    2017     2016  
ASSETS            
             
Current assets            
Cash and cash equivalents   $ -     $ -  
Accounts receivable     -       -  
Other current assets     -       -  
Total assets   $ -     $ -  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
Current liabilities                
Accounts payable   $ 1,500     $ -  
Short-term and current long-term debt     -       -  
Total liabilities     1,500       -  
                 
Stockholders’ equity (deficit)                
Common stock, $0.0001 par value, 250,000,000 and 247,000,000 shares authorized; 943,735 and 351,235 shares issued and outstanding as of December 31, 2017 and 2016, respectively     94       35  
Additional paid-in capital     9,871,180       9,697,739  
Accumulated deficit     (9,872,774 )     (9,697,774 )
Total stockholders’ equity (deficit)     (1,500 )     -  
Total liabilities and stockholders’ equity (deficit)   $ -     $ -  

 

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

 

F- 13  

 

 

INNOVATIVE BEVERAGE HOLDINGS GROUP, INC.

Statements of Operations

For the Years Ended December 31, 2017 and 2016

 

    2017     2016  
Total revenue   $ -     $ -  
Cost of revenue     -       -  
Gross profit     -       -  
                 
Operating expenses     175,000       -  
                 
Loss from Operations     (175,000 )     -  
                 
Other income (expense)     -       -  
                 
Federal income tax expense     -       -  
                 
Net loss   $ (175,000 )   $ -  
                 
Weighted average shares - basic and diluted     943,735       351,235  
Loss per share - basic and diluted   $ (0.19 )   $ (0.00 )

 

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

 

F- 14  

 

 

INNOVATIVE BEVERAGE HOLDINGS GROUP, INC.

Statements of Stockholders’ Deficit

For the Years Ended December 31, 2017 and 2016

 

    Common Stock     Additional Paid in     Accumulated        
    Shares     Amount     Capital     Deficit     Total  
BALANCES, January 1, 2016     351,235     $ 35     $ 9,697,739     $ (9,697,774 )   $ -  
Net Income     -       -       -       -       -  
BALANCES, December 31, 2016     351,235       35       9,697,739       (9,697,774 )     -  
                                         
Issuance of shares for legal settlement     592,500       59       173,441               173,500  
Net Income     -       -       -       (175,000 )     (175,000 )
BALANCES, December 31, 2017     943,735     $ 94     $ 9,871,180     $ (9,872,774 )   $ (1,500 )

 

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

 

F- 15  

 

 

INNOVATIVE BEVERAGE HOLDINGS GROUP, INC.

Statements of Cash Flows

For the Years Ended December 31, 2017 and 2016

 

    2017     2016  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (175,000 )   $           -  
Adjustments to reconcile net income (loss) to net cash                
Accounts receivable     -       -  
Issuance of shares for legal settlement     173,500       -  
Accounts payable     1,500       -  
CASH USED IN OPERATING ACTIVITIES     -       -  
                 
CASH FLOWS USED IN INVESTING ACTIVITIES     -       -  
CASH USED IN FINANCING ACTIVITIES     -       -  
                 
Net increase in cash     -       -  
                 
Cash, beginning of year     -       -  
                 
Cash, end of year   $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURES                
Cash paid for interest   $ -     $ -  
Cash paid for income taxes   $ -     $ -  

 

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

 

F- 16  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 1 – Organization and Summary of Significant Accounting Policies:

 

Organization:

 

Innovative Beverage Group Holdings, Inc. a Delaware corporation (the “Company”) is the surviving entity as the result of a merger between Ticketcart, Inc. and Innovative Beverage Group, Inc., both Nevada corporations. Innovative Beverage Group, Inc. is 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.

 

History:

 

Ticketcart, Inc. (“Ticketcart”) was incorporated in the State of Nevada on July 25, 2001 with authorized capital stock of 100,000,000 shares of common stock, par value $0.001 (“Common Stock”). 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. In 2004, Ticketcart commenced trading on the OTC Pink Sheet market under the ticker symbol TKTC.

 

On February 9, 2005, Kat-A-Tonic Distributing, Inc., a Texas corporation (“Kat-A-Tonic”) entered into a Stock Exchange Agreement (the “Share Exchange”) with United European Holdings, Ltd., a Nevada Corporation (“United European”), which resulted in the shareholders of Kat-A-Tonic, becoming the majority shareholder of United European. As part of that Stock Exchange Agreement the surviving company, United European, changed its name to Innovative Beverage Group, Inc. (“Innovative”) to reflect the new operations and business plan of the consolidated entity. At the time of the Share Exchange, United European’s common stock was quoted on an unsolicited basis on the “grey sheets” under the trading symbol UEUH. United European’s shares were very thinly traded and never attained any significant trading volume or shareholder base other than the original founding shareholders of United European and the shareholders who exchanged their prior Kat-A-Tonic common shares for newly issued United European common shares. Due to changes in the rules and policies regarding quotation of “grey market” securities, the consolidated company (now known Innovative) modified its plans to attain public trading status through United European’s shares and began to consider and negotiate with new public merger candidate companies and opportunities, while continuing to pursue and implement its beverage distribution and product development business.

 

On April 1, 2007, Innovative entered into negotiations to merge with or be acquired by Ticketcart, which had been involved in a series of negotiations and proposal for mergers and acquisitions with various other businesses. Over the following three months, Innovative and TicketCart negotiated a plan of reorganization and on June 25, 2007 the two companies entered into a Share Exchange and Acquisition Agreement for Innovative to be acquired as a wholly-owned subsidiary of TicketCart. At that time, TicketCart’s common stock traded over the counter on the Pink Sheets under the trading symbol “TKTC.” Pursuant to the terms of the Share Exchange and Acquisition Agreement, TicketCart implemented a reverse split of its common stock, changed its name to Innovative Beverage Group Holdings, Inc., and issued 47,199,432 new common shares in exchange for all of the issued and outstanding common stock of Innovative, resulting in the “Merged Entity.”

 

F- 17  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

On July 25, 2007, the Merged Entity filed a Certificate of Amendment with the State of Nevada changing the name of the Merged Entity to Innovative Beverage Group Holdings, Inc. (the “Company”). The Certificate of Amendment also increased the Company’s authorized capital stock to consist of 247,000,000 shares of Common Stock and 3,000,000 shares of Series A Non-Voting Convertible Preferred Stock (“Preferred Stock”).

 

As a result of the aforementioned transactions, the Company owned all of the issued and outstanding equity securities of Innovative, which in turn owned all of the equity securities of Kat-A-Tonic, the operating subsidiary of the Company. All of the prior shareholders of both Kat-A-Tonic and Innovative exchanged their shares for shares of the Company (the publicly traded parent company) as a result of the two separate acquisition transactions described above. After the July 25, 2007 reverse split, the Company’s common stock traded over the counter on the OTC Pink Sheets under a new trading symbol “IBGH.”

 

Innovative Beverage Group Holdings, Inc. (the “Company”) was a wholesale distributor of proprietary and exclusive energy drinks and New Age beverages and snacks to retail establishments in Texas, Louisiana and Missouri through a distributor licensing agreement with WorldTech, Inc. (a related affiliate). More than 50% of the Company’s sales were for products purchased from a single supplier, Think Pink Beverage, Inc., which provided bottled products and promotional assistance for the Company’s two principal beverage products. However, the beverage business was ultimately not successful and in 2013 the Company ceased operations.

 

On May 22, 2017, one of the Company’s shareholders, a North Carolina resident, (the “Plaintiff”) filed suit against 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 “Company Receiver”) over the Company.

 

On October 4, 2017 the Company 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 23, 2017 the Company, which was at that time a Nevada corporation, entered into an Agreement and Plan of Merger (the “Plan of Merger”) with Innovative Beverage Group Holdings, Inc., a North Carolina corporation (“IBGH North Carolina”). Pursuant to the Plan of Merger, each outstanding share (or fraction thereof) of the Company’s common stock was converted into a like number of shares of IBGH North Carolina common stock (the “Merger”), with IBGH North Carolina continuing as the surviving corporation of the Merger. IBGH North Carolina’s capitalization consisted of 250,000,000 shares consisting of 250,000,000 shares of common stock, par value $0.0001 per share.

 

On October 26, 2017, the Company filed Articles of Merger based on the above mentioned Merger with the North Carolina Secretary of State, and thereby changed its domicile from Nevada to North Carolina. Through the above transactions, the Company became a North Carolina corporation.

 

On December 14, 2017, the North Carolina Court ordered the Company’s Receiver to resolve the Plaintiff’s claims against the Company by issuing 92,500 shares of common stock to the Plaintiff, and by issuing an additional 500,000 shares to be held by the Company as Treasury Stock (the “Court Order”). The Court Order also disallowed all of the claims that had not been submitted to the Receiver and the North Carolina Court as of September 16, 2017.

 

F- 18  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

On December 24, 2017 the Company Receiver directed the Company’s transfer agent to issue a certificate for 92,500 shares of common stock to Plaintiff, and to issue 500,000 shares of common stock in book entry to the Company Treasury.

 

The Company’s fiscal year end is December 31.

 

Basis of Accounting:

 

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. In the opinion of management, these financials include all necessary adjustments to make them not misleading.

 

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.

 

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.

 

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.

 

F- 19  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

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.

 

    December 31,  
    2017     2016  
Net operating loss carry-forwards   $ 61,250     $      -  
Valuation allowance     (61,250 )     -  
Net deferred tax assets   $ -     $ -  

 

At December 31, 2017 the Company had net operating loss carry forwards of approximately $175,000.

 

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

 

Note 3 – Going Concern

 

The Company’s financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has earned no revenue from operations in the periods ended December 31, 2017 and 2016, and has an accumulated deficit of $9,872,774 and $9,697,774 respectively. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital or ultimately acquire an entity which the Company hopes will become profitable at some time in the near future. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Management is seeking new capital to revitalize the Company.

 

Note 4 – 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.

 

F- 20  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

Note 5 – Capital Stock:

 

On December 14, 2017, per Court Order, the North Carolina Court ordered the Company’s Receiver to resolve the Plaintiff’s claims against the Company by issuing 92,500 shares of common stock to the Plaintiff, and by issuing an additional 500,000 shares to be held by the Company as Treasury Stock. The Court Order also disallowed all of the claims that had not been submitted to the Receiver and the North Carolina Court as of September 16, 2017.

 

On December 24, 2017 the Company Receiver directed the Company’s transfer agent to issue a certificate for 92,500 shares of common stock to Plaintiff, and to issue 500,000 shares of common stock in book entry to the Company Treasury.

 

On March 1, 2018 the Board authorized the Company to raise up to $500,000 of equity capital at price of $0.40 per share of common stock (the “Initial Raise”). In connection with the Initial Raise, the Company has received subscriptions for $70,000, but has not yet issued shares of common stock pursuant to the Subscription Agreements. The Company plans to issue shares of its common stock now that FINRA has approved the 1:200 reverse stock split in accordance with the terms and conditions of the Subscription Agreements.

 

On April 13, 2018, The Company’s board of directors authorized a 1:200 reverse stock split on the shares of the Company’s common stock. Accordingly, all references to numbers of common shares and per-share data in the accompanying financial statements have been adjusted to reflect the stock split on a retroactive basis.

 

Note 6 – Subsequent Events:

 

On January 15, 2018 the Company entered into a Transfer Agent Services Agreement with Empire Stock Transfer, Inc. (“Empire”) whereby Empire will perform transfer agent and related services for the Company. Empire’s address is 1859 Whitney Mesa Drive, Henderson, NV 89014.

 

On January 22, 2018, while the Company was in receivership, the Company sold 500,000 shares (the “CRG Shares”) of its common stock to Convergent Risk Group (“CRG”), an entity owned and operated by the Company’s Chief Executive Officer, Robert Liscouski, for $155,000. Financing for the purchase of the CRG Shares was provided to CRG by a group of accredited investors (the “Original Investors”), in exchange for promissory notes from CRG (the “CRG Liabilities”). In order to further induce the Mr. Liscouski to accept his position as the Company’s Chief Executive Officer, the Company agreed to assume the CRG Liabilities in exchange for the Company’s issuance of convertible promissory notes to the Original Investors in the principal aggregate amount of $400,000 (the “January Quantum Notes”). The January Quantum Notes can be converted to shares of the Company’s common stock at a conversion price of $0.10 per share at any time prior to, or at, the maturity date of August 10, 2019.

 

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.

 

F- 21  

 

 

QUANTUM COMPUTING INC.

(Formerly Innovative Beverage Group Holdings, Inc.)

Notes to Financial Statements

(Unaudited)

 

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.

 

On February 23, 2018 the Board elected Mr. Robert Liscouski to serve as Chief Executive Officer and President of the Company and Mr. Christopher Roberts was elected to serve as the Company’s Chief Financial Officer, Treasurer and Secretary.

 

On March 1, 2018 the Board authorized the Company to raise up to $500,000 of equity capital at price of $0.40 per share of common stock (the “Initial Raise”). In connection with the Initial Raise, the Company has received subscriptions for $70,000, but has not yet issued shares of common stock pursuant to the Subscription Agreements. The Company plans to issue shares of its common stock now that FINRA has approved the 1:200 reverse stock split in accordance with the terms and conditions of the Subscription Agreements. Effective March 1, 2018 the Company hired Richard E. Malinowski to serve as the Company’s Chief Technology Operations Officer. The Company has executed an employment agreement with Mr. Malinowski. The Company does not consider Mr. Malinowski to be an executive officer but we do consider him to be key employee.

 

On April 13, 2018 by written consent, the Board and the majority stockholder amended the Company’s Articles of Incorporation to authorize a 1-for-200 reverse stock split of the issued and outstanding shares, and to increase the authorized capital of the company to 260,000,000 shares, consisting of 250,000,000 shares of common stock and 10,000,000 shares of preferred stock.

 

On May 8, 2018 the Company filed an Affidavit of Non-Operation and Certificate of Dissolution in the State of Nevada to formally terminate its presence in that state.

 

On May 24, 2018 the Board authorized a private placement of convertible promissory notes in the aggregate amount up to $15,000,000 at a conversion price of $1.00 per share (the “Convertible Note Offering”), In connection with the Convertible Note Offering, the Company has received funds of $725,000 but has not yet issued shares of common stock. The Company plans to issue shares of its common stock now that FINRA has approved the 1:200 reverse stock split in accordance with the terms and conditions of the Convertible Note Offering.

 

On July 2, 2018 the Financial Industry Regulatory Authority (FINRA) approved the Company’s request to change its name to Quantum Computing Inc., to change its official domicile from Nevada to Delaware, and to implement a 1:200 reverse stock split. The name and domicile change and reverse stock split took effect on July 3, 2018. FINRA also approved a new Ticker Symbol for the Company, “QUBT”, which will take effect 20 business days after July 3, 2018.

 

There are no other events of a subsequent nature that in management’s opinion are reportable as of January 8. 2019.

 

F- 22  

 

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

There have been no changes in or disagreements with accountants on accounting or financial disclosure matters.

 

Item 15. Financial Statements and Exhibits.

