IonQ, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2022, our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act was recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information was accumulated and communicated to our management to allow timely decisions regarding required disclosure. Accordingly, we believe that the consolidated financial statements included in this Annual Report do fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Management’s Annual Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on our evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2022. Remediation of Previously Identified Material Weakness As previously disclosed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2021, management concluded that there was a material weakness in our internal control over financial reporting 71 specifically related to our financial statement close process. In response to the material weakness identified, management developed and implemented a remediation plan to address the underlying causes of the material weakness, which was subject to senior management review and oversight of the audit committee of the Board (the “Audit Committee”). The remediation plan included: • hiring additional full-time accounting personnel with appropriate levels of experience, and augmenting skills gaps with external experts; • establishing and implementing policies surrounding the approval of transactions, related to, but not limited to, account reconciliations and journal entries; and • implementing a financial accounting system that supports effective information technology general controls, as well as the anticipated growth of the business. Implementation of the remediation plan described above and the resulting improvements in controls have strengthened our internal control over financial reporting and have addressed the related material weakness that was identified as of December 31, 2021. As part of our assessment of internal control over financial reporting, management tested and evaluated all internal controls to assess whether they were designed and operating effectively as of December 31, 2022. Management determined that its internal controls over financial reporting were designed and operating effectively to prevent and detect a material misstatement due to error or fraud and therefore concluded that the material weakness was remediated. Attestation Report of the Registered Public Accounting Firm This Annual Report does not include an attestation report of our registered public accounting firm due to an exemption for “emerging growth companies.” Changes in Internal Control over Financial Reporting Except as described above under “Remediation of Previously Identified Material Weakness,” there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 72 PART III Certain information required by Part III is omitted from this report because we will file with the SEC a definitive proxy statement pursuant to Regulation 14A (the “2023 Proxy Statement”), no later than 120 days after the end of our fiscal year, and certain information included therein is incorporated herein by reference. Item 10. Directors, Executive Officers and Corporate Governance. Information About Our Directors Information regarding directors required by this item will be contained in our 2023 Proxy Statement under the caption “Information Regarding Director Nominees and Current Directors,” and is hereby incorporated by reference. Information About Our Executive Officers The following table sets forth information regarding our executive officers who are not listed above as members of our Board as of March 15, 2023: Name Age Position Peter Chapman 62 President & Chief Executive Officer and Director Jungsang Kim 53 Chief Technology Officer and Director Christopher Monroe 57 Chief Scientist Thomas Kramer 52 Chief Financial Officer Rima Alameddine 57 Chief Revenue Officer Laurie Babinski 41 General Counsel and Secretary Peter Chapman has served as a member of our Board and president and chief executive officer since the closing of the Business Combination in September 2021. Mr. Chapman previously served as Legacy IonQ’s president and chief executive officer and a member of its board of directors since May 2019. From September 2014 to May 2019, Mr. Chapman served as a director of engineering for Amazon Prime at Amazon.com, Inc. prior to joining IonQ. Before that, Mr. Chapman was the president at Media Arc, Inc. We believe Mr. Chapman is well qualified to serve as a member of our Board because of his prior leadership and officer positions at technology and software companies. Jungsang Kim has served as a member of our Board and chief strategy officer since the closing of the Business Combination in September 2021. Dr. Kim is the co-founder of Legacy IonQ and served as its chief technology officer and a member of its board of directors since September 2015. Dr. Kim assumed the role of chief technology officer in May 2020. Dr. Kim has served as assistant/associate/full professor in the Department of Electrical and Computer Engineering, Department of Physics and Department of Computer Science at Duke University since June 2004. From August 2006 to February 2020, Dr. Kim was also the founder and president and chief executive officer of Applied Quantum Technologies, Inc. Dr. Kim received a B.S. in physics from Seoul National University and a Ph.D. in physics from Stanford University. We believe Dr. Kim is well qualified to serve as a member of our Board because of his extensive research in electrical and computer engineering and quantum mechanics. Christopher Monroe has served as our chief scientist since the closing of the Business Combination in September 2021. Dr. Monroe is the co-founder of Legacy IonQ and served as its chief scientist since September 2016. From August 2018 until May 2019, Dr. Monroe served as IonQ’s chief executive officer. Dr. Monroe has served as a Professor of Electrical Computer Engineering and Physics at Duke University since January 2021. Dr. Monroe held various positions at the University of Maryland, including from January 2021 to present as a College Park Professor, from 2015 to December 2020 as a Distinguished University Professor of Physics, from 73 September 2018 to December 2020 as a Professor of Electrical and Computer Engineering, and from September 2007 to December 2020 as a Bice Zorn Professor of Physics. From 2014 to December 2020, Dr. Monroe was a Fellow at the Center for Quantum Information and Computer Science and from 2007 to December 2020, Dr. Monroe was a Fellow at the Joint Quantum Institute. Dr. Monroe also held various academic and research positions at the University of Michigan, Ann Arbor, University of Colorado, Boulder, and the National Institute of Standards and Technology. Dr. Monroe serves on advisory boards at several academic institutions, including the Max Planck Institute of Quantum Optics and the Center for Quantum Technology, National University of Singapore. Dr. Monroe received an S.B. in physics from Massachusetts Institute of Technology and a Ph.D. in physics from the University of Colorado, Boulder. Thomas Kramer has served as our chief financial officer since the closing of the Business Combination in September 2021, and as our secretary from September 2021 to March 2022. Mr. Kramer served as Legacy IonQ’s chief financial officer since February 2021. From February 2017 to February 2021, Mr. Kramer served as managing director of Remarque Advisory. From November 2011 to October 2016, Mr. Kramer also served as chief financial officer of Opower, Inc., a cloud-based enterprise software company in the utilities space. From 2000 to 2011, Mr. Kramer served as chief financial officer of Cvent, Inc., a cloud-based enterprise software company in the event-management space. From 1998 to 2000, Mr. Kramer served as a consultant at the Boston Consulting Group. Mr. Kramer holds an M.B.A. from Harvard Business School and an M.S. in economics from the Norwegian School of Economics. Rima Alameddine has served as our chief revenue officer since December 2022. Previously, Ms. Alameddine served as the Vice President, Enterprise Sales, Healthcare, Life Science and Manufacturing, Americas, of NVIDIA Corporation, a publicly listed company, from November 2018 to December 2022. From July 2016 to October 2018, Ms. Alameddine served as the Vice President, Enterprise Sales, East and Central United States, of NVIDIA. Prior to this, between September 1998 and July 2016, Ms. Alameddine served in various roles at Cisco Systems, Inc., a publicly listed company, including Director, Enterprise Sales, New York from August 2012 to 2016 and Director, Enterprise Sales, Financial Services, from November 2010 to July 2012. Ms. Alameddine holds an M.S. in computer engineering and a B.S. in computer and communications engineering from Syracuse University and the American University of Beirut, respectively. Laurie Babinski has served as our general counsel and secretary since March 2022. From December 2019 to March 2022, Ms. Babinski served as deputy general counsel at Credit Karma, LLC, a multinational personal finance company, where she also served in various roles from August 2015 to December 2019, including as the lead of numerous legal functions such as product, marketing, regulatory, privacy, litigation, employment and government relations in the United States, Canada and the United Kingdom. Prior to that, Ms. Babinski worked at the law firm Baker Hostetler LLP practicing in the Media, Technology and Intellectual Property group. Ms. Babinski received a J.D. from Northwestern University Pritzker School of Law and holds a B.A. in Journalism and Spanish from Pepperdine University. Identification of Audit Committee and Financial Experts Information regarding our Audit Committee required by this item will be contained in our 2023 Proxy Statement under the caption “Information Regarding the Board of Directors and Corporate Governance,” and is hereby incorporated by reference. Material Changes to Procedures for Recommending Directors Information regarding procedures for recommending directors required by this item will be contained in our 2023 Proxy Statement under the caption “Information Regarding the Board of Directors and Corporate Governance,” and is hereby incorporated by reference. 74 Code of Business Conduct and Ethics Information regarding our Code of Business Conduct and Ethics ( the “Code of Conduct”), required by this item will be contained in our 2023 Proxy Statement under the caption “Information Regarding the Board of Directors and Corporate Governance—Code of Conduct and Ethics,” and is hereby incorporated by reference. The full text of our Code of Conduct is available at the investors section of our website at www.ionq.com. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report. Delinquent Section 16(a) Reports Information regarding compliance with Section 16(a) of the Exchange Act required by this item will be contained in our 2023 Proxy Statement under the caption “Delinquent Section 16(a) Reports,” if any, and is hereby incorporated by reference. Item 11. Executive Compensation. Information regarding our executive compensation required by this item will be contained in our 2023 Proxy Statement under the captions “Executive Compensation,” “Director Compensation” and “Information Regarding the Board of Directors and Corporate Governance—Information Regarding Committees of the Board of Directors—Compensation Committee—Compensation Committee Interlocks and Insider Participation,” and is hereby incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Ownership of Securities Information regarding ownership of our securities required by this item will be contained in our 2023 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management,” and is hereby incorporated by reference. Equity Compensation Plan Information Information regarding our equity compensation plans required by this item will be contained in our 2023 Proxy Statement under the caption “Equity Compensation Plan Information,” and is hereby incorporated by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information regarding related transactions and director independence required by this item will be contained in our 2023 Proxy Statement under the captions “Transactions with Related Persons” and “Information Regarding the Board of Directors and Corporate Governance—Independence of Our Board of Directors,” and is hereby incorporated by reference. Item 14. Principal Accountant Fees and Services. Information regarding accounting fees and services required by this item will be contained in our 2023 Proxy Statement in Proposal 2 under the captions “Principal Accountant Fees and Services” and “Pre-Approval Policies and Procedures” and is hereby incorporated by reference. 75 PART IV Item 15. Exhibit and Financial Statement Schedules. The financial statements schedules and exhibits filed as part of this Annual Report are as follows: (a)(1) Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 42) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Changes in Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 (a)(2) Financial Statement Schedules All other financial statement schedules are omitted because they are not required or the required information is included in the financial statements or notes thereto. (a)(3) Exhibits The exhibits required to be filed as part of this Annual Report on Form 10-K are listed in the Exhibit List attached hereto and are incorporated herein by reference. Exhibit Number Description 2.1^ Agreement and Plan of Merger, dated as of March 7, 2021, by and among dMY Technology Group, Inc. III, IonQ, Inc. and IonQ Trap Acquisition Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 3.1 Second Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 3.2 Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 4.1 Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on August 11, 2021). 