Quantum Computing Inc. Goodwill & Intangibles Disclosure
Note 4 – Intangible Assets and Goodwill
As a result of the merger with QPhoton, the Company has the following amounts related to intangible assets:
| Intangible Assets as of: | ||||||||||
| December 31, | Amortizable | |||||||||
| Amortizable Intangible Assets | 2023 | 2022 | Life | |||||||
| Customer relationships | $ | $ | 10,000,000 | 3 years | ||||||
| Non-compete agreement with founder | 2,722,000 | 500,000 | 3 years | |||||||
| Website domain name and trademark | 969,000 | 1,000,000 | 5 years | |||||||
| Employment agreements | 2,250,000 | 2 years | ||||||||
| Technology and licensed patents | 12,200,000 | 11,722,220 | 10 years | |||||||
| Less: accumulated amortization | (4,502,985 | ) | (3,248,495 | ) | ||||||
| Net intangible assets | $ | 11,388,015 | $ | 22,223,725 | ||||||
The asset balances as of December 31, 2022 were corrected in the Company’s June 2023 financial results, as discussed in Note 3, Business Combinations, Merger with QPhoton, Inc.
The aggregate amortization expense of the Company’s intangible assets for the years ended December 31, 2023 and 2022 was ,490and $3,248,495, respectively. The Company expects future amortization expense to be the following:
| Amortization | ||||
| 2024 | $ | 2,843,991 | ||
| 2025 | 2,352,518 | |||
| 2026 | 1,936,657 | |||
| 2027 | 1,831,682 | |||
| 2028 | 1,742,857 | |||
| Thereafter (2029-2032) | 680,310 | |||
| Total | $ | 11,388,015 | ||
The Company recorded goodwill resulting from the merger with QPhoton, calculated as the difference between the total purchase price and the value of tangible and intangible assets acquired less the liabilities assumed. The Company recorded goodwill of $59,125,773.38 resulting from the QPhoton merger. The following table provides a summary of the changes in goodwill for the years ended December 31, 2023 and 2022:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Goodwill, at beginning of year | 59,125,773 | $ | ||||||
| Goodwill additions | 9,581,220 | 59,125,773 | ||||||
| Goodwill deductions or impairment | 8,347,126 | |||||||
| Goodwill, at end of year | $ | 60,359,867 | $ | 59,125,773 | ||||
The Company tested the intangible assets and goodwill for impairment as of December 31, 2023 and concluded there was no impairment of intangible assets or goodwill at that time.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Apr 1, 2024 | Showing above |
| 2022 | Mar 30, 2023 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.