 

Exhibit
Number
  Description
     
3.1(i)*   Articles of Incorporation, as amended through April 17, 2018
3.2(i)*   By-laws
4.1*   Common Stock Specimen
4.2*   Form of 8% Convertible Promissory Note
10.1**   Robert Liscouski Employment Agreement dated February 15, 2018
10.2**   Christopher Roberts Employment Agreement dated March 1, 2018
10.3**   Sergey Shuster Employment Agreement dated February 28, 2018
10.4**   Richard Malinowski Employment Agreement dated July 23, 2018
10.6*   Form of Subscription Agreement
10.7*   Form of Subscription Agreement
10.8*   Form of Subscription Agreement
21.1*   Subsidiaries of the Registrant

 

* Filed herewith.

 

** Indicates a management contract or compensatory plan or arrangement.

 

34

 

 

SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: January 9, 2019 QUANTUM COMPUTING INC.
     
  By: /s/ Robert Liscouski
    Name: Robert Liscouski
    Title:   Chief Executive Officer

 

35

Exhibit 3.1(i)

 

STATE of DELAWARE

CERTIFICATE of INCORPORATION
A STOCK CORPORATION

 

First: The name of this Corporation is Quantum Computing Inc .

 

Second: Its registered office in the State of Delaware is to be located at 874 Walker Road, Suite C Street, in the City of Dover County of Kent Zip Code 19904 .

 

The registered agent in charge thereof is United Corporate Services, Inc.

 

Third: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

 

Fourth: The amount of the total stock of this corporation is authorized to issue is 250,000,000 shares (number of authorized shares) with a par value of $0.0001 per share.

 

Fifth: The name and mailing address of the incorporator are as follows:

Name Christopher Roberts

Mailing Address 215 Depot Court, SE

20175         Zip Code 20175

 

I, The Undersigned, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate, and do certify that the facts herein stated are true, and I have accordingly hereunto set my hand this 19th day of February        , A.D. 2018 .

 

  BY: /s/ Christopher Roberts
    (Incorporator)
     
  NAME:  Christopher Roberts
    (type or print)

 

State of Delaware

Secretary of State

Division of Corporations

Delivered 09:58 AM 02/22/2018

FILED 09:58 AM 02/22/2018

SR 20181224493 - File Number 6765151

   

 

 

 

 

STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION

 

Quantum Computing Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

 

FIRST: That at a meeting of the Board of Directors of Quantum Computing Inc. (the “Corporation”) resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said Corporation, declaring said amendment to be advisable and based upon the written consent of stockholders of said Corporation holding a majority of the outstanding shares of common stock for consideration thereof. The resolution setting forth the proposed amendment is as follows:

 

RESOLVED, that the Certificate of Incorporation of this Corporation be amended by changing the Article thereof numbered “Fourth” so that, as amended, said Article shall be and read as follows:

 

Fourth: The Company shall be authorized to issue two hundred and sixty million (260,000,000) shares of capital stock, of which two hundred fifty million (250,000,000) shares shall be shares of common stock, par value $0.0001 per share (“Common Stock”) and ten million (10,000,000) shares shall be shares of preferred stock, par value of $0.0001 per share, which may be issued in one or more series (“Preferred Stock”). The Board of Directors of the Company is authorized to fix the powers, preferences, rights, qualifications, limitations or restrictions of the Preferred Stock and any series thereof pursuant to Section 151 of the DGCL; and the existing issued and outstanding shares of Common Stock shall be subject to a reverse stock split on a one-for-two hundred (1:200) basis resulting in approximately 943,482 issued and outstanding shares of Common Stock at the Effective Date. No fractional shares will be issued in connection with the reverse split. Any fractional share will be rounded up to the first whole integer.

 

SECOND: That thereafter, pursuant to resolution of its Board of Directors, and based upon the written consent of holders of a majority of the shares of common of said Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute were voted in favor of the amendment.

 

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

 

IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed this 16th day of April 2018.

 

By: /s/ Christopher Roberts  
Name: Christopher Roberts  
Title: Secretary  

 

   

State of Delaware

Secretary of State

Division of Corporations

Delivered 11:45 AM 04/17/2018

FILED 11:45 AM 04/17/2018

SR 20182747224 - File Number 6765151

 

 

 

Exhibit 3.2(i)

 

BY-LAWS

 

of

 

QUANTUM COMPUTING INC.

(the “Corporation”)

 

Article I - Stockholders

 

1. Annual Meeting. The annual meeting of stockholders shall be held for the election of directors each year at such place, date and time as shall be designated by the Board of Directors. Any other proper business may be transacted at the annual meeting. If no date for the annual meeting is established or said meeting is not held on the date established as provided above, a special meeting in lieu thereof may be held or there may be action by written consent of the stockholders on matters to be voted on at the annual meeting, and such special meeting or written consent shall have for the purposes of these By-laws or otherwise all the force and effect of an annual meeting.

 

2. Special Meetings. Special meetings of stockholders may be called by the Chief Executive Officer, if one is elected, or, if there is no Chief Executive Officer, a President, or by the Board of Directors, but such special meetings may not be called by any other person or persons. The call for the meeting shall state the place, date, hour and purposes of the meeting. Only the purposes specified in the notice of special meeting shall be considered or dealt with at such special meeting.

 

3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a notice stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present and vote at such meeting, and, in the case of a special meeting, the purpose or purposes of the meeting, shall be given by the Secretary (or other person authorized by these By-laws or by law) not less than ten (10) nor more than sixty (60) days before the meeting to each stockholder entitled to vote thereat and to each stockholder who, under the Certificate of Incorporation or under these By-laws is entitled to such notice. If mailed, notice is given when deposited in the mail, postage prepaid, directed to such stockholder at such stockholder’s address as it appears in the records of the Corporation. Without limiting the manner by which notice otherwise may be effectively given to stockholders, any notice to stock holders may be given by electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law (the “DGCL”).

 

If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

 

 

 

4. Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting, present in person or represented by proxy, shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present. The stockholders present at a duly constituted meeting may continue to transact business until adjournment notwithstanding the withdrawal of enough stockholders to reduce the voting shares below a quorum.

 

5. Voting and Proxies. Except as otherwise provided by the Certificate of Incorporation or by law, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by either written proxy or by a transmission permitted by Section 212(c) of the DGCL, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period or is irrevocable and coupled with an interest. Proxies shall be filed with the Secretary of the meeting, or of any adjournment thereof. Except as otherwise limited therein, proxies shall entitle the persons authorized thereby to vote at any adjournment of such meeting.

 

6. Action at Meeting. When a quorum is present, any matter before the meeting shall be decided by vote of the holders of a majority of the shares of stock voting on such matter except where a larger vote is required by law, by the Certificate of Incorporation or by these By-laws. Any election of directors by stockholders shall be determined by a plurality of the votes cast, except where a larger vote is required by law, by the Certificate of Incorporation or by these By-laws. The Corporation shall not directly or indirectly vote any share of its own stock; provided, however, that the Corporation may vote shares which it holds in a fiduciary capacity to the extent permitted by law.

 

7. Presiding Officer. Meetings of stockholders shall be presided over by the Chairman of the Board, if one is elected, or in his or her absence, the Vice Chairman of the Board, if one is elected, or if neither is elected or in their absence, a Chief Executive Officer. The Board of Directors shall have the authority to appoint a temporary presiding officer to serve at any meeting of the stockholders if the Chairman of the Board, the Vice Chairman of the Board or the Chief Executive Officer is unable to do so for any reason.

 

8. Conduct of Meetings. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the presiding officer of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding officer of the meeting, may include, without limitation,the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the presiding officer of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

2

 

 

9. Action without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted by law to be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office, by hand or by certified mail, return receipt requested, or to the Corporation’s principal place of business or to the officer of the Corporation having custody of the minute book. Every written consent shall bear the date of signature and no written consent shall be effective unless, within sixty (60) days of the earliest dated consent delivered pursuant to these By-laws, written consents signed by a sufficient number of stockholders entitled to take action are delivered to the Corporation in the manner set forth in these By-laws. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

10. Stockholder Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section 10 shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting in the manner provided by law. The list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law.

 

Article II - Directors

 

1.  Powers. The business of the Corporation shall be managed by or under the direction of a Board of Directors who may exercise all the powers of the Corporation except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled.

 

2. Number and Qualification. Unless otherwise provided in the Certificate of Incorporation or in these By-laws, the number of directors which shall constitute the whole board shall be no less than one nor more than seven persons. Directors need not be stockholders.

 

3. Vacancies; Reduction of Board. A majority of the directors then in office, although less than a quorum, or a sole remaining Director, may fill vacancies in the Board of Directors occurring for any reason and newly created directorships resulting from any increase in the authorized number of directors. In lieu of filling any vacancy, the Board of Directors may reduce the number of directors.

 

3

 

 

4. Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, directors shall hold office until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

 

5. Removal. To the extent permitted by law, a director may be removed from office with or without cause by vote of the holders of a majority of the shares of stock entitled to vote in the election of directors.

 

6. Meetings. Regular meetings of the Board of Directors may be held without notice at such time, date and place as the Board of Directors may from time to time determine. Special meetings of the Board of Directors may be called, orally or in writing, by the Chief Executive Officer, if one is elected, or, if there is no Chief Executive Officer, the President, or by two or more Directors, designating the time, date and place thereof. Directors may participate in meetings of the Board of Directors by means of conference telephone or other communications equipment by means of which all directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting.

 

7. Notice of Meetings. Notice of the time, date and place of all special meetings of the Board of Directors shall be given to each director by the Secretary, or Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the officer or one of the directors calling the meeting. Notice shall be given to each director in person, by telephone, or by facsimile, electronic mail or other form of electronic communications, sent to such director’s business or home address at least twenty four (24) hours in advance of the meeting, or by written notice mailed to such director’s business or home address at least forty eight (48) hours in advance of the meeting, or on such shorter notice as the persons calling such meeting may deem necessary or appropriate in the circumstances.

 

8. Quorum. At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business. Less than a quorum may adjourn any meeting from time to time and the meeting may be held as adjourned without further notice.

 

9. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, unless otherwise provided in the following sentence, a majority of the directors present may take any action on behalf of the Board of Directors, unless a larger number is required by law, by the Certificate of Incorporation or by these By-laws. So long as there are two (2) or fewer Directors, any action to be taken by the Board of Directors shall require the approval of all Directors.

 

4

 

 

10. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the records of the meetings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

11. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, establish one or more committees, each committee to consist of one or more directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any provision of these By-laws.

 

Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but in the absence of such rules its business shall be conducted so far as possible in the same manner as is provided in these By-laws for the Board of Directors. All members of such committees shall hold their committee offices at the pleasure of the Board of Directors,and the Board may abolish any committee at any time.

 

Article III - Officers

 

1. Enumeration. The officers of the Corporation shall consist of a chief executive officer, president, chief financial officer and a secretary, each of whom shall be elected by the Board, unless such position is filled at the time of adoption of these By-laws. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board. All officers must be natural persons and any natural person may hold two or more offices, except that in the event that the Corporation shall have more than one director, the offices of chief executive officer or president and secretary shall be held by different persons.

 

2. Election. Each of the officers shall be elected by the Board. None of said officers need be a director. Except as hereinafter provided or subject to the express provisions of a contract authorized by the Board of Directors, each of said officers shall hold office from the date of his/her election until the next annual meeting of the Board and until his/her successor shall have been duly elected and qualified or until his or her removal or resignation.

 

3. Qualification. No officer need be a stockholder or Director. Any two or more offices may be held by the same person. Any officer may be required by the Board of Directors to give bond for the faithful performance of such officer’s duties in such amount and with such sureties as the Board of Directors may determine.

 

5

 

 

4.  Tenure. Except as otherwise provided by the Certificate of Incorporation or by these By-laws, each of the officers of the Corporation shall hold office until the first meeting of the Board of Directors following the next annual meeting of stockholders and until such officer’s successor is elected and qualified or until such officer’s earlier resignation or removal. Any officer may resign by delivering his or her written resignation to the Corporation, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.

 

5.  Removal. The Board of Directors may remove any officer with or without cause by a vote of a majority of the directors then in office.

 

6. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the tenn by the Board of Directors.

 

7. Chairman of the Board and Vice Chairman. Unless otherwise provided by the Board of Directors, the Chairman of the Board of Directors, if one is elected, shall preside, when present, at all meetings of the stockholders and the Board of Directors. The Chairman of the Board shall have such other powers and shall perform such duties as the Board of Directors may from time to time designate.

 

Unless otherwise provided by the Board of Directors, in the absence of the Chairman of the Board, the Vice Chairman of the Board, if one is elected, shall preside, when present, at all meetings of the stockholders and the Board of Directors. The Vice Chairman of the Board shall have such other powers and shall perform such duties as the Board of Directors may from time to time designate.

 

8. Powers and Duties. The powers and duties of the respective corporate officers shall be determined by the Board.

 

9. Salaries. The salaries of all executive officers of the Corporation shall be fixed by the Board of Directors or by such committee of the Board of Directors as may be designated from time to time by a resolution adopted by a majority of the Board of Directors.

 

10.  Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

 

6

 

 

Article IV - Capital Stock

 

1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by two of the following: Chairman of the Board of Directors or Vice Chairman of the Board of Directors, or Chief Executive Officer, or Chief Financial Officer, or President or a Vice President, or the Secretary or an Assistant Secretary. Such signatures may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. The Corporation shall not be permitted to issue fractional shares, and shall round up any fractional shares resulting from any transaction or change to capitalization to the next whole number

 

2. Transfers. Subject to any restrictions on transfer, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require.

 

3. Record Holders. Except as may otherwise be required by law, by the Certificate of Incorporation or by these By-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws.

 

It shall be the duty of each stockholder to notify the Corporation of such stockholder’s post office address.

 

4. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date on which it is established, and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, more than ten (10) days after the date on which the record date for stockholder consent without a meeting is established, nor more than sixty (60) days prior to any other action. In such case only stockholders of record on such record date shall be so entitled notwithstanding any transfer of stock on the books of the Corporation after the record date.

 

If no record date is fixed, (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, (b) the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this state, to its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded, and (c) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

7

 

 

5. Lost Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

Article V - Indemnification

 

1. Definitions. For purposes of this Article V:

 

(a) “Corporate Status” describes the status of a person who is serving or has served (i) as a Director of the Corporation, (ii) as an Officer of the Corporation, or (iii) as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation. For purposes of this Section 1(a), an Officer or Director of the Corporation who is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation. Notwithstanding the foregoing, “Corporate Status” shall not include the status of a person who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction with the Corporation with respect to such person’s activities prior to said transaction, unless specifically authorized by the Board of Directors or the stockholders of the Corporation;

 

(b) “Director” means any person who serves or has served the Corporation as a director on the Board of Directors of the Corporation;

 

(c) “Disinterested Director” means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the Corporation who is not and was not a pai1y to such Proceeding;

 

(d) “Expenses” means all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding;

 

(e) “Non-Officer Employee” means any person who serves or has served as an employee or agent of the Corporation, but who is not or was not a Director or Officer;

 

8

 

 

(f) “Officer” means any person who serves or has served the Corporation as an officer appointed by the Board of Directors of the Corporation;

 

(g) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; and

 

(h) “Subsidiary” shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity.

 

2. Indemnification of Directors and Officers. Subject to the operation of Section 4 of this Article V of these By-laws, each Director and Officer shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment) against any and all Expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Director or Officer or on such Director’s or Officer’s behalf in connection with any threatened, pending or completed Proceeding or any claim, issue or matter therein, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 2 shall continue as to a Director or Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding was authorized by the Board of Directors of the Corporation, unless such Proceeding was brought to enforce an Officer or Director’s rights to indemnification or, in the case of Directors, advancement of Expenses under these By-laws in accordance with the provisions set forth herein.

