What changed in this filing

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Item 1A. Risk Factors

2022-08-15 compared with 2022-05-16 · 216 added, 116 removed, 770 unchanged (30% of the section changed)

11 unchanged sentences

We may not be able to scale our business quickly enough to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies.

We may not manage our growth effectively.

Our management has limited experience in operating a public company.

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.

Our management has limited experience in operating a public company.

Our operating and financial results forecast relies in large part upon assumptions and analyses we developed.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

We have identified a material weakness in our internal control over financial reporting.

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We have not produced a scalable quantum computer and face significant barriers in our attempts to produce quantum computers.

If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail.

The quantum computing industry is competitive on a global scale 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.

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We may face unknown supply chain issues that could delay the introduction of our product and negatively impact our business and operating results.

If we cannot successfully execute on our strategy, including in response to changing customer needs and new technologies and other market requirements, or achieve our objectives in a timely manner, our business, financial condition and results of operations could be harmed.

If we cannot successfully execute on our strategy or achieve our objectives in a timely manner, our business, financial condition and results of operations could be harmed.

Our products may not achieve market success, but will still require significant costs to develop.

We are highly dependent on our co-founders, and our ability to attract and retain senior management and other key employees, such as quantum physicists and other key technical employees, is critical to our success.

If we fail to retain talented, highly-qualified senior management, engineers and other key employees or attract them when needed, such failure could negatively impact our business.

We are highly dependent on our co-founders, and our ability to attract and retain senior management and other key employees.

Our future growth and success depend on our ability to sell effectively to large customers.

We may not be able to accurately estimate the future supply and demand for our quantum computers, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue.

If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

Our systems depend on the use of a particular isotope of an atomic element that provides qubits for our ion trap technology.

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If our quantum computing systems are not compatible with some or all industry-standard software and hardware in the future, our business could be harmed.

If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborate partnerships, our future growth and development could be negatively impacted.

If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborative partnerships, our future growth and development could be negatively impacted.

Our future growth and success depend in part on our ability to sell effectively to government entities and large enterprises.

Contracts with government and state agencies are subject to a number of challenges and risks.

Our business depends on our customers’ abilities to implement useful quantum algorithms and sufficient quantum resources for their business.

If they are unable to do so due to the nature of their algorithmic challenge or other technical or personnel dilemmas, our growth may be negatively impacted.

System security and data protection breaches, as well as cyber-attacks, could disrupt our operations, which may damage our reputation and adversely affect our business.

1 unchanged sentence

Government actions and regulations, such as tariffs and trade protection measures, may limit our ability to obtain products from our suppliers.

Our operating and financial results forecast relies in large part upon assumptions and analyses we developed.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, its various strains or future pandemics.

We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation and reputation.

Public health threats could have an adverse effect on our business and financial results.

Licensing of intellectual property is of critical importance to our business.

For example, we license patents (some of which are foundational patents) and other intellectual property from the University of Maryland and Duke University on an exclusive basis.

If the license agreement with these universities terminates, or if any of the other agreements under which we acquired or licensed, or will acquire or license, material intellectual property rights is terminated, we could lose the ability to develop and operate our business.

If we are unable to obtain and maintain patent protection for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected.

Moreover, our trade secrets could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets.

We may face patent infringement and other intellectual property claims that could be costly to defend, result in injunctions and significant damage awards or other costs (including indemnification of third parties or costly licensing arrangements (if licenses are available at all)) and limit our ability to use certain key technologies in the future or require development of non-infringing products, services, or technologies, which could result in a significant expenditure and otherwise harm our business.

We may face patent infringement and other intellectual property claims that could be costly to defend, result in injunctions and significant damage awards or other costs and limit our ability to use certain key technologies in the future or require development of non-infringing products, services, or technologies.

Some of our in-licensed intellectual property, including the intellectual property licensed from the University of Maryland and Duke University, has been conceived or developed through government-funded research and thus may be subject to federal regulations providing for certain rights for the U.S.

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Our ability to generate revenues will largely be dependent on our ability to develop and produce quantum computers with increasing numbers of algorithmic qubits.

We have commercialized a quantum computer with 20 algorithmic qubits.

As a result, our scalable business model has not been formed and our technical roadmap may not be realized as quickly as hoped, or even at all.

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We have a history of operating losses and expect to incur significant expenses and continuing losses for the foreseeable future.

