Rigetti Computing, Inc. 10-Q/A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q/A. This discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” “will,” “continue,” “project,” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those we describe under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q/A that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. For purposes of this discussion, “Rigetti,” “the Company,” “we,” “us” or “our” refer to Rigetti Computing, Inc. and its subsidiaries unless the context otherwise requires. Restatement of Previously Issued Financial Statements As discussed in the Explanatory Note to this Quarterly Report on Form 10-Q/A and Note 1 — Description of Business —Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A, certain items within this Part 1, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” have been updated to reflect the restatement of the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A. Except as described above, this Management’s Discussion and Analysis of Financial Condition and Results of Operations does not substantively amend, update or change any other items or disclosures contained in the Original Form 10-Q filed with the SEC on August 12, 2022, and accordingly, this Management’s Discussion and Analysis of Financial Condition and Results of Operations does not reflect or purport to reflect any information or events occurring after August 12, 2022, the original filing date of the Original Form 10-Q, or modify or update those disclosures affected by subsequent events, except to reflect such restatement and its effects. Accordingly, the Company has not updated forward-looking statements or information to reflect events occurring after the filing of the Original Form 10-Q. Refer to Note 1 — Description of Business — Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A for a description of the restatement. Overview On March 2, 2022 (the “Closing Date”), we consummated the transactions contemplated by that certain Agreement and Plan of Merger dated as of October 6, 2021, as amended on December 23, 2021 and January 10, 2022 (as amended, the “Merger Agreement”), by and among Supernova Partners Acquisition Company II, Ltd., a Cayman Islands exempted company (“Supernova”), Supernova Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Supernova (the “First Merger Sub”), Supernova Romeo Merger Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Supernova (the “Second Merger Sub”), and Rigetti Holdings, Inc., a Delaware corporation (“Legacy Rigetti”). As contemplated by the Merger Agreement, on March 1, 2022 Supernova was domesticated as a Delaware corporation and changed its name to “Rigetti Computing, Inc.” (the “Domestication”). On the Closing Date, (i) First Merger Sub merged with and into Legacy Rigetti, the separate corporate existence of First Merger Sub ceased and Legacy Rigetti survived as a wholly owned subsidiary of Rigetti Computing, Inc. (the “Surviving Corporation” and, such merger, the “First Merger”), and (ii) immediately following the First Merger, the Surviving Corporation merged with and into the Second Merger Sub, the separate corporate existence of the Surviving Corporation ceased and Second Merger Sub survived as a wholly owned subsidiary of Rigetti Computing, Inc. and changed its name to “Rigetti Intermediate LLC” (such merger transaction, the “Second Merger” and, together with the First Merger, the “Merger”, and, collectively with the Domestication, the “PIPE Financing” (as defined below) and the other transactions contemplated by the Merger Agreement, the “Business Combination”). The closing of the Business Combination is herein referred to as “the Closing.” We build quantum computers and the superconducting quantum processors that power them. We believe our quantum computing represents one of the most transformative emerging capabilities in the world today. By leveraging quantum mechanics, we believe our quantum computers process information in fundamentally new, more powerful ways than classical computers. When scaled, it is anticipated that these systems will be poised to solve problems of staggering computational complexity at unprecedented speed. With the goal of unlocking this opportunity, we have developed the world’s first multi-chip quantum processor for scalable quantum computing systems. We believe that this patented and patent pending, modular chip architecture is the building block for new generations of quantum processors that we expect to achieve a clear advantage over classical computers. 36 Table of Contents Our long-term business model centers on revenue generated from quantum computing systems made accessible via the cloud in the form of Quantum Computing as a Service (“QCaaS”) products. However, the substantial majority of our revenues is derived from development contracts, and we anticipate this to persist over at least the next several years as we work to ramp up our QCaaS business. Additionally, we are working to further develop a revenue stream and forging important customer relationships by entering into technology development contracts with various partners. We are a vertically integrated company. We own and operate Fab-1, a dedicated and integrated laboratory and manufacturing facility, through which we own the means of producing our breakthrough multi-chip quantum processor technology. We leverage our chips through a full-stack product development approach, from quantum chip design and manufacturing through cloud delivery. We believe this full-stack development approach offers both the fastest and lowest risk path to building commercially valuable quantum computers. We have been generating revenue since 2018 through partnerships with government agencies and commercial organizations; however, we have not yet generated profits. We have incurred significant operating losses since inception. Our net losses were $12.3 million and $10.1 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $29.9 million and $17.9 million for the six months ended June 30, 2022 and June 30, 2021 respectively. As we expect to continue to invest in research and development infrastructure, we expect to continue to incur additional losses for the foreseeable future in line with our long-term business strategy. As of June 30, 2022, we had an accumulated deficit of $237.0 million. The Business Combination and PIPE Financing On October 6, 2021, SNII entered into the Merger Agreement by and among Supernova, First Merger Sub, Second Merger Sub, and Legacy Rigetti. On March 2, 2022, the Business Combination was consummated. While the legal acquirer in the Merger Agreement was Supernova, for financial accounting and reporting purposes under United States generally accepted accounting principles (“U.S. GAAP”), Rigetti was the accounting acquirer and the Merger was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and financial statements of Rigetti represent the continuation of the financial statements of Legacy Rigetti in many respects. Under this method of accounting, Supernova was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Rigetti was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Rigetti (i.e., a capital transaction involving the issuance of stock by Supernova for the stock of Rigetti). As a result of the Business Combination, all of the shares of Legacy Rigetti common stock outstanding immediately prior to the Closing (including Legacy Rigetti common stock resulting from the Legacy Rigetti preferred stock conversion) were converted into the right to receive an aggregate of 78,959,579 shares of our common stock, par value $0.0001 per share (“Common Stock”). Additionally, each issued and outstanding share of Supernova Class A and Class B common stock held by Supernova automatically converted