Leesburg quantum computing software company Quantum Computing Inc. (NASDAQ: QUBT) is purchasing fellow quantum firm QPhoton Inc. in its first M&A deal.
The acquisition will be paid for by a mixture of common stock, preferred stock and warrants and will represent in total approximately 49% of the total outstanding capital stock of QCI. The deal is expected to close during the third or fourth quarter of 2022, the companies said.
Quantum Computing Inc., or QCI, began trading on the Nasdaq in July after three years on the over-the-counter market. It designs software that takes out some of the complexity of coding mathematic equations on computers. It does this by deploying software tools like its quantum application accelerator, known as Qatalyst, to connect with quantum computers through the cloud, enabled through its partnership with Amazon Web Services, the cloud subsidiary of Amazon.com Inc. (NASDAQ: AMZN). That system, it says, makes quantum computing more accessible.
QPhoton, a company that develops quantum photonics systems it says operate at a lower cost for owners, will be a subsidiary of QCI. It will remain based in Hoboken, New Jersey, where CEO Yuping Huang is also a professor at the Stevens Institute of Technology. Once the transaction closes, Huang will be a director and officer at QCI. The founding director of the Center for Quantum Science and Engineering at the university, Huang will retain a part-time position at the university and facilitate partnerships between QPhoton and the school, the companies said.
QCI CEO Robert Liscouski said he was impressed by the quantum hardware company’s work, which he said complements QCI’s. “It’s simple in its elegance in terms of how it approaches doing the same thing that these more comprehensive and costly approaches do with a really effective result,” Liscouski said. “And we can start solving business problems today.”
The two companies announced a formal business partnership in February to integrate their technologies.
Currently, QCI has 30 employees, Liscouski said, up from 15 in July. Within the next year he plans to at least double that by bringing on QPhoton’s six employees as well as hiring new sales and engineering staff to help get QCI’s software to market and bring in more revenue.
QCI just began reporting revenue in the first quarter of 2022, when it posted $31,240, according to a Securities and Exchange Commission filing. It recorded a net loss of $7.1 million for the first quarter, an increase from a $3.4 million loss during the first quarter of 2021. That was largely due to an increase in operating expenses from $3.4 million to $6.7 million in the first quarter.
There’s pressure for QCI to begin generating more revenue in a competitive industry, the company has noted. “The quantum computing industry is new and rapidly developing, and as such, is and will remain dynamic and extremely competitive for the foreseeable future,” QCI wrote in its most recent annual earnings report. Locally, quantum companies have been popping up in recent years, including College Park’s IonQ Inc. (NYSE: IONQ+) and Bethesda’s Quantum Xchange.
So, it’s no surprise Liscouski sees this acquisition as a potential game-changer, and one that will require attention to detail in order to get right. “For the time being, frankly, I just want to keep heads down on execution right now,” he said. “This is an enormous opportunity for the company and it’s going to require all our focus on the execution side so we can bring this to fruition.”