We incurred net losses of $106.2 million and $4.2 million for the year ended December 31, 2021 and three months ended March 31, 2022, respectively.

As of March 31, 2022, we had an accumulated deficit of $150.0 million.

We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant production of our quantum computers, which is not expected to occur until 2025, at the earliest, and may occur later, or never.

We have historically experienced net losses from operations.

For the six months ended June 30, 2022 we incurred a loss from operations of $5.9 million.

As of June 30, 2022, we had an accumulated deficit of $151.7 million.

We believe that we will continue to incur losses each quarter until at least the time we begin significant production of our quantum computers, which is not expected to occur until 2025, at the earliest, and may occur later, or never.

Even with significant production, such production may never become profitable.

We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, continue to incur significant expenses in connection with the design, development and manufacturing of our quantum computers, and as we expand our research and development activities, invest in manufacturing capabilities, build up inventories of components for our quantum computers, increase our sales and marketing activities, develop our distribution infrastructure, and increase our general and administrative functions to support our growing operations and being a public company.

We expect the rate at which we will incur operating losses to be significantly higher in future periods as we, among other things, continue to incur significant expenses in connection with the design, development and manufacturing of our quantum computers, and as we expand our research and development activities, invest in manufacturing capabilities, build up inventories of components for our quantum computers, increase our sales and marketing activities, develop our distribution infrastructure, and increase our general and administrative functions to support our growing operations and being a public company.

We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.

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If we cannot evolve and scale our business and operations effectively, we may not be able to execute our business strategies in a cost-effective manner and our business, financial condition, profitability and results of operations could be adversely affected.

We may not manage growth effectively.

If we fail to manage growth effectively, our business, results of operations and financial condition could be harmed.

We anticipate that a period of significant expansion will be required to address potential growth.

This expansion will place a significant strain on our management, operational and financial resources.

Expansion will require significant cash investments and management resources and there is no guarantee that they will generate additional sales of our products or services, or that we will be able to avoid cost overruns or be able to hire additional personnel to support them.

In addition, we will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products.

To manage the growth of our operations and personnel, we must establish appropriate and scalable operational and financial systems, procedures and controls and establish and maintain a qualified finance, administrative and operations staff.

We may be unable to acquire the necessary capabilities and personnel required to manage growth or to identify, manage and exploit potential strategic relationships and market opportunities.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company.

Our management team may not successfully or effectively manage our transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to our management and growth.

We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States.

The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected.

It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

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Moreover, because of our unique technology, our customers will require particular support and service functions, some of which are not currently available, and may never be available.

If we experience delays in adding such support capacity or servicing our customers efficiently, or experiences unforeseen issues with the reliability of our technology, it could overburden our servicing and support capabilities.

If we experience delays in adding such support capacity or servicing our customers efficiently, or experience unforeseen issues with the reliability of our technology, it could overburden our servicing and support capabilities.

Similarly, increasing the number of our products and services would require us to rapidly increase the availability of these services.

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Failure to grow at rates similar to that of the quantum computing industry may adversely affect our operating results and ability to effectively compete within the industry.

We may not manage growth effectively.

If we fail to manage growth effectively, our business, results of operations and financial condition could be harmed.

We anticipate that a period of significant expansion will be required to address potential growth.

This expansion will place a significant strain on our management, operational and financial resources.

In addition, we will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products.

We may be unable to acquire the necessary capabilities and personnel required to manage growth or to identify, manage and exploit potential strategic relationships and market opportunities.

Our management has limited experience in operating a public company.

Our executive officers have limited experience in the management of a publicly traded company.

Our operating and financial results forecast relies in large part upon assumptions and analyses we have developed.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

Our projected financial and operating information reflect current estimates of future performance, which may never occur.

Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecasts depends on a number of factors, many of which are outside our control, including, but not limited to:

success and timing of development activity;

customer acceptance of our quantum computing systems;

breakthroughs in classical computing or other computing technologies that could eliminate the advantages of quantum computing systems rendering them less practical to customers;

competition, including from established and future competitors;

whether we can obtain sufficient capital to sustain and grow our business;

our ability to manage our growth;

our ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel;

the overall strength and stability of domestic and international economies.

Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our business, financial condition and results of operations.

We have identified a material weakness in our internal control over financial reporting.

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This material weakness could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

In light of the material weakness identified, we are implementing a remediation plan which includes measures designed to improve our internal control over financial reporting to remediate this material weakness.

