What changed in this filing

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Item 1A. Risk Factors

2023-05-11 compared with 2022-11-14 · 184 added, 201 removed, 864 unchanged (31% of the section changed)

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Investing in our securities involves a high degree of risk.

Before you make a decision to buy our securities, in addition to the risks and uncertainties described above under “Special Note Regarding Forward Looking Statements,” you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Quarterly Report on Form 10-Q.

Before you make a decision to buy our securities, you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Quarterly Report on Form 10-Q.

If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline, and you could lose all or part of your investment.

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

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

If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, this may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations or cause our access to the capital markets to be impaired.

We may need additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available.

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The quantum computing industry is competitive on a global scale and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers.

Our business is currently dependent upon our relationship with our cloud providers.

There are no assurances that we will be able to commercialize quantum computers from our relationships with cloud providers.

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

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

We may be unable to reduce the cost per qubit, which may prevent us from pricing our quantum systems competitively.

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We could suffer disruptions, outages, defects and other performance and quality problems with our quantum computing systems or with the public cloud and internet infrastructure on which they rely.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If our information technology systems, data, or physical facilities where our quantum computers are stored, or those of third parties upon which we rely, are or were compromised, we could experience adverse business consequences resulting from such compromise.

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

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

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

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

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

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

government or imposing certain obligations on us, such as a license to the U.S.

government under such intellectual property, “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S.

government or imposing certain obligations on us and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S.

manufacturers.

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We are an early stage company and have a limited operating history, which makes it difficult to forecast our future results of operations.

We were founded in 2015 and first offered our quantum-computing-as-a-service (“QCaaS”) and professional services related to training on our quantum computing systems in 2020 and 2019, respectively.

As a result of our limited operating history, our ability to accurately forecast our future results of operations is limited and subject to a number of uncertainties, including our ability to plan for and model future growth.

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

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

The development of our scalable business model will likely require the incurrence of a substantially higher level of costs than incurred to date, while our revenues will not substantially increase until more powerful, scalable computers are produced, which requires a number of technological advancements which may not occur on the currently anticipated timetable or at all.

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

timetable or at all.

As a result, our historical results should not be considered indicative of our future performance.

Further, in future periods, our growth could slow or decline for a number of reasons, including but not limited to slowing demand for our QCaaS, increased competition, changes to technology, inability to scale up our technology, a decrease in the growth of the overall market, or our failure, for any reason, to continue to take advantage of growth opportunities.

Further, in future periods, our growth could slow or decline for a number of reasons, including but not limited to slowing demand for our service offerings, increased competition, changes to technology, inability to scale up our technology, a decrease in the growth of the overall market, or our failure, for any reason, to continue to take advantage of growth opportunities.

We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries.

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Our success as a business ultimately relies upon fundamental research and development breakthroughs in the coming years and decade.

There is no certainty these research and development milestones will be achieved as quickly as hoped, or even at all.

There is no certainty these research and development milestones will be achieved as quickly as expected, or even at all.

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

We have historically experienced net losses from operations.

For the nine months ended September 30, 2022, we incurred a loss from operations of $29.9 million.

As of September 30, 2022, we had an accumulated deficit of $175.7 million.

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

For the three months ended March 31, 2023, we incurred a loss from operations of $28.0 million.

As of March 31, 2023, we had an accumulated deficit of $221.6 million.

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

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

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

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

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

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

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

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

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

Our management team may not successfully or effectively manage reporting obligations under federal securities laws.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a

significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to our management and growth.

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

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Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with quantum computing solutions.

The methodology and assumptions used to estimate market opportunities may differ materially from the methodologies and assumptions previously used to estimate total addressable market.

The methodology and assumptions used to estimate market opportunities may differ materially from the methodologies and assumptions previously used to estimate the total addressable market.

To estimate the size of our market opportunities and our growth rates, we have relied on market reports by leading research and consulting firms.

These estimates of total addressable market and growth forecasts are subject to significant uncertainty, are based on assumptions and estimates that may not prove to be accurate and are based on data published by third parties that we have not independently verified.

These estimates of the total addressable market and growth forecasts are subject to significant uncertainty, are based on assumptions and estimates that may not prove to be accurate and are based on data published by third parties that we have not independently verified.

Advances in classical computing may prove more robust for longer than currently anticipated.

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Unforeseen issues associated with scaling up and constructing quantum computing technology at commercially viable levels, and selling our technology, could negatively impact our business, financial condition and results of operations.

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

Moreover, because of our unique technology, our customers will require particular support and service functions, some of which are not currently available.

