Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K Risk Factors”) for a more complete understanding of the risks and uncertainties material to our business that make an investment in our securities speculative or risky. There have been no material changes to our risk factors as previously disclosed in the 2025 Form 10-K Risk Factors, except as follows:
We are in our early stages and have a limited operating history, which makes it difficult to forecast the future results of our operations. We have in the past failed to meet publicly announced milestones and may fail to meet projected technological milestones
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in the future. In addition, we have in the past changed our technology roadmap, including the anticipated milestones and timing thereof.
Our business was founded in 2013 and has operated quantum computers over the cloud since 2017. As a result of our limited operating history, our ability to accurately forecast the 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 quantum bits (“qubits”) and with increasing levels of performance. As of the date of this Quarterly Report on Form 10-Q, we have deployed a quantum computer having 108 qubits performing at a 99.1% median two-qubit gate fidelity (based on internal testing) with a gate speed of approximately 60 nanoseconds and a 99.9% median single gate fidelity (based on internal testing).
We are still in the technology development phase. Our scalable business model has not been formed as of yet and our technology roadmap may not be realized as quickly as hoped, or even at all. We have in the past failed to meet publicly announced milestones and may fail to meet projected technological milestones in the future. We have in the past changed our technology roadmap, including the anticipated milestones and timing thereof, including in each of the years ended December 31, 2018, 2022, 2023 and 2025. In April 2026, we announced that we intend to update our roadmap later in 2026, including updates to anticipated milestones and the anticipated timeline for milestones. Furthermore, we may be unable to achieve the milestones in our technology roadmap on their announced anticipated timeline or at all, including our next generation of modular system architecture, targeted qubit counts and fidelities. 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 unless and until more powerful, scalable, higher performing 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 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 sales of our on-premise quantum computers, QCaaS or QCS, increased competition, changes to technology, inability to scale up or improve performance of our technology, a decrease in the growth of the 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. If our assumptions regarding these risks and uncertainties and our future growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer. Our success as a business ultimately relies upon fundamental research and development breakthroughs in the coming years. There is no certainty these research and development milestones will be achieved as quickly as hoped, or even at all.
Risks Related to the Department of Commerce Transaction
In the event that the Department of Commerce Transaction progresses from the Letter of Intent to Definitive Award Documents, it is expected to be funded in phases over time and is subject to our achieving milestones, and there can be no assurance that such milestones will be achieved on the expected timeline or at all; any failure to meet a milestone could result in the withholding of funding and may subject previously disbursed amounts to clawback provisions.
On May 21, 2026, we announced that our wholly-owned subsidiary, Rigetti Sub, entered into the Letter of Intent with the Department of Commerce under the CHIPS Act of 2022, covering an award amount of up to an aggregate $100.0 million, to be disbursed to Rigetti Sub in one payment of $19.9 million to be made on the Award Date, two potential subsequent payments of $22.2 million and $18.5 million, respectively, in connection with the satisfactory completion of certain project milestones, and an additional potential $39.4 million that may be disbursed for other project activities. The Letter of Intent for the Department of Commerce Transaction provides, and the Definitive Award Documents for such collaboration are anticipated to provide, that the Award amounts will be released to us in phases over time subject to our achievement of specified business milestones, all of which are expected to be required to be achieved within the five-year Period of Performance. There can be no assurance that such milestones will be achieved on the expected timeline, or at all. If we are unable to meet such milestones, the corresponding funding will not be released to us. Our satisfaction of any given milestone, and receipt of the associated funding, does not guarantee that we will be able to meet any subsequent milestones and may subject previously disbursed amounts to clawback provisions. Further, our satisfaction of one or more milestones for one project does not guarantee that we will be able to meet any milestones for the other projects. Additionally, our ability to address key technical challenges related to superconducting quantum computing, including research and development activities related to the miniaturization and integration of readout electronics and leveraging of new, larger cryostat architectures is dependent upon a multitude of technical, commercial, organizational and ecosystem factors.
The Department of Commerce Transaction is currently contemplated pursuant to the Letter of Intent and remains subject to the negotiation and execution of the Definitive Award Documents, satisfaction of conditions precedent, and final government approvals,
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and there can be no assurance that such documentation will be executed or that the collaboration will be consummated on the anticipated terms or at all, any of which could have a material adverse effect on our business, prospects, financial condition and results of operations.
Furthermore, the Letter of Intent obligates us to negotiate in good faith with the Department to execute and deliver the Definitive Award Documents for the Department of Commerce Transaction within 60 days and no later than 90 days after the date of the Letter of Intent (unless otherwise extended by the Department) and includes certain requirements with respect to negotiation matters. In the event that Definitive Award Documents are not executed and delivered by during this period of 90 days after the date of the Letter of Intent as a result of our failure to negotiate in good faith, and if the Department has complied with its obligation to negotiate the Definitive Award Documents in good faith during such period, then the Department has the right (but not the obligation) to unilaterally declare that the Letter of Intent is binding and will serve as the operative Definitive Award Document, and to issue the Award pursuant to the terms included in the Letter of Intent and require us to issue shares of Company common stock on the economic terms set forth in the Letter of Intent. We have no such similar right to enforce the terms of the Letter of Intent. The Letter of Intent further provides that, if we fail to provide such payment to the Department, the Department will be entitled to seek specific performance, damages, or otherwise seek or impose any other remedy available.