These measures include adding resources (both internal and external) as well as improving the control environment around financial systems and processes.

In 2021, the Company completed the following remedial actions:

Hired additional full-time accounting personnel with appropriate levels of experience, and augmented skills gaps with external experts;

Established and implemented policies surrounding the approval of transactions, related to, but not limited to, account reconciliations and journal entries;

Selected and began implementing a financial accounting system that can support effective information technology general controls as well as the anticipated growth of the business.

Our management believes that these actions, and additional actions to be taken under our remediation plan, are sufficient to remediate the material weakness identified and strengthen our internal control over financial reporting.

The actions we are taking are subject to ongoing senior management review, as well as Audit Committee oversight.

The material weakness will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively.

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Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our common stock.

For additional information on the remediation plan and our progress, see the section titled “Controls and Procedures—Remediation Efforts to Address the Material Weakness.”

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of controls annually.

33 unchanged sentences

the photonic interconnect between ion traps could prove more challenging and take longer to perfect than currently expected.

This would limit our ability to scale beyond a single ion trap of approximately 22 logical qubits;

This would limit our ability to scale to a sufficiently large number of algorithmic qubits in a single system;

it could take longer to tune the qubits in a single ion trap, as well as preserve the stability of the qubits within a trap as we seek to maximize the total number of qubits within one trap;

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Any material change in our contractual and other business relationships with our public cloud providers could result in reduced use of our systems, increased expenses, including service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.

Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs which render our quantum computing systems obsolete or inferior to other products.

Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs that render our quantum computing systems obsolete or inferior to other products.

Our continued growth and success depend on our ability to innovate and develop quantum computing technology in a timely manner and effectively market these products.

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If our computers fail to achieve a broad quantum advantage, our business, financial condition and future prospects may be harmed.

Quantum advantage refers to the moment when a quantum computer can compute faster than traditional computers, while quantum supremacy is achieved once quantum computers are powerful enough to complete

calculations that traditional supercomputers cannot perform at all.

Broad quantum advantage is when quantum advantage is seen in many applications and developers prefer quantum computers to a traditional computer.

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any reductions or interruption in supply, including disruptions on our global supply chain as a result of the COVID-19 pandemic, which we have experienced, and may in the future experience;

any supply chain disruptions due to Russia’s recent incursion in the Ukraine and any indirect effects thereof which could further complicate existing supply chain constraints;

any supply chain disruptions due to the Russia-Ukraine war and any indirect effects thereof which could further complicate existing supply chain constraints;

financial problems of either manufacturers or component suppliers;

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The market for highly skilled workers and leaders in the quantum computing industry is extremely competitive.

In particular, hiring qualified personnel specializing in supply chain management, engineering and sales, as well as other technical staff and research and development personnel is critical to our business and the development of our quantum computing systems.

In particular, hiring qualified personnel specializing in engineering, software development and sales, as well as other technical staff and research and development personnel is critical to our business and the development of our quantum computing systems.

Some of these professionals are hard to find and we may encounter significant competition in our efforts to hire them.

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Any adverse impacts from the incompatibility of our quantum computing solutions could adversely affect our business, operating results and financial condition.

If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborate partnerships, our future growth and development could be negatively impacted.

If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborative partnerships, our future growth and development could be negatively impacted.

We have entered into, and may enter into, strategic partnerships to develop and commercialize our current and future research and development programs with other companies to accomplish one or more of the following:

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To the extent our customers are unable to effectively develop or utilize resources to advance algorithmic-use cases, our business, operating results and financial condition may be adversely impacted.

System security and data protection breaches, as well as cyber-attacks, could disrupt our operations, which may damage our reputation and adversely affect our business.

Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including phishing) are prevalent in the technology industry and our customers’ industries.

In addition, we may experience attacks, unavailable systems, unauthorized access or disclosure due to employee theft or misuse, denial-of-service attacks, sophisticated nation-state and nation-state supported actors, and advanced persistent threat intrusions.

The techniques may be used to sabotage or to obtain unauthorized access to our platform, systems, networks, or physical facilities where our quantum computers are stored, and may be unable to implement adequate preventative measures or stop security breaches while they are occurring.

law enforcement agencies have indicated to us that quantum computing technology is of particular interest to certain malicious cyber threat actors.

Our future growth and success depends in part on our ability to sell effectively to government entities and large enterprises.

Our potential customers include government agencies and large enterprises.