4.2 Warrant Agreement, dated November 12, 2020, between Continental Stock Transfer & Trust Company and IonQ, Inc. (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on November 17, 2020). 4.3 Description of the Registrant’s Securities (incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K (File No. 001-39694), filed with the SEC on March 28, 2022). 10.1 Amended and Restated Registration Rights Agreement, dated September 30, 2021, between and among the investors party thereto and IonQ, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 76 Exhibit Number Description 10.2 Form of Subscription Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.3 Hyundai Subscription Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.4 Kia Subscription Agreement (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.5 MSD Subscription Agreement (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.6 Silver Lake Subscription Agreement (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.7 BVE Subscription Agreement (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.8 Form of Venture Capital / Other Investors Subscription Agreement (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on March 8, 2021). 10.9+ IonQ, Inc. Change in Control Severance Plan and Summary Plan Description (incorporated herein by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on August 5, 2021). 10.10+ Form of Indemnification Agreement of IonQ, Inc. (incorporated herein by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 10.11+ 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 10.12+ Forms of Stock Option Grant Notice and Option Agreement under 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 10.13+ 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 10.14+ Forms of Option Grant Notice and Option Agreement under 2021 Equity Incentive Plan. 10.15+ Form of Restricted Stock Unit Grant Notice and Unit Award Agreement under 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-39694), filed with the SEC on August 15, 2022). 10.16+ 2021 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021). 10.17 Amended and Restated Office Lease, by and between University of Maryland – College Park and IonQ, Inc. (incorporated herein by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the SEC on October 4, 2021) 77 Exhibit Number Description 10.18 Warrant to Purchase Shares, dated November 27, 2019, issued to Amazon.com NV Investment Holdings LLC by IonQ, Inc. (incorporated herein by reference to Exhibit 10.33 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on July 16, 2021). 10.19 License Agreement, dated July 19, 2016, among the University of Maryland, Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.20 to the (incorporated herein by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.20 Amendment No. 1 to Exclusive License Agreement, dated September 22, 2017, between Duke University and the Registrant (incorporated herein by reference to Exhibit 10.21 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.21† Amendment No. 1 to Exclusive License Agreement, dated October 11, 2017, between the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.22 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.22† Amendment No. 2 to Exclusive License Agreement, dated October 4, 2018, between Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.23† Amendment No. 2 to Exclusive License Agreement, dated October 9, 2018, between the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.24† Amendment No. 3 to Exclusive License Agreement, dated April 27, 2021, between Duke University, the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.25† Amendment No. 3 to Exclusive License Agreement, dated February 1, 2021, between the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-39694), filed with the SEC on May 16, 2022). 10.26† Amendment No. 4 to Exclusive License Agreement, dated April 27, 2021, between Duke University, the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.26 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.27† Amendment No. 4 to Exclusive License Agreement, dated February 1, 2021, between the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No. 001-39694), filed with the SEC on May 16, 2022). 10.28† Amendment No. 5 to Exclusive License Agreement, dated September 10, 2021, between Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K (File No. 001-39694), filed with the SEC on March 28, 2022). 10.29† Amendment No. 5 to Exclusive License Agreement, dated September 24, 2021, between the University of Maryland and IonQ, Inc. (incorporated herein by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K (File No. 001-39694), filed with the SEC on March 28, 2022). 10.30† Amendment No. 6 to Exclusive License Agreement, dated January 23, 2023, between Duke University and IonQ, Inc. 10.31† Exclusive Option Agreement, dated July 15, 2016, between Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 78 Exhibit Number Description 10.32† First Amendment to Option Agreement, dated December 18, 2020, between Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.28 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.33 Second Amendment to Option Agreement, dated March 19, 2021, between Duke University and IonQ, Inc. (incorporated herein by reference to Exhibit 10.29 to the Company’s Registration Statement on Form S-4/A (File No. 333-254840), filed with the SEC on June 17, 2021). 10.34 Non-Employee Director Compensation Policy (incorporated herein by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K (File No. 001-39694), filed with the SEC on March 28, 2022). 21.1 List of Subsidiaries of Company (incorporated herein by reference to Exhibit 21.1 to the Company’s Current Report on Form 8-K (File No. 001-39694), filed with the Commission on October 4, 2021). 23.1 Consent of Ernst & Young LLP, an Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on the signature page to this report). 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibit 101). * Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act (whether made before or after the date of the Form10-K),irrespective of any general incorporation language contained in such filing. + Indicates a management contract or compensatory plan. † Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(10)(iv). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. ^ Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(1)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. Item 16. Form 10-K Summary None. 79 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. IonQ, Inc. March 30, 2023 BY: /s/ Peter Chapman Peter Chapman President and Chief Executive Officer ( Principal Executive Officer ) POWER OF ATTORNEY Each person whose individual signature appears below hereby authorizes and appoints Peter Chapman and Thomas Kramer, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Peter Chapman Peter Chapman President and Chief Executive Officer and Director (Principal Executive Officer) March 30, 2023 /s/ Thomas Kramer Thomas Kramer Chief Financial Officer (Principal Financial and Accounting Officer) March 30, 2023 /s/ Craig Barratt Craig Barratt Chair of the Board of Directors March 30, 2023 /s/ Ronald Bernal Ronald Bernal Director March 30, 2023 /s/ Kathryn Chou Kathryn Chou Director March 30, 2023 /s/ Niccolo de Masi Niccolo de Masi Director March 30, 2023 /s/ Jungsang Kim Jungsang Kim Co-Founder, Chief Technology Officer and Director March 30, 2023 80 /s/ Inder M. Singh Inder M. Singh Director March 30, 2023 /s/ Wendy Thomas Wendy Thomas Director March 30, 2023 /s/ Harry You Harry You Director March 30, 2023 81 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Changes in Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of IonQ, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of IonQ, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. 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 misstatement 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Tysons, Virginia March 30, 2023 F-2 Table of Contents IONQ, INC. Consolidated Balance Sheets (in thousands, except share and per share data) As of December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 44,367 $ 399,025 Short-term investments 311,430 123,443 Accounts receivable 3,292 707 Prepaid expenses and other current assets 12,539 6,442 Total current assets 371,628 529,617 Long-term investments 182,001 80,110 Property and equipment, net 26,014 18,870 Operating lease right-of-use assets 3,753 4,032 Intangible assets, net 8,944 5,841 Goodwill 742 — Other noncurrent assets 4,910 3,558 Total Assets $ 597,992 $ 642,028 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,055 $ 1,882 Accrued expenses 6,655 2,647 Current portion of operating lease liabilities 591 568 Unearned revenue 8,729 3,430 Current portion of stock option early exercise liabilities 1,130 1,164 Total current liabilities 20,160 9,691 Operating lease liabilities, net of current portion 3,459 3,643 Unearned revenue, net of current portion 1,201 1,533 Stock option early exercise liabilities, net of current portion 839 1,969 Warrant liabilities 3,819 33,962 Other noncurrent liabilities 303 — Total liabilities $ 29,781 $ 50,798 Commitments and contingencies (see Note 10) Stockholders’ Equity: Common stock $ 0.0001 par value; 1,000,000,000 shares authorized; 199,862,123 and 195,630,975 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 20 19 Additional paid-in capital 769,848 737,150 Accumulated deficit ( 194,302 ) ( 145,791 ) Accumulated other comprehensive loss ( 7,355 ) ( 148 ) Total stockholders’ equity 568,211 591,230 Total Liabilities and Stockholders’ Equity $ 597,992 $ 642,028 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents IONQ, INC. Consolidated Statements of Operations (in thousands, except share and per share data) Year Ended December 31, 2022 2021 Revenue $ 11,131 $ 2,099 Costs and expenses: Cost of revenue (excluding depreciation and amortization) 2,944 1,040 Research and development 43,978 20,228 Sales and marketing 8,385 3,233 General and administrative 35,966 13,737 Depreciation and amortization 5,604 2,548 Total operating costs and expenses 96,877 40,786 Loss from operations ( 85,746 ) ( 38,687 ) Change in fair value of warrant liabilities 30,136 ( 63,332 ) Interest income, net 7,093 64 Offering costs associated with warrants — ( 4,259 ) Other income (expense), net 6 28 Loss before benefit for income taxes ( 48,511 ) ( 106,186 ) Benefit for income taxes — — Net loss $ ( 48,511 ) $ ( 106,186 ) Net loss per share attributable to common stockholders—basic and diluted $ ( 0.25 ) $ ( 0.77 ) Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted 197,727,642 137,609,620 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents IONQ, INC. Consolidated Statements of Comprehensive Loss (in thousands) Year Ended December 31, 2022 2021 Net loss $ ( 48,511 ) $ ( 106,186 ) Other comprehensive loss, net of reclassification adjustments: Change in unrealized loss on available-for-sale securities, net ( 7,207 ) ( 148 ) Total other comprehensive loss ( 7,207 ) ( 148 ) Total comprehensive loss $ ( 55,718 ) $ ( 106,334 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents IONQ, INC. Consolidated Statements of Changes in Stockholders’ Equity (in thousands, except share data) Stockholders’ Equity Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Stockholders Equity’ Shares Amount Balance, December 31, 2020 118,146,795 $ 3 $ 93,305 $ ( 39,605 ) $ — $ 53,703 Net loss — — — ( 106,186 ) — ( 106,186 ) Other comprehensive loss — — — — ( 148 ) ( 148 ) Equity instruments issued in consideration for intellectual property and research and development arrangements 385,797 — 2,381 — — 2,381 Stock options exercised 1,044,199 — 288 — — 288 Vesting of restricted common stock 1,259,074 — 1,068 — — 1,068 Merger and PIPE transaction, net of transaction costs 70,300,768 16 526,296 — — 526,312 Stock-based compensation — — 8,023 — — 8,023 Warrants exercised 4,494,342 — 105,789 — — 105,789 Balance, December 31, 2021 195,630,975 $ 19 $ 737,150 $ ( 145,791 ) $ ( 148 ) $ 591,230 Net loss — — — ( 48,511 ) — ( 48,511 ) Other comprehensive loss — — — — ( 7,207 ) ( 7,207 ) Stock options exercised 2,239,490 1 1,058 — — 1,059 Vesting of restricted common stock 515,534 — 1,162 — — 1,162 Issuance of common stock from the settlement of restricted stock units 1,474,592 — 473 — — 473 Stock-based compensation — — 29,980 — — 29,980 Warrants exercised 1,532 — 25 — — 25 Balance, December 31, 2022 199,862,123 $ 20 $ 769,848 $ ( 194,302 ) $ ( 7,355 ) $ 568,211 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents IONQ, INC. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2022 2021 Cash flows from operating activities : Net loss $ ( 48,511 ) $ ( 106,186 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,604 2,548 Non-cash research and development arrangements 520 1,335 Amortization of customer warrant — 528 Offering costs associated with warrants — 4,259 Stock-based compensation 31,456 7,748 Change in fair value of warrant liabilities ( 30,136 ) 63,332 Other, net ( 1,136 ) 101 Changes in operating assets and liabilities: Accounts receivable ( 1,510 ) ( 317 ) Prepaid expenses and other current assets ( 7,012 ) ( 3,790 ) Accounts payable 1,060 763 Accrued expenses 1,344 1,259 Unearned revenue 3,892 3,605 Other assets and liabilities ( 269 ) ( 1,722 ) Net cash used in operating activities ( 44,698 ) ( 26,537 ) Cash flows from investing activities: Purchases of property and equipment ( 9,336 ) ( 7,783 ) Capitalized software development costs ( 2,179 ) ( 1,621 ) Intangible asset acquisition costs ( 1,049 ) ( 620 ) Purchases of available-for-sale securities ( 605,689 ) ( 203,761 ) Maturities and sales of available-for-sale securities 310,045 — Business acquired ( 848 ) — Net cash used in investing activities ( 309,056 ) ( 213,785 ) Cash flows from financing activities: Proceeds from stock options exercised 1,059 5,457 Tax withholding receipts related to vested and released restricted stock units 2,001 — Tax withholding payments related to vested and released restricted stock units ( 1,981 ) — Proceeds from public warrants exercised 17 26,070 Repurchase of early exercised stock options — ( 968 ) Proceeds from merger and PIPE transactions, net of transaction costs — 572,668 Net cash provided by financing activities 1,096 603,227 Net change in cash , cash equivalents and restricted cash ( 352,658 ) 362,905 Cash, cash equivalents and restricted cash at the beginning of the period 399,025 36,120 Cash, cash equivalents and restricted cash at the end of the period $ 46,367 $ 399,025 Supplemental disclosures of non-cash investing and financing transactions: Issuance of common stock for intellectual property $ — $ 1,567 Issuance of common stock for research and development arrangement — 814 Property and equipment purchases in accounts payable and accrued expenses 485 553 Intangible asset purchases in accounts payable and accrued expenses 164 83 Noncash reclassification of warrant liabilities to equity upon exercise 8 79,719 Bonus settled in restricted stock units 473 — The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents IONQ, INC. Notes to Consolidated Financial Statements 1. DESCRIPTION OF BUSINESS IonQ, Inc. (“IonQ” or “the Company”), formerly known as dMY Technology Group, Inc. III (“dMY”), was incorporated in the state of Delaware in September 2020 and formed as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. IonQ Quantum, Inc. (formerly known as IonQ, Inc., and referred to as “Legacy IonQ” herein), was incorporated in the state of Delaware in September 2015 and is headquartered in College Park, Maryland. On March 7, 2021, Legacy IonQ entered into an Agreement and Plan of Merger (the “Merger Agreement”) with dMY and Ion Trap Acquisition Inc. (“Merger Sub”), a direct, wholly owned subsidiary of dMY. Pursuant to the Merger Agreement, on September 30, 2021 (“the Closing Date”), the Merger Sub was merged with and into Legacy IonQ with Legacy IonQ continuing as the surviving corporation following the Merger, becoming a wholly owned subsidiary of dMY and the separate corporate existence of the Merger Sub ceased (the “Business Combination”). Commensurate with the Business Combination, dMY changed its name to IonQ, Inc. and Legacy IonQ changed its name to IonQ Quantum, Inc. Unless otherwise indicated, references in this Annual Report on Form 10-K to the “Company” and “IonQ” refer to the consolidated operations of IonQ, Inc. and IonQ Quantum, Inc subsequent to the Business Combination. References to “dMY” refer to the company prior to the consummation of the Business Combination and references to “Legacy IonQ” refer to IonQ, Inc. prior to the consummation of the Business Combination. IonQ is engaged in quantum computing and develops general-purpose quantum computing systems designed to solve some of the world’s most complex problems, and transform business, society, and the planet for the better. To operate the quantum computing systems, the Company has developed custom hardware, custom firmware, and an operating system to orchestrate the quantum computers. Business Combination While the legal acquirer in the Merger Agreement is dMY, for financial accounting and reporting purposes under accounting principles generally accepted in the United States of America (“U.S. GAAP”), Legacy IonQ is the accounting acquirer and the merger is accounted for as a “reverse recapitalization” (i.e., a capital transaction involving the issuance of stock by dMY for the stock of Legacy IonQ). For accounting purposes, the Business Combination was treated as the equivalent of Legacy IonQ issuing stock for the net assets of dMY, accompanied by a recapitalization. The net assets of dMY are stated at historical cost, and no goodwill or other intangible assets were recorded. Because Legacy IonQ was deemed the accounting acquirer in the Business Combination, the historical financial statements of Legacy IonQ are the historical financial statements of the Company upon the consummation of the Business Combination. As a result, the consolidated financial statements included in this report reflect: (i) the historical operating results of Legacy IonQ prior to the Business Combination; (ii) the combined results of dMY and Legacy IonQ following the close of the Business Combination on September 30, 2021; and (iii) the assets and liabilities of Legacy IonQ stated at their historical cost. In accordance with guidance applicable to these circumstances, the equity structure has been retroactively restated in all comparative periods to reflect the number of shares of the Company’s common stock, $ 0.0001 par value per share, issued to Legacy IonQ’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy IonQ convertible redeemable preferred stock and warrants and Legacy IonQ common stock prior to the Business Combination have been F-8 Table of Contents retroactively restated as shares reflecting the exchange ratio established in the Business Combination. Legacy IonQ’s convertible redeemable preferred stock and warrants previously classified as mezzanine equity were retroactively adjusted, converted into common stock, and reclassified to permanent equity because of the reverse recapitalization. All exercise prices for stock options and customer warrants have similarly been retroactively restated to reflect the exchange ratio established in the Business Combination. At the Closing Date, the consummation of the Merger provided approximately $ 636.0 million of gross proceeds, including $ 345.0 million from the PIPE investment in common stock at $ 10.00 per share. In connection with the Business Combination, Legacy IonQ and dMY incurred direct and incremental costs of approximately $ 52.0 million related to the equity issuance, consisting primarily of banking, legal, accounting, and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds. Additionally, approximately $ 4.3 million in offering costs were allocated to liability-classified warrants assumed in the Merger and expensed upon the close of the Business Combination. Concurrently with the execution of the Merger Agreement, certain former dMY stockholders entered into a sponsor support agreement. Under the sponsor support agreement, and effective upon the consummation of the Business Combination, 10 % of the dMY Class B common stock (or 750,000 shares), which were converted into shares of common stock at the consummation of the Business Combination, were unvested and subject to certain vesting and forfeiture provisions (the “Vesting Shares”). The Vesting Shares are accounted for as equity classified instruments and were included as merger consideration as part of the reverse recapitalization and recorded in additional paid-in capital. As of December 31, 2021, all of the Vesting Shares had vested and were released from any restrictions. Segment Reporting The Company operates as one operating segment as its chief executive officer, who is the chief operating decision maker, reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP as determined by the Financial Accounting Standards Board (“FASB”). Such consolidated financial statements include the accounts of IonQ and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Emerging Growth Company The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the Company’s consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. F-9 Table of Contents The Company remains an emerging growth company until the earliest of (i) December 31, 2025, (ii) the last day of the fiscal year in which the Company has total annual gross revenue of at least $ 1.235 billion, (iii) the last day of the fiscal year in which the Company is deemed to be a large accelerated filer, which means the market value of the Company’s common stock that is held by non-affiliates exceeds $ 700.0 million as of the prior June 30th or (iv) the date on which the Company has issued more than $ 1.0 billion in no n-convertible debt securities during the prior three-year period. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP and regulations of the SEC requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Significant estimates and judgments are inherent in the analysis and measurement of items including, but not limited to: revenue recognition, capitalization of internally developed software and quantum computing costs, useful lives of long-lived assets, and fair value of available-for-sale securities. Management bases its estimates and assumptions on historical experience, expectations, forecasts, and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ and be affected by changes in those estimates. Fair Value Measurements The Company evaluates the fair value of certain assets and liabilities using the fair value hierarchy. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: • Level 1—Observable inputs, which include quoted prices in active markets; • Level 2—Observable inputs other than the quoted prices in active markets that are observable either directly or indirectly, such as quoted prices in markets that are not active, or other inputs such as broker quotes, benchmark yield curves, credit spreads and market interest rates for similar securities that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; • Level 3—Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined using pricing models, discounted cash flow methodologies or similar techniques. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. Assets and liabilities that are measured at fair value on a non-recurring basis include property and equipment, intangible assets, and goodwill. The Company recognizes these items at fair value when they are considered to be F-10 Table of Contents impaired or upon initial recognition when acquired through a business combination or an asset acquisition. The fair value of these assets and liabilities are determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models. Due to their short-term nature, the carrying amounts reported in the Company’s consolidated financial statements approximates the fair value for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash in banks, checking deposits, money market funds, and certain commercial paper and U.S. government and agency securities. The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Restricted cash collateralizing letters of credit is included in other noncurrent assets in the consolidated balance sheets . The Company issues letters of credits in the ordinary course of business, including for lease arrangements. As of December 31, 2022, letters of credit totaling $ 2.0 million were outstanding. The following table provides a reconciliation of cash and restricted cash included in the consolidated balance sheets to the amounts included in the statements of cash flows (in thousands): 2022 2021 Cash and cash equivalents $ 44,367 $ 399,025 Restricted cash 2,000 — Total cash, cash equivalents and restricted cash in the consolidated statements of cash flows $ 46,367 $ 399,025 Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are non-interest bearing and represent amounts billed and currently due from customers at the gross invoiced amount as well as unbilled amounts related to unconditional rights for consideration to be received for services performed but not yet invoiced. A receivable is recorded when the Company has an unconditional right to receive payment. Accounts receivable consists of the following at December 31, 2022 and 2021 (in thousands): 2022 2021 Billed accounts receivable $ 1,150 $ 261 Unbilled accounts receivable 2,142 446 Total accounts receivable $ 3,292 $ 707 On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off. This assessment is based on management’s evaluation of the past due receivables, collectability of specific accounts, historical loss experience and overall economic conditions. The Company did no t have any allowance for doubtful accounts as of December 31, 2022 and 2021. Materials and Supplies Materials and supplies are carried at average cost and recorded in prepaid expenses and other current assets in the consolidated balance sheets. Materials and supplies used in the production of quantum computing systems to be made commercially available are capitalized to property and equipment when installed. Materials and supplies used for maintenance or research and development efforts are expensed when consumed. The Company capitalized $ 1.3 million of materials and supplies to property and equipment for the year ended December 31, 2022. F-11 Table of Contents Investments Management determines the appropriate classification of investments at the time of purchase based upon management’s intent with regard to such investments. The Company primarily invests in debt securities and classifies its investments as available-for-sale at the time of purchase if they are available to support either current or future operations. This classification is re-evaluated at each balance sheet date. Investments not considered cash equivalents, with remaining contractual maturities of one year or less from the balance sheet date are classified as short-term investments, and those with remaining contractual maturities greater than one year from the balance sheet date are classified as long-term investments. All investments are recorded at their estimated fair value, and any unrealized gains and losses are recorded in accumulated other comprehensive loss. Realized gains and losses on sales and maturities of investments are determined based on the specific identification method and are recognized in the consolidated statements of operations in other income (expense), net. The Company performs periodic evaluations to determine whether any declines in the fair value of investments below cost are other-than-temporary. The evaluation consists of qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as the Company’s ability and intent to hold the investments until a forecasted recovery occurs. The impairments are considered to be other-than-temporary if they are related to deterioration in credit risk or if it is likely that the underlying securities will be sold prior to a full recovery of their cost basis. Other-than-temporary fair value impairments are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations. Property and Equipment, Net Property and equipment, net is stated at cost less accumulated depreciation. Historical cost of fixed assets is the cost as of the date acquired. Hardware and labor costs associated with the building of quantum computing systems are capitalized. Costs to maintain quantum computing systems are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Useful lives are as follows: Computer equipment and acquired computer software 3 – 5 years Machinery, equipment, furniture and fixtures 5 – 7 years Quantum computing systems 3 years Leasehold improvements Shorter of the lease term or the estimated useful life of the related asset Effective October 1, 2022, the Company revised the accounting useful life of quantum computing systems, which was determined to be a change in accounting estimate and is being applied prospectively. This change in accounting estimate is not material for the year ended December 31, 2022. The estimated useful life for quantum computing systems was previously 2 years. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current operating lease liabilities and operating lease liabilities, net of current portion on the Company’s consolidated balance sheets. As of December 31, 2022, the Company has no financing lease arrangements. The Company recognizes lease expense for its operating leases on a straight-line basis over the term of the lease. The Company records a ROU asset and lease liability in connection with its operating leases. The Company’s lease portfolio is comprised primarily of real estate leases, which are accounted for as operating leases. The Company elected the practical expedient to not separate lease and non-lease components for all leases. F-12 Table of Contents ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. Operating lease ROU assets also include the impact of any lease incentives. Amendments to a lease are assessed to determine if it represents a lease modification or a separate contract. Lease modifications are reassessed as of the effective date of the modification using an incremental borrowing rate based on the information available at the commencement date. For modified leases the Company also reassesses the lease classification as of the effective date of the modification. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Company’s lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company considers contractual-based factors such as the nature and terms of the renewal or termination, asset-based factors such as physical location of the asset and entity-based factors such as the importance of the leased asset to the Company’s operations to determine the lease term. The Company generally uses the base non-cancelable lease term when determining the ROU assets and lease liabilities. Intangible Assets, Net The Company’s intangible assets include website domain costs, patents, intellectual property, developed technology and trademarks. Intangible assets with identifiable useful lives are initially valued at acquisition cost and are amortized over their estimated useful lives using the straight-line method. With respect to patents, acquisition costs include external legal and patent application costs. Intangible assets with indefinite useful lives, such as trademarks, are assessed for impairment at least annually. Capitalized Internally Developed Software Capitalized internally developed software, which is included in intangible assets, net, consists of costs to purchase and develop internal-use software, which the Company primarily uses to provide services to its customers. The costs to purchase and develop internal-use software are capitalized from the time that the preliminary project stage is completed, and it is considered probable that the software will be used to perform the function intended, until the time the software is placed in service for its intended use. Any costs incurred during subsequent efforts to upgrade and enhance the functionality of the software are also capitalized. Once this software is ready for its intended use, these costs are amortized on a straight-line basis over the estimated useful life of the software, which is typically assessed to be 3 years. During the years ended December 31, 2022 and 2021, the Company capitalized $ 3.2 million and $ 1.7 million in internal-use software costs, respectively. The Company amortized $ 1.5 million and $ 0.8 million of capitalized internally developed software costs during the years ended December 31, 2022 and 2021, respectively. Goodwill Goodwill is the excess of the purchase price ove r the fai r values assigned to the net assets acquired in a business combination. The Company tests goodwill for impairment on an annual basis, which it has determined to be the first day of the fiscal fourth quarter, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company tests goodwill qualitatively, or quantitatively by comparing the fair value of the reporting unit with the unit’s carrying amount. No impairment loss was recognized for the year ended December 31, 2022 . Impairment of Long-Lived Assets Long-lived assets, such as property and equipment and other long-term assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be F-13 Table of Contents recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount of the underlying asset exceeds its fair value. No impairment loss was recognized for the years ended December 31, 2022 or 2021. Early Exercise of Stock Options Stock options granted under the 2015 Equity Incentive Plan provide employee option holders, if approved by the Board, the right to exercise unvested options in exchange for restricted common stock, which is subject to a repurchase right held by the Company at the lower of (i) the fair market value of its common stock on the date of repurchase or (ii) the original purchase price. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are recorded as a liability. These amounts are reclassified to common stock and additional paid-in capital as the underlying shares vest. Warrant Liabilities The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued upon exercise or at each reporting date for the unexercised warrants, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. The warrants of dMY assumed in the Business Combination are classified as liabilities and remeasured at each reporting period (as more fully described in Note 13). The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. Revenue Recognition The Company derives revenue from providing access to its QCaaS, consulting services related to co-developing algorithms on the quantum computing systems, and from contracts associated with the design, development, and construction of specialized quantum computing systems together with related services. The Company applies the provisions of the FASB Accounting Standards Update (“ASU”), Revenue from Contracts with Customers (“ASC 606”), and all related applicable guidance. The core principle of ASC 606 is that an entity shall 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. To support this core principle, the Company applies the following five step approach: 1. Identify the contract with the customer 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognize revenue when (or as) the entity satisfies a performance obligation The Company has determined that its QCaaS contracts represent a combined, stand-ready performance obligation to provide access to its quantum computing systems together with related maintenance and support. The F-14 Table of Contents transaction price may consist of a variable fee based on usage of its quantum computing systems or a fixed fee for a minimum volume of usage to be made available over a defined period of access. Fixed fee arrangements may also include a variable component whereby customers pay an amount for usage over contractual minimums contained in the contracts. The Company has determined that contracts that contain consulting services related to co-developing quantum computing algorithms and the ability to use its quantum computing systems to run such algorithms represent a combined performance obligation that is satisfied over-time with revenue recognized based on the efforts incurred to date relative to the total expected effort. For contracts with a fixed transaction price, the fixed fee is recognized on a straight-line basis over the access period or associated measure of progress for the Company’s consulting services contracts. For contracts without fixed fees, variable usage fees are billed and recognized during the period of such usage. Certain of the Company’s contracts contain multiple performance obligations, most commonly in contracts for specialized quantum computing systems together with related maintenance and support. Such contracts may also include access to the Company’s QCaaS. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. When there are multiple performance obligations in a contract, the Company allocates the transaction price to each performance obligation based on its standalone selling price when available. We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. When the standalone selling price is not known, due to it being either highly variable or uncertain, the Company allocates the transaction price using the residual approach. Performance obligations are satisfied over time if the customer receives the benefits as we perform the work, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and we have a contractual right to payment for performance to date. Revenue is recognized on performance obligations satisfied over time based on the efforts incurred to date relative to the total expected effort. As of December 31, 2022 and 2021, substantially all of the revenue recognized by the Company was recognized based on transfer of service over time. Revenues recognized at a point in time were not material. In arrangements with cloud service providers, the cloud service provider is considered the customer and IonQ does not have any contractual relationships with the cloud service providers’ end users. For these arrangements, revenue is recognized at the amount charged to the cloud service prov i der and does not reflect any mark-up to the end user. The Company may enter into multiple contracts with a single counterparty at or near the same time. The Company will combine contracts and account for them as a single contract when one or more of the following criteria are met: (i) the contracts are negotiated as a package with a single commercial objective; (ii) consideration to be paid in one contract depends on the price or performance of the other contract; and (iii) goods or services promised are a single performance obligation. Consideration payable to a customer includes cash amounts that an entity pays, or expects to pay, to the customer. For arrangements that contain consideration payable to a customer, the Company uses judgment in determining whether such payments are a reduction of the transaction price or a payment to the customer for a distinct good or service. In 2019, the Company has entered into one revenue arrangement in which it granted warrants to the counterparty. Refer to Note 12 for further information on the customer warrants. The variable fees associated with the QCaaS are generally billed a month in arrears. Customers also have the ability to make advance payments. If a contract exists under ASC 606, advance payments are recorded as a contract liability until services are delivered or obligations are met and revenue is earned. Contract liabilities to be recognized in the succeeding 12-month period are classified as current and the remaining amounts are classified as non-current liabilities in the Company’s consolidated balance sheets. As of December 31, 2022, approximately $ 30.5 million of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for non-cancelable contracts, including both funded (firm orders for which funding has been both authorized and appropriated by the customer) and unfunded (firm orders for which funding has not been appropriated) orders. The Company expects approximately 60 % of the remaining performance obligations to be recognized as revenue within the next twelve months . F-15 Table of Contents The following table summarizes the changes in unearned revenue for the years ended December 31, 2022 and 2021 (in thousands): 2022 2021 Beginning balance $ 4,963 $ 1,358 Revenue recognized ( 4,216 ) ( 200 ) New deferrals, net 9,183 3,805 Ending balance $ 9,930 $ 4,963 For contractual arrangements where consideration is paid up-front, the transfer of the quantum computing services is completed at the discretion of the customer as the customer chooses to use the services starting from the date of contract inception. As such, the up-front payment of consideration does not represent a significant financing component. Assets Recognized from Costs to Obtain a Contract Sales commissions paid to employees and third parties are considered incremental costs to obtain a contract with a customer. These costs are capitalized in the period a customer contract is executed and are amortized as an expense consistent with the transfer of the goods or services to the customer. Capitalized costs are recorded in prepaid expenses and other current assets and other noncurrent assets in the consolidated balance sheets. Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is one year or less. As of December 31, 2022 and 2021, total capitalized costs were $ 1.0 million and zero , respectively. Amortization expense was less than $ 0.1 million and zero for the years ended December 31, 2022 and 2021, respectively. Cost of Revenue Cost of revenue primarily consists of expenses related to delivering the Company’s services, including direct labor costs, direct service costs and allocated shared resources. Cost of revenue excludes depreciation and amortization related to the Company’s quantum computing systems and related software and developed technology. Research and Development Research and development expenses consist of personnel costs, including stock-based compensation expense, and allocated shared resource costs for the Company’s hardware, software and engineering personnel who design and develop the Company’s quantum computing systems and research new quantum computing technologies. Unlike a standard computer, design and development efforts continue throughout the useful life of the Company’s quantum computing systems to ensure proper calibration and optimal functionality. Research and development expenses also include purchased hardware and software costs related to quantum computing systems constructed for research purposes that are not probable of providing future economic benefit and have no alternate future use. In December 2020, the Company amended its option agreement with Duke University (“Duke”), and under this amendment, the Company issued common shares to Duke in consideration for research and development services through July 15, 2026. The amended arrangement is considered a research and development service arrangement and recorded as a prepayment based on the fair value of the common stock issued on the effective date of the amendment and amortized over the term of the arrangement as services are received. In February 2021, the Company and the University of Maryland (“UMD”) amended the option agreement with UMD pursuant to which the Company issued shares of common stock to UMD as a nonrefundable upfront payment in exchange for research and development services by UMD and rights to any potential future intellectual property developed through July 2021. The amended arrangement is considered a research a nd F-16 Table of Contents development service arrangement and recorded as a prepayment based on the fair value of the common stock issued on the effective date of the amendment and amortized over the term of the arrangement as services are received. Refer to Note 8 for further information on the Duke and UMD agreements. Advertising Costs Advertising costs are expensed as incurred and are included in sales and marketing expenses in the consolidated statements of operations. These costs were $ 1.3 million and $ 1.1 million for the years ended December 31, 2022 and 2021, respectively. Stock-Based Compensation The Company measures and records the expense related to stock-based awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and uses the straight-line method to recognize stock-based compensation. The Company uses the Black-Scholes-Merton (“Black- Scholes”) option-pricing model to determine the fair value of stock awards and the estimated fair value for stock options. The Black-Scholes option- pricing model requires the use of subjective assumptions, which determine the fair value of share-based awards, including the fair value of the Company’s common stock, the option’s expected term, the price volatility of the underlying common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. The Company records forfeitures as they occur. Stock-based compensation cost for restricted stock units is measured based on the fair value of the Company’s common stock on the grant date. For awards with a performance-based vesting condition, the Company records stock-based compensation cost if it is probable that the performance condition will be achieved. The Company records stock-based compensation expense for incentive compensation liabilities based on estimated payments to employees for which the Company expects to settle the liability by granting restricted stock units. For these awards, stock-based compensation expense is accrued commencing at the service inception date, which generally precedes the grant date, through the end of the requisite service period. The Company obtained third-party valuations to estimate the fair value of its common stock for awards granted prior to the Business Combination, for purposes of measuring stock-based compensation expense. The third-party valuations were prepared using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants (“AICPA”) Accounting & Va luation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred income taxes are provided for temporary differences in recognizing certain income, expense and credit items for financial reporting purposes and tax reporting purposes. Such deferred income taxes primarily relate to the difference between the tax bases of assets and liabilities and their financial reporting amounts. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized. Excess tax benefits or tax deficiencies from stock option exercises are recognized in the income tax provision in the period in which they occur. The Company records a valuation allowance when it determines, based on available positive and negative evidence, that it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. The F-17 Table of Contents Company determines the realizability of its deferred tax assets primarily based on the reversal of existing taxable temporary differences and projections of future taxable income (exclusive of reversing temporary differences and carryforwards). In evaluating such projections, the Company considers its history of profitability, the competitive environment, and general economic conditions. In addition, the Company considers the time frame over which it would take to utilize the deferred tax assets prior to their expiration. For certain tax positions, the Company uses a more-likely-than-not threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of tax benefits determined on a cumulative probability basis, which are more-likely-than-not to be realized upon ultimate settlement in the financial statements. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. However, there were no amounts recognized relating to interest and penalties in the consolidated statements of operations for the years ended December 31, 2022 and 2021. The Company had no uncertain income tax positions as of December 31, 2022 and 2021. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, investments, and trade accounts receivable. The Company maintains the majority of its cash, cash equivalents, restricted cash and investments with two financial institutions. The Company’s deposits periodically exceed amounts guaranteed by the Federal Deposit Insurance Corporation. While the Company has not experienced any losses in such accounts, the recent failure of Silicon Valley Bank (“SVB”), at which the Company held cash and cash equivalents in multiple accounts, exposed the Company to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation of the resolution of SVB in a manner that fully protected all depositors. The Company’s accounts receivable are derived from customers primarily located in the U.S. The Company performs periodic evaluations of its customers’ financial condition and generally does not require its customers to provide collateral or other security to support accounts receivable and maintains an allowance for doubtful accounts. Credit losses historically have not been material. Significant customers are those that represent more than 10 % of the Company’s total revenue. The Company’s revenue was primarily from three significant customers for the year ended December 31, 2022, and from two significant customers for the year ended December 31, 2021. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock during the period, plus common stock equivalents, outstanding during the period. If the Company reports a net loss, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be antidilutive. The following table sets forth the computation of basic and diluted loss per share attributable to common stockholders (in thousands, except share and per share data): Year Ended December 31, 2022 2021 Numerator: Net loss attributable to common stockholders $ ( 48,511 ) $ ( 106,186 ) Denominator: Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted 197,727,642 137,609,620 Net loss per share attributable to common stockholders—basic and diluted $ ( 0.25 ) $ ( 0.77 ) F-18 Table of Contents In periods with a reported net loss, the effect of anti-dilutive stock options, unvested restricted stock units, unvested common stock (including unvested restricted common stock) and warrants are excluded and diluted loss per share is equal to basic loss per share. The following is a summary of the weighted average common stock equivalents for the securities outstanding during the respective periods that have been excluded from the computation of diluted net loss per common share, as their effect would be anti-dilutive: Year Ended December 31 2022 2021 Common stock options outstanding 22,951,439 24,206,373 Warrants to purchase common stock 8,301,202 8,301,202 Public and private warrants 5,231,750 2,359,179 Unvested Vesting Shares — 129,452 Unvested restricted stock units 4,418,852 — Unvested common stock 1,158,095 1,407,500 Total 42,061,338 36,403,706 Recently Issued Accounting Standards Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, along with various updates and improvements. The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company will adopt this standard in the first quarter of 2023. Based on the composition of the Company’s trade receivables and other financial assets, current market conditions and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06, Debt, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company does not expect adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures. 3. ACQUISITIONS On December 30, 2022, the Company acquired the assets of Entangled Networks Ltd. for total cash consideration of $ 1.0 million. The acquisition supports the Company’s efforts to build large-scale quantum computers by enabling computation across multiple distributed quantum processors. As part of the preliminary purchase price allocation, the Company recorded $ 0.3 million in identifiable intangible assets and $ 0.7 million in goodwill . F-19 Table of Contents 4. CASH EQUIVALENTS, RESTRICTED CASH AND INVESTMENTS The following table summarizes the Company’s unrealized gains and losses and estimated fair value of cash equivalents, restricted cash and investments in available-for-sale securities recorded in the consolidated balance sheets (in thousands): AS OF DECEMBER 31, 2022 AS OF DECEMBER 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cash and money market funds $ 46,367 $ — $ — $ 46,367 $ 123,690 $ — $ — $ 123,690 Commercial paper 130,141 — ( 443 ) 129,698 203,628 — ( 21 ) 203,607 Corporate notes and bonds 277,184 19 ( 5,993 ) 271,210 80,060 2 ( 109 ) 79,953 Municipal bonds 9,905 — ( 273 ) 9,632 2,000 — — 2,000 US government and agency 83,556 23 ( 688 ) 82,891 193,347 1 ( 20 ) 193,328 Total cash equivalents, restricted cash and investments $ 547,153 $ 42 $ ( 7,397 ) $ 539,798 $ 602,725 $ 3 $ ( 150 ) $ 602,578 Unrealized losses related to investments were primarily a result of interest rate fluctuations, and none of the investments held as of December 31, 2022, have been in a continuous unrealized loss position for greater than one year. As of December 31, 2022, the Company did not consider any of its available-for-sale investments to be other-than-temporarily impaired nor does the Company intend, or believe it is more likely than not, that it will be required to sell the investments in an unrealized loss position before the recovery of the associated amortized cost basis. The estimated fair value of the Company’s cash equivalents, restricted cash and investments in available-for-sale securities as of December 31, 2022, aggregated by investment category and classified by contractual maturity date, is as follows (in thousands): 1 Year or Less 1 Year or Greater Total Cash and money market funds $ 44,367 $ 2,000 $ 46,367 Commercial paper 129,698 — 129,698 Corporate notes and bonds 120,447 150,763 271,210 Municipal bonds 4,911 4,721 9,632 US government and agency 56,374 26,517 82,891 Total $ 355,797 $ 184,001 $ 539,798 F-20 Table of Contents 5. FAIR VALUE MEASUREMENTS The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands): Fair Value Measured as of December 31, 2022: Level 1 Level 2 Level 3 Total Assets: Cash, cash equivalents and restricted cash: Cash and money market funds (1) $ 46,367 $ — $ — $ 46,367 Total cash, cash equivalents and restricted cash 46,367 — — 46,367 Short-term investments: Commercial paper — 129,698 — 129,698 Corporate notes and bonds — 120,447 — 120,447 Municipal bonds — 4,911 4,911 US government and agency — 56,374 — 56,374 Total short-term investments — 311,430 — 311,430 Long-term investments : Corporate notes and bonds — 150,763 — 150,763 Municipal bon ds — 4,721 — 4,721 US government and agency — 26,517 — 26,517 Total long-term investments — 182,001 — 182,001 Total Assets $ 46,367 $ 493,431 $ — $ 539,798 Liabilities: Public warrants $ 3,819 $ — $ — $ 3,819 Fair Value Measured as of December 31, 2021: Level 1 Level 2 Level 3 Total Assets: Cash, cash equivalents, and restricted cash: Cash and money market funds (1) $ 123,690 $ — $ — $ 123,690 Commercial paper — 125,335 — 125,335 US government and agency — 150,000 — 150,000 Total cash, cash equivalents and restricted cash 123,690 275,335 399,025 Short-term investments: Commercial paper — 78,272 — 78,272 Corporate notes and bonds — 14,818 — 14,818 Municipal bonds 2,000 2,000 US government and agency — 28,353 — 28,353 Total short-term investments — 123,443 — 123,443 Long-term investments : Corporate notes and bonds — 65,135 — 65,135 US government and agency — 14,975 — 14,975 Total long-term investments — 80,110 — 80,110 Total Assets $ 123,690 $ 478,888 $ — $ 602,578 Liabilities: Public warrants $ 33,962 $ — $ — $ 33,962 (1) Includes money market funds associated with the Company’s overnight investment sweep account and collateralizing letters of credit. F-21 Table of Contents The Company’s warrant liabilities are comprised of the public warrants. The private placement warrants were fully exercised as of December 31, 2021. Refer to Note 13 for further information. Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period. There were no transfers between levels during the years ended December 31, 2022 and 2021. As of December 31, 2022, the public warrants were publicly traded at $ 0.73 per warrant. The private placement warrants were marked to fair value on the date of exercise. The fair value of the private placement warrants was determined using Level 3 inputs. Management determined the fair value of the private placement warrants using unobservable inputs in the Black-Scholes valuation model. Inherent in the valuation were assumptions related to expected stock-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimated the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate was based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants was assumed to be equivalent to their remaining contractual term. The dividend rate was based on the historical rate, which the Company anticipate d remaining at zero. The following table provides quantitative information regarding Level 3 fair value measurement inputs for the private placement warrants as of the date the private placement warrants were exercised. December 3, 2021 Exercise price $ 11.50 Stock price $ 18.78 Volatility 74.10 % Term 4.83 Risk-free rate 1.10 % Dividend yield — % The Company did not have any Level 3 assets or liabilities as of December 31, 2022 or 2021, as the private placement warrants were fully exercised. 6. PROPERTY AND EQUIPMENT, NET Property and equipment, net as of December 31, 2022 and 2021, are composed of the following (in thousands): 2022 2021 Computer equipment and acquired computer software $ 2,407 $ 840 Machinery, equipment, furniture and fixtures 7,506 5,497 Leasehold improvements 1,132 827 Quantum computing systems 22,430 15,151 Gross property and equipment 33,475 22,315 Less: accumulated depreciation ( 7,461 ) ( 3,445 ) Property and equipment, net $ 26,014 $ 18,870 Depreciation expense for the years ended December 31, 2022 and 2021 was $ 4.0 million and $ 1.7 million, respectively. F-22 Table of Contents 7. INTANGIBLE ASSETS, NET Intangible assets as of December 31, 2022 and 2021, are composed of the following (in thousands, except as otherwise noted): December 31, 2022 Weighted Average Remaining Useful Life (Years) Gross Carrying Amount Accumulated Amortization Net Amount Patents 16.5 $ 4,438 $ ( 146 ) $ 4,292 Trademark Indefinite 131 — 131 Website and other 9.6 220 ( 17 ) 203 Developed technology 2.0 318 — 318 Internally developed software 2.2 6,548 ( 2,548 ) 4,000 Total $ 11,655 $ ( 2,711 ) $ 8,944 December 31, 2021 Weighted Average Remaining Useful Life (Years) Gross Carrying Amount Accumulated Amortization Net Amount Patents 17.0 $ 3,555 $ ( 51 ) $ 3,504 Trademark Indefinite 82 — 82 Website and other 10.0 51 ( 11 ) 40 Internally developed software 2.3 3,297 ( 1,082 ) 2,215 Total $ 6,985 $ ( 1,144 ) $ 5,841 Total amortization expense for intangible assets for the years ended December 31, 2022 and 2021, was $ 1.6 million and $ 0.8 million, respectively. As of December 31, 2022, the projected annual amortization expense for the Company’s intangible assets is as follows (in thousands): Year ending December 31, 2023 $ 2,130 2024 1,646 2025 744 2026 124 2027 124 Thereafter 4,045 Total $ 8,813 8. AGREEMENTS WITH UMD AND DUKE Exclusive License Agreement The Company entered into an exclusive license agreement (“License Agreement”) in July 2016 with UMD and Duke. The License Agreement grants to the Company an exclusive, perpetual license (“Initial Patents”) to certain patents, know-how and other intellectual property utilized in trapped-ion quantum computing systems. The license granted to the Company is exclusive for all patents (and non-exclusive for other types of intellectual property), subject to certain governmental rights and retained rights by UMD and Duke and other non-profit F-23 Table of Contents institutions to use and practice the Licensed Patents (as defined below) and technology for internal research and other non-profit purposes. In exchange for the Initial Patents, UMD and Duke received an aggregate of 142,886 common shares after giving effect to the recapitalization. On February 1, 2021, the Company and UMD executed two amendments to the License Agreement granting exclusive rights to license additional intellectual property in exchange for a total of 257,198 common shares after giving effect to the recapitalization. Management evaluated the amendments and concluded that the arrangements qualify as equity-classified instruments and recorded an intangible asset and additional paid-in capital based on the fair value of the shares at the date the amendments were executed of $ 1.6 million. The shares for each executed amendment were issued during the year ended December 31 , 2021 . Exclusive Option Agreements The Company also entered into an exclusive option agreement (“Option Agreement”) with each of UMD and Duke in 2016 whereby on the anniversary of the effective date of the License Agreement for a period of 5 years, the Company has the right to exclusively license additional intellectual property developed by UMD and Duke (the “Additional Patents” and together with the Initial Patents, the “Licensed Patents”) by exercising an annual option and issuing common shares each to Duke and UMD in consideration for the Additional Patents. The amount issued to UMD and Duke pursuant to the option over the 5 -year term was equal to an aggregate of 642,995 common shares to each university after giving effect to the recapitalization. The Company may elect not to exercise the option if there was not a minimum number of intellectual property developed in a given year and then the Option Agreement would extend another year . In December 2020, the Company amended its option agreement with Duke, and under this amendment, the Company issued 1,214,317 common shares after giving effect to the recapitalization, to Duke in consideration for research and development services through July 15, 2026. Under the terms of the amended Option Agreement, the issuance of shares is a nonrefundable upfront payment in exchange for research and development services by Duke whereby the Company will obtain rights to any potential future intellectual property developed during the term. As such, the fair value of the shares of common stock was recorded as a prepaid expense and is being amortized over the term of the arrangement as services are received. The Company recognized $ 0.5 million of research and development expense related to the agreement with Duke during each of the years ended December 31, 2022 and 2021. In February 2021, the Company and UMD amended the UMD Option Agreement pursuant to which the Company issued the remaining 128,599 shares of common stock after giving effect to the recapitalization to UMD as a nonrefundable upfront payment in exchange for research and development services by UMD and rights to any potential future intellectual property developed through July 2021. The fair value of the shares issued to UMD was $ 0.8 million. The Company recognized $ 0.8 million of research and development expense associated with the UMD Option Agreement amendment for the year ended December 31, 2021. The UMD Option Agreement was fully amortized in 2021 and therefore no research and development expense was recognized for the year ended December 31, 2022. Additionally, under the terms of the License Agreement and Option Agreement, UMD was provided an exit guarantee if a sale or liquidation of the Company would occur that provides for the following: • acceleration of the issuance of common stock as if exercised through the License Agreement, • additional consideration equal to the consideration that a holder of one-half of one percent ( 0.5 %) of the common stock of the Company, on a fully-diluted basis, would have received in the sale to the extent it exceeds the amount UMD and Duke shall be entitled to as a result of ownership at the time of sale. The exit guarantee with UMD lapsed as a result of the Business Combination in September 2021. The useful life of the Licensed Patents derived from the License Agreement and the Option Agreement is the remaining legal life at the time of acquisition. The value of the Licensed Patents is based on the fair value of the F-24 Table of Contents common stock given as consideration on the effective date of each agreement and exercise of option. The asset is amortized over the useful life of the Licensed Patents. 9. ACCRUED EXPENSES Accrued expenses as of December 31, 2022 and 2021, are composed of the following (in thousands): 2022 2021 Accrued salaries and other payroll liabilities $ 4,935 $ 1,025 Accrued accounting and tax liabilities 250 700 Accrued expenses—other 1,470 922 Total accrued expenses $ 6,655 $ 2,647 10. COMMITMENTS AND CONTINGENCIES Warranties and Indemnification The Company’s commercial services are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company’s documentation under normal use and circumstances. The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe third- party intellectual property rights. To date, the Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the accompanying financial statements. Shareholder Lawsuit In May 2022, a securities class action complaint captioned Leacock v. IonQ, Inc. et al ., Case No.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. IonQ, Inc ., Case No.8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder against the Company and certain of the Company’s current officers (“IonQ Defendants”). Both the Leacock Litigation and Fisher Litigation, which have been consolidated into a single action, 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 seek damages. In September 2022, the Court appointed lead plaintiffs and counsel for lead plaintiffs, and ordered lead plaintiffs to file a consolidated amended complaint. The consolidated amended complaint was filed on November 22, 2022. As part of the consolidated amended complaint, certain members of the Company’s Board of Directors as well as other dMY related defendants (“Additional Defendants”) have been added as defendants to the case. On February 7, 2023, the IonQ Defendants and the Additional Defendants each filed a motion to dismiss the consolidated amended complaint. Both the IonQ Defendants and Additional Defendants believe that the allegations in the complaints are without merit and intend to defend the matters vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot reasonably estimate the possible loss or range of loss, if any, that may result from the associated suit. Glatt Litigation On January 12, 2021, dMY Technology Group, Inc. II, dMY Sponsor II, LLC, dMY, and dMY Sponsor III, LLC (“Sponsor”) accepted service of a lawsuit where they were named as counterclaim defendants in an underlying action by and between GTY Technology Holdings, Inc. (“GTY”), dMY Technology Holdings Inc., dMY Sponsor, LLC, dMY Sponsor II, LLC, dMY Technology Group Inc. II, dMY and Sponsor (collectively “dMY Defendants”) F-25 Table of Contents and Carter Glatt (“Glatt”) and Captains Neck Holdings LLC (“Captains Neck”), an entity of which Mr. Glatt is a member. The underlying lawsuit, filed by dMY Technology Group, Inc. and dMY Sponsor, LLC, seeks a declaratory judgment that Glatt and Captains Neck are not entitled to membership units of dMY Sponsor LLC, which was formed by Harry L. You, the co-founder and former President and Chief Financial Officer of GTY when Glatt was still working at GTY. The underlying lawsuit contains claims arising from Glatt’s termination of employment from GTY, including theft and misappropriation of confidential GTY information, breach of contract, breach of the duties of loyalty and fiduciary duty and conversion. Glatt responded to the underlying lawsuit by adding members of the Sponsor and officers of dMY as additional counterclaim defendants (collectively with the dMY Defendants Glatt and Captains neck, the “Counterclaim Defendants”) and adding Dune Acquisition Holdings LLC, a newly formed special purpose acquisition company, as a counterclaimant and asserting claims for breach of contract, fraudulent misrepresentation, negligent misrepresentation, tortious interference with business relations, quantum meruit and unjust enrichment. dMY, and now the Company, has never employed Glatt and has no business agreements with him. The Counterclaim Defendants have denied the claims against them and have filed a motion to dismiss the suit. Although the outcome of this matter cannot be predicted with certainty and the impact of the final resolution of this matter on the Company’s results of operations in a particular subsequent reporting period is not known, management does not believe that the resolution of this matter will have a material adverse effect on the Company’s future consolidated financial position, future results of operations or cash flows. 