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

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

Similarly, increasing the number of our customers, products or services, for example by entering into government contracts and expanding to new geographies, has required and may continue to require us to rapidly increase the availability of these services.

Failure to adequately support and service our customers may inhibit our growth and ability to expand computing targets globally.

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

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

In connection with the preparation of our financial statements as of and for the year ended December 31, 2021, we identified a material weakness in our internal control over financial reporting specifically related to our financial statement close process.

Specifically,

Although we recently added accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S.

GAAP and SEC rules, the Company is still in process of formalizing its processes and procedures, establishing clear authorities and approvals and segregating duties to facilitate accurate and timely financial reporting.

Our financial accounting system has limited functionality and does not facilitate effective information technology general controls relevant to financial reporting.

Additionally, elements of our close process are managed and processed outside the accounting system, increasing the risk of error.

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

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

At this time, we cannot predict the success of such efforts or the outcome of our assessment of the remediation efforts.

We can give no assurance that our efforts will remediate this material weakness in our internal control over financial reporting, or that additional material weaknesses will not be identified in the future.

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

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

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

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company,” as defined in the JOBS Act.

At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.

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In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe that we have sufficient funds for current or future operating plans.

Weakness and volatility in capital markets and the economy, in general or as a result of macroeconomic conditions such as rising inflation, could limit our access to capital markets and increase our costs of borrowing.

Weakness and volatility in capital markets and the economy, in general or as a result of bank failures or macroeconomic conditions such as rising inflation and interest rates, could limit our access to capital markets and increase our costs of borrowing.

There can be no assurance that financing will be available to us on favorable terms, or at all.

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As of December 31, 2022, we had U.S.

federal and state net operating loss carryforwards of approximately $14.1 million.

federal and state net operating loss carryforwards of approximately $96.3 million and $69.5 million, respectively.

Our net operating loss carryforwards are subject to review and possible adjustment by the IRS, and state tax authorities.

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An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.

Our ability to utilize our net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including changes in connection with our business combination with dMY Technology Group, Inc.

III (“dMY”) or other transactions.

Our ability to utilize our net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including changes in connection with our Business Combination with dMY or other transactions.

Similar rules may apply under state tax laws.

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the gate speed in our technology could prove more difficult to improve than expected;

the scaling of fidelity with qubit number could prove poorer than expected, limiting our ability to achieve larger quantum volume.

the scaling of fidelity with qubit number could prove poorer than expected, limiting our ability to achieve larger algorithmic qubits.

In addition, we will need to develop the manufacturing process necessary to make these quantum computers in high volume.

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Our current competitors include:

large, well-established tech companies that generally compete in all of our markets, including Honeywell, Google, Microsoft, Amazon, Intel and IBM;

large, well-established tech companies that generally compete in all of our markets, including Google, Microsoft, Amazon, Intel and IBM;

countries such as China, Russia, Canada, Australia and the United Kingdom, and those in the European Union and we believe additional countries in the future;

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For all of these reasons, competition may negatively impact our ability to maintain and grow consumption of our platform or put downward pressure on our prices and gross margins, any of which could materially harm our reputation, business, results of operations, and financial condition.

Our business is currently dependent upon our relationship with our cloud providers.

An element of our business is currently dependent upon our relationship with our cloud providers.

There are no assurances that we will be able to commercialize quantum computers from our relationships with cloud providers.

Cloud computing partnerships could be terminated, or not scale as anticipated, or even at all.

We currently offer our QCaaS on public clouds provided by Amazon Web Services’ (“AWS”), Microsoft’s Azure Quantum (“Azure”), and the Google Cloud Marketplace.

We currently offer our QCaaS on public clouds provided by AWS’s Amazon Braket, Microsoft’s Azure Quantum, and the Google Cloud Marketplace.

The companies that own these public clouds have internal quantum computing efforts that are competitive to our technology.

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All of the foregoing could make it difficult or impossible for us to provide products and services that compete favorably with those of the public cloud providers.

Further, if our contractual and other business relationships with our public cloud providers are terminated, either by the counterparty or by us, suspended or suffer a material change to which we are unable to adapt, such as the elimination of services or features on which we depend, we would be unable to provide our QCaaS at the same scale and would experience significant delays and incur additional expense in transitioning customers to a different public cloud provider.

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

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

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Without timely innovation and development, our quantum computing solutions could be rendered obsolete or less competitive by changing customer preferences or because of the introduction of a competitor’s newer technologies.

We believe that many competing technologies will require a technological breakthrough in one or more problems related to science, fundamental physics or manufacturing.