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While we may execute Definitive Award Documents with the government and receive funding thereafter, there can be no assurances that the authorization and continued support for the transactions contemplated by the Definitive Award Documents will not be modified, challenged or impaired in the future, which could adversely affect on our business, prospects, financial condition and results of operations.
We expect to enter into Definitive Award Documents for the Department of Commerce Transaction on substantially the terms set forth in the Letter of Intent. However, given the heightened sensitivity and complexity of contracting with a government entity, particularly in a high-profile industry implicating national security, there can be no assurances that terms of the Department of Commerce Transaction, including the Definitive Award Documents once executed, will not be modified, challenged or impaired in the future, which could adversely affect our business, prospects, financial condition and results of operations. We believe there are multiple factors that may contribute to this uncertainty, including, but not limited to, the interpretation of current and future, and enactment of future, federal and international laws, regulations, administrative actions and rulings, and interpretations and changes to interpretations thereof, whether by a court or within the legislative or executive branches of the federal government; our ability to comply with any conditions or other requirements imposed by such laws, regulations, actions and rulings, and changes thereto; a determination by the legislative, judicial, or executive branches of the federal government that any aspect of the Department of Commerce Transaction, or the related Definitive Award Documents, was unauthorized, void, or voidable; future changes in federal administration and related executive and legislative priorities; the continued availability of Congressional appropriations and Department funding; geopolitical developments; and the legal and strategic challenges associated with enforcing the obligations of and seeking performance from a government counterparty, especially in conjunction with the unique defenses and remedies available to the federal government. Furthermore, while the Department is expected to be contractually bound under the Definitive Award Documents, if breached, no other agency, office or branch of the federal government has made any assurances or will have any obligations under the Definitive Award Documents to actively support, accede to or refrain from challenging, investigating or otherwise impeding the commitments and obligations of the parties to the Definitive Award Documents or relating to the Department of Commerce Transaction, whether now or in the future. The Department of Commerce Transaction may also be challenged by other third parties and is subject to the risk of litigation, the cost and result of which could adversely affect our business, prospects, financial condition and results of operations.
Future funding may be required to meet milestones under the Department of Commerce Transaction. Our ability to fund such obligations from our balance sheet or by raising additional equity or debt financing may be adversely affected by market conditions, interest rates, investor risk appetite, or macroeconomic factors beyond our control.
In the event that our budgeted sources of cash assumed to fund the Department of Commerce Transaction are lower than anticipated, we would be obligated under the terms of the Definitive Award Documents to find an alternative source of cash. Our ability to fund such obligations from our balance sheet would depend on the strength of our balance sheet at the time. Our ability to obtain such capital would depend on market conditions and our operating performance, and may result in higher costs of capital, increased leverage, or dilution to existing stockholders. Depending on the type and terms of any financing we pursue, stockholders’ rights and the value of their investment in our common stock could be reduced. Any additional equity financing would dilute shareholdings. If the issuance of new securities results in diminished rights to holders of our common stock, the market price of our common stock could be negatively impacted. New or additional debt financing, if available, could involve restrictions on financing and operating activities. Interest on such debt could also increase costs and negatively impact operating results.
If we need additional financing and are unable to obtain it as needed, and at competitive rates, our ability to fund our current operations and implement our business plan and strategy could be negatively affected, and we could be forced to reduce the scope of our operations and scale back our research and development programs. Certain market disruptions could also increase our cost of borrowing or negatively affect our ability to access one or more financial markets. Such market disruptions could result from:
● adverse macroeconomic conditions, including inflationary factors or the occurrence of recession;
● adverse equity or debt capital market conditions, including as a result of rising interest rates;
● poor performance and health of the quantum computing industry in general;
● bankruptcy or financial distress of quantum computing companies;
● significant decreases in the current or future anticipated demand for quantum computing; or
● adverse regulatory actions that could impact the quantum computing industry.
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Because the Department will keep 100% of the shares of Company common stock that it is receiving whether or not the Department of Commerce Transaction is funded in full or at all, if all or part of the Department of Commerce Transaction is not funded for any reason, or if the funding is received but subsequently clawed back, existing holders of our Company common stock may experience dilution without a corresponding infusion of capital into the Company.
Pursuant to the Letter of Intent, as a condition to entry into the Definitive Award Documents for the Department of Commerce Transaction, we will be required to issue shares of the Company’s common stock on the Award Date to the Department in the total amount of the Award, at an implied issuance price that is based on the lowest reported closing price per share on: (i) the date that the first draft of the Letter of Intent was transmitted from the Department to Rigetti Sub (May 5, 2026), (ii) the date that the Letter of Intent is executed by Rigetti Sub and the Department (May 20, 2026), and (iii) the Award Date, in each case, discounted by fifteen percent (15%). The Department will retain 100% of such shares whether or not the Award is funded in full or if the funding is received but subsequently clawed back. Accordingly, existing common stockholders will experience dilution of their ownership positions in connection with any such issuance. If the trading price of our common stock declines prior to the Award Date, we may be required to issue a substantial number of shares on the Award Date and existing common stockholders would experience substantial dilution of their ownership positions without a corresponding infusion of capital into the Company.