11. STOCKHOLDERS’ EQUITY Our second amended and restated certificate of incorporation authorizes us to issue up to 1,000,000,000 shares of common stock, $ 0.0001 par value per share, and 20,000,000 shares of preferred stock, par value $ 0.0001 per share. Preferred Stock Under our second amended and restated certificate of incorporation, our board of directors may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 20,000,000 shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. Any issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders would receive dividend payments and payments on liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deterring or preventing a change of control or other corporate action. No shares of preferred stock have been issued as of December 31, 2022. Common Stock The terms, rights, preference, and privileges of the common stock are as follows: Voting Rights Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, each holder of common stock possess all voting power for the election of our directors and all other matters requiring stockholder action. Holders of common stock are entitled to one vote per share on matters to be voted on by stockholders. The Company’s second amended and restated certificate of incorporation and bylaws do not provide for cumulative voting rights. Dividends Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of common stock may be entitled to receive dividends out of legally available funds if the board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that the board of directors may determine. We do not anticipate paying any cash dividends in the foreseeable future. F-26 Table of Contents Liquidation In the event of our voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up, the holders of common stock will be entitled to receive an equal amount per share of all of our assets of whatever kind available for distribution to stockholders, after the rights of the holders of the preferred stock, if any, have been satisfied. Rights and Preference Holders of the Company’s common stock have no preemptive or other subscription rights, and there are no sinking fund or redemption provisions applicable to the common stock. The rights, preferences, and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that may be issued. Common Stock Reserved for Issuance The Company’s common stock reserved for future issuances after giving effect to the recapitalization are as follows: As of December 31, 2022 2021 Stock options outstanding 24,716,270 22,133,210 Warrants to acquire common stock 8,301,202 8,301,202 Public warrants outstanding 5,231,486 5,233,018 Shares available for future grant 28,769,625 31,589,000 Total common stock reserved 67,018,583 67,256,430 12. WARRANT TRANSACTION AGREEMENT In November 2019, contemporaneously with a revenue arrangement, the Company entered into a contract, pursuant to which the Company agreed to issue to a customer warrants to acquire shares of Legacy IonQ Series B-1 preferred stock (the “Warrant Shares”), subject to certain vesting events. Upon closing of the Business Combination, these warrants exercisable for Legacy IonQ Series B-1 preferred stock were assumed by the Company and converted into a warrant to purchase a number of shares of common stock equal to the product (rounded down to the nearest whole number) of (a) the number of shares of Legacy IonQ common stock issuable upon conversion of a share of Legacy IonQ Series B-1 preferred stock and(b) the Exchange Ratio (as defined in the Super 8-K filed with the SEC on October 4, 2021), at an exercise price per share (rounded up to the nearest whole cent) equal to (i) the exercise price per share of such Legacy IonQ Warrant Shares divided by (ii) the Exchange Ratio. Except as specifically provided in the Merger Agreement, the Warrant Shares will have the same terms and be subject to the same conditions (including applicable vesting conditions) as set forth in the Legacy IonQ warrant agreement. As of December 31, 2022, the contract allows for the customer to acquire up to 8,301,202 shares of common stock in the Company. As the Warrant Shares were issued in connection with an existing commercial agreement with a customer, the value of the Warrant Shares was determined to be consideration payable to the customer and consequently is treated as a reduction to revenue recognized under the corresponding revenue arrangement. Approximately 6.5 % of the Warrant Shares vested and became immediately exercisable in August 2020. The remaining Warrant Shares will vest and become exercisable upon satisfaction of certain milestones based on revenue generated under the commercial agreement with the customer, to the extent certain prepayments are made by the customer. The exercise price for the Warrant Shares is $ 1.38 per share and the warrant is exercisable through November 2029. The fair value of the Warrant Shares at the date of issuance was determined to be $ 8.7 million. F-27 Table of Contents During 2020, Warrant Shares with a fair value of $ 0.6 million vested. This fair value of the unamortized warrants was recorded within other noncurrent assets and the Warrant Shares are amortized over time as the related customer revenue is earned. During the year ended December 31, 2021, $ 0.5 million of the warrant amortization was recorded as a reduction of the related customer revenue. As of December 31, 2021, the contract asset was fully amortized, and therefore no warrant amortization was recorded as a reduction of the related customer revenue during the year ended December 31, 2022. 13. WARRANT LIABILITIES The Company assumed 11,500,000 warrants, comprised of 7,500,000 public warrants and 4,000,000 private placement warrants, on September 30, 2021 as part of the Business Combination. T here were 5,231,486 and 5,233,018 of public warrants to purchase common stock outstanding as of December 31, 2022 and 2021, respectively. There were no private placement warrants outstanding as of December 31, 2022 and 2021. Each warrant entitles the registered holder to purchase one share of common stock at a price of $ 11.50 per share. Public warrants The public warrants may be exercised on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering of dMY; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the public warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their public warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The public warrants became exercisable on November 17, 2021. Redemption of warrants when the price per share of common stock equals or exceeds $ 18.00 : Once the warrants become exercisable, the Company may redeem the outstanding warrants for cash: • in whole and not in part; • at a price of $ 0.01 per warrant ; • upon a minimum of 30 days’ prior written notice of redemption ; and • if, and only if, the closing price of common stock equals or exceeds $ 18.00 per share (as adjusted) for any 20 trading days within a 30 -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. Redemption of warrants for when the price per share of common stock equals or exceeds $ 10.00 : Once the warrants become exercisable, the Company may redeem the outstanding warrants: • in whole and not in part; • at $ 0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value (as defined within the warrant agreement) of the common stock except as otherwise described within the warrant agreement; and upon a minimum of 30 days’ prior written notice of redemption; and • if, and only if, the closing price of common stock equals or exceeds $ 10.00 per public share (as adjusted) for any 20 trading days within the 30 -trading day period ending three trading days before the Company sends notice of redemption to the warrant holders. No public warrants were redeemed by the Company as of December 31, 2022. F-28 Table of Contents Private placement warrants The private placement warrants were identical to the public warrants, except that the private placement warrants and the shares of common stock issuable upon exercise of the private placement warrants were not transferable, assignable, or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the private placement warrants were non-redeemable so long as they were held by dMY Sponsor III, LLC or its permitted transferees. Otherwise, the private placement warrants had terms and provisions that were identical to those of the public warrants, including as to exercise price, exercisability and exercise period. In December 2021, 4.0 million private placement warrants were exercised on a cashless basis, resulting in the net issuance of 2.2 million shares. 14. STOCK-BASED COMPENSATION Equity Incentive Plans The Company has a 2015 Equity Incentive Plan (the “2015 Plan”), which provided for the grant of share-based compensation to certain officers, directors, employees, consultants, and advisors. Upon the closing of the Business Combination, no further awards were made pursuant to the 2015 Plan and all outstanding Legacy IonQ stock options under the 2015 Plan were assumed by the Company. Each Legacy IonQ stock option issued and outstanding immediately prior to the Business Combination was converted into an option to purchase shares of common stock of the Company equal to the product of (a) the number of shares of Legacy IonQ common stock subject to such Legacy IonQ stock option agreement immediately prior to the Business Combination and (b) the exchange ratio at an exercise price equal to the (i) the exercise price per share of such Legacy IonQ stock option divided by (ii) the exchange ratio. Such stock options will continue to be governed by the terms of the 2015 Plan and the stock option agreements thereunder, until such outstanding options are exercised or until they terminate or expire by their terms. For awards granted under the 2015 Plan, vesting generally occurs over four to five years from the date of grant. In August 2021, the Company’s board of directors adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which was subsequently approved by the Company’s stockholders in September 2021, and became effective upon the closing of the Business Combination. The 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards (“RSU”), performance awards and other forms of awards to employees, directors, and consultants. The number of shares of the Company’s common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, by 5 % of the Fully Diluted Common Stock (as defined in the 2021 Plan) outstanding on December 31 of the preceding year, or a lesser number of shares determined by the Company’s board of directors prior to such increase. As of January 1, 2023, the number of shares reserved for issuance under the 2021 Plan increased by 13,587,593 . For awards granted under the 2021 Plan, vesting terms range from one to four years from the date of grant. As of December 31, 2022, the Company had 23,415,625 shares available for grant under the 2021 Plan. Under both equity incentive plans, all options granted have a contractual term of 10 years. Stock Options The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option- pricing model requires estimates of highly subjective assumptions, which affect the fair value of each stock option. Expected Volatility —As the Company was privately held until 2021 and there has been limited history of a public market for its common stock prior to closing the Business Combination, the expected volatility is based on the average historical stock price volatility of comparable publicly-traded companies in its industry peer group, financial, and market capitalization data. F-29 Table of Contents Expected Term —The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. The Company has estimated the expected term of its employee awards using the SAB Topic 14 Simplified Method allowed by the FASB and SEC, for calculating expected term as it has limited historical exercise data to provide a reasonable basis upon which to otherwise estimate expected term. Certain of the Company’s options began vesting prior to the grant date, in which case the Company uses the remaining vesting term at the grant date in the expected term calculation. Risk-Free Interest Rate —The Company estimates its risk-free interest rate by using the yield on actively traded non-inflation-indexed U.S. treasury securities with contract maturities equal to the expected term. Dividend Yield —The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero. Fair Value of Underlying Common Stock —For options granted under the 2015 Plan, because the Company’s common stock was not yet publicly traded on the date of grant, the Company estimated the fair value of common stock prior to closing the Business Combination. The board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of Legacy IonQ’s previously Convertible Redeemable Preferred Stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. For options granted under the 2021 Plan, the Company utilizes the closing stock price on the date of grant as the fair value of the common stock underlying such options. The assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2022 and 2021, are as follows: 2022 2021 Risk-free interest rate 2.60 % 0.96 % Expected term (in years) 5.82 6.26 Expected volatility 75.82 % 77.04 % Dividend yield — % — % F-30 Table of Contents The stock option activity is summarized in the following table: Number of Option Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions) Outstanding as of December 31, 2021 22,133,210 $ 0.64 7.84 $ 377.58 Granted 4,974,350 8.28 Exercised ( 2,239,490 ) 0.47 Cancelled/ Forfeited ( 151,800 ) 0.66 Outstanding as of December 31, 2022 24,716,270 $ 2.19 7.32 $ 49.69 Exercisable as of December 31, 2022 11,484,369 $ 0.85 6.50 $ 31.49 Exercisable and expected to vest as of December 31, 2022 24,716,270 $ 2.19 7.32 $ 49.69 The following table summarizes additional information on stock option grants, vesting and exercises (in millions, except per share amounts): Year Ended December 31, 2022 2021 Total intrinsic value of options exercised $ 6.7 $ 54.4 Aggregate grant-date fair value of options vested $ 9.9 $ 7.4 Weighted-average grant date fair value per share for options granted $ 5.58 $ 5.83 Early Exercised Stock Options As of December 31, 2022 and 2021, there were 905,128 and 1,420,662 shares, respectively, subject to repurchase related to stock options early exercised and unvested. As of December 31, 2022 and 2021, the Company recorded a liability related to these shares subject