to 20,209,462 shares of Common Stock (of which 3,059,273 shares are subject to vesting under certain conditions). Upon consummation of the Business Combination, the most significant change in our reported financial position and results of operations was an increase in cash of $208.2 million (as compared to Rigetti’s balance sheet at December 31, 2021), including $225.6 million of proceeds from the Business Combination and PIPE Financing net against transaction costs incurred by us of $17.4 million. Additional direct and incremental transaction costs were also incurred by Rigetti in connection with the Business Combination. Generally, costs (e.g., SPAC shares) are recorded as a reduction to additional paid-in capital. Costs allocated to liability-classified instruments that are subsequently measured at fair value through earnings (e.g., certain SPAC warrants) are expensed. Rigetti’s transaction costs totaled $20.65 million, of which $19.75 million was allocated to equity-classified instruments and recorded as a reduction to additional paid-in capital, and the remaining $0.9 million was allocated to liability-classified instruments that are subsequently measured at fair value through earnings and recognized as expense in the condensed consolidated statements of operations during the six months ended June 30, 2022. 37 Table of Contents As a result of the Business Combination, we became subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, and listing standards of the Nasdaq Capital Market, which will necessitate us to hire additional personnel and implement procedures and processes to address such public company requirements. We expect to incur additional ongoing expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources. Our future results of consolidated operations and financial position may not be comparable to historical results as a result of the Business Combination. COVID-19 Update and Other Events The COVID-19 pandemic continues to evolve rapidly and we intend to continue to monitor it closely. The evolution of the virus is unpredictable and any resurgence may slow down our ability to develop our quantum computing products and related services. The COVID-19 pandemic could limit the ability of suppliers and business partners to perform, including third-party suppliers’ ability to provide components, services and materials. We may also experience an increase in the cost of raw materials. Following the recent invasion of Ukraine by Russia, the U.S. and global financial markets experienced volatility, which has led to disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity globally. In response to the invasion, the United States, United Kingdom and European Union, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia and possible future punitive measures that may be implemented, as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity on acceptable terms, in both Europe and globally, and has introduced significant uncertainty into global markets. As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict. During the three and six months ended June 30, 2022, we experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic and the general disruptions resulting from the ongoing conflict between Ukraine and Russia and related sanctions, as well as increases in costs of component parts, labor and raw materials, which we largely attribute to rising inflation and high demand as a result of restricted supply. We expect these increased costs to remain high as the COVID-19 pandemic, the Ukraine-Russia conflict and their respective effects persist. As global economic conditions recover from the COVID-19 pandemic, the Ukraine-Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that these and related events could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic events, or any similar negative economic condition. In addition, there has been increasing volatility and uncertainty in the credit and financial markets which could limit our access to capital. Impacts of the COVID-19 pandemic, geopolitical and macroeconomic conditions, some of which we have already experienced, include those described throughout the “Risk Factors” included in this Quarterly Report on Form 10-Q/A , including the risk factor titled “We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, its various strains or future pandemics” and “Unfavorable conditions in our industry or the global economy, could limit our ability to grow our business and negatively affect our results of operations.” Change in Fiscal Year In October 2021, our board of directors approved a change to our fiscal year-end from January 31 to December 31, effective December 31, 2021. We believe the year-end change is important and useful to our financial statement users to allow for increased comparability with our industry peers. As a result of this change, our fiscal year now begins on January 1 and ends on December 31 of each year, starting on January 1, 2022. Year-over-year quarterly financial data has been and will continue to be recast to be comparative with the new fiscal quarter ends in the new fiscal year. Key Components of Results of Operations Revenue We generate revenue through our development contracts, as well as from our QCaaS offerings and other services including training and provision of quantum computing components. Development contracts are generally multi-year, non-recurring arrangements pursuant to which we provide professional services regarding collaborative research in practical applications of quantum computing to technology and business problems within the customer’s industry or organization and assists the customer in developing quantum algorithms and applications to assist the customer in areas of business interest. QCaaS revenue is recognized on a ratable basis over the contract term or on a usage basis, which generally ranges from three months to two years. Revenue related to development contracts and other services is recognized as the related milestones are completed or over time, as the work required to complete these milestones is completed. Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer. 38 Table of Contents Cost of Revenue Cost of revenue consists primarily of all direct and indirect cost associated with providing QCaaS offerings and development contracts and other services, including employee salaries and employee related costs, including compensation, bonuses, employee taxes and benefit costs of program management and personnel associated with the delivery of goods and services to customers and sub-contract costs for work performed by third parties. Cost of revenue also includes an allocation of facility costs, depreciation and amortization directly related to providing the QCaaS offerings and development contracts and other services. We expect cost of revenue to increase as we continue to expand on our operations, enhance our service offerings and expand our customer base. Operating Expenses Our operating expenses consist of sales and marketing, general and administrative and research and development expenses. Research and Development Research and development costs are expensed as incurred. Research and development expenses include compensation, employee benefits, stock- based compensation, outside consultant fees, allocation of facility costs, depreciation and amortization, materials and components purchased for research and development. We expect research and development expenses to increase as we invest in the enhancement of our product offerings. We do not currently capitalize any research and development expenditures. Sales and Marketing Sales and marketing expenses consist primarily of compensation including stock-based compensation, employee benefits of sales and marketing employees, outside consultants’ fees, travel and marketing and promotion costs. We expect selling and marketing expenses to increase as we continue to expand on our operations, enhance our service offerings, expand our customer base, and implement new marketing strategies. General and Administrative General and administrative expenses include compensation, employee benefits, stock-based compensation, legal, insurance, finance administration and human resources, an allocation of facility costs (including leases), bad debt costs, professional service fees, and an allocation of other general overhead costs including depreciation and amortization to support our operations, which consist of operations other than associated with providing QCaaS offerings and development contracts and other services. We expect our general and administrative expenses to increase as we continue to grow our business. We also expect to incur additional expenses as a result of operating as a public company. Provision for Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have recorded a full valuation allowance against our deferred tax assets. 