Therefore, our future success will depend on our ability to effectively sell our products to such customers.

Sales to these end-customers involve risks that may not be present (or that are present to a lesser extent) with sales to non-governmental agencies or smaller customers.

These risks include, but are not limited to, (i) increased purchasing power and leverage held by such customers in negotiating contractual arrangements with us and (ii) longer sales cycles and the associated risk that substantial time and resources may be spent on a potential end-customer that elects not to purchase our solutions.

Sales to government agencies are typically under fixed fee development contracts, which involve additional risks.

In addition, government contracts generally include the ability of government agencies to terminate early which, if exercised, would result in a lower contract value and lower than anticipated revenues generated by such arrangement.

Government agencies and large organizations often undertake a significant evaluation process that results in a lengthy sales cycle.

Our contracts with government agencies are typically structured in phases, with each phase subject to satisfaction of certain conditions.

As a result, the actual scope of work performed pursuant to any such contracts, in addition to related contract revenue, could be less than total contract value.

In addition, product purchases by such organizations are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays.

Finally, these organizations typically have longer implementation cycles, require greater product functionality and scalability, require a broader range of services, demand that vendors take on a larger share of risks, require acceptance provisions that can lead to a delay in revenue recognition and expect greater payment flexibility.

All of these factors can add further risk to business conducted with these potential customers and could lead to lower revenue results than originally anticipated.

Contracts with government and state agencies are subject to a number of challenges and risks.

The bidding process for government contracts can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate revenue.

We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts.

In addition, our perceived relationship with the U.S.

government could adversely affect our business prospects in certain non-U.S.

geographies or with certain non-U.S.

Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to:

changes in government fiscal or procurement policies, or decreases in government funding available for procurement of goods and services generally, or for our federal government contracts specifically;

changes in government programs or applicable requirements;

restrictions in the grant of personnel security clearances to our employees;

ability to maintain facility clearances required to perform on classified contracts for U.S.

federal government and foreign government agencies, as applicable;

changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding;

changes in the government’s attitude towards us as a company or our technology;

appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government;

the adoption of new laws or regulations or changes to existing laws or regulations;

budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies;

influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers;

changes in legal obligations or political or social attitudes with respect to security or data privacy issues;

potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns;

increased or unexpected costs or unanticipated delays caused by other factors outside of our control.

Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain entering into contracts with us and/or purchasing our computers in the future, reduce the size or timing of payment with respect to our services to or purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.

System security and data protection breaches, as well as cyber-attacks, could adversely impact our information technology systems, data, intellectual property, proprietary or confidential information or operations, or those of third parties upon which we rely, which may damage our reputation and adversely affect our business, as well as other adverse consequences.

Cyber-attacks, malicious internet-based activity, online and offline fraud, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including phishing) are prevalent (and continue to rise) in the technology industry and our customers’ industries.

In addition, we may experience attacks to our information technology systems or data, unavailable information technology systems or data, ransomware and cyber extortion attacks, unauthorized access, theft or misuse or disclosure of our data or intellectual property (including due to employee theft, misuse or errors), denial-of-service attacks, attacks by sophisticated nation-state and nation-state supported actors, and advanced persistent threat intrusions.

The techniques may be used to sabotage or to obtain unauthorized access to our platform, information technology systems, data, intellectual property, networks, or physical facilities where our quantum computers are stored, and we may be unable to implement adequate preventative and responsive measures or stop and mitigate security breaches before or while they are occurring.

law enforcement agencies have indicated to us that quantum computing technology is of particular interest to certain malicious cyber threat actors, including nation-state and other malicious actors who may steal our intellectual property, or proprietary or confidential information, including our trade secrets.

Our platform is built to be accessed through third-party public cloud providers such as AWS, Azure and the Google Cloud Marketplace.

These providers may also experience breaches and attacks to their products which may impact our systems.

Data security breaches may also result from non- technical means, such as actions by an employee with access to our systems.

While we and our third-party cloud providers have implemented security measures designed to protect against security breaches, these measures could fail or may be insufficient, resulting in the unauthorized disclosure, modification, misuse, destruction, or loss of sensitive or confidential information.

Actual or perceived breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or sensitive or confidential data about us, our partners, our customers or third parties could expose the company and the parties affected to a risk of loss or misuse of this information, resulting in litigation and potential liability, paying damages, regulatory inquiries or actions, damage to the our brand and reputation or other harm to the our business.