 

3. Indemnification of Non-Officer Employees. Subject to the operation of Section 4 of this Article V of these By-laws, each Non-Officer Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Non-Officer Employee or on such Non-Officer Employee’s behalf in connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee’s Corporate Status, if such Non-Officer Employee acted in good faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 3 shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the benefit of his or her heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non-Officer Employee only if such Proceeding was authorized by the Board of Directors of the Corporation.

 

9

 

 

4. Good Faith. Unless ordered by a court, no indemnification shall be provided pursuant to this Article V to a Director, to an Officer or to a Non-Officer Employee unless a determination shall have been made that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal Proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (b) a committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though less than a quorum), (c) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation.

 

5. Advancement of Expenses to Directors Prior to Final Disposition.

 

(a) The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such Director is involved by reason of such Director’s Corporate Status within ten (10) days after the receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses.

 

(b) If a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within 10 days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such advancement of Expenses under this Article V shall not be a defense to the action and shall not create a presumption that such advancement is not permissible. The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.

 

10

 

 

(c) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Director has not met any applicable standard for indemnification set forth in the DGCL.

 

6. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.

 

(a) The Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses incurred by or on behalf of any Officer and Non-Officer Employee in connection with any Proceeding in which such is involved by reason of the Corporate Status of such Officer or Non-Officer Employee upon the receipt by the Corporation of a statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer and Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer Employee is not entitled to be indemnified against such Expenses.

 

(b) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable standard for indemnification set forth in the DGCL.

 

7. Contractual Nature of Rights.

 

(a) The foregoing provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and Officer entitled to the benefits hereof at any time while this Article V is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

 

(b) If a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within 60 days after receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification under this Article V shall not be a defense to the action and shall not create a presumption that such indemnification is not permissible. The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.

 

11

 

 

(c) In any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director or Officer has not met any applicable standard for indemnification set forth in the DGCL.

 

8. Non-Exclusivity of Rights. The rights to indemnification and advancement of Expenses set forth in this Article V shall not be exclusive of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision of the Certificate or these By-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.

 

9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee, or arising out of any such person’s Corporate Status, whether or not the Corporation would have the power to indemnify such person against such liability under the DGCL or the provisions of this Article V.

 

10. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person under this Article V as a result of such person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, employee benefit plan or enterprise.

 

Article VI - Miscellaneous Provisions

 

1. Fiscal Year. Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall end on December 31 st of each year.

 

2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation.

 

3. Execution of Instruments. Subject to any limitations which may he set forth in a resolution of the Board of Directors, all deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without director action may be executed on behalf of the Corporation by, a President or Chief Executive Officer, or by any other officer, employee or agent of the Corporation as the Board of Directors may authorize.

 

4. Voting of Securities. Unless the Board of Directors otherwise provides, a President, any Vice President or the Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or attorney in fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by this Corporation.

 

5. Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding against the Corporation.

 

12

 

 

6. Corporate Records. The original or attested copies of the Certificate of Incorporation, By-laws and records of all meetings of the incorporators, stockholders and the Board of Directors and the stock and transfer records, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each, shall be kept at the principal office of the Corporation, at the office of its counsel, or at an office of its transfer agent.

 

7. Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.

 

8. Amendments. These By-laws may be altered, amended or repealed, and new By-laws may be adopted, by the stockholders or by the Board of Directors; provided, that (a) the Board of Directors may not alter, amend or repeal any provision of these By-laws which by law, by the Certificate of Incorporation or by these By-laws requires action by the stockholders and (b) any alteration, amendment or repeal of these By-laws by the Board of Directors and any new By-law adopted by the Board of Directors may be altered, amended or repealed by the stockholders.

 

9. Waiver of Notice. Whenever notice is required to be given under any provision of these By laws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting needs to be specified in any written waiver or any waiver by electronic transmission.

 

Adopted: May 22, 2018

 

13

 

Exhibit 4.1

 

 

 

 

 

Exhibit 4.2

 

NEITHER THE CONVERTIBLE NOTE (THE “NOTE”) NOR THE SHARES OF COMMON STOCK (THE “SHARES”) ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE NOTE AND THE UNDERLYING SHARES ISSUABLE UPON CONVERSION HEREOF MAY BE REFERRED TO COLLECTIVELY, AS THE “SECURITIES.”

 

QUANTUM COMPUTING INC.

 

8% CONVERTIBLE PROMISSORY NOTE

 

Principal Amount: ________________

Original Issuance Date: ________________

 

Quantum Computing, Inc., a Delaware corporation f/k/a Innovative Beverage Group Holdings, Inc. (the “Company”) with offices located 215 Depot Court, Suite 215, Leesburg, VA 20175 , pursuant to the terms and conditions set forth in this Subscription and Investor’s Representation Agreement (the “Subscription Agreement”), has issued this 8% Convertible Promissory Note (the “Note” or, collectively, the “Notes”) to ____________ (the “Holder”) this ___ day of ______, 2018 (the “Issuance Date”), in connection with the offering pursuant to the Subscription Agreement in the aggregate principal amount of up to $1,000,000 (the “Note Offering”). The Company and the Holder are sometimes referred to individually, as a “Party” and collectively, as the “Parties.”

 

NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:

 

Section 1. The Note :

 

1.1 This Note in the principal amount of $____________ (the “Principal”) is being issued to the Holder pursuant to the Subscription Agreement between the Company and the Holder dated ___________, 2018.

 

1.2 This Note is being issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Act”), based upon Regulation D promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Act. under the Securities Act of 1933, as amended (the “Act”).

 

1.3 The Holder hereby represents to the Company that the Holder is an “accredited investor” as that term is defined in Rule 501 of Regulation D.

 

1.4 The Holder acknowledges and agrees that pursuant to the terms of the above-referenced Subscription Agreement that this Note: (i) bears interest at the rate of 8% per annum (the “Interest”); (ii) is due and payable on a date twelve (12) months from the Issuance Date (the “Maturity Date”); and (iii) the Interest and principal amount of this Note payable to Holder is convertible, on a mandatory basis into shares of the Company’s common stock (the “Shares”) within ten (10) business days of the effective date of the Reverse Split (the Mandatory Conversion”) as more fully-described in the Subscription Agreement, at a conversion price of $1.00 per Share (the “Conversion Price”).

 

1.5 This Note is one of a series of Notes containing substantially identical terms and conditions issued to other accredited holders each of whom acquired a portion of the Assigned Notes from the Original Noteholders.

 

Section 2. Interest, Maturity Date, Prepayment and Default :

 

2.1 Interest shall accrue from the Issuance Date on the unpaid Principal amount at a rate equal to eight (8%) percent per annum, simple interest.

 

2.2 Subject to Section 2, Principal and any accrued but unpaid Interest under this Note shall be due and payable upon demand by the Holder at the Maturity Date, unless the Note has been converted into Shares based upon the Mandatory Conversion provisions of Note and all of the Notes issued pursuant to the separate Subscription Agreements with other Holders, within ten (10) days of the Reverse Split referenced in Section 1.4 above, which is subject to application with and approval by FINRA and upon the effective date of the Reverse Split, FINRA.

 

 

 

 

2.3 The Company may prepay the Principal and Interest due on this Note provided that the Company delivers twenty (20) days advance written notice of the Holder (the “Prepayment Notice”).

 

2.4 Notwithstanding the provisions of Section 2.2 above, the entire unpaid Principal sum of this Note, together with accrued and unpaid Interest thereon, unless the same shall be converted into Shares based upon the Mandatory Conversion, shall become immediately due and payable upon: (i) the execution by the Company of a general assignment for the benefit of creditors; (ii) the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without dismissal for a period of 90 days or more; or (iii) the appointment of a receiver or trustee to take possession of the property or assets of the Company.

 

2.5 Notwithstanding the provisions of Sections 2.2 through 2.4 above, the Holder, at any time after the Issuance Date or prior to the expiration of the twenty (20) day period following which the Company has given Holder the Prepayment Notice, may, at Holder’s sole discretion, elect to convert the entire unpaid Principal together with accrued and unpaid Interest thereon, into Shares at the Conversion Price set forth in Section 1.4 above, in accordance with the procedures of Section 3 below.

 

Section 3. Conversion :  

 

3.1 The Principal and accrued but unpaid Interest under this Note shall, at the Holder’s election, may be converted at any time after the Issuance Date and prior to any prepayment pursuant to Section 2.3 above, into Shares of the Company’s common stock at a Conversion Price of $1.00 per Share, by delivery of written notice of election to convert (the “Conversion Notice”), in the form attached as Exhibit A hereto (the “Voluntary Conversion”).

 

3.2 The Principal and accrued but unpaid Interest under this Note shall be subject to Mandatory Conversion within ten (10) business days of the effective date of the Reverse Split at the Conversion Price of $1.00 per Share. The Parties acknowledge and agree that the Reverse Split is subject to approval by FINRA.

 

3.3 No fractional Shares will be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, round up the number of Shares issuable to the next whole integer. Upon conversion of this Note pursuant to this Sections 3.2 or 3.3 above, the Holder shall surrender this Note, duly endorsed, at the principal offices of the Company or the transfer agent of the Company, Empire Stock Transfer or any successor transfer agent (the “Transfer Agent”).

 

3.4 At its expense, the Company will issue written instructions to Transfer Agent within three (3) business days of receipt of the Conversion Notice, together with payment by wire transfer to the Company’s bank account as set forth in Section 3.5 below, to issue and deliver to such Holder, at the address of the Holder most recently furnished in writing to the Company, a certificate or certificates for the number of Shares to which such Holder is entitled upon such conversion, which Shares shall be issued in book entry form. Upon conversion of this Note, the Company will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the Principal and accrued Interest being converted, including, without limitation, the obligation to pay such portion of the principal amount and accrued interest.

 

3.5 The wire instructions for payment of the Conversion Price multiplied by the number of Shares being issued are as follows:

 

Bank: Bank of America
ABA: 026009593
Address: 505 East Market St., Leesburg, VA 20176
for credit to: Quantum Computing, Inc.
Account#: 4350-4394-1694

  

3.6 All payments shall be made in lawful money of the United States of America by wire transfer to the account set forth in Section 3.5 above.

 

2

 

 

Section 4. Transfer; Successors and Assigns :  

 

The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Notwithstanding the foregoing, except for a pledge of this Note to a bank or other financial institution that creates a mere security interest in this Note in connection with a bona fide loan transaction, the Holder may not assign, pledge, or otherwise transfer this Note without the prior written consent of the Company. Subject to the preceding sentence, this Note may be transferred only upon surrender of the original Note to the Company for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company, and, thereupon, a new note for the same principal amount and interest will be issued to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note.

 

Section 5. Governing Law; Jurisdiction :  

 

This Note shall be governed by and construed under the laws of the State of Virginia, where the Company maintains its offices and banking relationships, among other relevant contacts, without giving effect to principles of conflicts of law. The Parties irrevocably consent to the jurisdiction and venue of the state and federal courts located in Fairfax County, State of Virginia, in connection with any action relating to this Note.

 

Section 6. Notices :

 

Any notice required or permitted by this Note shall be given in writing and shall be deemed effectively given (a) upon personal delivery to the Party to be notified, (b) upon confirmation of receipt by fax by the Party to be notified, (c) one business day after deposit with a reputable overnight courier, prepaid for overnight delivery and addressed as set forth in (d), or (d) three days after deposit with the United States Post Office, postage prepaid, registered or certified with return receipt requested and addressed to the Party to be notified at the address of such Party indicated on the signature page hereof, or at such other address as such Party may designate by 10 days’ advance written notice to the other Party given in the foregoing manner.

 

  Section 7. Amendments and Waivers :

 

Any term of this Note may be amended only with the written consent of the Company and the holders of a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 7 shall be binding upon the Company, each Holder and each transferee of the Note.

 

Section 8. Shareholders, Officers and Directors Not Liable :  

 

In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note.

 

Section 9. Action to Collect on Note :

 

If action at law or equity is necessary to enforce or interpret the terms of this Note, the prevailing Party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.

 

Section 10. Waiver of Jury Trial :

 

Each of the Company and Holder hereby waives its right to trial by jury in any claim (whether based upon contract, tort or otherwise) under, related to or arising in connection with this Note.

 

3

 

 

Section 11. Waiver of Notice of Presentment :

 

The Company hereby waives presentment, protest and demand, notice of protest, demand and dishonor and non-payment of this Note in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note.

 

QUANTUM COMPUTING INC/

 

By: _________________________

Name: Robert Liscouski

Title: Chief Executive Officer

 

AGREED TO AND ACCEPTED

BY HOLDER:

 

By: ___________________________

Name: ________________________

Title (if applicable): _____________

Address: ___________________________

___________________________________

___________________________________

Email: _____________________________

Tax ID (if applicable):________________

 

4

 

 

EXHIBIT A

CONVERSION NOTICE

 

The undersigned Holder hereby elects to convert the principal together with all accrued but unpaid interest hereon under this Convertible Note due _________ __, 2019 of Quantum Computing Inc., a Delaware corporation (the “Company”), into shares of the Company’s common stock (the “Shares”) according to the conditions hereof, as of the date written below. If the Shares are to be issued in the name of a person other than the undersigned Holder, the undersigned Holder will pay all transfer taxes, payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.

 

Conversion Calculations:

 

Date to Effect Conversion: ____________________________

 

Principal Amount of Note to be Converted: $__________________

 

Additional Interest to be Converted: $_______________

 

Number of shares of Common Stock to be issued: ______________

 

Signature: _________________________________________

 

Name: ____________________________________________

 

Address for Delivery of Common Stock Certificates: __________

_____________________________________________________

_____________________________________________________

 

Or

 

DWAC Instructions: _________________________________

 

Broker No: _____________

Account No: _______________

 

5

Exhibit 10.1

 

QUANTUM COMPUTING INC.

215 Depot Court, SE

Leesburg, VA 20175

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of this 15th day of February 2018, between Robert Liscouski (“Executive”) and Quantum Computing Inc. (the “Company”), a Delaware corporation.

 

WHEREAS, the Company desires that for the foreseeable future the Executive will serve as the Company’s President as well as a member of the Board of Directors and the Executive is willing to continue to serve in the foregoing positions on the terms and conditions set forth in this Agreement;

 

NOW, THEREFORE in consideration of the mutual covenants and promises contained herein and other good and valuable considerations, the sufficiency of which is hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1. Effective Date and Term of Employment . As of the first date stated above (“Effective Date”), the Executive shall serve as the Company’s President and Chief Executive Officer (“CEO”). The Company will employ Executive as President and CEO, and Executive agrees to work for the Company, at its Leesburg, Virginia facility, to perform the duties and responsibilities inherent in such position, and such other duties and responsibilities as the Company shall from time to time assign to Executive.

 

2. Duties and Responsibilities . The Executive agrees to work for the Company as its President performing all of the duties and responsibilities inherent in such position. As the President the Executive shall report to the Company’s Board of Directors and shall be subject to the supervision thereof, and Executive shall have such authority as is delegated by the Board, which authority shall be sufficient for Executive to perform all of the duties of the office referenced herein. The Executive shall devote the Executive’s full business time and reasonable best efforts in the performance of the foregoing services. Subject to the restrictions set forth in Section 6.4, Executive may accept other board memberships or service with other charitable organizations that are not in conflict with Executive’s primary responsibilities and obligations to the Company.