39 Table of Contents Results of Operations Three and Six Months Ended June 30, 2022 compared to Three and Six Months Ended June 30, 2021 (as restated) The following tables set forth our results of operations for the periods indicated: Three Months Ended June 30, 2022 versus 2021 Six Months Ended June 30, 2022 versus 2021 2022 2021 $ Change % Change 2022 2021 $ Change % Change As Restated (1) As Restated (1) (In thousands) (In thousands) Revenue: $ 2,134 $ 1,540 $ 594 39 % $ 4,238 $ 3,900 $ 338 9 % Cost of revenue 873 365 508 139 % 1,287 637 650 102 % Total gross profit 1,261 1,175 86 7 % 2,951 3,263 (312 ) -10 % Operating expenses: Research and development 12,747 7,496 5,251 70 % 26,673 14,431 12,242 85 % Sales and marketing 1,487 644 843 131 % 2,963 957 2,006 210 % General and administrative 12,785 2,711 10,074 372 % 24,345 5,232 19,113 365 % Total operating expenses 27,019 10,851 16,168 149 % 53,981 20,620 33,361 162 % Loss from operations (25,758 ) (9,676 ) (16,082 ) 166 % (51,030 ) (17,357 ) (33,673 ) 194 % Other (expense) income, net: Interest expense (1,040 ) (405 ) (635 ) 157 % (2,244 ) (481 ) (1,763 ) 367 % Change in fair value of derivative warrant liabilities 7,980 — 7,980 nm 11,750 — 11,750 nm Change in fair value of earn-out liability 6,566 — 6,566 nm 12,557 — 12,557 nm Transaction cost — — — nm (927 ) — (927 ) nm Other income — 7 (7 ) -100 % — (23 ) 23 -100 % Total other income (expense), net 13,506 (398 ) 13,904 21,136 (504 ) 21,640 Net loss before provision for income taxes (12,252 ) (10,074 ) (2,178 ) (29,894 ) (17,861 ) (12,033 ) Provision for income taxes — — — — — — Net loss $ (12,252 ) $ (10,074 ) $ (2,178 ) $ (29,894 ) $ (17,861 ) $ (12,033 ) (1) For discussion on the restatement adjustments, see Note 1 – Description of Business - Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors Revenue Revenue increased $0.6 million, or 39%, to $2.1 million for the three months ended June 30, 2022, up from $1.5 million for the three months ended June 30, 2021. The period over period change is attributable to revenue from a new contract signed in late 2021 with a government agency of $0.4 million together with revenue from the start of the second phase of a large government agency project entered into in August 2021 of $0.7 million partially offset by a decrease in revenue of $0.5 million from a U.K. government agency project. Revenue increased $0.3 million, or 9%, to $4.2 million for the six months ended June 30, 2022, up from $3.9 million for the six months ended June 30, 2021. The period over period increase was primarily attributable to an increase in revenue of $1.7 million due to the start of a new contract and the second phase of a large government agency project along with the expansion in scope of other U.S. projects of $0.4 million, offset by a $0.5 million decrease in revenue related to a U.K. government agency project, and the completion of the first phase of a large government agency project of $1.3 million in the six months ended June 30, 2021. These development contracts are fixed price milestone or cost share-based contracts and the timing and amounts of revenue recognized in each quarter will therefore vary based on the delivery of the associated milestones and/ or the work performed. We expect to continue to generate the majority of our revenue from development contracts over at least the next several years and that revenue will be variable in timing and size as we work to ramp up our QCaaS business for the longer term. In addition, we are negotiating contracts with a government entity that is also an existing customer and the contracting process has taken longer than anticipated. Accordingly, there is a risk that some or all of the $4.0 million revenue we anticipate from these contracts would be deferred to later fiscal periods after the 2022 fiscal year if the contract negotiations are not completed, the contracts are not executed and we are unable to invoice for the full amount in 2022. Moreover, if negotiations result in contract terms that are less favorable than we anticipated, the total expected value of these contracts could decrease. Additionally, a portion of such anticipated revenue relates to work that has already been performed and costs that have already been incurred. We cannot assure the execution of these contracts in a timely manner or at all. If the contracts are not ultimately executed, it would likely be very difficult to realize the expected revenue from this government entity and we may be unable to recoup all or a portion of costs already incurred. Cost of Revenue Cost of revenue increased $0.5 million, or 139%, to $0.9 million for the three months ended June 30, 2022, as compared to $0.4 million for the three months ended June 30, 2021. The increase was mainly attributable to an increase in employee-related costs of $0.1 million and subcontract cost of $0.4 million associated with specific projects and collaborative development contract services work with government agencies. Cost of revenue increased $0.7 million, or 102%, to $1.3 million for the six months ended June 30, 2022, as compared to $0.6 million for the six months ended June 30, 2021. The increase was mainly attributable to an increase in employee-related costs of $0.3 million and subcontract cost of $0.4 million associated with specific projects and collaborative development contract services work with government agencies. 40 Table of Contents We expect these costs to increase as we expand headcount and increase third party subcontractor costs related to our collaborative development contract services work with government agencies. In addition, we have incurred and may continue to incur increased costs associated with equipment, system components and labor due to current global economic conditions, including inflation, labor shortages and supply conditions. Operating Expenses Research and Development Expenses Research and development expenses increased by $5.2 million, or 70%, to $12.7 million for the three months ended June 30, 2022, from $7.5 million for the three months ended June 30, 2021. The increase was primarily attributable to: • a $3.5 million increase in employee related costs in the three months ended June 30, 2022 due to an increase in headcount and related wage costs of $1.6 million, and a $1.9 million increase in stock compensation expense. • a $1.6 million increase associated with the continued and expanded investment in research and development efforts, including $1.2 million increase in software subscription and material costs, a $0.2 million increase in rent and utilities related to our Fremont fab facility, and a $0.2 million increase in associated