These providers, and other third-party providers and suppliers upon which we rely, may also experience breaches and attacks to their products, information technology systems and data, which may adversely impact our systems, data, intellectual property, and operations.

Data security breaches may also result from non- technical means, such as misuse or errors by employees or contractors with access to our systems.

Actual or perceived breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information, intellectual property or sensitive or confidential data about us, our partners, our customers or third parties could expose the company and the parties affected to a risk of loss or misuse of this information, resulting in litigation and potential liability, paying damages, regulatory inquiries or actions, damage to the our brand and reputation or other harm to the our business.

Our efforts to prevent and overcome these challenges could increase our expenses and may not be successful.

If we fail to detect or remediate a security breach in a timely manner, or a breach otherwise affects our customers, or if we suffer a cyber- attack that impacts our ability to operate our platform, we may suffer material damage to our reputation, business, financial condition and results of operations.

If we fail to detect or remediate a security breach in a timely manner, or a breach otherwise affects our customers, or if we suffer a cyber- attack that impacts our ability to operate our platform, or results in the exposure of our data, intellectual property, or confidential or proprietary information we may suffer material damage to our reputation, customer relationships, business, financial condition and results of operations.

Unfavorable conditions in our industry or the global economy, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of changes in our industry or the global economy on the company or our customers and potential customers.

Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, natural disasters or other catastrophic events, warfare, terrorist attacks on the United States or elsewhere, and geopolitical tensions, such as Russia’s recent incursion into Ukraine, could cause a decrease in business investments, including the progress on development of quantum technologies, and negatively affect the growth of our business.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.

For example, the ongoing COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.

Similarly, the Russia-Ukraine war has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.

Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

Employee salaries and benefits expenses have increased as a result of economic growth, increased demand for business services, increased competition for trained and talented employees, among other wage-inflationary pressures and we cannot assure that they will not continue to rise.

In addition, higher inflation also could increase our customers’ operating costs, which could result in reduced budgets for our customers and potentially less demand for our platform and the development of quantum technologies.

Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition.

In addition, in challenging economic times, our current or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products and services.

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We may accept government grants that place restrictions on our ability to operate.

Our operating and financial results forecast relies in large part upon assumptions and analyses we have developed.

If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.

Our projected financial and operating information reflect current estimates of future performance, which may never occur.

success and timing of development activity;

customer acceptance of our quantum computing systems;

breakthroughs in classical computing or other computing technologies that could eliminate the advantages of quantum computing systems rendering them less practical to customers;

competition, including from established and future competitors;

whether we can obtain sufficient capital to sustain and grow our business;

our ability to manage our growth;

our ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel;

the overall strength and stability of domestic and international economies.

Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our business, financial condition and results of operations.

Acquisitions, divestitures, strategic investments and strategic partnerships could disrupt our business and harm our financial condition and operating results.

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We may incur unexpected costs, claims or liabilities that we incur during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse.

We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, its various strains or future pandemics.

We face various risks related to epidemics, pandemics, and other outbreaks, including the COVID-19 pandemic, including newly discovered strains of the virus.

In response to the COVID-19 pandemic, governments have implemented significant measures, including, but not limited to, business closures, quarantines, travel restrictions, shelter-in-place, stay-at-home and other social distancing directives, intended to control the spread of the virus.

Companies have also taken precautions, such as requiring employees to work remotely, imposing travel

restrictions and temporarily closing businesses.

To the extent that these restrictions remain in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures or the likelihood of achieving widespread global vaccination rates as part of the broadscale efforts to contain or treat COVID-19 or future pandemics, there is likely to be an adverse impact on our potential customers, our employees and global economic conditions, and consumer confidence and spending, which could materially and adversely affect our operations and demand for our products.

Public health threats could have an adverse effect on our business and financial results.

We face various risks related to epidemics, pandemics, and other outbreaks, including the ongoing COVID-19 pandemic, including newly discovered and/or vaccine-resistant strains of the virus.

In response to the ongoing COVID-19 pandemic, governments have implemented significant measures, including, but not limited to, business closures, quarantines, travel restrictions, shelter-in-place, stay-at-home and other social distancing directives, intended to control the spread of the virus.

Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.

To the extent that these restrictions remain, or are put back, in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures or the likelihood of achieving widespread global vaccination rates as part of the broadscale efforts to contain or treat COVID-19 or future pandemics, there is likely to be an adverse impact on our potential customers, our employees and global economic conditions, and consumer confidence and spending, which could materially and adversely affect our operations and demand for our products.

