Quantum Computing (QUBT) risk factors, FY2024 10-K

Risks Related to Our Financial Condition and Status as an Early-Stage Company

1. 01We are in our early stages and have a limited operating history, which makes it difficult to forecast the future results of our operations
2. 02We have a history of operating losses and expect to incur significant expenses and continuing losses for the foreseeable future
3. 03We have a history of accumulated deficits, recurring losses and negative cash flows from operating activities. We may be unable to achieve or sustain profitability or remain a going concern
4. 04We may not be able to scale our business quickly enough to meet customer and market demand, which could adversely affect our financial condition and results of operations or cause us to fail to execute on our business strategies
5. 05Our success will depend upon our ability to expand, scale our operations, and increase our sales and support capability. Even if the market in which we compete meets the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all
6. 06We may not manage growth effectively
7. 07We have incurred losses during our history, do not expect to become profitable in the near future and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire, if at all

Risks Related to Our Business and Industry

1. 08We have not produced any of our products at volume and we face significant barriers in our attempts to develop and manufacture our products, including the need to invent and develop new technology. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail
2. 09We may be unable to reduce the production cost sufficiently, which may prevent us from pricing our quantum systems competitively
3. 10If our products and services fail to deliver customer value to a broader range of customers than classical approaches, our business, financial condition and future prospects may be harmed
4. 11The quantum computing industry is competitive and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers
5. 12Further, the industry might recognize the intrinsic advantages of optical integrated circuits in information processing applications and our competitors could shift to a more direct competitive approach using similar technologies, even with strong intellectual property protection
6. 13For all of these reasons, competition may negatively impact our ability to maintain and grow consumption of our platform or put downward pressure on our prices and gross margins, any of which could materially harm our reputation, business, results of operations, and financial condition
7. 14Our products and services may from time to time incorporate high-performance classical computing through public clouds to provide services to end users and our partners. These public cloud services are predominantly on Amazon Web Services at the present time
8. 15We depend on certain suppliers to source products. Failure to maintain our relationship with any of these suppliers, or a failure to replace any of these suppliers, could have a material adverse effect on our business, financial position, results of operations and cash flows
9. 16In order to compete, we must attract, retain and motivate key associates, and the failure to do so could have an adverse effect on our business, financial condition and results of operations
10. 17Even if we are successful in developing our products and executing our strategy, competitors in the industry may achieve technological breakthroughs that render our quantum computing systems obsolete or inferior to other products
11. 18The quantum computing industry is in its early stages and volatile, and if it does not develop, if it develops slower than we anticipate, if it encounters negative publicity or if our quantum computing products and services do not achieve commercial adoption, the growth of our business will be harmed
12. 19We have experienced in the past and could also suffer future disruptions, outages, defects and other performance and quality problems with our quantum computing products and services, our production technology partners or with the public cloud, data centers and internet infrastructure on which we rely
13. 20Our future growth and success depend on our ability to sell effectively to government entities and large enterprises
14. 21Our quantum computing systems may not be compatible with some or all industry-standard software and hardware in the future, which could harm our business
15. 22Cybersecurity risks and the failure to maintain the integrity of data belonging to the Company could expose us to data loss, litigation and liability, and our reputation could be significantly harmed
16. 23Computer malware, viruses, hacking, phishing attacks and spamming could harm our business and results of operations
17. 24Unfavorable conditions in our industry or the global economy could limit our ability to grow our business and negatively affect our results of operations
18. 25Furthermore, uncertain economic conditions may make it more difficult for us to raise funds through borrowings or sales of debt or equity securities. We cannot predict the timing, location, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry
19. 26We may become subject to legal proceedings that could have a material adverse impact on our financial position and results of operations
20. 27We intend to continue exploring strategic business acquisitions and other business combinations and transactions, which are subject to inherent risks
21. 28If 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
22. 29Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price
23. 30We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws
24. 31We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims

Risks Related to Intellectual Property

1. 32Any failure to obtain, maintain and protect our intellectual property rights could impair our ability to protect and commercialize our proprietary products and technology and cause us to lose our competitive advantage
2. 33Our inability to secure patent protection or enforce our patent rights could have a material adverse effect on our ability to prevent others from commercializing similar products or technology
3. 34We may face patent infringement and other intellectual property claims that could be costly to defend, result in injunctions and significant damage awards, or limit our ability to use certain key technologies in the future, all of which could harm our business
4. 35Growing our customer base depends upon the effective operation of our applications with operating systems, networks and standards that we do not control
5. 36We may not be able to protect our source code from copying if there is an unauthorized disclosure of source code

Risks Related to Our Common Stock

1. 37Our stock price has been and may continue to be volatile or may decline regardless of our operating performance, and you may lose part or all of your investment
2. 38Future sales of shares of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price
3. 39Delays in filing financial reports, internal control weaknesses, and restatements could hinder our ability to regain Form S-3 eligibility and adversely affect our business and stock price
4. 40“Penny stock” rules may make buying or selling our common stock difficult, which may make our stock less liquid and make it harder for investors to buy and sell our securities
5. 41Shares 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
6. 42We 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
7. 43You may experience dilution of your ownership interest due to the future issuance of additional shares of our common stock
8. 44As of March 18, 2025, our directors and executive officers collectively beneficially own approximately 20.1% of the shares of our common stock including the beneficial ownership of Dr. Yuping Huang of 17.2% of the shares of our common stock
9. 45Our articles of incorporation grant the Board the power to issue additional shares of common and preferred shares and to designate other classes of preferred shares, all without stockholder approval