depreciation from increased capital expenditures. • During the three months ended June 30, 2022, we recorded an accrual of $0.1 million representing estimated electrical utility fees for a portion of the electrical usage at our Berkeley facility. For further detail on these additional expenses, see Note 1 to our unaudited condensed consolidated financial statements for the three-months ended June 30, 2022 included elsewhere in this Quarterly Report on Form 10-Q/A. The actual amount of fees that we may be required to pay to our electricity provider and any related costs, expenses or penalties may be higher or more significant than the estimates described above. Research and development expenses increased by $12.2 million, or 85%, to $26.7 million for the six months ended June 30, 2022, from $14.4 million for the six months ended June 30, 2021. The increase was primarily attributable to: • a $7.1 million increase in employee related costs for the six months ended June 30, 2022 due to an increase in headcount and resulting wage costs of $3.1 million, a $2.4 million increase in stock compensation expense, and a one-time cumulative recognition of previously deferred stock compensation expense of $1.6 million related to the satisfaction of the liquidity condition with respect to outstanding stock units recognized as a result of the close of the Business Combination; and • a $3.6 million increase associated with the ongoing and expanded investment in research and development efforts, including a $3.0 million increase in software subscription and material costs, a $0.2 million increase in rent and utilities, and a $0.4 million increase in depreciation. • A one-time correction during the six months ended June 30, 2022 representing estimated electrical utility fees for a portion of the electrical usage at our Berkeley facility from February 2019 to December 31, 2021, which was an out-of-period adjustment. We have cumulatively recorded an accrual of $1.5 million for the three months ended March 31, 2022, and an additional $0.1 million accrual for the three months ended June 30, 2022. For further detail on these additional expenses, see Note 1 to our unaudited condensed consolidated financial statements for the three and six -months ended June 30, 2022 included elsewhere in this Quarterly Report on Form 10-Q/A. The actual amount of fees that we may be required to pay to our electricity provider and any related costs, expenses or penalties may be higher or more significant than the estimates described above. We expect research and development expenses to increase as we continue to invest in the enhancement of our product offerings, including with respect to cost of building QPU fridges, quantum chip fabrication costs, expansion of facilities and general salaries and wages. In addition, we have incurred and expect to continue to incur increased research and development expenses due to increasing costs of labor, including expenses associated with stock compensation in order to attract and retain qualified personnel; equipment and component costs impacted by the current macroeconomic environment including supply chain constraints; and labor shortages. Sales and Marketing Expenses Sales and marketing increased by $0.8 million, or 131%, to $1.5 million for the three months ended June 30, 2022, from $0.6 million for the three months ended June 30, 2021. The increase was primarily driven by a $0.2 million increase in employee related costs, $0.2 million increase in stock compensation, and $0.4 million increase in consultant and other spending on sales and development activities for the purpose of customer growth and acquisition. 41 Table of Contents Sales and marketing increased $2.0 million, or 210%, to $3.0 million for the six months ended June 30, 2022, from $1.0 million for the six months ended June 30, 2021. The increase was primarily driven by a $0.9 million increase in employee related costs, a $0.7 million increase in stock compensation of which $0.4 million was related to the satisfaction of the liquidity condition with respect to outstanding stock units recognized as a result of the close of the Business Combination, and a $0.4 million increase in consultant and other spending on sales and development activities for the purpose of customer growth and acquisition. We expect selling and marketing expenses to increase as we seek to expand and enhance our service offering as well as expand our operations and customer base globally. In addition, we anticipate implementing new marketing strategies with respect to customer acquisition efforts and product marketing campaigns as our technology and product offerings expand. General and Administrative Expenses General and administrative expenses increased by $10.1 million, or 372%, to $12.8 million for the three months ended June 30, 2022, from $2.7 million for the three months ended June 30, 2021. The increase was attributable to: • a $8.4 million increase in stock compensation expense; • a $1.8 million increase in legal and accounting costs related to enhanced public reporting requirements, investor relation costs and other software acquisition costs; • a $1.1 million increase in employee related cost as a result of operating as a public Company, including higher executive salaries and increased headcount-related wage costs to build and upgrade the resources to operate as a public company and to build out our information security team; and • a $0.9 million increase in other costs including directors and officers insurance and other office expenses attributable to return to office work. These costs were partially offset by the gain in change in fair value of our Forward Warrant Agreement of $2.1 million which was entered into with Ampere as part of our strategic collaboration agreement. General and administrative expenses increased by $19.1 million, or 365%, to $24.3 million for the six months ended June 30, 2022, from $5.2 million for the six months ended June 30, 2021. The increase was attributable to: • a $9.9 million increase in stock compensation expense; • a one-time cumulative recognition of previously deferred stock compensation expense of $6.9 million related to the satisfaction of the liquidity condition with respect to outstanding stock units recognized as a result of the close of the Business Combination; • a $2.6 million increase in legal and accounting costs related to enhanced public reporting requirements, investor relation costs and other software acquisition costs; • one-time transaction bonuses awarded to employees in recognition of the closing of the Business Combination and associated taxes of $2.1 million; • a $1.7 million increase in employee related cost as a result of operating as a public company, including higher executive salaries and increased headcount-related wage costs to build and upgrade the resources to operate as a public company and to build out our information security team; and • a $1.0 million increase in other costs including directors and officers insurance and other office expenses attributable to return to office work. 42 Table of Contents These costs were partially offset by the gain in change in fair value of our forward contract agreement of $5.1 million which was entered into with Ampere as part of our strategic collaboration agreement. We expect general and administrative expenses to increase as we operate as a public company. Other Income (Expense), net Interest Expense Interest expense, net of interest income, was $1.0 million and $0.4 million for the three months ended June 30, 2022 and 2021, respectively. Interest expense was $2.2 million and $0.5 million for the six months ended June 30, 2022 and 2021, respectively. The increase in expense was a result of the Loan Agreement we entered into with