The spread of COVID-19 has and may continue to impact our suppliers by disrupting the manufacturing, delivery and the overall supply chain of parts required to manufacture our quantum computers.

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Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of COVID-19’s global economic impact, including any recession that has occurred or may occur in the future and the uncertainty of the timing of the broader economic recovery to pre-pandemic levels.

Risks Related to Our International Expansion and Future Operations

Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations.

We currently maintain offices and/or have personnel in the United States and Canada, and recently expanded operations to Germany and Israel, and we intend to expand our international operations by developing a sales presence in other international markets.

We expect to continue to expand our international operations, which may include opening offices in new jurisdictions.

Any additional international expansion efforts that we are undertaking and may undertake may not be successful.

In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States or other countries where we currently operate.

These risks include, among other things:

lack of familiarity and burdens of complying with foreign laws, legal standards, privacy and cybersecurity standards, regulatory requirements, tariffs and other barriers, and the risk of penalties to our customers and individual members of management or employees if our practices are deemed to not be in compliance;

practical difficulties of enforcing intellectual property rights in countries with varying laws and standards and reduced or varied protection for intellectual property rights in some countries;

an evolving legal framework and additional legal or regulatory requirements for data privacy and cybersecurity, which may necessitate the establishment of systems to maintain data in local markets, requiring us to invest in additional data centers and network infrastructure, and the implementation of additional employee data privacy documentation (including locally compliant data privacy notice and policies), all of which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business;

unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

difficulties in managing systems integrators and partners;

differing technology standards;

different pricing environments, longer sales cycles, longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

increased financial accounting and reporting burdens and complexities;

difficulties in managing and staffing international operations including the proper classification of independent contractors and other contingent workers, differing employer/employee relationships and local employment laws;

increased costs involved with recruiting and retaining an expanded employee population outside the United States through cash and equity-based incentive programs and unexpected legal costs and regulatory restrictions in issuing our shares to employees outside the United States;

global political and regulatory changes that may lead to restrictions on immigration and travel for our employees;

fluctuations in exchange rates that may decrease the value of our foreign-based revenue;

potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems, restrictions on the repatriation of earnings, and transfer pricing requirements;

permanent establishment risks and complexities in connection with international payroll, tax and social security requirements for international employees.

Additionally, operating in international markets also requires significant management attention and financial resources.

We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.

Compliance with laws and regulations applicable to our global operations also substantially increases our cost of doing business in foreign jurisdictions.

We have limited experience in marketing, selling and supporting our platform outside of the United States.

Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.

If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, financial condition, revenues, results of operations or cash flows will suffer.

We may be unable to keep current with changes in government requirements as they change from time to time.

Failure to comply with these regulations could harm our business.

In many countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or other regulations applicable to us.

Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners and agents will comply with these laws and policies.

Violations of laws or key control policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences or the prohibition of the importation or exportation of our solutions and could harm our business, financial condition, revenues, results of operations or cash flows.

Our international sales and operations subject us to additional risks and costs, including the ability to engage with customers in new geographies and exposure to foreign currency exchange rate fluctuations, that can adversely affect our business, financial condition, revenues, results of operations or cash flows.

We are continuing to expand our international operations as part of our growth strategy.

However, there are a variety of risks and costs associated with our international sales and operations, which include making investments prior to the sales or use of quantum computers, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.

Furthermore, we cannot predict the rate at which our quantum computers will be accepted in international markets by potential customers.

We have started the process of establishing a sales presence in Germany and Israel;

however, our sales, support and engineering organization outside the United States is substantially smaller than our U.S.

sales organization.

We believe our ability to attract new customers to subscribe to our platform or to attract existing customers to renew or expand their use of our platform is directly correlated to the level of engagement we obtain with the customer.

To the extent we are unable to effectively engage with non-U.S.

customers due to our limited sales force capacity, we may be unable to effectively grow in international markets.

As our international operations expand, our exposure to the effects of fluctuations in currency exchange rates grows.

While we have primarily transacted with customers in U.S.

dollars, historically, we expect to continue to expand the number of transactions with our customers that are denominated in foreign currencies in the future.

Additionally, fluctuations in the value of the U.S.

dollar and foreign currencies may make our subscriptions more expensive for international customers, which could harm our business.

