Rigetti Computing, Inc. 10-Q/A

Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of June 30, 2022. Based on the evaluation of our disclosure controls and procedures, our management concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to the material weakness described below. This material weakness in our internal control over financial reporting relates to the lack of effective review controls over the accounting for complex financial instruments as described further below. We are adding additional controls over the review of complex financial instrument valuations as well as technical accounting resources, which are still being designed and implemented. The material weakness will not be considered remediated until such time as management designs and implements effective controls that operate for a sufficient period of time and has concluded, through testing, that these controls are effective. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. After giving full consideration to this material weakness and the additional procedures that we performed, management has concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q/A fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP ; however, it resulted in errors in the financial statements and related disclosures in the Original Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022, which we have restated as described in Note 1 to the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A, in addition to errors in the financial statements and related disclosures for the quarter ended June 30, 2022 also described in Note 1 to the notes to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A. Material Weakness As previously disclosed, in connection with our unaudited condensed consolidated financial statements for the nine months ended October 31, 2021, we identified a material weakness in our internal control over financial reporting related to the lack of effective review controls over the accounting for complex financial instruments. Specifically, the controls failed to identify an error in the accounting for complex warrant instruments. The error related to the Company not properly accounting for the liability associated with the warrants to purchase Common Stock issued to Trinity Capital Inc. that was subsequently cancelled and reissued for a new warrant in connection with an amendment to the Loan Agreement. While evaluations in connection with the Original Form 10-Q did not identify that the material weakness was unremediated, the evaluation of disclosure controls and procedures in connection with the preparation of our financial statements for the second quarter of 2022 identified that the previously reported material weakness remained unremediated and, we identified and corrected an immaterial error related to the revaluation of the liability associated with the same warrants issued to Trinity Capital as previously disclosed in our Quarterly Report on Form 10-Q for such period. 50 Table of Contents In addition, in connection with the preparation of the financial statements for the third quarter of 2022, we discovered that the previously identified material weakness led to additional material errors related to the valuation of the Earn-out liability and the Private Warrant liability that affected the previously issued unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022 and June 30, 2022. These errors were corrected in the restated unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022, included in a separate amendment to the Quarterly Report on Form 10-Q for such period, and June 30, 2022, included elsewhere in this Quarterly Report on Form 10-Q/A for such period. See Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q/A for further detail on the impact to the previously filed financial statements. Our management previously concluded that this material weakness in our internal control over financial reporting was due to the fact that at the time we initially identified the material weakness, we did not have sufficient accounting resources and did not have the necessary business processes and related internal controls formally designed and implemented to address the accounting and financial reporting requirements related to these complex instruments. Our design and implementation of controls to evaluate and monitor the accounting for these complex financial instrument liabilities were still not adequate as of June 30, 2022 due to the reasons described above. Remediation Plan Our remediation plan related to this material weakness includes: • incorporating additional controls and procedures over the review of complex financial instrument valuations as well as technical accounting resources to identify the inventory of complex accounting and financial instruments that require accounting analysis and evaluation; • enhancing the precision of review controls over complex financial instruments; and • augmenting the review process relating to the valuation analyses performed by the third-party valuation experts and accounting firms that are utilized by the Company. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. As management continues to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address the material weakness. The material weakness will not be considered remediated unless and until such time as management designs and implements effective controls that operate for a sufficient period of time and concludes, through testing, that these controls are effective. Until the controls have been operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively, the material weakness described above will continue to exist. Management will monitor the progress of the remediation plan and report regularly to the audit committee of the board of directors on the progress and results of the remediation plan, including the identification, status and resolution of internal control deficiencies. We can provide no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weakness or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. Changes in Internal Control over Financial Reporting Other than the material weakness and remediation efforts described above, there have been no other changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 51 Table of Contents PART II — OTHER INFORMATION