We believe that many

competing technologies will require a technological breakthrough in one or more problems related to science, fundamental physics or manufacturing.

While it is uncertain whether such technological breakthroughs will occur in the next several years, that does not preclude the possibility that such technological breakthroughs could eventually occur.

Any technological breakthroughs which render our technology obsolete or inferior to other products could have a material effect on our business, financial condition or results of operations.

Any technological breakthroughs that render our technology obsolete or inferior to other products could have a material effect on our business, financial condition or results of operations.

We may be unable to reduce the cost per qubit, which may prevent us from pricing our quantum systems competitively.

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Any disruptions, outages, defects and other performance and quality problems with our quantum computing system or with the public cloud and internet infrastructure on which it relies, could result in reduced use of our systems, increased expenses, including service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.

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

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

We are reliant on third-party suppliers for components necessary to develop and manufacture our quantum computing solutions.

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a significant increase in the price of one or more components, including due to industry consolidation occurring within one or more component supplier markets or as a result of decreased production capacity at manufacturers;

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

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

any reductions or interruption in supply, including disruptions on our global supply chain as a result of the global chip shortage, or the Russia-Ukraine war and any indirect effects thereof;

financial problems of either manufacturers or component suppliers;

significantly increased freight charges, or raw material costs and other expenses associated with our business;

other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis;

other factors beyond our control or that we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis;

a failure to develop our supply chain management capabilities and recruit and retain qualified professionals;

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a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs.

If any of the aforementioned factors were to materialize, it could cause us to halt production of our quantum computing solutions and/or entail higher manufacturing costs, any of which could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

We have experienced supply chain issues in the past as a result of COVID-19.

If any of the aforementioned factors were to materialize, it could cause us to delay or halt production of our quantum computing solutions and/or entail higher manufacturing costs, any of which could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

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

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failures to accurately predict market or customer demands;

defects, errors or failures in the design or performance of our quantum computing system;

negative publicity about the performance or effectiveness of our system;

defects, errors or failures in the design or performance of our quantum computing systems;

negative publicity about the performance or effectiveness of our systems;

strategic reaction of companies that market competitive products;

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These individuals could leave our employment at any time, as they are “at will” employees.

A loss of the co-founders, a member of senior management, or an engineer or other key employee particularly to a competitor, could also place us at a competitive disadvantage.

A loss of one of our co-founders, a member of senior management, or an engineer or other key employee particularly to a competitor, could also place us at a competitive disadvantage.

Effective succession planning is also important to our long-term success.

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We anticipate being required to provide forecasts of our demand to our current and future suppliers prior to the scheduled delivery of products to potential customers.

Currently, there is no historical basis for making judgments on the demand for our quantum computers or our ability to develop, manufacture, and deliver quantum computers, or our profitability, if any, in the future.

Currently, there is very little historical basis for making judgments on the demand for our quantum computers or our ability to develop, manufacture, and deliver quantum computers, or our profitability, if any, in the future.

If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs.

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If we are unable to procure these isotopically enriched atomic samples, or are unable to do so on a timely and cost-effective basis, and in sufficient quantities, we may incur significant costs or delays, which could negatively affect our operations and business.

There are limited suppliers to sources of isotopically enriched materials which may be necessary for the production of our ion trap technology.

There are limited suppliers to sources of isotopically enriched materials that may be necessary for the production of our ion trap technology.

We currently purchase such materials through the National Isotope Development Center managed by the U.S.

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We have focused our efforts on creating quantum computing hardware, the operating system for such hardware and a suite of low-level software programs that optimize execution of quantum algorithms on our hardware.

Further up the software stack, we rely on third parties to create higher level quantum programming languages, software development kits (SDKs), and application libraries.

Further up the software stack, we rely on third parties to create higher level quantum programming languages, SDKs, and application libraries.

Such third-party software and programming is essential to operating our quantum computing products and services.

Our quantum computing solutions are designed today to be compatible with most major quantum software development kits, including Qiskit, Cirq, Q# QDK, and OpenQASM, all of which are open source.

Our quantum computing solutions are designed today to be compatible with most major quantum SDKs, including Qiskit, Cirq, Q# QDK, and OpenQASM, all of which are open source.

If a proprietary (not open source) software toolset became the standard for quantum application development in the future by a competitor, usage of our hardware might be limited as a result, which would have a negative impact on us.

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

We have entered into, and may enter into, partnerships and other contractual arrangements with customers to develop, test and run quantum algorithms specific to their business.

We have entered into, and may enter into, contracts, partnerships and other arrangements with customers to develop, test and run quantum algorithms specific to their business.