 

3. Compensation and Benefits .

 

3.1 Salary . The Company has paid, prior to the Effective Date hereof, and shall continue to pay, Executive a base salary of $15,000.00 twice per calendar month (i.e., at an annualized rate of $360,000 per year), payable in accordance with the Company’s customary payroll practices (the “Base Salary”). The Base Salary thereafter shall be subject to annual review and adjustment, as determined by the Board (or the Compensation Committee of the Board) in its sole discretion, provided, however, that the Base Salary may not be decreased without the Executive’s consent unless the compensation payable to all executives of the Company is also similarly reduced.

 

 

 

 

3.2 Annual Incentive . For the fiscal year ending December 31, 2019 and in subsequent fiscal years, Executive will be eligible to receive an annual cash bonus in an amount up to $150,000, subject to Executive achieving the performance milestones that are established and approved by the Board of Directors within 60 days following the beginning of such fiscal year. The bonus, if payable, shall be calculated and paid within 30 days after the end of the fiscal year in which such bonus was earned; provided , however , that the Company may delay the calculation and payment of any portion of such bonus which is based on the attainment of a revenue, earnings or similar milestone until the completion of the audit of the Company’s financial statements for the fiscal year in question. {I am not sure we want to start this until the company is generating revenue}

 

3.3 Long-Term Incentives . The Company may from time to time establish incentive programs, including but not limited to stock options, and the Executive will be eligible to participate in such incentive programs under terms to be set when such programs are approved by the Board and Shareholders.

 

3.4 Fringe Benefits . Executive shall be entitled to participate in all bonus and benefit programs that the Company establishes and makes available to its executive employees, if any, to the extent that Executive’s position, tenure, salary, age, health and other qualifications make Executive eligible to participate, including, but not limited to health care plans, short and long term disabilities plans, life insurance plans, retirement plans, and all other benefit plans from time to time in effect. Executive shall also be entitled to take four (4) weeks of fully paid vacation in accordance with Company policy.

 

3.5 Reimbursement of Certain Expenses . Executive shall be reimbursed for such reasonable and necessary business expenses incurred by Executive while Executive is employed by the Company, which are directly related to the furtherance of the Company’s business, including compensation under the Company’s standard policies if Executive uses his personal vehicle for Company business where such business is more than one hundred fifty (150) miles from the Company’s main offices or Executive’s home, wherever such trip commences. The Executive must submit any request for reimbursement no later than fifteen (15) days following the date that such business expense is incurred in accordance with the Company’s reimbursement policy regarding same and business expenses must be substantiated by appropriate receipts and documentation. The Company may request additional documentation or a further explanation to substantiate any business expense submitted for reimbursement, and retains the discretion to approve or deny a request for reimbursement. If a business expense reimbursement is not exempt from Section 409A of the Code, any reimbursement in one calendar year shall not affect the amount that may be reimbursed in any other calendar year and a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit or payment. Any business expense reimbursements subject to Section 409A of the Code shall be made no later than the end of the calendar year following the calendar year in which such business expense is incurred by the Executive.

 

3.6 Indemnification . The Company shall continue to indemnify Executive to the fullest extent permitted under applicable law, the Company’s Articles of Organization and the Company’s By-laws, each as they may be amended from time to time. The Executive shall be insured under the Company’s Directors’ and Officers’ liability policy in the same manner as other senior executives of the Company for as long as Executive is an officer or director of the Company and as long as the Company maintains such policy in force. Such indemnity and insurance shall survive the termination of Executive’s employment by the Company.

 

2

 

 

4. Termination of Employment Period . Executive’s employment under the terms of this agreement may terminate upon the occurrence of any of the following:

 

4.1 Termination for Cause . At the election of the Company, for “Cause,” upon written notice by the Company to Executive. For the purposes of this Section, “Cause” for termination shall be deemed to exist upon the occurrence of any of the following:

 

(a) Executive’s conviction or entry of nolo contendere to any felony or a crime involving moral turpitude, fraud or embezzlement of Company property; or

 

(b) Executive’s dishonesty, gross negligence or gross misconduct that is materially injurious to the Company or material failure to perform her/his duties under this Agreement which has not been cured by Executive within 10 days after he/she shall have received written notice from the Company stating with reasonable specificity the nature of such failure to perform; or

 

(c) Executive’s illegal use or abuse of drugs, alcohol, or other related substances that is materially injurious to the Company.

 

4.2 Voluntary Termination by the Company . At the election of the Company, without Cause.

 

4.3 Death or Disability . Upon the death or disability of Executive. As used in this Agreement, “disability” shall occur when Executive, due to a physical or mental disability, for a period of 90 days in the aggregate whether or not consecutive, during any 360-day period, is unable to perform the services contemplated under this Agreement.

 

4.4 Termination for Good Reason . Subject to the notice and cure periods set forth in Section 5.5, at the election of Executive for “Good Reason” (as defined below), upon written notice by the Executive to the Company.

 

4.5 Voluntary Termination by Executive . At the election of Executive, without. Good Reason, upon not less than 30 days prior written notice by him/her to the Company.

 

5. Effect of Termination .

 

5.1 Termination for Cause, at the Election of Executive, or at Death or Disability . In the event that Executive’s employment is terminated for Cause, the Company shall have no further obligations under this Agreement other than to pay to Executive Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company. In the event that Executive’s employment is terminated upon Executive’s death or disability, or at the election of Executive, the Company shall have no further obligations under this Agreement other than (i) to pay to Executive, in a single lump sum upon such termination, Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company and (ii) to pay to Executive, in a single lump sum, pro rata portion of any bonus (to the extent earned prior to such termination) for the fiscal year in which termination occurs, pursuant to Section 3.2.

 

3

 

 

5.2 Voluntary Termination by the Company, or for Good Reason . In the event that Executive’s employment is terminated during the term of this Agreement without Cause, or by Executive’s resignation for Good Reason, and Executive executes a release in favor of the Company substantially in the form annexed hereto as Exhibit A, not later than 30 days after Executive’s employment terminates, and the period in which Executive is entitled to revoke such release has expired without any such revocation, then the Company shall continue to pay to Executive the annual Base Salary in effect immediately prior to such termination for the twelve-month period following Executive’s last day of employment. In addition, the Company shall continue Executive’s coverage under and its contributions towards Executive’s health care, dental, and life insurance benefits on the same basis as immediately prior to the date of termination, except as provided below, for the six-month period following Executive’s last day of employment. In addition to the foregoing amounts, the Company shall pay Executive in a single lump sum, a pro rata portion of any bonus (to the extent earned prior to such termination) for the year in which termination occurs, pursuant to Section 3.2. Notwithstanding the foregoing, subject to any overriding laws, the Company shall not be required to provide any health care, dental, or life insurance benefit otherwise receivable by Executive if Executive is actually covered or becomes covered by an equivalent benefit (at the same cost to Executive, if any) from another source. Any such benefit made available to Executive shall be reported to the Company.

 

5.3 Notwithstanding any other provision of this Amended Agreement with respect to the timing of payments under Section 5, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” of the Company within the meaning of Section 409A(a)(2)(B)(i) of the Code, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which the Executive may become entitled under Section 5 which are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first business day of the seventh month following the date of termination, at which time the Executive shall be paid an aggregate amount equal to six months of payments otherwise due to the Executive under the terms of Section 5, as applicable. After the first business day of the seventh month following the date of termination and continuing each month thereafter, the Executive shall be paid the regular payments otherwise due to the Executive in accordance with the terms of Section 5, as thereafter applicable.

 

5.4 Upon Executive’s termination without Cause during the term of this Agreement, or as a result of Executive’s resignation for Good Reason during the term of this Agreement, all stock options granted by the Company and then held by Executive shall be accelerated and become fully vested and exercisable as of the date of Executive’s termination.

 

4

 

 

5.5 As used in this Agreement, “Good Reason” means, without Executive’s written consent, (a) a “material diminution” (as such term is used in Section 409A of the Code) of the duties assigned to Executive (provided, however, that no termination of Executive’s service as a member of the Board, regardless of the reason therefore, shall constitute a “material diminution” of Executive’s duties for purposes of this Section 5.5); or (b) a material reduction in Base Salary or other benefits (other than a reduction or change in benefits generally applicable to all executive employees of the Company); or (c) relocation to an office more than 50 miles further from Executives current residence in Virginia than the Company’s current location in the greater Washington, DC metropolitan area is located from such residence; or (d) a “Change of Control” of the Company, as that term is defined in the Control Plan; or (e), the acquisition (other than an acquisition directly from the Company) by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding shares of voting stock of the Company (the “Voting Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of (i) 50% or more of the then outstanding Voting Stock, or (ii) Voting Stock which has the effect of increasing the percentage of Voting Stock owned by any such individual, entity or group to 50% or more of the then outstanding Voting Stock, shall not constitute a Change of Control. In the event Executive resigns for Good Reason within twelve (12) months after a Change of Control or acquisition, as defined in (d) or (e) above, Executive shall receive, in addition to any severance to which he/she is entitled under § 5.2 of the Employment Agreement as amended, an additional sum equal to twelve (12) months of his/her base salary then in effect. Notwithstanding the occurrence of any of the events enumerated in this Section 5.5, no event or condition shall be deemed to constitute Good Reason unless (i) Executive reports the event or condition which the Executive believes to be Good Reason to the Board, in writing, within 45 days of such event or condition occurring and (ii) within 30 days after the Executive provides such written notice of Good Reason, the Company has failed to fully correct such Good Reason and to make the Executive whole for any such losses.

 

5.6 The provisions of this Section 5 and the payments provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code, and shall be interpreted and administered consistent with such intent. To the extent required for compliance with Section 409A, references in this Agreement to a “termination of employment” shall mean a “separation of service” as defined by Section 409A. It is further intended that each installment of the payments provided hereunder shall be treated as a separate “payment” for purposes of Section 409A. Neither the Company nor Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

 

6. Nondisclosure and Noncompetition .

 

6.1 Proprietary Information .

 

(a) Executive agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, designs, drawings, slogans, tests, logos, ideas, practices, projects, developments, plans, research data, financial data, personnel data, computer programs and codes, and customer and supplier lists. Executive will not disclose any Proprietary Information to others outside the Company except in the performance of his/her duties or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge or generally known within the industry without fault by Executive, or unless otherwise required by law.

 

5

 

 

(b) Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, electronic or other material containing Proprietary Information, whether created by Executive or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by Executive only in the performance of her/his duties for the Company.

 

(c) Executive agrees that his/her obligation not to disclose or use information, know-how and records of the types set forth in paragraphs (a) and (b) above, also extends to such types of information, know-how, records and tangible property of subsidiaries and joint ventures of the Company, customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to Executive in the course of the Company’s business.

 

6.2 Inventions .

 

(a) Disclosure . Executive shall disclose promptly to an officer or to attorneys of the Company in writing any idea, invention, work of authorship, whether patentable or un-patentable, copyrightable or un-copyrightable, including, but not limited to, any computer program, software, command structure, code, documentation, compound, genetic or biological material, formula, manual, device, improvement, method, process, discovery, concept, algorithm, development, secret process, machine or contribution (any of the foregoing items hereinafter referred to as an “Invention”) Executive may conceive, make, develop or work on, in whole or in part, solely or jointly with others. The disclosure required by this Section applies (a) to any invention related to the general line of business engaged in by the Company or to which the Company planned to enter during the period of Executive’s employment with the Company and for one year thereafter; (b) with respect to all Inventions whether or not they are conceived, made, developed or worked on by Executive during Executive’s regular hours of employment with the Company; (c) whether or not the Invention was made at the suggestion of the Company; and (d) whether or not the Invention was reduced to drawings, written description, documentation, models or other tangible form.

 

(b) Assignment of inventions to Company Exemption of Certain Inventions . Executive hereby assigns to the Company without royalty or any other further consideration Executive’s entire right, title and interest in and to all Inventions which Executive conceives, makes, develops or works on during employment and for one year thereafter, except as limited by 6.2(a) above and those Inventions that Executive develops entirely on Executive’s own time after the date of this Agreement without using the Company’s equipment, supplies, facilities or trade secret information unless those Inventions either (a) relate at the time of conception or reduction to practice of the Invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (b) result from any work performed by Executive for the Company.

 

6

 

 

(c) Records . Executive will make and maintain adequate and current written records of all Inventions. These records shall be and remain the property of the Company.

 

(d) Patents . Executive will assist the Company in obtaining, maintaining and enforcing patents and other proprietary rights in connection with any Invention covered by Section 6.2. Executive further agrees that his obligations under this Section shall continue beyond the termination of his employment with the Company, but if he is called upon to render such assistance after the termination of such employment, he shall be entitled to a fair and reasonable rate of compensation for such assistance. Executive shall, in addition, be entitled to reimbursement of any expenses incurred at the request of the Company relating to such assistance.

 

6.3 Prior Contracts and Inventions Information Belonging to Third Parties . Executive represents that there are no contracts to assign Inventions between any other person or entity and Executive. Executive further represents that (a) Executive is not obligated under any consulting, employment or other agreement which w oul d affect the Company’s rights or my duties under this Agreement, (b) there is no action, investigation, or proceeding pending or threatened, or any basis therefor known to me involving Executive’s prior employment or any consultancy or the use of any information or techniques alleged to be proprietary to any former employer, and (c) the performance of Executive’s duties as an employee of the Company will not breach, or constitute a default under any agreement to which Executive is bound, including, without limitation, any agreement limiting the use or disclosure of proprietary information acquired in confidence prior to engagement by the Company. Executive will not, in connection with Executive’s employment by the Company, use or disclose to the Company any confidential, trade secret or other proprietary information of any previous employer or other person to which Executive is n o t lawfully entitled.

 

6.4 Noncompetition and Non-solicitation .

 

(a) During Executive’s employment with the Company and for a period of 12 months after the termination of Executive’s employment with the Company for any reason or for no reason, Executive will not directly or indirectly, absent the Company’s prior written approval, render services of a business, professional or commercial nature to any other person or entity in the area of quantum computing development or such other services or products provided by the Company at the time employment terminates in any geographical area where the Company does business at the time this covenant is in effect, whether such services are for compensation or otherwise, whether alone or in conjunction with others, as an employee, as a partner, or as a shareholder (other than as the holder of not more than 1% of the combined voting power of the outstanding stock of a public company), officer or director of any corporation or other business entity, or as a trustee, fiduciary or in any other similar representative capacity.

 

7

 

 

(b) During the Executive’s employment with the Company and for a period of 12 months after the termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, recruit, solicit or induce, or attempt to recruit, solicit or induce any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company.

 

(c) During the Executive’s employment with the Company and for a period of 12 months after termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, contact, solicit, divert or take away, or attempt to solicit, contact, divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company.

 

6.5 Interpretation of Agreement . If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

 

6.6 Restrictions Necessary . The restrictions contained in this Section are necessary for the protection of the business, proprietary information, and goodwill of the Company and are considered by Executive to be reasonable for such purpose. Executive agrees that any breach of this Section will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. The prevailing party shall be entitled to recover its reasonable attorneys’ fees in such an action. In addition, the Company’s obligation to pay Executive the amount set forth in Section 5.2 or 5.3 shall terminate in the event Executive materially breaches any terms and conditions in Section 6.

 

7. Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral relating to the subject matter of this Agreement between th e Company and the Executive. For the avoidance of doubt, however, this Agreement is in addition to, and shall not supersede any stock option agreement between the Company and Executive.