Trinity Capital Inc. (“Trinity”) in March 2021 (as amended from time to time, the “Loan Agreement”). The period over period increase was primarily because for the three months and six months ended June 30, 2022, interest expense was based on the overall borrowings under the Loan Agreement of $32.0 million for a three-month and six-month interest period, while for the same period in 2021, interest expense was based on borrowings under the Loan Agreement within a range of $12.0 to $19.0 million for a shorter interest period of only three months and 10 days. Change in Fair Value of Warrant Liabilities A discussion of change in fair value of warranty liabilities is included in Note 9 to our unaudited condensed consolidated financial statements for the three- and six- month periods ended June 30, 2022 elsewhere in this Quarterly Report on Form 10-Q/A. Change in Fair Value of Earn-out Liability A discussion of change in fair value of earn-out liability is included in Note 2, Sponsor Earn-out Liability, to our unaudited condensed consolidated financial statements for the three- and six-month periods ended June 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q/A. Transaction Costs Transaction costs arose from the Business Combination allocated to liability-classified instruments that are subsequently measured at fair value through earnings must be expensed as incurred. We incurred a total transaction cost of $0.9 million allocated to liability-classified instruments for the six-month period ended June 30, 2022. We did not incur any transaction costs for the comparable six months ended June 30, 2021. We did not incur any transaction costs as part of the results of operations for the three months ended June 30, 2022 and June 30, 2021. Liquidity and Capital Resources We have incurred net losses since inception, and experienced negative cash flows from operations. Prior to the Business Combination, we financed our operations primarily through the issuance of preferred stock, warrants, convertible notes, venture backed debt and revenue. During the six months ended June 30, 2022, we incurred a net loss of $12.3 million. As of June 30, 2022, we had an accumulated deficit of $237.0 million, and we expect to incur additional losses and higher operating expenses for the foreseeable future in line with our long-term business and investment strategy. In connection with the closing of the Business Combination on March 2, 2022, we received a total of $225.6 million from the Business Combination and PIPE Investment, net against transaction costs incurred by us. We believe that our existing cash and cash equivalents, including net proceeds from the Business Combination, should be sufficient to meet our anticipated operating cash needs for at least the next 12 months based on our current business plan and expectations and assumptions considering current macroeconomic conditions. We have based these estimates on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect, and future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q/A. Our short-term cash requirements include capital expenditures for materials and components for research and development and quantum computing fridges; working capital requirements; and strategic collaborative arrangements and investments. Our long-term requirements include expenditures for the planned expansion of our quantum chip fabrication facility; planned development of multiple generations of quantum processors; and anticipated additional investments to scale our QCaaS offering. 43 Table of Contents We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations. Until such time as we can generate significant revenue from sales of our development contracts and other services, including our QCaaS offering, we expect to finance our cash needs primarily through our Loan Agreement with Trinity, our arrangements with Ampere, our committed equity financing with B. Riley and other equity or debt financings or other capital sources, including development contract revenue with government agencies and strategic partnerships. To the extent that we raise additional capital through the sale of equity or convertible debt securities, including through the use of our committed equity financing with B. Riley, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our quantum computing development efforts. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q/A. In addition, actual sales, if any, of shares of our Common Stock to B. Riley pursuant to the committed equity financing will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our common stock and determinations by us as to appropriate sources of funding for our business and operations. We cannot guarantee the extent to which we may utilize the committed equity financing. Loan and Security Agreement On March 10, 2021, we entered into the Loan Agreement with Trinity for term loans with a principal amount of $12.0 million, bearing an interest rate of the greater of 7.5% plus the prime rate published by the Wall Street Journal or 11.0%. In addition, we are required to pay a final payment fee equal to 2.75% of the aggregate amount of all term loan advances. The term loans under the Loan Agreement are secured by all of our assets. The Loan Agreement contains customary representations, warranties and covenants, but does not include any financial covenants. The negative covenants include restrictions on the ability to incur indebtedness, pay dividends, execute fundamental change transactions, and other specified actions. In connection with entry into the Loan Agreement, we issued a warrant to purchase our shares of common stock to Trinity. The Guarantor of the loan is Rigetti Holdings, Inc. and the loan is secured by substantially all of our assets. On May 18, 2021, we entered into a first amendment to the Loan Agreement, which modified certain financial covenants, including an additional good faith deposit of $20,000 and adding a tranche B to the Loan Agreement in an aggregate amount of $15.0 million, consisting of two advances of $8.0 million and $7.0 million each. In connection with such amendment, the maturity date was modified to be the date equal to 48 months from the first payment date of each specific cash advance. In connection with such amendment, we cancelled the initial warrants and issued a warrant to purchase 995,099 shares of our common stock. On October 21, 2021, we entered into a second amendment to the Loan Agreement, which modified the date requiring us to deliver evidence of completion of the PIPE transaction and execution of a definitive merger agreement with a special purpose acquisition company to October 31, 2021. Pursuant to the second amendment, the maturity date was modified to be the date equal to 48 months from the first payment date of each specific cash advance. Subject to an interest only period of 18 months following each specific cash advance date, the term loan incurs interest at the greater of a variable interest rate based on prime rate or 11% per annum, payable monthly. Interest-only payments are due monthly immediately following an advance for a period of 18 months and, beginning on the 19th month, principal and interest payments are due monthly. In January 2022, we entered into the third amendment to the Loan Agreement to increase the debt commitment by $5.0 million to $32.0 million. The amendment allows us to draw an additional $5.0 million immediately with an additional $8.0 million to be drawn at the sole discretion of the lender. We drew the additional $5.0 million upon signing the amendment. Other modifications per the amendment included an extension of the requirement to raise an additional $75 million of equity and a defined exit fee for the additional $5.0 million to be at 20% of the advanced funds under the amendment. In conjunction with the amendment, we also guaranteed payment of all monetary amounts owed and performance of all covenants, obligations and liabilities. As of June 30, 2022, the total principal amount outstanding under the Loan Agreement was approximately $32.0 million. We use borrowings under the Loan Agreement for working capital purposes. 