The success of these contracts and partnerships is dependent on our customer’s ability to implement useful and scalable algorithms for their portfolio.

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

Our customers and potential customers include government agencies and large enterprises.

Our customers and potential customers include domestic and international government agencies and large enterprises.

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

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

Additionally, such government contracts may suspend us from doing business with foreign governments or prevent us from selling our products in certain countries.

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

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In addition, reduction in government priorities and requirements could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition.

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

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

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

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

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

For example, in 2021, the U.S.

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geographies or with certain non-U.S.

Conversely, our perceived relationship with non-U.S.

governments or government entities could adversely affect our business prospects with the U.S.

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

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

federal government and foreign government agencies, as applicable;

government and foreign government agencies, as applicable;

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

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In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “Processing”) personal data and other sensitive information, including intellectual property, proprietary and confidential business data, trade secrets, sensitive third-party data, business plans, transactions, and financial information of our own, our partners, our customers, or other third parties (collectively, “Sensitive Data”).

In the ordinary course of our business, we and the third parties upon which we rely may process Sensitive Data, and, as a result, we and the third parties upon which we rely face a variety of evolving threats to our information technology systems, data, or physical facilities where our quantum computers are stored, including but not limited to ransomware attacks, which could cause security incidents.

We and the third parties upon which we rely may process Sensitive Data, and, as a result, we and the third parties upon which we rely face a variety of evolving threats to our information technology systems, data, or physical facilities where our quantum computers are stored, including but not limited to ransomware attacks, which could cause security incidents.

Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our Sensitive Data and information technology systems, and those of the third parties upon which we rely.

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Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations.

Our platform is built to be accessed through third-party cloud providers, such as AWS, Azure, and the Google Cloud Marketplace, and we rely on these and other third-party service providers and technologies to operate critical business systems to process Sensitive Data in a variety of contexts, including, without limitation, other cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

Our platform is built to be accessed through third-party cloud providers, such as AWS’s Amazon Braket, Microsoft’s Azure Quantum, and Google’s Cloud Marketplace, and we rely on these and other third-party service providers and technologies to operate critical business systems to process Sensitive Data in a variety of contexts, including, without limitation, other cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.

We may also rely on third-party service providers to provide other products, services, parts, or otherwise to operate our business.

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While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.

We may be unable in the future to detect vulnerabilities in our information technology systems (including in our services) because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred.

We take steps to detect and remediate vulnerabilities in our information technology systems (including in our services), but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit vulnerabilities change frequently and, are often sophisticated in nature.

Therefore, such vulnerabilities could be exploited but, may not be detected until after a

security incident has occurred.

These vulnerabilities pose material risks to our business.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

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We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.

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

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

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

For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets and any future public health crises could result in similar impacts on the global economy.

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

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

We may pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships.

We have pursued and we may continue to pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships.

The identification of suitable acquisition, strategic investment or strategic partnership candidates can be costly and time consuming and can distract our management team from our current operations.

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Even if we successfully complete a strategic transaction, we may not be able to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business.

We may experience unexpected changes in how we are required to account for strategic transactions pursuant to U.S.

We may experience unexpected changes in how we are required to account for strategic transactions pursuant to accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and may not achieve the anticipated benefits of any strategic transaction.

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

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

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

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

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

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

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

In addition, various aspects of our business cannot be conducted remotely, such as the assembly of our quantum computers.

These measures by government authorities may remain in place for a significant period of time and they are likely to continue to adversely affect our future manufacturing plans, sales and marketing activities, business and results of operations.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, suppliers, vendors and business partners.

Due to the fluid nature of the COVID-19 pandemic and uncertainties regarding the related economic impact are likely to result in sustained market turmoil, which could also negatively impact the company’s business, financial condition and cash flows.

The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.

As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business.

However, if the pandemic continues to persist as a severe worldwide health crisis, the disease could negatively impact our business, financial condition results of operations and cash flows, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

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

Risks Related to Our International Expansion and Future Operations

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

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

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

We currently maintain offices and/or have personnel in the United States, Canada, and Israel, and recently expanded operations to Germany.

We expect to continue to expand our international operations by developing our sales and operations presence in these and other international markets, which may include opening offices in new jurisdictions.

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

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difficulties in managing systems integrators and partners;

increased or unexpected supply chain challenges or delays;

differing technology standards;

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

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

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

global public health threats or geopolitical events such as the Russia-Ukraine war;

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

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

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

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

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

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

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

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

We have a limited sales presence in Germany and Israel;

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

sales organization.