 

8. Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and Executive.

 

9. Arbitration . All disputes concerning compliance with or the interpretation of this Agreement, or any other aspect of Executive’s employment with the Company or the termination of that employment, shall be resolved by a single arbitrator under the Employment Dispute Rules then obtaining of the American Arbitration Association. The decision of the arbitrator shall be final and binding. Notwithstanding the foregoing, any claims by the Company concerning Executive’s compliance with the Nondisclosure and Noncompetition provisions of this Agreement are excluded from the scope of this Arbitration provision and may be brought in any court of competent jurisdiction. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflicts of laws thereunder.

 

8

 

 

10. Notices . Any notice or other communication required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by U.S. registered or certified mail (return receipt requested), or sent via facsimile (with receipt of confirmation of complete transmission) to the party at the party’s last known address or facsimile number or at such other address or facsimile number as the party may have previously specified by like notice. If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section.

 

11. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation into which the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of Executive are personal and shall not be assigned by her/him.

 

12. Miscellaneous .

 

12.1 No Waiver . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

 

12.2 Severability . In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

 

12.3 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument and facsimile signatures delivered by fax or e-mail transmission shall be treated as originals.

 

[Signature page follows]

 

9

 

 

IN WITNESS WHEREOF , each of the Company and Executive has executed this Amendment as of the date first above written.

 

  QUANTUM COMPUTING INC.
       
  By: /s/ Christopher Roberts
    Name: Christopher Roberts
    Title: Chief Financial Officer
       
  Date Executed: March 1, 2018

 

  /s/ Robert Liscouski
  Robert Liscouski
   
  Date Executed: March 1, 2018

 

[Signature page for employment agreement]

 

10

 

 

Exhibit A

 

General Release of Claims

 

1. Your Release of Claims. By signing this Agreement, you hereby agree and acknowledge that, for good and valuable consideration, you are waiving your right to assert any and all forms of legal claims against the Company 1/ of any k ind whatsoever, whether known or unknown, arising from the beginning of time through the date you execute this Agreement (the “Execution Date”). Except as set forth below, your waiver and release herein is intended to bar any form of legal claim, complaint or any other form of action (jointly referred to as “Claims”) against the Company seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys’ fees and any other costs) against the Company, for any alleged action, inaction or circumstance existing or arising through the Execution Date.

 

Without limiting the foregoing general waiver and release, you specifically waive and release the Company from any Claim arising from or related to your prior employment relationship with the Company or the termination thereof, including, without limitation:

 

** Claims under any state or federal discrimination, fair employment practices or other employment related statute, regulation or executive order (as they may have been amended through the Execution Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, national origin, age, gender, marital status, disability, veteran status or sexual orientation. Without limitation, specifically included in this paragraph are any Claims arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the Americans With Disabilities Act and any similar Federal and state statute.

 

** Claims under any other state or federal employment related statute, regulation or executive order (as they may have been amended through the Execution Date) relating to wages, hours or any other terms and conditions of employment.

 

** Claims under any state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence.

 

** Any other Claim arising under state or federal law.

 

 

1/ For purposes of this Agreement, the Company includes the Company and any of its divisions, affiliates (which means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company), subsidiaries and all other related entities, and its and their directors, officers, employees, trustees, agents, successors and assigns.

 

11

 

 

You acknowledge and agree that, but for providing this waiver and release, you would not be receiving the economic benefits being provided to you under the terms of this Agreement. You further acknowledge that this release does not waive any claims you cannot by law waive and does not release any claims that arise after its execution.

 

It is the Company’s desire and intent to make certain that you fully understand the provisions and effects of this Agreement. To that end, you have been advised and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Also, because you are over the age of 40, the Age Discrimination in Employment Act (“ADEA”), which prohibits discrimination on the basis of age, allows you at least twenty-one (21) days to consider the terms of this Agreement. ADEA also allows you to rescind your assent to this Agreement if, within seven (7) days after you sign this Agreement, you deliver by hand or send by mail (certified, return receipt and postmarked within such 7 day period) a notice of rescission to the Company. The eighth day following your signing of this Agreement is the Effective Date.

 

Also, consistent with the provisions of Federal law, nothing in this release shall be deemed to prohibit you from challenging the validity of this release under the discrimination laws (the “Federal Discrimination Laws”) or from filing a charge or complaint of employment-related discrimination with the Equal Employment Opportunity Commission (“EEOC”) or any state fair employment practices agency, or from participating in any investigation or proceeding conducted by the EEOC or any state fair employment practices agency. Further, nothing in this release or Agreement shall be deemed to limit the Company’s right to seek immediate dismissal of such charge or complaint on the basis that your signing of this Agreement constitutes a full release of any individual rights under the Federal Discrimination Laws, or to seek restitution to the extent permitted by law of the economic benefits provided to you under this Agreement in the event that you successfully challenge the validity of this release and prevail in any claim under the Federal Discrimination Laws.

 

  By:  
    Executive:
    Date signed: March 1, 2018

 

12

Exhibit 10.2

 

QUANTUM COMPUTING INC.

215 Depot Court, SE
Leesburg, VA 20175

 

March 1, 2018

 

Mr. Christopher Roberts

1014 Priory Place

McLean, VA 22101

 

Re: Consulting Services Agreement

 

Dear Mr. Roberts:

 

This letter agreement (this “Agreement”) sets forth the terms and conditions whereby you agree to provide certain services to Quantum Computing Inc. a Delaware corporation (the “Company” ).

 

1. SERVICES .

 

(a) The Company hereby engages you, and you hereby accept such engagement, as an independent contractor to provide certain services to the Company and its subsidiaries on the terms and conditions set forth in this Agreement. Specifically, you will provide financial and accounting and business strategy services (the “Services”) to the Company and its subsidiaries, including assisting with the preparation and compilation of the consolidated financial statements of the Company and its subsidiaries and its reports filed with the U.S. Securities & Exchange Commission and any stock exchange on which the Company’s securities are listed, assisting with any financial and accounting due diligence investigation for any potential acquisitions by the Company, and to generally assist with other financial, accounting and business strategy matters.

 

(b) The Company shall not control the manner or means by which you perform the Services, including the time and place you perform the Services. You shall furnish, at your own expense, the equipment, supplies, and other materials used to perform the Services. The Company shall provide you with access to its premises and equipment to the extent necessary for the performance of the Services.

 

(c) Your primary contact for the Services and other matters under this Agreement will be the Company’s President, currently Robert Liscouski, who will have authority on behalf of the Company to make all determinations and take all actions on behalf of the Company under this Agreement.

 

2. TERMINATION . This Agreement may be terminated by either party at will, for any reason or no reason, on fourteen (14) days’ prior written notice. Each party’s obligations under this Agreement, including your obligations under including Sections 5, 7 and 9 and the Company’s payment obligations, shall survive the termination of this Agreement, regardless of the manner or nature of such termination, and shall be binding upon each party and its heirs, executors, administrators and successors. The termination of this Agreement and the expiration of any restricted periods under this Agreement that apply thereafter will not relieve a party of any obligation or liability arising from any breach by such party of this Agreement during the term or such restricted period.

 

3. FEES AND EXPENSES . As full compensation for the Services the Company shall pay you fees of One Hundred Fifty U.S. Dollars ($150.00) per hour (the Fees ”). You acknowledge that you will receive an IRS Form 1099-MISC from the Company, and that you shall be solely responsible for all federal, state, and local taxes on all fees paid under this Agreement. The Company agrees to reimburse you for your reasonable documented out-of-pocket travel and meal expenses incurred in connection with the provision of the Services hereunder and that are approved in advance by the Company (the “Expenses”). The Company shall pay all undisputed Fees and Expenses within twenty (20) days after the Company’s receipt of an invoice submitted by you.

 

 

 

 

4. RELATIONSHIP OF THE PARTIES . You are an independent contractor of the Company, and this Agreement shall not be construed to create any association, partnership, joint venture, employee, or agency relationship between you and the Company for any purpose You have no authority (and shall not hold yourself out as having authority) to bind the Company and you shall not make any agreements or representations on the Company’s behalf without the Company’s prior written consent. Without limiting the foregoing, you will not be eligible to participate in any vacation, group medical or life insurance, disability, profit sharing or retirement benefits, or any other fringe benefits or benefit plans offered by the Company to its employees, and the Company will not be responsible for withholding or paying any income, payroll, Social Security, or other federal, state, or local taxes, making any insurance contributions, including for unemployment or disability, or obtaining worker’s compensation insurance on your behalf. You shall be responsible for, and shall indemnify the Company against, all such taxes or contributions, including penalties and interest. Any persons employed or engaged by you in connection with the performance of the Services shall be your employees or contractors and you shall be fully responsible for them and indemnify the Company against any claims made by or on behalf of any such employee or contractor.

 

5. CONFIDENTIALITY AND BUSINESS OPPORTUNITIES .

 

(a) You acknowledge that you will have access to the confidential and proprietary information of the Company and its subsidiaries, including trade secrets, technology, and information pertaining to business operations and strategies, customers, pricing, marketing, finances, sourcing, personnel, or operations of the Company, its affiliates or their respective suppliers or customers, as well as information regarding the status of the receivership of the Company and any potential business combination targets that the Company may seek, in each case whether spoken, written, printed, electronic, or in any other form or medium (collectively, the “Confidential Information” ). Confidential Information also includes any information disclosed by third parties, including any potential acquisition, merger or other business combination target or partner of the Company or its affiliates, to the extent that the Company or its affiliate has an obligation of confidentiality in connection therewith. Notwithstanding the foregoing, Confidential Information shall not include information that: (i) is or becomes generally available to the public other than through your breach of this Agreement; (ii) is communicated to you by a third party (other than the Company or its affiliates or their respective agents or representatives) that had no confidentiality obligations with respect to such information; or (iii) is developed by you independently and without reference to the Confidential Information (as can be demonstrated by the records and files in your possession).

 

(b) You agree to treat all Confidential Information as strictly confidential, not to disclose Confidential Information or permit it to be disclosed, in whole or part, to any third party without the prior written consent of the Company in each instance, and not to use any Confidential Information for any purpose except as required in the performance of the Services. You shall notify the Company immediately in the event you become aware of any loss or disclosure of any Confidential Information in violation of this Agreement.

 

(c) Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency; provided that (i) the Company is given reasonable prior written notice, (ii) you cooperate with any reasonable request of the Company or its affiliates to seek to prevent or narrow such disclosure and (iii) if after compliance with clauses (i) and (ii) such disclosure is still required, you only disclose such portion of the Confidential Information that is expressly required to be disclosed by such law, regulation or order, as it may be subsequently narrowed.

 

2

 

 

(d) Upon termination of this Agreement for any reason, or at any other time upon the Company’s written request, you shall, within seven (7) days after such termination: (i) deliver to the Company all tangible documents and materials (and any copies) containing, reflecting, incorporating, or based on the Confidential Information; (ii) permanently erase all of the Confidential Information from your computer systems; and (iii) certify in writing to the Company that you have complied with the requirements of this clause.

 

(e) Notwithstanding any other provision of this Agreement, during the term of this Agreement and for a period of twelve (12) months thereafter, you may not usurp or divert any business or corporate opportunity of the Company or its subsidiaries or, other than in the performance of the Services during the term, disclose the identity of any actual or potential merger, acquisition or other business combination target or partner of the Company or its affiliates to anyone.

 

6. NOTICE OF IMMUNITY UNDER THE ECONOMIC ESPIONAGE ACT OF 1996, AS AMENDED BY THE DEFEND TRADE SECRETS ACT OF 2016 . Notwithstanding any other provision of this Agreement, you will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the Company’s trade secrets to your attorney and use the trade secret information in the court proceeding if you file any document containing the trade secret under seal and do not disclose the trade secret, except pursuant to court order.

 

7. WORKS FOR HIRE . As used herein, “Intellectual Property” means any invention, concept, design, work, plan, product, equipment, idea, improvement, patent, patent application, copyright, copyright application, work of authorship, mask work, any trademark, service mark, trade dress, brand name, business name or logo (including, in each case, appurtenant goodwill), trade secret, Confidential Information, method, internet domain name, hamlet domain name registration, web site, web page, computer program, software (whether source code or object code), system design, hardware, manual, manuscript, or other documentation, or other thing, tangible or intangible, stored or saved in any medium now or heretofore known, or any improvements thereof which is, was or will be: (i) made, developed or conceived, wholly or partially, solely by you or jointly with others in the provision of the Services hereunder; or (ii) conceived, created or developed by you, wholly or partially and/or alone or with others, using the facilities, properties, equipment or other resources of the Company or its affiliates. The parties hereto expressly agree that any such Intellectual Property shall be considered a work made for hire, and that all such Intellectual Property belongs to and shall be the sole and exclusive property of the Company (or its designee or successor or assign). To the extent that any such Intellectual Property is deemed not to be a work made for hire, you hereby irrevocably grant, assign, transfer, and convey to the Company or its designee, successors or assigns all rights, title, and interest in and to all Intellectual Property, and in and to all income, royalties, damages, claims and payments now or hereafter due or payable with respect thereto, and in and to all causes of action, either in law or in equity for past, present, or future infringement of the Intellectual Property, and in and to all rights corresponding to the foregoing throughout the world. If the Intellectual Property is one to which the provisions of 17 U.S.C. § 106A apply, you hereby waive and appoint the Company to assert on your behalf your moral rights or any equivalent rights regarding the form or extent of any alteration to the Intellectual Property (including removal or destruction) or the making of any derivative works based on the Intellectual Property, including photographs, drawings or other visual reproductions or the Intellectual Property, in any medium, for the Company’s purposes. You further agree that, during and at any time after the term, you shall execute any and all further documents necessary or advisable to effectuate such assignment solely to the Company or its nominees, and shall cooperate in every lawful fashion to effectuate such assignment.

 

3

 

 

8. REPRESENTATIONS AND WARRANTIES .

 

(a) You represent, warrant and covenant to the Company that: (i) you have the right to enter into this Agreement and to perform fully all of your obligations in this Agreement; (ii) your entering into this Agreement with the Company and your performance of the Services do not and will not conflict with or result in any breach or default wider any other agreement to which you are subject; (iii) you have the required skill, experience, and qualifications to perform the Services; (iv) you shall perform the Services in a professional and workmanlike manner in accordance with generally recognized industry standards for similar services and you shall devote sufficient resources and your best efforts to ensure that the Services are performed in a timely, professional and reliable manner; (v) you shall perform the Services in compliance with all applicable federal, state, local and foreign laws and regulations; and (vi) you shall not export, directly or indirectly, any technical data acquired from the Company, or any products utilizing any such data, to any country in violation of any applicable export laws or regulations.

 

(b) The Company hereby represents and warrants to you that: (i) it has the full right, power, and authority to enter into this Agreement and to perform its obligations hereunder, subject to any approvals required by the Bankruptcy Court; and (ii) the execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action.

 

9. INDEMNIFICATION .

 

(a) The Company shall defend, indemnify, and hold harmless you from and against all losses, damages, liabilities, deficiencies, actions, judgments, interest, awards, penalties, fines, costs, or expenses of whatever kind (including reasonable attorneys’ fees and costs) (“ Losses ”) paid, suffered or incurred by you to the extent caused by, arising out of or resulting from a breach or violation of this Agreement by the Company.