44 Table of Contents The Loan Agreement is secured by a first-priority security interest in substantially all of our assets. As of the date of this Quarterly Report on Form 10-Q/A , we are in compliance with all covenants under the Loan Agreement. Our cash commitments as of June 30, 2022 were primarily as follows (in thousands): Total Short-Term Long-Term (in thousands) Financing obligations $ 29,427 $ 4,226 $ 25,201 Operating lease obligations 10,163 1,502 8,661 Total $ 39,590 $ 5,728 $ 33,862 Financing obligations consist of principal and interest expense related to the Loan and Security Agreement. Operating lease obligations consist of obligations under non-cancelable operating leases for our offices and facilities. The cash requirements in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty. Summary of Historical Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Six Months Ended Six Months Ended June 30, June 30, 2022 2021 (in thousands) Net cash used in operating activities $ (35,085 ) $ (14,098 ) Net cash used in investing activities (10,636 ) (3,744 ) Net cash provided by financing activities 217,766 20,117 Cash Flows Used in Operating Activities Our cash flows from operating activities are significantly affected by our ability to achieve significant growth to offset expenditures related to research and development, sales and marketing, and general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities increased by $21.0 million, or 149%, when comparing the six months ended June 30, 2022 to the same period in 2021. The increase in spending was primarily due to: • an increase in headcount and payroll related costs of $8.2 million as a result of investments in research and development efforts combined with upgrading internal and external resources to operate as a public company including a one-time bonus related to the business combination of $2.1 million 45 Table of Contents • a $5.6 million increase in legal and accounting costs related to enhanced public reporting requirements, investor relation costs, and other software acquisition costs • a prepayment of insurance premium for directors and officers of $3.0 million. • a $1.7 million in additional interest costs related to increased borrowing amounts associated with the Loan Agreement • a total transaction costs of $1.0 million incurred in connection with the closing of the Business Combination • a $1.5 million in working capital changes. Net cash used in operating activities during the six months ended June 30, 2022 was $35.1 million, resulting primarily from a net loss of $29.9 million, adjusted for non-cash charges of $3.0 million in depreciation, $22.5 million in stock-based compensation, $2.0 million loss from the change in fair value of derivative warrant liabilities related to the Loan Agreement, $3.1 million gain from the change in fair value of Private Warrants (as defined below), $10.7 million gain from the change in fair value of Public Warrants (as defined below), $5.1 million gain from change in fair value of the forward warrant agreement with Ampere, $12.6 million gain from change in fair value for contingent earn-out liabilities, and $0.7 million in amortization of debt financing costs. These non-cash charges were partially offset by adjustments for changes in operating assets and liabilities seen during the period. Changes in operating assets and liabilities accounted for $2.0 million of cash used in operations. The changes primarily consisted of an increase in accounts receivable of $1.0 million; an increase in prepaid and current assets of $2.9 million; a decrease in accounts payable of $0.9 million; offset by an increase in accrued expenses and other current liabilities of $2.7 million, and an increase in deferred revenue of $0.1 million. Net cash used in operating activities during the six months ended June 30, 2021 was $14.1 million, resulting primarily from a net loss of $17.9 million, adjusted for non-cash charges of $2.4 million in depreciation and $1.1 million in stock-based compensation. Changes in operating assets and liabilities was $0.3 million of cash provided by operations, which primarily consisted of an increase in accounts receivable of $0.3 million; an increase in prepaid and current assets of $0.5 million; a decrease in deferred revenue of $0.1 million; offset by an increase in accounts payable, accrued expenses and other liabilities of $1.2 million. We expect to incur increased electrical utility expenses in the future. We also expect to incur costs related to additional legal and consulting fees related to the restatement of our first and second quarter 2022 financial statements. Cash Flows Used in Investing Activities Net cash used in investing activities during the six months ended June 30, 2022 was $10.6 million, resulting solely from the addition of $10.6 million to property and equipment. Investments made into property and equipment during this period relate primarily to process computing equipment, quantum computing fridges, and development tools for our chip fabrication facility. Net cash used in investing activities during the six months ended June 30, 2022, increased by $6.9 million compared to the six months ended June 30, 2021, largely as a result of increased investment in research and development infrastructure. Net cash used in investing activities during the six months ended June 30, 2021 was $3.7 million, representing additions of $3.7 million to property and equipment. We expect to make additional investments with respect to electricity upgrades. Thus, we foresee an increase in cash used for capital expenditures in the future. Cash Flows provided by Financing Activities Net cash provided by financing activities during the six months ended June 30, 2022 was $217.8 million, reflecting $225.6 million from the Business Combination and PIPE Investment net against SNII transaction costs, offset by transaction costs paid directly by Rigetti of $17.4 million; the additional proceeds from the issuance of debt and warrants of $5.0 million associated with the Loan Agreement, less cash payment on debt issuance cost of $0.09 million and exit fees of $1.0 million; and proceeds from issuance of common stock upon exercise of stock options and warrants of $5.7 million. 46 Table of Contents For the six months ended June 30, 2021, net cash provided by financing activities was $20.1 million, mainly reflecting proceeds from the issuance of debt for a total amount of $20.0 million and proceeds from issuance of common stock upon exercise of stock options and warrants for a total $0.1 million. Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A, which have been prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on its historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. While our significant accounting policies are described in the Notes to our unaudited condensed consolidated financial statements for the three and six month period ended June 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q/A, we believe the following critical accounting policies are most important to understanding and evaluating our reported financial results. Public and Private Warrants Prior to the Business Combination, Supernova issued 4,450,000 Private Warrants (“Private Warrants”) and 8,625,000 public warrants (“Public Warrants” and collectively, “Warrants”). Each whole warrant entitles the holder to purchase one share of our common stock at a price of $11.50 per share, subject to adjustments and will expire five years after the Merger or earlier upon redemption or liquidation. The Private Warrants do not meet the derivative scope exception and are accounted for as derivative liabilities. Specifically, the Private Warrants contain provisions that cause the settlement amounts dependent upon the characteristics of the holder of the warrant which is not an input into the pricing of a fixed-for-fixed option on equity shares. Therefore, the Private Warrants are not considered indexed to our stock and should be classified as a liability. Since the Private Warrants meet the definition of a derivative, we recorded the Private Warrants as liabilities on the condensed consolidated balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in the fair value recognized in the condensed consolidated statements of operations at each reporting date. The fair value of the Private Warrants was measured using the Black-Scholes option- pricing model at each measurement date. The Public Warrants also fail to meet the indexation guidance in ASC 815 and are accounted for as liabilities as the Public Warrants include a provision whereby in a scenario on which there is not an effective registration statement, the warrant holders have a cap, 0.361 common stock per warrant (subject to adjustment), on the issuable number of shares in a cashless exercise. Subsequent to the separate listing and trading of the Public Warrants, the fair value of the Public Warrants has been measured based on the observable listed prices for such warrants and the fair value of the Private Warrants are measured using a Monte Carlo Pricing Model. On the consummation of the Business Combination, we recorded a liability related to the Private Warrants of $9.6 million, with an offsetting entry to additional paid-in capital. On June 30, 2022, the fair value of the Private Warrants decreased to $6.5 million, with the gain on the change in fair value of derivative warrant liabilities recorded in the condensed consolidated statement of operations for the six months ended June 30, 2022. Similarly, on the consummation of the Business Combination, we recorded a liability related to the Public Warrants of $16.3 million, with an offsetting entry to additional paid-in capital. On June 30, 2022, the fair value of the Public Warrants decreased to $5.6 million with the gain on the change in fair value of derivative warrant liabilities recorded in the condensed consolidated statement of operations for the six months ended June 30, 2022. 47 Table of Contents Other Derivative Warrant Liabilities We currently do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815, “Derivatives and Hedging” (“ASC 815”) at the initial recognition. Other than the Public and Private Warrants noted above, we also issued a total of 783,129 common stock warrants in conjunction with the Loan Agreement in 2021. Such derivative warrant liabilities are classified as non-current as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. We utilized Black-Scholes model to determine grant fair value of the warrants which was approximately $2.7 million which was recorded as part of Debt Issuance Cost. The change in fair value of the warrants from the issuance date through June 2, 2022 of $3.7 million was driven primarily by an increase in the fair value of our stock that occurred as a result of the Business Combination. The warrant liability balance was $6.4 million as of June 2, 2022, at which time all outstanding Trinity Warrants of 783,129 were exercised into shares of our Common Stock. The fair value of the warrant liability of $6.4 million was reclassified to equity upon such exercise. We recorded a total loss of $1.5 million and $2.0 million to Change in Fair Value of Warrant Liability as a component of other income in the condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively, after the correction of the error as described in Note 1– Description of Business – Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors to the unaudited condensed consolidated financial statements. Earn-Out Liability At Business Combination Closing, the Sponsor subjected certain shares (“Sponsor Vesting Shares”) of Common Stock held by the Sponsor Holders to forfeiture and vesting as of the Closing if thresholds related to the weighted average price of Common Stock are not met for the duration of various specified consecutive day trading periods during the five-year period following the Closing (the “Earn-out Triggering Events”). Any such shares held by the Sponsor Holders that remain unvested after the fifth anniversary of the Closing will be forfeited. The Sponsor Vesting Shares issued in related to the Business Combination are accounted for as liability classified instruments because the Earn-out Triggering Events that determine the number of Sponsor Vesting Shares to be earned back by the Sponsor include outcomes that are not solely indexed to our common stock. The aggregate fair value of the Sponsor Vesting Shares on the Business Combination Closing was estimated using a Monte Carlo simulation model and was determined to be $20.4 million at Closing. As of June 30, 2022, the Earn-out Triggering Events were not achieved for any of the tranches and as such we adjusted the carrying amount of the liability to its estimated fair value of $7.9 million. The change in the fair value of $6.6 million and $12.6 million for the three and six months ended June 30, 2022 is included in change in fair value of Vesting Shares liability in the condensed consolidated statements of operations. Forward Warrant Agreement In connection with the execution of the Merger Agreement in October 2021, we entered into the Forward Warrant Agreement with Ampere for the purchase of a warrant for an aggregate purchase price (including amounts from exercise) of $10.0 million. The Forward Warrant Agreement provides for the issuance of a warrant for the purchase of an aggregate of 1,000,000 shares of Common Stock at an exercise price of $0.0001. The purchase of the warrant was conditioned upon, among other things, the consummation of the Business Combination and the entry into a collaboration agreement between Ampere and us. The collaboration agreement was entered into in January 2022. Ampere was required to pay $5.0 million to us no later than the later of (i) the Closing and (ii) June 30, 2022. On June 30, 2022, pursuant to the Warrant Subscription Agreement, we issued the warrant to Ampere upon receipt of an aggregate of $5.0 million (including the exercise price), and upon such payment and issuance, 500,000 shares of our common stock vested under the warrant and were immediately exercised by Ampere pursuant to the terms of the warrant. Ampere is required to pay an additional $5.0 million to us no later than the closing date of the listing of Ampere’s capital stock, provided that if the listing has not occurred by the second anniversary of the Warrant Subscription Agreement, Ampere is not obligated to make the additional payment and we are not obligated to issue the warrants. The Forward Warrant Agreement further provides that we will use commercially reasonable efforts to file a registration statement to register the resale of the shares issued or issuable pursuant to the warrant and upon such payment the warrant will vest and be exercisable by Ampere with respect to 500,000 shares of Common Stock pursuant to the terms of the warrant. We evaluated the Forward Warrant Agreement as a derivative in conjunction with the guidance of ASC 480, “Distinguishing Liabilities from Equity”. We calculated fair value of the Forward Warrant Agreement by using the Forward Contract Pricing methodology at inception and at the end of June 30, 2022. The fair value of