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

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

If such a challenge or disagreement were to occur, and our position

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

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

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Risks Related to Litigation and Government Regulation

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

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

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

For example, 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 we are named as counterclaim defendants in an underlying action by and between GTY Technology Holdings, Inc.

(“GTY”), dMY Technology Group, Inc.

and dMY Sponsor, LLC, dMY Sponsor II, LLC, dMY Technology Group Inc.

II, dMY and Sponsor (collectively, “dMY Defendants”) 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 has 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.

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

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

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 (the “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 (the “Board”) 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 the Additional Defendants believe that the allegations in the various complaints are without merit and intend to defend the matters vigorously.

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

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

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

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

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

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

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

Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.

In addition, the laws and regulations our business is subject to are complex and change frequently.

We may be required to incur significant expense to comply with changes in, or remedy violations of, these laws and regulations.

Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable.

Even if we believe a claim is covered by insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may become subject to product liability claims, even those without merit, which could harm our business prospects, operating results, and financial condition.

We may face inherent risk of exposure to claims in the event our quantum computers do not perform as expected or malfunction.

A successful product liability claim against us could require us to pay a substantial monetary award.

Moreover, a product liability claim could generate substantial negative publicity about our quantum computers and business and inhibit or prevent commercialization of other future quantum computers, which would have material adverse effects on our brand, business, prospects and operating results.

Any insurance coverage might not be sufficient to cover all potential product liability claims.

Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition.

We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.

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

We are subject to numerous federal, state and local environmental laws and regulations governing, among other things, solid and hazardous waste storage, treatment and disposal, and remediation of releases of hazardous materials.

There are significant capital, operating and other costs associated with compliance with these environmental laws and regulations.

Environmental laws and regulations may become more stringent in the future, which could increase costs of compliance or require us to manufacture with alternative technologies and materials.

Federal, state and local authorities also regulate a variety of matters, including, but not limited to, health, safety and permitting in addition to the environmental matters discussed above.

New legislation and regulations may require us to make material changes to our operations, resulting in significant increases to the cost of production.

Our manufacturing process will have hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents.

There may be safety incidents that damage machinery or product, slow or stop production, or harm employees.

Consequences may include litigation, regulation, fines, increased insurance premiums, mandates to temporarily halt production, workers’ compensation claims, or other actions that impact the company brand, finances, or ability to operate.

Contracts with U.S.

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

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

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

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

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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).

For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.

For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal information of California consumers, business representatives and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.

The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

In addition, the California Privacy Rights Act of 2020 (“CPRA”), which becomes effective January 1, 2023, will expand the CCPA’s requirements, including applying to personal information of business representatives and employees and establishing a new regulatory agency to implement and enforce the law.

In addition, the California Privacy Rights Act of 2020 (“CPRA”) expands the CCPA’s requirements, including by adding a new right for individuals to correct their personal information and establishing a new regulatory agency to implement and enforce the law.

Other states, such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.

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Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s General Data Protection Regulation (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No.

13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal data.

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or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

Additionally, we also target customers in Asia and may be subject to new and emerging data privacy regimes in Asia, including China’s Personal Information Protection Law, Japan’s Act on the Protection of Personal Information, and Singapore’s Personal Data Protection Act.

Additionally, we also target customers in Asia and may be subject to new and emerging data privacy regimes in Asia, including China’s PIPL, Japan’s Act on the Protection of Personal Information, and Singapore’s Personal Data Protection Act.

In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows.

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If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

Some European regulators have prevented companies from transferring personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.

We may also be bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

For example, certain privacy laws, such as the GDPR and CCPA, require our customers to impose specific contractual restrictions on their service providers.

Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigators, and activist groups.

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations.

In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.

We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

For example, certain privacy laws, such as the EU GDPR, UK GDPR and CCPA, require our customers to impose specific contractual restrictions on their service providers.

Additionally, some of our customers may require us to host personal data locally.

We may publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.

We publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

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Regulations related to quantum computing are currently evolving and we may face additional risks associated with changes to these regulations.

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

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

For example, on January 12, 2021, dMY Technology Group, Inc.

(“GTY”), dMY Technology Group, Inc.

and dMY Sponsor, LLC, dMY Sponsor II, LLC, dMY Technology Group Inc.

II, dMY and Sponsor (collectively, “dMY Defendants”) 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 Counterclaim Defendants have denied the claims against them and have a motion to dismiss the suit.

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

et al., Case No.

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.

In September 2022, the Court appointed lead plaintiffs and counsel for lead plaintiffs, and ordered lead plaintiffs to file a consolidated amended complaint on or before November 22, 2022.