 

(b) You shall defend, indemnify, and hold harmless the Company and its affiliates and their respective officers, directors, employees, agents, successors, and assigns from and against all Losses paid, suffered or incurred by any of them to the extent caused by, arising out of or resulting from: (i) negligent acts or omissions. willful misconduct or malfeasance in the performance of the Services hereunder, (ii) a breach or violation of this Agreement by you or (iii) any national, federal, state, provincial, municipal or other governmental authority challenging your classification as an independent contractor of the Company rather than an employee or that all or any portion of the amounts paid to you by the Company are subject to income taxes or any other employment-related taxes.

 

10. OTHER BUSINESS ACTIVITIES . You may be engaged or employed in any other business, trade, profession, or other activity which does not place you in a conflict of interest with the Company or otherwise violate the provisions of this Agreement, including any of your obligations under Sections 5, 7 or 8(a).

 

11. ASSIGNMENT . You shall not assign any rights, or delegate or subcontract any obligations, under this Agreement without the Company’s prior written consent. Any assignment in violation of the foregoing shall be deemed null and void ab initio. The Company may freely assign its rights and obligations under this Agreement at any time. Subject to the limits on assignment stated above, this Agreement will inure to the benefit of, be binding on, and be enforceable against each of the parties hereto and their respective successors and assigns.

 

4

 

 

12. MISCELLANEOUS .

 

(a) All notices, requests, consents, claims, demands, waivers, and other communications hereunder (each, a “Notice” ) shall be in writing and addressed to the parties at the addresses set forth on the first page of this Agreement (or to such other address that may be designated by the receiving party from time to time in accordance with this Section). All Notices shall be delivered by personal delivery, nationally recognized overnight courier (with all fees prepaid), facsimile or email (with affirmative confirmation of receipt), or certified or registered mail (in each case, return receipt requested, postage prepaid). Except as otherwise provided in this Agreement, a Notice is effective only if (i) the receiving party has received the Notice and (ii) the party giving the Notice has complied with the requirements of this Section.

 

(b) This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to such subject matter.

 

(c) Except as otherwise provided herein or by applicable law, this Agreement may not be amended or changed in any respect, except by a written agreement executed by both parties hereto. No waiver will be effective unless it is expressly set forth in a written instrument executed by the waiving party and any such waiver will have no effect except in the specific instance in which it is given. Any delay or omission by a party (including any third party beneficiary) in exercising its rights under this Agreement, or failure to insist upon strict compliance with any term, covenant, or condition of this Agreement will not be deemed a waiver of such term, covenant, condition or right, nor will any waiver or relinquishment of any right or power under this Agreement at any time or times be deemed a waiver or relinquishment of such right or power at any other time or times.

 

(d) This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule. Each party irrevocably submits to the exclusive jurisdiction and venue of (i), during the period of the Company Receivership, the Bankruptcy Court, and (ii) after the entry of a final decree by the Bankruptcy Court closing the Company Case, the federal and state courts located in Fairfax or Alexandria County, Commonwealth of Virginia (or any appellate courts thereof) in any legal suit, action, or proceeding arising out of or based upon this Agreement or the Services provided hereunder, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding in which any such claim is made that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts. Each party hereby knowingly, voluntaril y and intentionally irrevocably waives the right to a trial by jury in respect to any litigation based hereon, or arising out of, under, or in connection with this Agreement.

 

(e) If any term or provision of this Agreement, is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term, or provision in any other jurisdiction. In lieu of any such invalid, illegal or unenforceable provision, the parties hereto intend that there shall be added as part of this Agreement a provision as similar in terms to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.

 

5

 

 

(f) You acknowledge and agree that irreparable injury may result to the Company or its affiliates if you breach any of the terms of this Agreement, including Sections 5 and 7 hereof, and that the Company and its affiliates may have no adequate remedy at law. You accordingly agrees that in the event of any actual or threatened breach or non-performance by you of this Agreement, including Sections 5 and 7 hereof, the Company and its affiliates will be entitled to injunctive and other equitable relief from any court of competent jurisdiction, without the necessity of showing actual monetary damages or the posting of a bond or other security. All remedies provided for in this Agreement are cumulative of all other remedies existing at law or in equity, and nothing contained herein shall be construed as prohibiting the Company or its affiliates from pursuing any other remedies available to it for any breach or threatened breach by you, including the recovery of damages. The non-prevailing party to any litigation, action or other legal proceeding that is determined Under this Agreement will pay its own expenses and the reasonable documented out-of-pocket expenses, including reasonable attorneys’ fees and costs, reasonably incurred by the prevailing party.

 

(g) The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The use in this Agreement of a masculine, feminine or neither pronoun shall be deemed to include a reference to the others. In this Agreement, the singular includes the plural and the plural the singular. In this Agreement: (i) the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; and (ii) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement.

 

(h) The parties hereto agree that each party has participated in the drafting and preparation of this Agreement, and, accordingly, in any construction or interpretation of this Agreement, the same shall not be construed against any party by reason of the source of drafting.

 

(i) This Agreement may be executed in multiple counterparts and by facsimile signature (including via pdf or other electronic document transmission), each of which shall be deemed an original and all of which together shall constitute one instrument.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

6

 

 

If this letter accurately sets forth our understanding, kindly execute the enclosed copy of this letter and return it to the undersigned.

 

  Very truly yours,
   
  QUANTUM COMPUTING INC.
     
  By: /s/ Robert Lisocuski
  Name: Robert Liscouski
  Title: CEO

 

Accepted and agreed effective as of the date first set forth above.

 

/s/ Christopher Roberts  
Christopher Roberts  

 

[Signature Page to Services Agreement]

 

 

 

Exhibit 10.3

 

QUANTUM COMPUTING INC. EMPLOYMENT/ CONSULTING AGREEMENT

 

EMPLOYEE (PRINT FULL NAME) Sergey Shuster

 

THIS AGREEMENT made between me, the above-named person (“Employee”), and Quantum Computing Inc., a Delaware Corporation, hereinafter referred to as “QUANTUM” WITNESSETH:

 

1. Scope of Work. QUANTUM shall employ the Employee for consulting engagements and “Work for hire”. The Employee shall, at the direction of QUANTUM’s management, provide these development services and project management with the appropriate documentation to QUANTUM’s. The Employee shall perform faithfully the duties assigned to them to the best of their ability.

 

2.  Termination. The Employee contract period shall continue until terminated by either QUANTUM or the Employee pursuant to the notice requirements of this paragraph. Each party shall provide thirty days written notice. QUANTUM may terminate the Employee immediately if the Employee engages in serious misconduct or dishonesty or if QUANTUM Investors terminates the venture.

 

3. Compensation. As compensation for service, QUANTUM shall compensate the Employee at a rate of per $18,333 per month paid twice per month, typically on the l st and 15 th of each month.

 

3.1 Stock. As further compensation for service, employee will receive 400,000 shares of stock (Tkr: QBIT) under a separate agreement.

 

4. Employee Benefits. During the contract period, The Employee shall be entitled to participate in employee benefit plans, such as life and health insurance and other medical benefits. Employee benefit plan is being defined.

 

5. Business Expenses. QUANTUM shall reimburse the Employee for all reasonable and necessary business expenses incurred by tile Employee in performing duties only if required by tile client. The Employee shall provide QUANTUM with supporting documentation sufficient to satisfy reporting requirements of the Internal Revenue Service.

 

6. Noncompetition and Nondisclosure. The Employee acknowledges that the successful development and marketing of QUANTUM professional services and products require substantial time and expense. Such efforts generate for QUANTUM valuable and proprietary information (“confidential information”) which gives QUANTUM a business advantage over others who do not have such information. Confidential information includes but is not limited to tile following: business plans, methodologies, training materials, analytic models and computer software. The Employee acknowledges that during tile contract period he/she may obtain knowledge of such confidential information. Accordingly, the Employee agrees to undertake the following obligations which he/she acknowledges to be reasonably designed to protect QUANTUM’s legitimate business interests without unnecessarily or unreasonably restricting the Employee.

 

  a) Upon termination for any reason, tile Employee shall return all QUANTUM property, including but not limited to computer programs, files, notes, records, charts, or other documents or things containing in whole or in part any of QUANTUM’s confidential information;

 

  b) The Employee shall refrain from using or disclosing to any person, without the prior written approval of QUANTUM’s principals and executive officers any confidential information unless at that time the information has become generally and lawfully known to QUANTUM’s competitors.

 

  c) Without limiting tile obligations of paragraph 6 (b), the Employee shall not, for a period of two years following termination for any reason, for self or as agent, partner or employee of filly person, firm or corporation, engage in tile practice of consulting for filly client of QUANTUM for whom the Employee performed services, or prospective QUANTUM client to whom the Employee submitted, or assisted in the submission of, a proposal during the contract period, unless a prior relationship between the Employee and client is disclosed to QUANTUM’s management prior to tile execution of this Agreement. If a prior relationship between the Employee and client is disclosed to QUANTUM’s management prior to the execution of this Agreement, the Employee shall not for a period of one year following termination for any reason, for self or as agent, partner or employee of filly person, firm or corporation, engage in the practice of consulting on any client project for which The Employee performed similar services or for any add-on or related client projects unless mutually agreed upon in writing.

 

 

 

 

  d) During the contract period and for a two-year period immediately following termination of the Employee for any reason, neither the Employee nor QUANTUM shall induce or assist in the inducement of any employee away from the other party’s employ or from the faithful discharge of such employee’s contractual and fiduciary obligations to serve his employer’s interests with undivided loyalty;
     
  e) For two years following the termination of the Employee for any reason, the Employee shall keep QUANTUM currently advised in writing if he/she, acting for self or as agent, partner, representative or employee of any firm or corporation, engages in the programming of a similar product or practice of consulting for any client of QUANTUM for whom the Employee performed services, or prospective QUANTUM client to whom the Employee submitted, or assisted in the submission of, a proposal during the contract period.

 

7. Remedies. The Employee recognizes and agrees that a breach of any or all of the provisions of paragraph 6 will constitute immediate and irreparable harm to QUANTUM’s business advantage, including but not limited to QUANTUM’s valuable business relations, for which damages cannot be readily calculated and for which damages are an inadequate remedy. Accordingly, entitle Employee acknowledges that QUANTUM’s shall therefore be entitled to an order enjoining any further breaches by the Employee. The Employee agrees to reimburse QUANTUM for all costs and expenses, including reasonable attorneys’ fees incurred by QUANTUM in connection with the enforcement of its rights under any provision of this Agreement if the Employee is found in breach of this agreement.

 

8. Intellectual Property. During the contract period, The Employee shall disclose to QUANTUM all ideas, inventions and business plans which he develops during the course of engagement with respect to QUANTUM products which relate directly to his/her employment, including but not limited to any computer programs, processes, products or procedures which may, upon application, be protected by patent or copyright. The Employee agrees that any such ideas, inventions, or business plans shall be the property of QUANTUM of which the Employee does not have an equity interest and that the Employee shall at QUANTUM’s request and cost provide QUANTUM with such assurances as is necessary to secure a patent or copyright. It is expressly understood all programming and quantitative work is work for hire and the Employee shall have no intellectual property rights or interest and are all work for hire.

 

9. Notices. All notices shall be in writing. Notices intended for QUANTUM shall be either delivered personally to QUANTUM’s President or sent by registered or certified mail addressed to it at its current principal office, and notices intended for the Employee shall be either delivered personally to for Employee representative or sent by registered or certified mail addressed to last known address.

 

10. Entire Agreement. This agreement constitutes the entire agreement between QUANTUM and the Employee. The parties may modify this Agreement only by a written instrument signed by the parties.

 

11. Employee Handbook . The Employee acknowledges receipt of the QUANTUM’s Employee Handbook, and attests that the Employee has read and will abide by the policies and procedures contained within.

 

12. Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

 

13. Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

Quantum Computing, Inc. EMPLOYEE  
     
BY Sergey Shuster  
     
Signature   /s/ Sergey Schuster  
     
TITLE Data Scientist  
     
DATE February 28, 2018  

 

 

Exhibit 10.4

  

QUANTUM COMPUTING INC.

215 Depot Court, SE

Leesburg, VA 20175

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of this 23rd day of July 2018 (the “Effective Date”), between Richard E. Malinowski (“Executive”) and Quantum Computing Inc. (the “Company”), a Delaware corporation.

 

WHEREAS, on February 15, 2018, the Company and the Executive entered into an oral agreement (the “Oral Agreement”) whereby the Executive was to be employed to serve as the Company’s Chief Technology and Operations Officer (“CTOO”);

 

WHEREAS, the Company and Executive are entering into this Agreement to memorialize the terms and conditions of the Oral Agreement and the Executive is willing to continue to serve in the foregoing position on the terms and conditions set forth herein;

 

NOW, THEREFORE in consideration of the mutual covenants and promises contained herein and other good and valuable considerations, the sufficiency of which is hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1. Effective Date and Term of Employment . Since March 1, 2018 the Executive has served as the Company’s CTOO and the effective date of this Agreement is the first date listed above (the “Effective Date”). The Company will continue to employ Executive as CTOO, and Executive agrees to work for the Company, at such facility as the Company deems appropriate, to perform the duties and responsibilities inherent in such position, and such other duties and responsibilities as the Company shall from time to time as assigned to Executive. The term of this Agreement shall commence on the date hereof and shall continue for a period of two (2) years. Thereafter, this Agreement shall be automatically renewed for one year periods, unless otherwise terminated by the Company or Executive upon written notice to the other given not less than ninety (90) days prior to the next anniversary of the Agreement. ‘The initial two (2) year term may terminate as provided for in Section 4 below. The initial term and any renewals thereof shall be referred to herein as the “Term.”

 

2. Duties and Responsibilities . The Executive agrees to work for the Company as its CTOO performing all of the duties and responsibilities inherent in such position. As the CTOO the Executive shall report to the Company’s Board of Directors (the “Board”) and/or President and shall be subject to the supervision thereof, and Executive shall have such authority as is delegated by the Board and/or the President, which authority shall be sufficient for Executive to perform all of the duties of the office referenced herein. The Executive shall devote the Executive’s full time, attention and skills to the operations of the Business (as defined below) of the Company and that he will perform such duties, functions, responsibilities and authority in connection with the foregoing as are from time to time delegated to Executive by the Board, which duties shall include but shall not be limited to the responsibility of managing the design, development, delivery and support of the Company’s software and hardware products, management of the R&D staff and intellectual property assets, and the overall operations of the Company and put forth reasonable best efforts in the performance of the foregoing services. Subject to the restrictions set forth in Section 6.4, Executive may accept other board memberships or service with other charitable organizations that are not in conflict with Executive’s primary responsibilities and obligations to the Company.

 

 

 

 

3. Compensation and Benefits .

 

3.1 Salary . The Company will pay Executive a base salary of $15,000.00 twice per calendar month (i.e., at an annualized rate of $360,000 per year), payable in accordance with the Company’s customary payroll practices (the “Base Salary”). The Base Salary thereafter shall be subject to annual review and adjustment, as determined by the Board (or the Compensation Committee of the Board) in its sole discretion, provided, however, that the Base Salary may not be decreased without the Executive’s consent unless the compensation payable to all executives of the Company is also similarly reduced.