to repurchase in the amount of $ 2.0 million and $ 3.1 million, respectively, in its consolidated balance sheets. During 2021, we exercised our right to repurchase 0.4 million shares related to the early exercise of stock options. The unvested shares were repurchased for $ 1.0 million from an employee in connection with the termination of their service. Restricted Stock Units The RSU activity is summarized in the following table: Number of RSUs Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Fair Value (in millions) Outstanding as of December 31, 2021 — $ — — $ — Granted 10,891,685 7.34 Vested ( 1,472,683 ) 9.29 Forfeited ( 98,957 ) 9.01 Outstanding as of December 31, 2022 9,320,045 $ 7.02 3.21 $ 65.38 Expected to vest after December 31, 2022 9,279,045 $ 6.99 3.22 $ 64.85 F-31 Table of Contents During the year ended December 31, 2022, the Company granted 81,134 RSUs related to the settlement of an accrued bonus liability. Stock-Based Compensation Expense Total stock-based compensation expense for stock option awards and RSU awards, which are included in the consolidated financial statements, is as follows (in thousands): Years Ended December 31, 2022 2021 Cost of revenue $ 902 $ 62 Research and development 13,472 2,841 Sales and marketing 1,298 67 General and administrative 15,784 4,778 Stock-based compensation, net of amounts capitalized 31,456 7,748 Capitalized stock-based compensation—Intangibles and fixed assets 1,741 275 Total stock-based compensation $ 33,197 $ 8,023 Unrecognized Stock-Based Compensation A summary of our remaining unrecognized compensation expense and the weighted-average remaining amortization period as of December 31, 2022, related to our non-vested stock options and RSU awards is presented below (in millions, except time period amounts): Unrecognized Expense Weighted- Average Amortization Period (Years) Restricted stock units $ 61.3 1.6 Stock options $ 44.7 1.6 Employee Stock Purchase Plan In August 2021, the Company’s board of directors adopted the Employee Stock Purchase Plan (the “ESPP”), which was subsequently approved by the Company’s stockholders in September 2021, and became effective upon the closing of the Business Combination. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). The number of shares of common stock initially reserved for issuance under the ESPP was 5,354,000 shares. The ESPP provides for an annual increase on January 1 of each year, beginning on January 1, 2022, and continuing through and including January 1, 2031, equal to the lesser of (i) 1 % of the fully diluted shares of common stock outstanding on the last day of the prior fiscal year, (ii) 10,708,000 shares, or (iii) a lesser number of shares determined by the Company’s board of directors prior to such increase. The board of directors elected not to approve the annual increase of ESPP shares on January 1, 2023. Under the terms of the ESPP, eligible employees can elect to acquire shares of the Company’s common stock through periodic payroll deductions during a series of offering periods. Purchases under the ESPP are affected on the last business day of each offering period at a 15 % discount to the lower of closing price on that day or the closing price on the first day of the offering period. As of December 31, 2022, no shares of common stock had been issued under the ESPP and no offering period had been set by the board of directors. F-32 Table of Contents 15. INCOME TAXES The current and deferred components of the provision for income taxes for both Federal, State and foreign jurisdictions are zero for both of the years ended December 31, 2022 and 2021. The Company’s provision for income taxes differs from the amount determined by applying the applicable federal statutory tax rate to the loss before income taxes due to the valuation allowance for the net deferred income tax assets. A reconciliation of the U.S. statutory tax rate to our effective tax rate is presented below: Years Ended December 31, 2022 2021 U.S . federal statutory income tax rate 21.0 % 21.0 % State and local income taxes 7.4 % 1.2 % R&D tax credits 5.9 % 1.7 % Stock-based compensation - 5.1 % - 0.6 % Warrant expense 13.0 % - 12.5 % Change in tax rates 0.4 % - 2.1 % Provision to return and deferred tax adjustments 10.9 % — Valuation allowance - 53.4 % - 8.1 % Other - 0.1 % - 0.6 % Effective tax rate 0.0 % 0.0 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021, were as follows (in thousands): 2022 2021 Deferred tax assets: Accrued bonus $ 1,018 $ 310 Unearned revenue — 281 Stock-based compensation 2,965 1,002 Accrued expenses 152 119 Warrant expenses 149 138 Depreciation and amortization 2,725 170 Other 1,955 809 Lease liabilities 1,068 1,023 R&D credit carryforwards 6,240 3,781 Net operating loss carryforwards 24,836 14,148 Capitalized R&D costs 8,262 — Total deferred tax assets 49,370 21,781 Valuation allowance ( 48,212 ) ( 20,388 ) Total deferred tax assets , net of valuation allowance 1,158 1,393 Deferred tax liabilities: Right of use assets ( 989 ) ( 979 ) Capitalized R&D costs — ( 414 ) Other ( 169 ) — Total deferred tax liabilities ( 1,158 ) ( 1,393 ) Net deferred tax assets (liabilities) $ — — F-33 Table of Contents The following table summarizes the activity in the Company’s valuation allowance against its gross deferred tax assets (in thousands): 2022 2021 Beginning balance $ 20,388 $ 9,747 Charged to costs and expenses 25,925 10,677 Charged (credited) to other accounts 1,899 ( 36 ) Ending balance $ 48,212 $ 20,388 The Company had pre-tax U.S. federal and state net operating loss carryforwards of approximately $ 96.3 million and $ 69.5 million, respectively, as of December 31, 2022. The Company’s net operating loss carryforwards generated prior to January 1, 2018 of $ 1.1 million will begin to expire, if not utilized, in 2036. The Company’s net operating loss carry forwards generated after December 31, 2017, will carryforward indefinitely. As of December 31, 2022, the Company had U.S. federal and state tax credit carryforwards of $ 6.3 million. The tax credit carryforwards will expire between 2025 and 204 2 . The deductibility of such credits and net operating losses (“NOL”) may be limited. Under Section s 383 and 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which generally occurs if the percentage of the corporation’s stock owned by 5 % stockholders increases by more than 50 % over a three-year period, the corporation’s ability to use its pre-change credits and NOL carryforwards and other pre-change tax attributes to offset its post-change income, may be limited. The Company has not determined if it has experienced Section 383/382 ownership changes in the past and if a portion of its NOL and tax credit carryforwards are subject to an annual limitation. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of its control. If the Company determines that an ownership change has occurred and its ability to use its historical NOL and tax credit carryforwards is significantly limited, it would harm the Company’s future operating results by effectively increasing its future tax obligations. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, including a three-year cumulative loss position as of December 31, 2022 and 2021, the Company has concluded that it is not more likely than not that its deferred income tax assets will be realized. Accordingly, the Company has provided a full valuation allowance, for each of the years ended December 31, 2022 and 2021. The net increase in the valuation allowance of $ 27.8 million is due to the impacts of capitalized research and development and current year operating losses. The Company is generally subject to a three-year statute of limitations by major tax jurisdictions. The current tax years that are subject for examination are tax years 201 9 through 202 1 , although tax years dating back to 2016 remain open up to the tax attribute amounts carried forward for future use. 16. LEASES The Company has one operating lease for its corporate headquarters with UMD that is also used for its research and development functions. As of December 31, 2022 and 2021, the weighted-average remaining lease term was 8 years and 9 years, respectively. The weighted-average discount rate was 11.9 % at both December 31, 2022 and 2021. The components of lease cost were as follows (in thousands): 2022 2021 Operating lease cost (1) Fixed lease cost $ 763 $ 763 Short-term cost 79 13 Total operating lease cost $ 842 $ 776 F-34 Table of Contents (1) The lease costs are reflected in the consolidated statements of operations as follows (in thousands): Year Ended December 31, 2022 2021 Cost of revenue $ 53 $ 45 Research and development 612 613 Sales and marketing 46 8 General and administrative 131 110 Total $ 842 $ 776 Supplemental cash flow and other information related to operating leases was as follows (in thousands): Year Ended December 31 2022 2021 Cash payments included in the measurement of operating lease liabilities $ 644 $ 561 As of December 31, 2022, maturities of operating lease liabilities are as follows (in thousands): Amount Year Ending December 31, 2023 $ 671 2024 750 2025 772 2026 795 2027 819 Thereafter 2,532 Total lease payments 6,339 Less: imputed interest ( 2,289 ) Present value of operating lease liabilities $ 4,050 In December 2022, the Company entered into a lease agreement for approximately 65,000 square feet in Bothell, Washington, which will commence in 2023 and expire in 2030 , with total future lease payments of approximately $ 9.7 million. 17. EMPLOYEE BENEFIT PLAN The Company has a 401(k) savings plan (the “401(k) Plan”), which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to contribute up to 100 % of their eligible compensation, subject to certain limitations. The 401(k) Plan provides for a discretionary employer-matching contribution. The Company made a matching contribution of $ 0.9 million and $ 0.5 million to the 401(k) Plan for the years ended December 31, 2022 and 2021, respectively. 18. RELATED PARTY TRANSACTIONS Transactions with UMD and Duke As described in Note 8, the Company entered into a License Agreement and Option Agreement with UMD and Duke whereby the Company, in the normal course of business, has licensed certain intellectual property and, in F-35 Table of Contents the case of the amendments to the Option Agreements, has purchased research and development services. The Company considers these agreements to be related party transactions because the Company’s Co-founder and Chief Technology Officer served as a professor at Duke and the Company’s Co-founder and Chief Scientist served as a professor at UMD. During 2021, the Company’s Chief Scientist moved to Duke and each, in their role as professors at Duke, are leading the research subject to the License Agreement and Option Agreement with Duke as of December 31, 2022. In addition, the Company has an operating lease for office space with UMD. In Sep tember 2021, the Company entered into a contract with UMD to provide certain quantum computing services and facility access (the “UMD Quantum Agreement”) related to the National Quantum Lab at UMD in exchange for payments totaling $ 14.0 million over 3 years. Over the term of the contract, the Company estimates that it will make payments to UMD of approximately $ 1.4 million, including a pledge to establish the IonQ Endowed Professorship in the College of Computer, Mathematical and Natural Sciences at UMD with a contribution of $ 1.0 million. The pledge and other estimated payments to UMD will not be an exchange for distinct goods or services under the provisions of ASC 606 and therefore are considered a reduction of the transaction price for the UMD Quantum Agreement. The transaction price is currently estimated at $ 12.6 million, reflecting this reduction. In July 2022, the Company entered into an agreement to provide customized quantum computing hardware to UMD for a transaction price of $ 0.7 million. The Company’s results from transactions with related parties, as reflected in the consolidated statements of operations are detailed below. Except for $ 0.5 million related to the amortization of a research and development arrangement with Duke for each of the years ended December 31, 2022 and 2021, all transactions in the table below relate to the Company’s arrangements with UMD (in thousands): Year Ended December 31, 2022 2021 Revenue $ 4,022 $ 1,179 Cost of revenue 51 35 Research and development (1) 1,082 1,949 Sales and marketing 131 8 General and administrative 117 218 (1) Included in research and development expenses is non-cash amortization associated with the Exclusive Option Agreements with UMD and Duke of $ 0.5 million and $ 1.3 million for the years ended December 31, 2022 and 2021, respectively. Also included in research and development expenses is $ 0.6 million in allocated rent expense for each of the years ended December 31, 2022 and 2021. F-36 Table of Contents The Company has the following balances related to transactions with related parties, as reflected in the consolidated balance sheets. Except for $ 0.5 million prepaid expenses and other current assets as of both December 31, 2022 and 2021, and $ 1.3 million and $ 1.8 million in other noncurrent assets as of December 31, 2022 and 2021, respectively, which relate to prepaid services to Duke under the Option agreement, all transactions in the table below relate to the Company’s arrangements with UMD (in thousands): December 31, 2022 2021 Assets Prepaid expenses and other current assets $ 529 $ 612 Operating lease right-of-use asset 3,753 4,032 Other noncurrent assets 1,325 1,845 Liabilities Accounts payable 29 54 Current operating lease liabilities 591 568 Unearned revenue 3,514 2,821 Non-current operating lease liabilities 3,459 3,643 19. GEOGRAPHIC INFORMATION Revenue generated for customers located in the United States was approximately 82 % and 90 % of revenue for the years ended December 31, 2022 and 2021, respectively. F-3 7