If the shares of common stock that we issue to the Department are subsequently sold by the Department or its nominee into the public markets, or a perception begins to exist that such sales might occur, the market price of our common stock could become depressed, with could further impair our ability to raise capital through the sale of additional equity securities.
The financial, tax and accounting treatment of the Department of Commerce Transaction contemplated by the Definitive Award Documents remains uncertain and subject to change.
Given both the novelty and complexity of the Department of Commerce Transaction, and the ongoing negotiation of the Definitive Award Documents, our initial analysis of the financial, tax and accounting implications of our commitments and obligations in connection with the Department of Commerce Transaction has not been completed. Additionally, no assurance can be provided that this initial assessment will not require adjustment or amendment over time due to changes in tax law or regulations, accounting practices and requirements and unforeseen developments in the course of performing under the Definitive Award Documents, particularly with respect to characterization of payments received from the Department, among other considerations. The Definitive Award Documents for the Department of Commerce Transaction will be highly integrated, and certain of the obligations under each agreement are expected to be contingent upon or impacted by the terms and obligations of the others. If one or more of such agreements, or one or more elements of the transactions, were to be altered, amended or terminated, management would need to assess the financial, tax and accounting implications of such changes, which could be significant, together with any related available remedies. We are unable to predict, and may not be able to anticipate, either these changes or the impact thereof. Any of the foregoing could negatively affect our business, prospects, financial condition and results of operations, including, but not limited to, causing changes to our financial outlook, recharacterizations, restatements or other modifications of our financial statements or adjustments to previously provided estimates or guidance.
The Definitive Award Documents will contain affirmative and negative covenants that may restrict our ability and the ability of our subsidiaries to take actions management believes are important to our long-term strategy, and the pursuit of the Award milestones may distract our management team and other employees from other matters important to our long-term strategy.
The Definitive Award Documents for the Department of Commerce Transaction will contain affirmative covenants requiring us to take certain actions and negative covenants restricting our ability to take certain actions. In addition, the Department of Commerce Transaction will be subject to comprehensive, ongoing reporting and disclosure obligations, including financial, operational, cybersecurity and supply chain information.
Compliance with the affirmative and negative covenants contained in the Definitive Award Documents could restrict our ability to take actions that management believes may be important to our long-term strategy. If strategic transactions we wish to undertake are prohibited by the Definitive Award Documents, our ability to execute our long-term strategy could be adversely affected, which could in turn have an adverse effect on our business, prospects, financial condition, or results of operations. For example, any requirement to obtain government approval or consent, or to provide notification, could delay or limit future financings, mergers, acquisitions, or asset dispositions. Furthermore, the pursuit of the Award milestones may distract our management team and other employees from other matters important to our long-term strategy.
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The Letter of Intent also includes certain restrictions designed to require us to maintain a nexus with the United States. These restrictions include a requirement that future ownership of any invention that is or may be patentable under U.S. law generated in connection with activities funded under the Definitive Award Documents, as well as certain underlying background intellectual property owned by us, be restricted to U.S. company ownership for ten years following the Period of Performance or the first commercial sale of the funded innovation, whichever is later. Additionally, we must notify the Department of our intent to sell, transfer, or assign ownership of any such inventions or background intellectual property at least 60 days prior to any such transaction. Federally funded innovations are additionally required to be produced exclusively in the United States during the Period of Performance and for ten years thereafter, subject to certain limited exceptions and as to be further defined in the Definitive Award Documents. Under the terms of the Letter of Intent, the Department has the right to claw back up to the full disbursed Award amount in the event of (a) any breach of the terms of the Definitive Award Documents relating to domestic control of intellectual property, domestic production, or research security provisions, or (b) any failure to timely complete certain required project activities (defined in the Definitive Award Documents) or abandonment of the project. The Letter of Intent also includes various compliance and certification obligations related to the Research Security Program of the Department, which are designed to protect scientific research, intellectual property, and critical technology from foreign interference, theft, and misuse.
Given the scarcity of U.S. precedents for transactions such as those contemplated under the Department of Commerce Transaction and the government becoming a stockholder of ours, we may experience other adverse consequences resulting from the potential announcement or completion of the Department of Commerce Transaction.
Given the scarcity of recent U.S. precedents for transactions such as those contemplated by Department of Commerce Transaction, it is difficult to foresee all the potential consequences. Among other things, there could be adverse reactions, immediately or over time, from investors, employees, customers, suppliers, other business or commercial partners, foreign governments or competitors. There may also be litigation related to the Department of Commerce Transaction or otherwise and increased public or political scrutiny with respect our operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.