 

3.2 Annual Incentive . For the fiscal year ending December 31, 2019 and in subsequent fiscal years during the Term, Executive will be eligible to receive an annual cash bonus in an amount up to $200,000, subject to Executive achieving the performance milestones that are established and approved by the Board within 60 days following the beginning of such fiscal year. The bonus, if payable, shall be calculated and paid within 30 days after the end of the fiscal year in which such bonus was earned; provided, however, that the Company may delay the calculation and payment of any portion of such bonus which is based on the attainment of a revenue, earnings or similar milestone until the completion of the audit of the Company’s financial statements for the fiscal year in question.

 

3.3 Initial Stock Grant; Recoupment; Lock-up Agreement . As an inducement to join the Company and to recruit the necessary key technical staff, the Company agrees to grant the Executive 3,800,000 shares (the “Shares”) of Quantum Computing’s restricted common stock, to be issued upon the execution and delivery hereof. The Shares will vest immediately, but will be subject to recoupment by the Company in the event that Executive’s employment is terminated (i) by the Company for Cause, (ii) by Executive breaching this Agreement for any reason whatsoever, or (iii) by Executive without Good Reason, effective immediately as of the date of such termination, in accordance with the following schedule:

 

Termination Date   Percentage of Shares Subject to Recoupment
From Effective Date through February 29, 2020   66.66%
March 1, 2020 through February 28, 2021   33.34%

 

For the avoidance of doubt, if Executive is employed under this Agreement on March 1, 2021, this Section 3.3 shall no longer be in effect and Executive’s Shares shall not be subject to recoupment by the Company. In addition, this Section 3.3 shall not subject any other compensation given to the Executive under Section 3 hereof to recoupment by the Company.

 

The Shares are subject to the terms and conditions of the lock-up agreement delivered by the Executive to the Company, entered into as the date hereof, in the form attached hereto as Exhibit A .

 

3.4 Long-Term Incentives . The Company may from time to time establish other incentive programs, including but not limited to stock grants, stock options, and the Executive will be eligible to participate in such incentive programs under terms to be set when such programs are approved by the Board and Shareholders.

 

2

 

 

3.5 Fringe Benefits . Executive shall be entitled to participate in all bonus and benefit programs that the Company establishes and makes available to its executive employees, if any, to the extent that Executive’s position, tenure, salary, age, health and other qualifications make Executive eligible to participate, including, but not limited to health care plans, short and long term disabilities plans, life insurance plans, retirement plans, and all other benefit plans from time to time in effect. Executive shall also be entitled to take four (4) weeks of fully paid vacation in accordance with Company policy.

 

3.6 Reimbursement of Certain Expenses . Executive shall be reimbursed for such reasonable and necessary business expenses incurred by Executive while Executive is employed by the Company, which are directly related to the furtherance of the Company’s business, including compensation under the Company’s standard policies if Executive uses his personal vehicle for Company business where such business is more than one hundred fifty (150) miles from the Company’s main offices or Executive’s home, wherever such trip commences. The Executive must submit any request for reimbursement no later than fifteen (15) days following the date that such business expense is incurred in accordance with the Company’s reimbursement policy regarding same and business expenses must be substantiated by appropriate receipts and documentation. The Company may request additional documentation or a further explanation to substantiate any business expenses submitted for reimbursement, and retains the discretion to approve or deny a request for reimbursement. If a business expense reimbursement is not exempt from Section 409A of the Code, any reimbursement in one calendar year shall not affect the amount that may be reimbursed any other calendar year and a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit or payment. Any business expense reimbursements subject to Section 409A of the Code shall be made no later than the end of the calendar year following the calendar year in which such business expense is incurred by the Executive.

 

3.7 Indemnification . The Company shall indemnify Executive to the fullest extent permitted under applicable law, the Company’s Articles of Organization and the Company’s By-laws, each as they may be amended from time to time. The Executive shall be insured under the Company’s Directors’ and Officers’ liability policy in the same manner as other senior executives of the Company for as long as Executive is an officer of the Company and as long as the Company maintains such policy in force. Such indemnity and insurance shall survive the termination of Executive’s employment by the company.

 

4. Termination of Employment Period . Executive’s employment under the terms of this Agreement may terminate upon the occurrence of any of the following:

 

4.1 Termination for Cause . At the election of the Company, for “Cause,” upon written notice by the Company to Executive. For the purposes of this Section, “Cause” for termination shall be deemed to exist upon the occurrence of any of the following:

 

(a) Executive’s conviction or entry of nolo contendere to any felony or a crime involving moral turpitude, fraud or embezzlement of Company property; or

 

3

 

 

(b) Executive’s dishonesty, gross negligence or gross misconduct that is materially injurious to the Company or material failure to perform her/his duties under this Agreement which has not been cured by Executive within 10 days after he/she shall have received written notice from the Company stating with reasonable specificity the nature of such failure to perform; or

 

(c) Executive’s illegal use or abuse of drugs, alcohol, or other related substances that is materially injurious to the Company.

 

4.2  Voluntary Termination by the Company . At the election of the Company, without Cause upon 30 days prior written notice.

 

4.3 Death or Disability . Upon the death or disability of Executive. As used in this Agreement, “disability” shall occur when Executive, due to a physical or mental disability, for a period of 90 days in the aggregate whether or not consecutive, during any 360-day period, is unable to perform the services contemplated under this Agreement.

 

4.4 Termination for Good Reason . Subject to the notice and cure periods set forth in Section 5.5, at the election of Executive for “Good Reason” (as defined below), upon written notice by the Executive to the Company.

 

4.5 Voluntary Termination by Executive . At the election of Executive, without Good Reason, upon not less than 30 days prior written notice by him/her to the Company.

 

5. Effect of Termination .

 

5.1 Termination for Cause, at the Election of Executive, or at Death or Disability . In the event that Executive’s employment is terminated for Cause, the Company shall have no further obligations under this Agreement other than to pay to Executive’s Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company. In the event that Executive’s employment is terminated upon Executive’s death or disability, or at the election of Executive, the Company shall have no further obligations under this Agreement other than (i) to pay to Executive, in a single lump sum upon such termination, Base Salary and accrued vacation through the last day of Executive’s actual employment by the Company and (ii) to pay to Executive, in a single lump sum, a pro rata portion of any bonus (to the extent earned prior to such termination) for the fiscal year in which termination occurs, pursuant to Section 3.2.

 

5.2 Voluntary Termination by the Company, or for Good Reason . In the event that Executive’s employment is terminated during the term of this Agreement without Cause, or by Executive’s resignation or Good Reason, and Executive executes a release of claims in favor of the Company, not later than 30 days after Executive’s employment terminates, and the period in which Executive is entitled to revoke such release has expired without any such revocation, then the Company shall continue to pay to Executive the annual Base Salary in effect immediately prior to such termination for the twelve-month period following Executive’s last day of employment. In addition, the Company shall continue Executive’s coverage under and its contributions towards Executive’s health care, dental, and life insurance benefits on the same basis as immediately prior to the date of termination, except as provided below, for the six-month period following Executive’s last day of employment. In addition to the foregoing amounts, the Company shall pay Executive in a single lump sum, a pro rata portion of any bonus (to the extent earned prior to such termination) for the year in which termination occurs, pursuant to Section 3.2. Notwithstanding the foregoing, subject to any overriding laws, the Company shall not be required to provide any health care, dental, or life insurance benefit otherwise receivable by Executive if Executive is actually covered or becomes covered by an equivalent benefit (at the same cost to Executive, if any) from another source. Any such benefit made available to Executive shall be reported to the Company.

 

4

 

 

5.3 Notwithstanding any other provision of this Amended Agreement with respect to the timing of payments under Section 5, if, at the time of the Executive’s termination, the Executive is deemed to be “specified employee” of the Company within the meaning of Section 409A(a)(2)(B)(i) of the Code, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which the Executive may become entitled under Section 5 which are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first business day of the seventh month following the date of termination, at which time the Executive shall be paid an aggregate amount equal to six months of payments otherwise due to the Executive under the terms of Section 5, as applicable. After the first business day of the seventh month following the date of termination and continuing each month thereafter, the Executive shall be paid the regular payments otherwise due to the Executive in accordance with the terms of Section 5, as thereafter applicable.

 

5.4 Upon Executive’s termination without Cause during the term of this Agreement, or as a result of Executive’s resignation for Good Reason during the term of this Agreement, all stock options granted by the Company and then held by Executive shall be accelerated and become fully vested and exercisable as of the date of Executive’s termination.

 

5.5 As used in this Agreement, “Good Reason” means, without Executive’s written consent, (a) a “material diminution” (as such term is used in Section 409A of the Code) of the duties assigned to Executive (provided, however, that no termination of Executive’s service as a member of the Board, if appointed thereto, regardless of the reason therefore, shall constitute a “material diminution” of Executive’s duties for purposes of this Section 5.5); or (b) a material reduction in Base Salary or other benefits (other than a reduction or change in benefits generally applicable to all executive employees of the Company); or (c) a “Change of Control” of the Company, as that term is defined in the Control Plan; or (d), the acquisition (other than an acquisition directly from the Company) by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the then outstanding shares of voting stock of the Company (the “Voting Stock”); provided, however, that any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of (i) 50% or more of the then outstanding Voting Stock, or (ii) Voting Stock which has the effect of increasing the percentage of Voting Stock owned by any such individual, entity or group to 50% or more of the then outstanding Voting Stock, shall not constitute a Change of Control.

 

5

 

 

5.6 The provisions of this Section 5 and the payments provided hereunder are intended to be exempt from or to comply with the requirements of Section 409A of the Code, and shall be interpreted and administered consistent with such intent. To the extent required for compliance with Section 409A, references in this Agreement to a “termination of employment” shall mean a “separation of service” as defined by Section 409A. It is further intended that each installment of the payments provided hereunder shall be treated as a separate “payment” for purposes of Section 409A. Neither the Company nor Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

 

6. Nondisclosure and Noncompetition .

 

6.1 Proprietary Information .

 

(a) Executive agrees that all information, products, specifications, designs, plans, drawings, data, know-how, prototypes, discoveries, research, developments, methods, processes, procedures, improvements, ‘know-how’, compilations, market research, marketing techniques and plans, business plans and strategies, customer names and other information related to customers, price lists, pricing policies and financial information or other business and/or technical information and materials, in oral, demonstrative, written, graphic or machine-readable form, which is unpublished, not available to the general public, whether or not in writing, of a private, secret or confidential nature concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, designs, drawings, slogans, tests, logos, ideas, practices, projects, developments, plans, research data, financial data, personnel data, computer programs and codes, and customer and supplier lists. Executive will not disclose any Proprietary Information to others outside the Company except in the performance of his/her duties or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge or generally known within the industry without fault by Executive, or unless otherwise required by law.

 

(b) Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, electronic or other material containing Propriety Information, whether created by Executive or others, which shall come into his custody or possession, shall be and are the exclusive property of the Company to be used by Executive only in the performance of her/ his duties for the Company.

 

(c) Executive agrees that his/her obligation not to disclose or use information, know-how and records of the types set forth in paragraphs (a) and (b) above, also extends to such types of information, know-how, records and tangible property of subsidiaries and joint ventures of the Company, customers of the Company or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to Executive in the course of the Company’s business.

 

6

 

 

6.2 Inventions .

 

(a) Disclosure . Executive shall disclose promptly to an officer or to attorneys of the Company in writing any idea, invention, work of authorship, whether patentable or un-patentable, copyrightable or un-copyrightable, including, but not limited to, any computer program, software, command structure, code, documentation, compound, genetic or biological material, formula, manual, device, improvement, method, process, discovery, concept, algorithm, development, secret process, machine or contribution (any of the foregoing items hereinafter referred to as an “Invention”) Executive may conceive, make, develop or work on, in whole or in part, solely or jointly with others. The disclosure required by this Section applies (a) to any invention related to the general line of business engaged in by the Company or to which the Company planned to enter during the period of Executive’s employment with the Company; (b) with respect to all Inventions whether or not they are conceived, made, developed or worked on by Executive during Executive’s regular hours of employment with the Company; (c) whether or not the Invention was made at the suggestion of the Company; and (d) whether or not the Invention was reduced to drawings, written description, documentation, models or other tangible form. Executive hereby assigns to the Company all his right, title, and interest in and to any and all inventions, discoveries, developments, improvements, techniques, designs and data related to quantum simulators, quantum annealers, quantum computing algorithms and quantum application software which Executive conceives of, reduces to practice, or otherwise creates, either alone or jointly with others, in the course of his employment hereunder and in which the law recognizes any protectable interest. This paragraph excludes the following Inventions: all current patents held by Richard E. Malinowski and/or REMTCS Inc, and 228 trading and security algorithms developed by Richard E. Malinowski and/or RBMTCS over the last 20 years.

 

(b) Assignment of inventions to Company; Exemption of Certain Inventions . Executive hereby assigns to the Company without royalty or any other further consideration Executive’s entire right, title and interest in and to all Inventions which Executive conceives, conceived of, reduces to practice, makes, develops, creates or works on, either alone or jointly with other, during or in the course of employment, except as limited by 6.2(a) above and those Inventions that Executive, develops entirely on Executive’s own time after the date of this Agreement without using the Company’s equipment, supplies, facilities or trade secret information unless those Inventions either (a) relate at the time of conception or reduction to practice of the Invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (b) result from any work performed by Executive for the Company.

 

(c) Records . Executive will make and maintain adequate and current written records of all Inventions. These records shall be and remain the property of the Company.

 

(d) Patents . Executive will assist the Company in obtaining, maintaining and enforcing patents and other proprietary rights in connection with any Invention covered by Section 6.2. Executive further agrees that his obligations under this Section shall continue beyond the termination of his employment with the Company, but if he is called upon to render such assistance after the termination of such employment, he shall be entitled to a fair and reasonable rate of compensation for such assistance. Executive shall, in addition, be entitled to reimbursement of any expenses incurred at the request of the Company relating to such assistance.

  

7

 

  

6.3 Prior Contracts and Inventions; Information Belonging to Third Parties . Executive represents that there are no contracts to assign Inventions between any other person or entity and Executive. Executive further represents that (a) Executive is not obligated under any consulting, employment or other agreement which would affect the Company’s rights or my duties under this Agreement, (b) there is no action, investigation, or proceeding pending or threatened, or any basis therefor known to me involving Executive’s prior employment or any consultancy or the use of any information or techniques alleged to be proprietary to any former employer, and (c) the performance of Executive’s duties as an employee of the Company will not breach, or constitute a default under any agreement to which Executive is bound, including, without limitation, any agreement limiting the use or disclosure of proprietary information acquired in confidence prior to engagement by the Company. Executive will not, in connection with Executive’s employment by the Company, use or disclose to the Company any confidential, trade secret or other proprietary information of any previous employer or other person to which Executive is not lawfully entitled.

 

6.4 Noncompetition and Non-solicitation .

 

(a) During Executive’s employment with the Company and for a period of 12 months after the termination of Executive’s employment with the Company for any reason or for no reason, Executive will not directly or indirectly, absent the Company’s prior written approval, render services of a business, professional or commercial nature to any other person or entity in the area of quantum computing or such other services or products provided by the Company at the time employment terminates in any geographical area where the Company does business at the time this covenant is in effect, whether such services are for compensation or otherwise, whether alone or in conjunction with others, as an employee, as a partner, or as a shareholder (other than as the holder of not more than 1% of the combined voting power of the outstanding stock of a public company), officer or director of any corporation or other business entity, or as a trustee, fiduciary or in any other similar representative capacity.