the Forward Warrant Agreement was estimated based on the following key inputs and assumptions 1) Assumed holding period 2) Related risk-free rate and 3) Likelihood of the outcome of the various contingencies outlined below. Based on these inputs and assumption, we calculated the fair value of the forward contract to be a $0.2 million derivative liability and a $1.5 million derivative asset at December 31, 2021 and June 30, 2022, respectively. We have included the derivative liability in other liabilities (current) and derivative asset separately as a forward contract asset on the balance sheet line in the accompanying consolidated balance sheets as of December 31, 2021 and June 30, 2022, respectively. The change in fair value is recorded as part of the general and administrative operating activities in our unaudited condensed consolidated financial statements of operations contained elsewhere in this Quarterly Report on Form 10-Q/A. Revenue Recognition Revenue consists primarily of our contracts that provide access to Rigetti quantum computing systems, collaborative research services, professional services, and the sale of custom quantum computing components. Access to Rigetti quantum computing systems can be purchased as a quantum computing subscription, or on a usage basis for a specified quantity of hours. Revenue related to subscription-based access to Rigetti quantum computing systems (i.e., quantum computing subscriptions) is recognized on a ratable basis over the subscription term, which can range from three months to two years. Revenue related to usage-based access to Rigetti quantum computing systems is recognized over time as the systems are accessed using an output method based on compute credit hours expended. Revenue related to collaborative research services and professional services is recognized over time as the services are provided using an input measure based on actual labor hours incurred to date relative to total estimated labor hours needed to complete the program or total contracted hours over the program period. Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer. 48 Table of Contents Our fixed fee development contracts vary in term from one to five years, with the majority of such contracts having a term of 18 months to two years. When establishing the pricing for our fixed fee arrangements, we determine the pricing based on estimated costs to complete and expected margins taking into account the scope of work outlined within the contract being evaluated and our historical experience with similar services and contracts. Actual costs incurred over the period in which these contracts are fulfilled could vary from these estimates and therefore, these estimates are subject to uncertainty. On a quarterly basis, management reviews the progress with respect to each contract and its related milestones and evaluates whether any changes in estimates exists. As a result of the quarterly reviews, revisions in the estimated effort to complete the contract are reflected in the period in which the change is identified. These revisions may impact the overall progress related to transfer of control and therefore, result in either increases or decreases in revenues as well as increase or decreases in fulfillment costs and contract margins. In accordance, with ASC No. 250, Accounting Changes and Error Corrections, any changes in estimates are reflected in our consolidated statements of operations in the period in which the circumstances that give rise to the revision become known to the management. To date, we have not experienced any changes in estimates that have had a material impact on our results from operations or financial position. When our contracts with customers contain multiple performance obligations, the transaction price is allocated on a relative standalone selling price basis to each performance obligation. We typically determine standalone selling price based on observable selling prices of our products and services. In instances where standalone selling price is not directly observable, standalone selling price is determined using information that may include market conditions and other observable inputs. Standalone selling price is typically established as a range. In situations in which the stated contract price for a performance obligation is outside of the applicable standalone selling price range and has a different pattern of transfer to the customer than the other performance obligations in the contract, we will reallocate the total transaction price to each performance obligation based on the relative standalone selling price of each. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer. Revenue is recorded based on the transaction price, which includes fixed consideration and estimates of variable consideration. The amount of variable consideration included in the transaction price is constrained and is included only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Our contracts with customers may include renewal or other options at fixed prices. Determining whether such options are considered distinct performance obligations that provide the customer with a material right and therefore should be accounted for separately requires significant judgment. Judgment is required to determine the standalone selling price for each renewal option to determine whether the renewal pricing is reflective of standalone selling price or is reflective of a discount that would provide the customer with a material right. Based on our assessment of standalone selling prices, we determined that there were no significant material rights provided to our customers requiring separate recognition. Stock-Based Compensation Our share-based compensation awards are all equity-classified and consist of stock options and restricted stock units (“RSU”). Stock options have service vesting conditions ranging from 1 to 5 years. RSUs granted pursuant to our prior equity incentive plan adopted in 2013 have a 4-year service vesting condition and a performance condition linked to the occurrence of a liquidity event defined as a change-in-control event, successful initial public offering or successful merger with a special purpose acquisition company, which was satisfied by the Closing. RSUs outstanding under the 2022 Plan have a service vesting condition only. Compensation expenses are based on the grant-date fair value of the awards and recognized over the requisite service period using a straight-line method for stock options and RSUs granted under 2022 Plan. Compensation expense for RSUs granted under the 2013 Plan are recognized using a graded vesting method. We have elected to account for forfeitures of employee stock awards as they occur. 49 Table of Contents Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 of our unaudited condensed consolidated financial statements for the six months ended June 30, 2022 included elsewhere in this Quarterly Report on Form 10-Q/A. Emerging Growth Company and Smaller Reporting Company Status In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Following the Business Combination, we still qualify as an emerging growth company and plans to take advantage of the benefits of the extended transition period emerging growth company status permits. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used. We will remain an emerging growth company under the JOBS Act until the earliest of (a) the last day of our first fiscal year following the fifth anniversary of the completion of SNII’s initial public offering, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years. We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. Item 3. Quantitative and Qualitative Disclosures About Market Risks We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.