Additionally, we incur expenses for employee compensation and other operating expenses for our non-U.S.

employees in the local currency for such locations.

Fluctuations in the exchange rates between the U.S.

dollar and other currencies could result in an increase to the U.S.

dollar equivalent of such expenses.

These fluctuations could cause our results of operations to differ from our expectations or the expectations of our investors.

Additionally, such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.

Our international operations may subject us to greater than anticipated tax liabilities.

The amount of taxes we may pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to any future intercompany arrangement or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.

If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.

Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

Risks Related to Litigation and Government Regulation

State, federal and foreign laws and regulations related to privacy, data use and security could adversely affect us.

We are subject to state and federal laws and regulations related to privacy, data use and security.

In addition, in recent years, there has been a heightened legislative and regulatory focus on data security, including requiring consumer notification in the event of a data breach.

Legislation has been introduced in Congress and there have been several Congressional hearings addressing these issues.

From time to time, Congress has considered, and may do so again, legislation establishing requirements for data security and response to data breaches that, if implemented, could affect us by increasing our costs of doing business.

In addition, several states have enacted privacy or security breach legislation requiring varying levels of consumer notification in the event of a security breach.

Contracts with U.S.

government entities subject us to risks, including early termination, audits, investigations, sanctions and penalties.

As part of our business strategy, we may enter into contracts with state and government entities, which subjects our business to statutes and regulations applicable to companies doing business with the government, including the Federal Acquisition Regulation.

These government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors.

For instance, most U.S.

government agencies include provisions that allow the government to unilaterally terminate or modify contracts for convenience, and in that event, the counterparty to the contract may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination.

If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source.

In addition, government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions.

These requirements include, for example:

specialized disclosure and accounting requirements unique to government contracts;

financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S.

public disclosures of certain contract and company information;

mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.

Government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits and investigations regarding our compliance with government contract requirements.

In addition, if we fail to comply with government contracting laws, regulations and contract requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts, the Federal Civil False Claims Act (including treble damages and other penalties), or criminal law.

In particular, the False Claims Act’s “whistleblower” provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S.

Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.

State, federal and foreign laws and regulations, and other obligations, related to privacy, data protection and security could adversely affect us.

We are subject to state and federal laws and regulations related to privacy, data protection and security.

In addition, in recent years, there has been a heightened legislative and regulatory focus on privacy and data security, including requiring consumer notification in the event of a data breach and providing consumers with additional rights with respect to their personal data.

Legislation has been introduced in Congress and there have been several Congressional hearings addressing privacy and data security.

From time to time, Congress has considered, and may do so again, legislation establishing requirements for privacy, data security and response to data breaches that, if implemented, could affect us by increasing our costs of doing business.

In addition, several states have enacted comprehensive privacy laws or security breach legislation.

For example, the California Consumer Privacy Act (“CCPA”), which enhances consumer protection and privacy rights by granting consumers resident in California new rights with respect to the collection of their personal data and imposing new operational requirements on businesses, went into effect in January 2020.

The CCPA includes a statutory damages framework and private rights of action against businesses that fail to comply with certain CCPA terms or implement reasonable security procedures and practices to prevent data breaches.

Several other states are considering similar legislation.

Several other states have passed or are considering similar legislation.

Foreign governments are raising similar privacy and data security concerns.

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Our business is exposed to risks associated with litigation, investigations and regulatory proceedings.

We may in the future face legal, administrative and regulatory proceedings, claims, demands and/or investigations involving stockholder, consumer, competition and/or other issues relating to our business.

We may face legal, administrative and regulatory proceedings, claims, demands and/or investigations involving stockholder, consumer, competition and/or other issues relating to our business.

Litigation and regulatory proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us from engaging in certain business practices, or requiring other remedies, such as compulsory licensing of patents.

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The Counterclaim Defendants have denied the claims against them and have a motion to dismiss the suit.

We may also be exposed to increased stockholder litigation due to the short seller report issued in May 2022.

In addition, in the past, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of these companies’ stock.

Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources.

Investigations, inquiries or litigation by various regulators may harm our reputation regardless of the outcome of any such action.

In May 2022, a securities class action complaint captioned Leacock v.

8:22-cv-01306, was filed by a stockholder of the Company in the United States District Court for the District of Maryland (the “Leacock Litigation”) against the Company and certain of the Company’s current officers.