 

(b) During the Executive’s employment with the Company and for a period of 12 months after the termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, recruit, solicit or induce, or attempt to recruit, solicit or induce any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company.

 

(c) During the Executive’s employment with the Company and for a period of 24 months after termination of Executive’s employment for any reason or for no reason, Executive will not, directly or indirectly, contact, solicit, divert or take away, or attempt to solicit, contact, divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company.

 

6.5 Interpretation of Agreement . If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

 

8

 

 

6.6 Restrictions Necessary . The restrictions contained in this Section are necessary for the protection of the business, proprietary information, and goodwill of the Company and are considered by Executive to be reasonable for such purpose. Executive agrees that any breach of this Section will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief. The prevailing party shall be entitled to recover its reasonable attorneys’ fees in such an action. In addition, the Company’s obligation to pay Executive the amount set forth in Section 5.2 or 5.3 shall terminate in the event Executive materially breaches any terms and conditions in Section 6.

 

7. Entire Agreement . This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral relating to the subject matter of this Agreement between the Company and the Executive. For the avoidance of doubt, however, this Agreement is in addition to, and shall not supersede any stock option agreement between the Company and Executive.

 

8. Amendment . No modification, alteration, amendment or revision of or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by both parties hereto.

 

9. Arbitration . Except for the right of either party to apply to a court of competent jurisdiction for a temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm, any and all claims, disputes or controversies arising under, out of, or in connection with the parties shall be unable to resolve within sixty (60) days shall be mediated in good faith. The party raising such dispute shall promptly advise the other party of such claim, dispute or controversy in a writing, which describes in reasonable detail the nature of such dispute. By not later than five (5) business days after the recipient has received such notice of dispute, each party shall have selected for itself a representative who shall have the authority to bind such party and shall additionally have advised the other party in writing of the name and title of such representative. By not later than ten (10) business days after the date of such notice of dispute, the party against whom the dispute shall be raised shall select a mediation firm in Virginia and such representatives shall schedule a date with such firm for a mediation firm for a mediation hearing. The parties shall enter into good faith mediation and shall share the costs equally. All disputes concerning compliance with or the interpretation of this Agreement, or any other aspect of Executive’s employment with the Company or the termination of that employment, shall be resolved by a single arbitrator under the Employment Dispute Rules then obtaining of the American Arbitration Association. The decision of the arbitrator shall be final and binding. Notwithstanding the foregoing, any claims by the Company concerning Executive’s compliance with the Nondisclosure and Noncompetition provisions of this Agreement are excluded from the scope of this Arbitration provision and may be brought in any court of competent jurisdiction. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflicts of laws thereunder.

 

9

 

 

10. Notices . Any notice or other communication required or permitted by this Agreement to be given to a part shall be in writing and shall be deemed given if delivered by: (a) certified mail, return receipt requested, (b) hand delivered, (c) by e-mail in so-called “portable document format (.pdf)” with electronic confirmation of receipt thereof, or (d) delivered by a national overnight express service (in the case of delivery by .pdf, the notice must be followed by a copy of the notice being delivered by a means provided in (a), (b), or (d)). If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section. Notices must be delivered to the following addresses or at such other addresses as may be later designated by notice:

 

To Quantum Computing Inc.:

 

Quantum Computing Inc.

 

215 Depot Court SE

Leesburg, VA 20175

Attn: Robert Liscouski, CEO

 

To: Richard E. Malinowski

 

Richard E. Malinowski

2 Warrenton Lane

Colts Neck, New Jersey 07722

 

11. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and assigns, including any corporation into which the Company may be merged or which may succeed to its assets or business, provided, however, that the obligations of Executive are personal and shall not be assigned by her/him.

 

12. Miscellaneous .

 

12.1 No Waiver . No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.

 

12.2 Severability . In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. The intention of the parties, as expressed in any provision held to be void or ineffective, shall be given such full force and effect as may be permitted by law.

 

12.3 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument and facsimile signatures delivered by fax or e-mail transmission shall be treated as originals.

 

10

 

 

IN WITNESS WHEREOF , each of the Company and Executive has executed this Amendment as of the date first above written.

 

  QUANTUM COMPUTING INC.
       
  By: /s/ Robert Liscouski
    Name: Robert Liscouski
    Title: Chief Executive Officer
       
  Date Executed: July 24, 2018
   
  By: /s/ Richard E. Malinowski
    Richard E. Malinowski
     
  Date Executed: July 24, 2018

 

11

Exhibit 10.6

 

QUANTUM COMPUTING INC.

 

SUBSCRIPTION AGREEMENT

DATED: AUGUST __, 2018

 

 

 

THIS SUBSCRIPTION AND INVESTOR’S REPRESENTATION AGREEMENT (THE “SUBSCRIPTION AGREEMENT”) RELATES TO AN OFFERING AND SALE (THE “OFFERING”) BY QUANTUM COMPUTING, INC., A DELAWARE CORPORATION (THE “COMPANY”) OF 8% CONVERTIBLE PROMISSORY NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF UP TO $15,000,000 (THE “NOTES”). THE NOTES CONVERT INTO SHARES OF THE COMPANY’S COMMON STOCK, PAR VALUE $0.0001 (THE “SHARES”).

 

THE OFFERING BY THE COMPANY OF THE NOTES IS BEING MADE: (i) PURSUANT TO SECTION 4(a)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND RULE 506(B) PROMULGATED UNDER REGULATION D (“REGULATION D”) OF THE SECURITIES ACT; (ii) TO ONE OR MORE “ACCREDITED INVESTORS” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION D.

 

THE NOTES AND THE SHARES UNDERLYING THE NOTES THAT ARE SUBJECT TO THIS SUBSCRIPTION AGREEMENT (COLLECTIVELY, THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION D UNDER THE ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE ACT.

 

THE SECURITIES THAT ARE SUBJECT TO THIS OFFERING HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING, OR THE ACCURACY OR ADEQUACY OF THE DISCLOSURE IN THIS SUBSCRIPTION AGREEMENT. ANY SUCH REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

 

 

 

QUANTUM COMPUTING INC.

 

SUBSCRIPTION AND INVESTOR’S REPRESENTATION AGREEMENT

OFFERING OF 8% CONVERTIBLE PROMISSORY NOTE

PURSUANT TO REGULATION D

 

DATED: AUGUST __, 2018

 

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of August___, 2018, by and between Quantum Computing Inc., a Delaware corporation (f/k/a Innovative Beverage Group Holdings, Inc.) (the “Company”) with offices located at 215 Depot Court, Suite 215, Leesburg, VA 20175 (the “Company”), and the investor identified on the signature page hereto (the “Purchaser”).

 

WHEREAS , the Company deems it in the best interests of the Company and its stockholders to conduct a private placement offering consisting of convertible notes up to the principal aggregate amount of up to $15,000,000 pursuant to the terms and conditions herein (the “Offering”);

 

WHEREAS , the Company and Purchasers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(a)(2) and/or Regulation D (“Regulation D”) promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”); and

 

WHEREAS , the parties hereto desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Purchasers, and Purchasers shall purchase a 8% Convertible Promissory Note in the form of Exhibit A hereto (the “Note”) in the principal amount set forth on the signature page hereto.

 

NOW, THEREFORE , in consideration of the mutual covenants and other agreements contained in this Agreement, the Company and Purchasers hereby agree as follows:

 

1. Purchase and Sale . Upon the terms and subject to the conditions set forth in this Agreement, the Company hereby agrees to sell, assign, transfer and deliver to Purchasers, and Purchasers hereby agree to purchase and accept delivery from the Company, the Notes free of all liens, pledges, mortgages, security interests, charges, restrictions, adverse claims or other encumbrances of any kind or nature whatsoever (“Encumbrances”), for the consideration specified herein.

 

2. Investor’s Representations and Warranties . The undersigned Investor hereby acknowledges, represents and warrants to, and agrees with, the Company as follows:

 

2.1 The undersigned is acquiring the Note, and/or Shares underlying the Note, for his/her/its own account as principal, not as a nominee or agent, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof in whole or in part and no other person has a direct or indirect beneficial interest in such the Note, or Shares underlying the Note, or any portion thereof. Further, the undersigned does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Notes for which the undersigned is subscribing or any part thereof.

 

2.2 The undersigned has all requisite and full power and authority (and in the case of an individual, the capacity) to enter into this Subscription Agreement, to execute and deliver this Subscription Agreement, to perform all the obligations required to be performed by the undersigned hereunder, such purchase will not contravene any law, rule or regulation binding on the undersigned or any investment guideline or restriction applicable to the undersigned, and has been duly authorized and constitutes a valid and legally binding obligation of the undersigned Investor.

 

2

 

 

2.3 The undersigned Investor affirms that he/she/it is not subscribing for the Notes as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting, or any solicitation of a subscription by person previously not known to the undersigned in connection with investments generally.

 

2.4 The undersigned Investor understands that, except as otherwise expressly provided herein, the Investor does not have registration rights nor is the Company under any obligation to register the Notes or the Shares underlying the Notes (collectively, the “Securities”) under the Act upon the written or other demand of the Investor or otherwise.

 

2.5 The undersigned is: (i) an “accredited investor” as defined in Rule 501 of Reg D; (ii) is experienced in making investments of the kind described in this Subscription Agreement; (iii) is able, by reason of his/her/its business and financial experience, to protect his/her/its own interests in connection with the transactions described in this Subscription Agreement, and the related documents; and (iv) able to afford the entire loss of his/her/its investment in the Notes.

 

2.6 The undersigned Investor acknowledges his/her/its understanding that the Offering is intended to be exempt from registration under the Securities Act, based upon the exemption provided under Regulation D promulgated by the Securities and Exchange Commission (SEC) under the Securities Act. The undersigned represents that he is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

2.7 In furtherance thereof, in addition to the other representations and warranties of the undersigned Investor made herein, the undersigned further represents and warrants to and agrees with the Company as follows: (i) the undersigned realizes that the basis for the exemption may not be present if, notwithstanding such representations, the undersigned is subscribing for and acquiring the Notes for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise; (ii) the undersigned has the financial ability to bear the economic risk of his/her/its investment in the Securities, has adequate means for providing for his/her/its current needs and contingencies and has no need for liquidity with respect to its investment in the Securities offered by the Company; (iii) the undersigned, either individually or by its officers and principals, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment in the Securities; (iv) the undersigned, if an entity and not a “natural person,” represents it has not been organized for the purpose of acquiring the Securities; (v) the undersigned has been provided an opportunity for a reasonable period of time prior to the date hereof to obtain additional information concerning the Offering, the Company and all other information the undersigned deems relevant, to the extent the Company possesses such information or can acquire it without unreasonable effort or expense; and (vi) the undersigned understands that as of the date of this Offering and perhaps for the foreseeable future, the Company is not a reporting company under nor has it filed any reports with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Notwithstanding the foregoing, the undersigned acknowledges that the Company has filed reports with the OTC Markets under its former name, Innovative Beverage Group Holdings, Inc. (OTC: IBGH), and its current name, Quantum Computing, Inc. (OTC: QUBT) and that as of the date of this Subscription Agreement, the Company is not current in its reporting obligations with OTC Markets. The Investor understands that Quantum Computing, Inc. may be considered a “shell company” as defined in Rule 405 of the Exchange Act and may be a shell company for the foreseeable future, even if it becomes a reporting company under the Exchange Act.

 

2.8 The undersigned is not relying on the Company, or its affiliates or agents, with respect to economic considerations involved in his/her/its investment in the Securities and the undersigned has relied solely on his/her/its own financial expertise and/or that of his/her/its legal, financial and investment advisors..

 

2.9 No representations or warranties have been made to the undersigned by the Company, or any officer, director, employee, agent, affiliate or representative of the Company, other than the representations made by the Company in writing as contained herein and, in subscribing for purchase of the Securities, the undersigned is not relying upon any representations other than those contained herein.

 

2.10 Any resale of the Notes or the Shares underlying conversion of the Notes shall only be made in compliance with exemptions from registration afforded by Reg D promulgated by the SEC under the Securities Act. Further, any such sale of such Securities will be made in full compliance with the federal securities laws of the United States.

 

3

 

 

2.11 The undersigned understands that the Notes are being offered and sold in reliance on an exemption from the registration requirements of United States federal securities laws under Reg D promulgated by the SEC under the Securities Act and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the undersigned set forth herein in order to determine the availability of such exemptions and the suitability of the undersigned to acquire the Securities.

 

2.12 The undersigned understands that an investment in the Securities is a speculative investment which involves a high degree of risk and the potential loss of his/her/its entire investment.

 

2.13 The undersigned’s overall commitment to investments which are not readily marketable is not disproportionate to the undersigned’s net worth, and an investment in the Securities will not cause such overall commitment to become excessive.

 

2.14 The undersigned represents and warrants to the Company that all information that the undersigned has provided to the Company, including, without limitation, the representations and warranties provided herein or previously provided to the Company are true, correct and complete in all material respects as of the date hereof and will be as of the Closing.

 

2.15 The undersigned is aware that no federal or state agency has: (i) made any finding or determination as to the fairness of this investment; (ii) made any recommendation or endorsement of the Notes subject to this Offering or the Company; or (iii) guaranteed or insured any investment in the Securities or any investment made in or by the Company.

 

2.16 The undersigned understands that the Notes and the conversion price of $1.00 per Share applicable to the principal amount and accrued interest does not necessarily bear any relation to the assets, book value or net worth of the Company and was determined arbitrarily by the Company and its management after taking into consideration, among other things, the Company’s new business direction, name change and (1 for 200) reverse stock split (the “Reverse Stock Split”).

 

2.17 The undersigned further understands that there is a substantial risk of further dilution on his/her/its investment in the Company because of the issuance and sale of additional Notes, Shares or other securities by the Company.

 

2.18 The undersigned will comply with all applicable laws and regulations in effect in any jurisdiction in which the undersigned purchases or sells Securities and obtain any consent, approval or permission required for such purchases or sales under the laws and regulations of any jurisdiction to which the undersigned is subject or in which the undersigned makes such purchases or sales, and the Company shall have no responsibility therefore.

 

2.19 Neither the execution or delivery by the undersigned of this Subscription Agreement to which the undersigned is a party, nor the consummation or performance by the undersigned of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the organizational documents of the undersigned (if the undersigned is not a natural person); (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which the undersigned is a party or by which the properties or assets of the undersigned are bound; or (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of the undersigned under, or alter the obligations of any person under, or create in any person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a governmental authority or any other person) pursuant to, or result in the creation of a lien on any of the assets or properties of the undersigned under, any note, bond, mortgage, indenture, contract, lease, license, permit, franchise or other instrument or obligation to which the undersigned is a party or any of the undersigned’s assets and properties are bound or affected.

 

4

 

 

2.20 There is no action pending against, or to the knowledge of the undersigned, threatened against or affecting, the undersigned by any governmental authority or other person with respect to the undersigned that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Subscription Agreement.

 

2.21 No person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the undersigned for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the undersigned and the undersigned will indemnify and hold the Company and its affiliates harmless against any liability or expense arising out of, or in connection with, any such claim.

 

2.22 The undersigned will not transfer any or all of the undersigned’s Securities absent an effective registration statement under the Securities Act and applicable state securities law covering the disposition of the undersigned’s Securities, without first providing the Company with an opinion of counsel (which counsel and opinion are reasonably satisfactory to the Company) to the effect that such transfer will be exempt from the registration and the prospectus delivery