In June 2022, a securities class action complaint captioned Fisher v.

8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder against the Company and certain of the Company’s current officers.

Both the Leacock Litigation and Fisher Litigation allege violations of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act and seeking unspecified damages.

These proceedings and any additional investigations, inquiries or litigation by various regulators may harm our reputation regardless of the outcome of any such action.

The outcome of any litigation, regardless of its merits, is inherently uncertain.

Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.

Negative perceptions of our business may result in additional regulation, enforcement actions by the government and increased litigation, or harm to our ability to attract or retain customers or strategic partners, any of which may affect our business.

Any damage to our reputation, including from publicity from legal proceedings against us or companies that work within our industry, governmental proceedings, unfavorable media coverage or class action could adversely affect our business, financial condition and results of operations.

An unfavorable outcome or settlement in a legal, administrative and regulatory proceeding may result in a material adverse impact on our business, results of operations, financial position and overall trends.

An unfavorable outcome or settlement in the Leacock or Fisher Litigation or any other legal, administrative and regulatory proceeding may result in a material adverse impact on our business, results of operations, financial position and overall trends.

In addition, regardless of the outcome, litigation can be costly, time-consuming, and disruptive to our operations.

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Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against such company.

Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.

Such litigation could result in substantial costs and a diversion of management’s attention and resources.

See also “ —Risks Related to Litigation and Government Regulation —

Our business is exposed to risks associated with litigation, investigations and regulatory proceedings

Short sellers may engage in manipulative activity intended to drive down the market price of our common stock, which could also result in related regulatory and governmental scrutiny, among other effects.

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Department of Justice, could result in a material diversion of our management’s time and could have a material adverse effect on our business and results of operations.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.

Similarly, Russia’s recent incursion of Ukraine has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.

Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely.

If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive.

Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

In addition, higher inflation could also increase our customers’ operating costs, which could result in reduced budgets for our customers and potentially less demand for our products and services.

Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition.

There may not be an active trading market for our common stock or public warrants, which may make it difficult to sell such securities.

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A small number of stockholders will continue to have substantial control over us, which may limit other stockholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over us.

As of March 31, 2022, our directors and executive officers of, and beneficial owners of 5% or more of our voting securities and their respective affiliates beneficially own, in the aggregate, approximately 39.3% of our outstanding common stock.

As of June 30, 2022, our directors and executive officers of, and beneficial owners of 5% or more of our voting securities and their respective affiliates beneficially own, in the aggregate, approximately 25% of our outstanding common stock.

This significant concentration of ownership may have a negative impact on the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders.

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In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the NYSE minimum share price requirement or prevent future non-compliance with NYSE’s listing requirements.

Additionally, if our securities are not listed on, or become delisted from, NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on NYSE or another national securities exchange.

Additionally, if our securities are not listed on, or become delisted from the NYSE, for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on the NYSE or another national securities exchange.

You may be unable to sell your securities unless a market can be established or sustained.

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Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.

If we are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in the

accuracy and completeness of our financial reports and the market price of our common stock could decline.

If we are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decline.

We could become subject to investigations by the NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.

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There is no guarantee that the public warrants will be in the money prior to their expiration, and as such, the public warrants may expire worthless.

The public warrants expire on September 30, 2026.

We may amend the terms of the public warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-outstanding public warrants.

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Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment.

Although our ability to amend the terms of the public warrants with the consent of

at least 50% of the then- outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the public warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a public warrant.

Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then- outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the public warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a public warrant.

We may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to warrantholders, thereby making such warrants worthless.

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The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings and there is uncertainty as to whether a court would enforce such provisions.

In addition, investors cannot waive compliance with the federal securities laws and the

rules and regulations thereunder.

In addition, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

It is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in such action.

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These provisions of our Certificate of Incorporation and Bylaws could discourage lawsuits against directors and officers, which could reduce the market price of our common stock.

(a) Exhibits.

The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q.

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Forms of Restricted Stock Unit Grant Notice and Award Agreement under the 2021 Equity Incentive Plan

Amendment No.

3 to Exclusive License Agreement, dated February 1, 2021, between the University of Maryland and IonQ, Inc.

Amendment No.

4 to Exclusive License Agreement, dated February 1, 2021, between the University of Maryland and IonQ, Inc.

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

August 15, 2022

/s/ Peter Chapman

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(Principal Executive Officer)

August 15, 2022

/s/ Thomas Kramer

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors