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Item 7. Management’s Discussion and Analysis

2023-03-27 compared with 2022-02-23 · 522 added, 112 removed, 5 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes related thereto which are included in “Item 8.

Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A.

Risk Factors” and elsewhere in this Annual Report on Form 10- K.

We are a blank check company incorporated as a Cayman Islands exempted company on December 22, 2020.

We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.

Our sponsor is Supernova Partners II LLC, a Cayman Islands exempted company.

The registration statement for our Initial Public Offering was declared effective on March 1, 2021.

On March 4, 2021, we consummated our Initial Public Offering of 34,500,000 units, which includes 4,500,000 additional Units to cover over-allotments, at $10.00 per Unit, generating gross proceeds of $345.0 million, and incurring offering costs of approximately $19.5 million, of which approximately $12.1 million was for deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement of 4,450,000 warrants, at a price of $2.00 per private placement warrant with the Sponsor, generating gross proceeds of $8.9 million.

Upon the closing of the Initial Public Offering and the private placement, $345.0 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the private placement were placed in a trust account, located in the United States at J.P.

Morgan Chase Bank, N.A., with American Stock Transfer & Trust Company acting as trustee, and invested only in U.S.

government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of:

(i) the completion of a business combination or (ii) the distribution of the Trust Account as described below.

Our management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of private placement warrants , although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination .

There is no assurance that the Company will be able to complete a business combination successfully.

We must complete one or mor e initial business combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the amount of any deferred underwriting discount held in trust) at the time of the signing of the agreement to enter into the initial business combination .

However, we will only complete a business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

If we are unable to complete a business combination within 24 months from the closing of the Initial Public Offering, or March 4, 2023, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account (less taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidation distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the board of directors, liquidate and dissolve, subject, in the case of clauses (ii) and (iii), to our obligations under Cayman Islands law to provide for claims of creditors and in all cases subject to the other requirements of applicable law.

There will be no redemption rights or liquidating distributions with respect to the warrants, which will expire worthless if we fail to complete its initial business combination within the Completion Window.

Recent Developments

As more fully described in “Item 1.

Business,” on October 6, 2021, the Company entered into a Merger Agreement with First Merger Sub, Second Merger Sub and Rigetti, as amended by Amendment No.

1 to Agreement and Plan of Merger dated as of December 23, 2021 and Amendment No.

2 to the Agreement and Plan of Merger dated as of January 10, 2022 (and as may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), relating to a proposed business combination transaction between the Company and Rigetti.

In connection with the Merger Agreement, we entered into subscription agreements with the PIPE Investors pursuant to which the PIPE Investors have committed to purchase in a private placement 10,251,000 shares of Supernova common stock (the “PIPE Shares”) at a purchase price of $10.00 per share and an aggregate purchase price of $102.51 million.

The purchase of the PIPE Shares is conditioned upon, among other things, the consummation of the transactions and will be consummated concurrently with the closing.

On December 23, 2021, Supernova entered into Subscription Agreements with two “accredited investors” (as such term is defined in Rule 501 of Regulation D) pursuant to which the Subsequent PIPE Investors have agreed to subscribe for and purchase, and Supernova has agreed to issue and sell to the Subsequent PIPE Investors, an aggregate of 4,390,244 shares of Stock at a price of $10.25 per share, for aggregate gross proceeds of $45,000,000 (the “Subsequent PIPE Financing,” and together with the Initial PIPE Financing, the “PIPE Financing”).

The shares of Class A common stock to be issued pursuant to the PIPE Subscription Agreements have not been registered under the Securities Act and will be issued in reliance on the availability of an exemption from such registration.

The Sponsor has purchased PIPE Shares in the PIPE Financing on the same terms as the initial PIPE Investors.

In addition, in connection with the execution of the Merger Agreement, Supernova entered into a sponsor support agreement with the Sponsor, Rigetti, and Supernova’s directors and officers.

The consummation of the Transactions is subject to customary closing conditions, including, among others:

(i) approval by Supernova’s and Rigetti’s respective stockholders, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the obtaining of any consents required under antitrust laws in the jurisdictions specified on a schedule, (iii) no law or order enjoining or prohibiting the consummation of the Transactions being in force, (iv) Supernova having at least $5,000,001 of net tangible assets as of the Closing, (v) receipt of approval for listing on the Nasdaq of the shares of Supernova common stock to be issued in connection with the Transactions, (vi) completion of the Domestication, (vii) the effectiveness of the registration statement on Form S-4, (viii) the accuracy of the parties’ respective representations and warranties

(subject to specified materiality thresholds) and the material performance of the parties’ respective covenants and other obligations, (ix) no material adverse effect on Rigetti having occurred since signing that is continuing at Closing and (x) solely as relates to Rigetti’s obligation to consummate the Transaction, Supernova having at least $165,000,000 of available cash at the Closing.

For full details and the filed agreements, refer to the Current Report on Form 8-K announcing the Merger Agreement filed w ith the SEC on October 6, 2021, the Current Report on Form 8-K announcing the first amendment to the Merger Agreement filed w ith the SEC on December 23, 2021 and the Current Report on Form 8-K announcing the second amendment to the Merger Agreement filed w ith the SEC on January 10, 2022.

Management has evaluated subsequent events and transactions that occurred through the date the consolidated financial statements were issued.

Other than disclosed above, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

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 Annual Report on Form 10-K 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.

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 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.

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 are derived from development contracts, and we anticipate this market opportunity will exist for 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 $71.5 million and $38.2 million for the year ended December 31, 2022, and 11 months ended December 31, 2021, respectively.

We expect to continue to incur additional losses for the foreseeable future as we invest in research development and infrastructure in line with our long-term business strategy.

As of December 31, 2022, we had an accumulated deficit of $278.7 million.

Based on our estimates and current business plan, we expect that we will need to obtain additional capital by late 2024 or early 2025 in order to continue our research and development efforts and achieve our business objectives.

There is no assurance that additional financing will be available.

If we are unable to raise additional funding when needed, we may be required to delay, limit or substantially reduce our quantum computing development efforts.

In February 2023, we announced an updated business strategy, including revisions to our technology roadmap.

In connection with this updated strategy, we have implemented a workforce reduction in order to focus the organization and our resources on nearer-term strategic priorities.

In March 2023, we further refined our business strategy after internally deploying Ankaa-1, our 84-qubit system delivering denser qubit spacing and tunable couplers, within our company for testing.

We plan to concentrate on refining the performance of Ankaa-1.

Upon the anticipated external launch of the Ankaa-1 84-qubit system, which is expected to be to select customers, we plan to continue efforts to improve the performance of the system with the goal of reaching at least 98% 2-qubit gate fidelity to support the anticipated Ankaa-2 84-qubit system.

We then plan to launch the anticipated Ankaa-2 84 qubit system, continuing to work to improve performance with the goal of reaching at least 99% gate fidelity on Ankaa-2.

If these targets are achieved, we plan to shift focus to scaling to develop Lyra, an anticipated 336-qubit system.

We believe that this business plan should enable us to concentrate our software application development strategy on what we believe to be the highest likelihood applications for demonstrating nearer term narrow quantum advantage.

The reduction in workforce impacted approximately 50 employees or 28% of our workforce.

We began implementing activities with respect to the revised business plan and reduction in workforce in February 2023.

Affected employees were offered separation benefits, including severance payments and temporary healthcare coverage assistance.

We currently expect to incur restructuring charges of approximately $1.4 million for severance payments and temporary healthcare coverage for effected employees.

Such restructuring charges are expected to be incurred and recorded in the first quarter of 2023.

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 $205.0 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 of transaction costs incurred by us of $20.6 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 $20.6 million, of which $19.7 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 consolidated statements of operations during the year ended December 31, 2022.

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 has and 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.

Macroeconomic Considerations

Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations.

For example, macroeconomic events, including the COVID-19 pandemic, rising inflation, the U.S.

Federal Reserve raising interest rates, the Russia-Ukraine war, and recent bank failures have led to economic uncertainty globally.

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods.

If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors,” including the risk factor titled “Unstable market and economic conditions have had and may continue to have serious adverse consequences on our business, financial condition and share price.”

Specifically, the COVID-19 pandemic has limited and could further limit the ability of suppliers and business partners to perform, including third-party suppliers’ ability to provide components, services and materials.

We have experienced and may experience further increases in the cost of raw materials.

Furthermore, during the year ended December 31, 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 and interest rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic events, or any similar negative economic condition.

In addition, global economic conditions have been worsening, with disruptions to, and volatility and uncertainty in, the credit and financial markets in the U.S.

and worldwide resulting from the effects of COVID-19 and increases in inflation, interest rates and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures.

If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and other efforts.

However, like many other companies, we are taking actions to monitor our operations to account for the increases in cost of capital.

Specifically, this includes efforts to enhance our operational efficiency, maximize our R&D spend through strategic collaborations, and being highly selective in hiring top-tier talent.

Change in Fiscal Year

In October 2021, the board of directors of Legacy Rigetti (the “Legacy Rigetti Board”) approved a change in fiscal year end from January 31 to December 31, effective December 31, 2021.

As a result of this change, our fiscal year begins on January 1 and ends on December 31 of each year, starting on January 1, 2022.

For fiscal year 2021, this covers a period of 11 months starting from February 1, 2021 and ending on December 31, 2021.

See below “Result of Operations” regarding comparability of prior periods relating to the change in fiscal year.

Key Components of Results of Operations

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 customers 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 milestones deemed probable of being met is completed.

Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer.

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 related taxes, bonuses, 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.

Cost of revenue is expected to increase with any growth in revenues as we expand 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, 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, outside consultant’s fees, travel and marketing promotion costs.

We expect selling and marketing expenses to increase after we achieve narrow and broad quantum advantage, and subsequently 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, insurance, facility costs), professional service fees, and other general overhead costs other than those 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.

Results of Operations

Our entire activity since inception up to December 31, 2021, was in preparation for our formation and the Initial Public Offering, identifying a target company for a Business Combination and activities in connection with the proposed acquisition of Rigetti.

We will not be generating any operating revenues until the closing and completion of our initial business combination.

For the year ended December 31, 2021, we had a net loss of approximately $23.2 million, which consisted of approximately $4.9 million in general and administrative expenses, approximately $502,000 of offering costs associated with derivative warrant liabilities and an approximate $17.8 million loss from change in fair value of derivative warrant liabilities, partially offset by approximately $19,000 of income from investments held in the Trust Account.

For the period from December 22, 2020 (inception) through December 31, 2020, we had a net loss of approximately $15,000, which consisted of solely of general and administrative expenses.

Liquidity and Going Concern

As of December 31, 2021, we had approximately $0.5 million in our operating bank account and a working capital deficit of approximately $3.4 million.

The Company has incurred and expects to incur significant costs in pursuit of its financing and acquisition plans.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standards Board Accounting Standards Update 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that the Company’s cash flow deficit raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

There is no assurance that the Company’s plans to consummate a business combination or raise additional funds will be successful within the Completion Window.

The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Contractual Obligations

Registration Rights

The holders of Founder Shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights pursuant to a registration rights agreement signed upon consummation of the Initial Public Offering.

These holders were entitled to certain demand and “piggyback” registration rights.

However, the registration rights agreement provided that we would not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered.

We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriters a 45-day option from the final prospectus relating to the Initial Public Offering to purchase up to 4,500,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions.

On March 4, 2021, the underwriter fully exercised its over-allotment option.

The underwriters were entitled to an underwriting discount of $0.20 per unit, or $6.9 million in the aggregate, paid upon the closing of the Initial Public Offering.

In addition, $0.35 per unit, or approximately $12.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions.

The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.

Contingent Fees

We have entered into certain consulting arrangements for due diligence in connection with our search for a prospective initial Business Combination.

A portion of the fees in connection with the services rendered as of December 31, 2021 have been deferred and is contingent upon the closing of a Business Combination and therefore not included as liabilities on the accompanying consolidated balance sheets.

As of December 31, 2021, these fees were approximately $0.5 million.

Critical Accounting Policies

Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

We evaluate all of its 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 Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The public warrants and the private placement warrants are recognized as derivative liabilities in accordance with ASC 815.

Accordingly, Supernova recognizes the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period until exercised.

The fair value of the public warrants issued in connection with the initial public offering and private placement warrants were initially measured at fair value using a Monte Carlo simulation model.

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 Black-Scholes Option Pricing Model.

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.

Class A Ordinary Shares Subject to Possible Redemption

We account for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value.

Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity.

At all other times, Class A ordinary shares are classified as shareholders’ equity.

Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events.

Accordingly, as of December 31, 2021, 345,000,000 Class A ordinary shares subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of our consolidated balance sheets.

There were no Class A ordinary shares issued or outstanding as of December 31, 2020.

Immediately upon the closing of the Supernova IPO, we recognized the accretion from initial book value to redemption amount value.

The change in the carrying value of redeemable Class A ordinary shares resulted in charges against additional paid-in capital and accumulated deficit.

Net Income (Loss) Per Ordinary Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares.

Income and losses are shared pro rata between the two classes of shares.

Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average ordinary shares outstanding for the respective period.

The calculation of diluted net income (loss) does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering and the private placement warrants to purchase an aggregate of 13,075,000 shares of Class A ordinary shares in the calculation of diluted income (loss) per share, because their inclusion would be anti-dilutive under the treasury stock method.

The number of weighted average Class B ordinary shares for calculating basic net income (loss) per ordinary share was reduced for the effect of an aggregate of 1,125,000 Class B ordinary shares that were subject to forfeiture if the over-allotment option was not exercised in full or part by the underwriters.

Since the contingency was satisfied as of December 31, 2021, we included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares.

Accretion associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815‑40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020‑06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

The Company adopted ASU 2020-06 on January 1, 2021.

Adoption of the ASU did not impact our financial position, results of operations or cash flows.

Our management does not believe that any other recently issued, but not yet effective, accounting standards updates, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

Off-Balance Sheet Financing Arrangements

As of December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies.

We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

As a result, the consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and

performance and comparisons of the CEO’s compensation to median employee compensation.

These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

As described above in “—Change in Fiscal Year,” the board of Legacy Rigetti changed the fiscal year from January 1 to December 31, effective December 31, 2021.

Accordingly, the fiscal year ended December 31, 2021 covers a period of 11 months from February 1, 2021 to December 31, 2021 (“fiscal year 2021”).

Financial statements for the fiscal year ended December 31, 2022 include the 12 months ended December 31, 2022 (“fiscal year 2022”).

The comparability of our results of operations for fiscal year 2022 with fiscal year 2021 is affected by the change in fiscal year since fiscal year 2021 includes an 11-month period versus a 12-month period for fiscal year 2022.

For comparability purposes, to supplement the discussion of our historical results of operations for fiscal year 2022 and comparative period in 2021, we have included a discussion of unaudited supplemental recast information for the 12 months ended December 31, 2021.

The unaudited supplemental recast information for the 12-month period ended December 31, 2021 includes historical consolidated results of operations for fiscal year 2021 and one month of results of operations for January 2021.

All dollar amounts in tables, except share and per share amounts, are presented in thousands unless otherwise noted.

Year ended December 31, 2022 compared to 11 months ended December 31, 2021 and Supplemental Information – Year ended December 31, 2022 compared to Unaudited 12 months ended December 31, 2021

The following tables set forth our results of operations for fiscal year 2022 compared to fiscal year 2021 and supplemental information comparing fiscal year 2022 to the unaudited 12 month period ended December 31, 2021:

Supplemental Information

December 31, 2022

11 Months Ended

December 31, 2021

December 31, 2022

12 Months Ended

December 31, 2021

Cost of revenue

Total gross profit

Operating expenses:

Research and development

Sales and marketing

General and administrative

Goodwill impairment

Total operating expenses

Loss from operations

Supplemental Information

December 31, 2022

11 Months Ended

December 31, 2021

December 31, 2022

12 Months Ended

December 31, 2021

Other (expense) income, net:

Interest expense

Interest income

Change in fair value of derivative warrant liabilities

Change in fair value of earn-out liability

Transaction cost

Other income (expense)

Total other income (expense), net

Net loss before provision for income taxes

Provision for income taxes

*nm – not meaningful

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Revenue increased $4.9 million, or 60%, to $13.1 million for the year ended December 31, 2022, up from $8.2 million for the 11 months ended December 31, 2021.

The period over period increase was attributable to a $5.3 million increase in revenue from extension of three government contracts into year-two and year-three phases, a $0.7 million increase from a non-governmental QCaaS customer, and other increases in revenue from existing projects totaling $0.4 million.

These increases were offset in part by a $0.9 million decrease in revenue from a U.S.

government contract that is nearing completion and a $0.6 million decrease in revenue from other customers.

Our development contracts are fixed price milestone or cost share-based contracts and the timing and amounts of revenue recognized in each quarter vary based on the delivery of the associated milestones and/or 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 vary in timing and size as we work to ramp up our QCaaS business for the longer term.

There may be some near-term reduction in revenue as we align to our new strategy announced in February 2023.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

Revenue increased $4.5 million, or 52%, to $13.1 million for the year ended December 31, 2022, up from $8.6 million for the unaudited 12 months ended December 31, 2021.

The period over period increase was primarily attributable to the reasons discussed in the section above, offset in part by one more month of activity in the 2021 comparison period.

We earned $0.4 million of revenue in January 2021 which was included in the unaudited 12 months ended December 31, 2021.

Cost of Revenue

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Cost of revenue increased by $1.3 million, or 77%, to $2.9 million for the year ended December 31, 2022, as compared to $1.6 million for the 11 months ended December 31, 2021.

The increase was mainly attributable to an increase in employee-related costs of $0.4 million and subcontractor costs of $0.9 million associated with specific projects and collaborative development contract services work with government agencies.

We expect subcontractor costs to increase and employee-related costs to decline in the near term as a result of the reorganization efforts, including the reduction in workforce, that we announced in February 2023.

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.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

Cost of revenue increased by $1.1 million, or 62%, to $2.9 million for the year ended December 31, 2022, as compared to $1.8 million for the unaudited 12 months ended December 31, 2021.

The increase was mainly attributable to the reasons described in the section above and one more month in the 2021 comparison period.

We incurred $0.2 million of employee-related costs in January 2021 which was included in the unaudited 12 month periods ended December 31, 2021.

Operating Expenses

Research and Development Expenses

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Research and development expenses increased by $33.0 million, or 123%, to $60.0 million for the year ended December 31, 2022, from $26.9 million for the 11 months ended December 31, 2021.

The period over period increase was primarily attributable to the following factors and one less month of activity in the 2021 comparison period:

a $22.6 million increase in employee-related costs for the year ended December 31, 2022 due to an increase in headcount and resulting wage increase of $9.5 million, a $13.1 million increase in stock-based compensation expense, which includes annual refresh grants of restricted stock to employees in the year ended December 31, 2022 and a one-time cumulative recognition of previously deferred stock-based 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 in March 2022.

a $7.4 million increase associated with the ongoing and expanded investment in research and development efforts, including a $3.5 million increase in software subscription costs, a $2.0 million increase in depreciation, a $0.9 million increase in equipment spares and materials costs, a $0.3 million increase in other costs, a $0.4 million increase in other expenses relates to travel and meal costs, and a $0.3 million increase in consultant fees.

a $3.0 million increase in facility costs, including a $1.3 million one-time catch up for electricity usage at our Berkeley facility from February 2019 to December 31, 2021, which was an out-of-period adjustment;

additional electricity usage of $0.7 million, and an increase in operating lease expense of $1.0 million due to an expansion of office space.

We expect research and development expenses to remain consistent during the next two years as a result of anticipated increase in expenses as we shift our focus to further developing the Ankaa-1 84-qubit system and improving performance with the anticipated Ankaa-2 84-qubit system, offset by our reorganization efforts announced in February 2023.

Thereafter our plan is to shift to development of the anticipated Lyra 336-qubit system, working towards the goal of achieving narrow quantum advantage.

We expect research and development expenses to increase as and if we near the point of achieving narrow quantum advantage.

Our ability to limit research and development costs in the nearer term will be impacted by increasing costs for labor, including stock-based compensation expenses 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.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

Research and development expenses increased by $31.2 million, or 108%, to $60.0 million for the year ended December 31, 2022, from $28.8 million for the unaudited 12 months ended December 31, 2021.

The increase was primarily attributable to the reasons discussed in the section above and one more month of expenses included in the 2021 comparison period specifically related to the following:

$1.6 million of employee-related costs, including $1.4 million for wages and $0.2 million for stock-based compensation expense.

$0.2 million of depreciation expense.

Sales and Marketing Expenses

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Sales and marketing increased $3.9 million, or 156%, to $6.3 million for the year ended December 31, 2022, from $2.5 million for the 11 months ended December 31, 2021.

The period over period increase was primarily attributable to a $0.8 million increase in employee related costs, a $2.0 million increase in stock-based 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 in March 2022, a $1.1 million increase for consultants and other spending for sales development activities.

We expect selling and marketing expenses to marginally decrease or stay consistent during the next few years due to the reduction in workforce we implemented in February 2023 and other cost control efforts.

We expect sales and marketing expenses to increase if and when we near the point of narrow quantum advantage.

Supplemental Information Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

Sales and marketing increased $3.8 million, or 148%, to $6.3 million for the year ended December 31, 2022, from $2.6 million for the unaudited 12 months ended December 31, 2021.

The increase was primarily driven by the reasons discussed in the section above and one more month of activity in the 2021 comparison period.

General and Administrative Expenses

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

General and administrative expenses increased by $36.3 million, or 322%, to $47.6 million for the year ended December 31, 2022, from $11.3 million for the 11 months ended December 31, 2021.

The increase was attributable to the following factors:

a $27.9 million increase in stock-based compensation expense, including a one-time cumulative recognition of previously deferred stock-based 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 closing of the Business Combination.

a $7.8 million increase in other expenses, including $4.6 million in legal and accounting costs related to public company reporting requirements, investor relation costs, other software acquisition costs, and a $3.2 million increase in consultant costs.

a $2.7 million increase for directors’ and officers’ insurance and other office expenses attributable to a return to in-person office work related to the Covid-19 pandemic;

a $1.8 million increase for transaction bonuses awarded to employees in recognition of the closing of the Business Combination,

a $1.8 million increase in employee related costs as a result of operating as a public company and the build out of our information security team, including higher executive salaries and increased headcount.

a $0.5 million increase in depreciation expense.

These costs were partially offset by the gain in change in fair value of our Forward Warrant Agreement of $5.8 million which was entered into with Ampere in October 2021 as part of our strategic collaboration agreement.

We expect general and administrative expenses to decrease or stay consistent during the next few years due to the reduction in workforce we implemented in February 2023 and other efforts to control costs.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

General and administrative expenses increased by $34.5 million, or 264%, to $47.6 million for the year ended December 31, 2022, from $13.1 million for the unaudited 12 months ended December 31, 2021.

The increase was attributable to the reasons described in the section above and one more month of activity in the 2021 comparison period.

The Company incurred the following costs totaling $1.8 million in January 2021 which were included in the unaudited 12 months ended December 31, 2021:

$0.5 million in other expenses including legal and accounting costs related to private company financing initiatives, audit, third party consulting services, preparing the company to go public and other software acquisition costs;

$0.5 million in employee related costs;

$0.3 million in other costs attributable to return to office work;

$0.2 million in depreciation;

$0.1 million in stock-based compensation expense.

$0.2 million in other costs

Goodwill impairment

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Goodwill impairment increased by $5.4 million for the year ended December 31, 2022, when compared to the 11 months ended December 31, 2021.

We test for goodwill impairment on the first of November each year and at interim dates when indicators of impairment exist.

When assessing goodwill for possible impairment, we first consider qualitative factors, including but not limited to macroeconomic conditions, industry and market considerations, our overall performance and events directly affecting us.

It was noted during our annual goodwill impairment assessment on November 1, 2022 that the Company had experienced a sustained decline in stock price, however, we determined at that time that our goodwill was not impaired.

Subsequently, our stock price continued to decline, resulting in a triggering event that required us to evaluate goodwill for possible impairment as of December 31, 2022.

After adjusting the Company’s stock market capitalization for a control premium based on market comparable transactions, we determined that the fair value of the Company was less than its carrying value or stockholder’s equity, resulting in a non-cash goodwill impairment charge of $5.4 million for the year ended December 31, 2022.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

As the goodwill impairment occurred during the year ended December 31, 2022, the increase in impairment during the year ended December 31, 2022 as compared to the unaudited 12 months ended December 31, 2021 is related to the matter described in the above section.

Other Income (Expense), net

Interest Expense

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Interest expense was $5.3 million and $2.5 million for the year ended December 31, 2022 and the 11 months ended December 31, 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 a combination of the Federal Reserve increasing interest rates in response to inflation and a longer interest period during the year ended December 31, 2022.

For the year ended December 31, 2022, interest expense was based on the overall borrowings under the Loan Agreement of $32.0 million with higher interest rates.

For the 11 months ended December 31, 2021 interest expense reflected lower borrowings and interest rates, with borrowings ranging from $12.0 to $27.0 million.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

The increase in interest expense during the year ended December 31, 2022 as compared to the unaudited 12 months ended December 31, 2021 is related to the matter described in the above section.

As the Loan Agreement was entered into in March 2021, no interest costs were incurred in January 2021.

Interest Income

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Interest income was $2.4 million and virtually nil for the year ended December 31, 2022, and the 11 months ended December 31, 2021, respectively.

The increase in interest income was a result of the available-for-sales investments we hold and the increase in interest rates on deposits due to Federal Reserve rate increases.

As of December 31, 2022, investment securities in our Trust Account consisted of $36.3 million in money market funds, $58.2 million in United States Treasury securities, $3.6 million in corporate bonds and $23.1 million in commercial paper.

We earned interest on such investments.

We did not hold available-for-sales investments and did not earn interest on such investments during the 11 months ended December 31, 2021.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

The period over period increase was attributable to the reasons explained in the section above and one more month of interest income recognized in the unaudited 12 months ended December 31, 2021.

Change in Fair Value of Warrant Liabilities

A discussion of change in fair value of warranty liabilities is included in Note 13 to our consolidated financial statements for the year ended December 31, 2022, included elsewhere in this Annual Report on Form 10-K.

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 consolidated financial statements for the year ended December 31, 2022, included elsewhere in this Annual Report on Form 10-K.

Transaction Costs

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

A portion of transaction costs arising from the Business Combination were allocated to liability-classified instruments that are subsequently measured at fair value through earnings.

Transaction costs allocated to these instruments must be expensed as incurred.

We incurred and expensed total transaction costs of $0.9 million allocated to liability-classified instruments for the year ended December 31, 2022.

We did not incur any transaction costs for the 11 months ended December 31, 2021.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

As no transaction costs were incurred during the unaudited 12 months ended December 31, 2021, the increase in transaction costs during the year ended December 31, 2022 is related to the matter described in the section above.

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 revenues.

During the year ended December 31, 2022, we incurred a net loss of $71.5 million.

As of December 31, 2022, we had an accumulated deficit of $278.7 million, and we expect to incur additional losses for the foreseeable future.

In connection with the closing of the Business Combination on March 2, 2022, we received net proceeds of $225.6 million.

We believe that our existing balances of cash, cash equivalents and marketable securities 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 cannot be sure that additional financing will be available.

If we are unable to raise additional funding when needed, we may be required to delay, limit or substantially reduce our quantum computing development efforts.

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 Annual Report on Form 10-K.

Global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide resulting from the continuing effects of COVID-19 pandemic, disruptions in banking systems, international conflicts and otherwise.

If these conditions persist and deepen, we could experience an inability to access additional capital or our liquidity could otherwise be impacted.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or other efforts.

A recession or additional market corrections resulting from the impact of the continuing effects of the COVID-19 pandemic and macroeconomic conditions could materially affect our business and the value of our securities.

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.

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 potential securities 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 Annual Report on Form 10-K.

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 at 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 shares of our 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 $75.0 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 December 31, 2022, the total principal amount outstanding under the Loan Agreement was approximately $30.7 million.

We use borrowings under the Loan Agreement for working capital purposes.

The Loan Agreement is secured by a first-priority security interest in substantially all of our assets.

As of the date of this Annual Report on Form 10-K, we are in compliance with all covenants under the Loan Agreement.

Our cash commitments as of December 31, 2022 were primarily as follows:

Financing obligations

Estimated cash interest on financing obligations

Operating lease obligations

Financing obligations consist of cash principal payments related to the Loan and Security Agreement and are presented gross.

These balances on the consolidated balance sheet are presented net of issuance costs.

Estimated cash interest on financing obligations are based on the interest rate on the Loan and Security Agreement as of February 2023 of 15.25%.

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:

Supplemental Information

11 Months Ended

December 2021

12 Months Ended

December 2021

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

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.

Year ended December 31, 2022 vs.

11 months ended December 31, 2021

Net cash used in operating activities increased by $33.6 million, or 116%, when comparing the year ended December 31, 2022 to the 11 months ended December 31, 2021.

The increase in spending was primarily due to:

an increase in headcount and payroll related costs of $20.8 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;

a $6.3 million increase in legal and accounting costs related to enhanced public reporting requirements, investor relation costs, and other software acquisition costs;

a $3.3 million prepayment of insurance premiums for directors and officers liability insurance;

$2.8 million in additional interest costs related to increased borrowing amounts associated with the Loan Agreement;

transaction costs of $1.0 million incurred in connection with the closing of the Business Combination.

Net cash used in operating activities during the year ended December 31, 2022 was $62.7 million, resulting primarily from a net loss of $71.5 million, adjusted for non-cash charges of $11.2 million.

These non-cash charges were partially offset by changes in operating assets and liabilities during the period.

Changes in operating assets and liabilities accounted for $2.3 million of cash used in operations.

The changes primarily consisted of an increase in accounts receivable of $4.7 million;

an increase in prepaid and current assets of $1.1 million;

a decrease in accounts payable of $0.7 million, and a decrease in other liabilities of $0.3 million;

offset by an increase in accrued expenses and other current liabilities of $4.5 million.

Net cash used in operating activities during the 11 months ended December 31, 2021 was $29.0 million, resulting primarily from a net loss of $38.2 million, adjusted for non-cash charges of $9.0 million.

Changes in operating assets and liabilities accounted for $0.2 million of cash provided by operations, which primarily consisted of an increase in prepaid and current assets of $0.3 million;

an increase in deferred revenue of $0.5 million, an increase in accounts receivable of $1.1 million, offset by an increase in accounts payable, accrued expenses and other liabilities of $1.1 million.

In connection with the reorganization efforts announced in February 2023, we transitioned to a newly appointed CFO and CTO and are implementing a workforce reduction in order to focus the organization and its resources on nearer-term strategic priorities.

As a result of the reorganization, we expect to incur costs related to management transition, and reduce operating expenses in activities outside of focus areas in the nearer term and prioritize cash resources.

Supplemental Information - Year ended December 31, 2022 vs.

Unaudited 12 months ended December 31, 2021

Net cash used in operating activities increased by $32.0 million, or 105%, when comparing the year ended December 31, 2022 to the unaudited 12 months ended December 31, 2021.

The increase in spending was primarily due to reasons explained in the section above.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2022 was $107.0 million, resulting from the addition of $22.7 million in property and equipment and the addition of $84.3 million in available-for-sale securities.

Investments in property and equipment during this period relate primarily to process computing equipment, quantum computing fridges, and development tools for our chip fabrication facility.

Investments in available-for-sale securities consist of U.S Treasury securities, commercial paper, and corporate bonds that have a maturity of one year or less.

Net cash used in investing activities during the 11 months ended December 31, 2021, and unaudited 12 months ended December 31, 2021 was $7.0 million and $7.4 million, respectively, and is attributable to additions to property and equipment.

Net cash used in investing activities during the year ended December 31, 2022, increased by $100.0 million and $99.6 million compared to the 11 months and unaudited 12 months ended December 31, 2021, respectively, largely as a result of increased investment in available-for-sale securities and research and development infrastructure, including additional investments for electricity upgrades.

Investments in our Fab 1 facility and quantum computing fridges will continue to be made to the extent necessary to support our new strategic direction referred to above.

Cash Flows provided by Financing Activities

Net cash provided by financing activities during the year ended December 31, 2022 was $215.5 million, reflecting proceeds of $225.6 million from the Business Combination and PIPE Investment net of transaction costs, additional proceeds from the issuance of debt and warrants of $5.0 million associated with the Loan Agreement, less principal payments of $1.3 million, debt issuance costs and exit fees totaling $1.1 million;

and proceeds from issuance of Common Stock upon exercise of stock options and warrants of $6.1 million.

Net cash provided by financing activities was the same for the 11 months ended December 31, 2021 and unaudited 12 months ended December 31 2021 for a total of $25.6 million, mainly reflecting proceeds from the issuance of debt totaling $27.0 million less cash payments for debt issuance costs of $0.3 million, proceeds from issuance of Common Stock upon exercise of stock options and warrants for a total $0.3 million, and payment of deferred offering costs of $1.5 million.

Net cash provided by financing activities during the year ended December 31, 2022 increased by $189.9 million as compared to both the 11 months and unaudited 12 months ended December 31, 2021, largely from the close of the Business Combination and PIPE Investment net of transaction costs, and additional proceeds from the issuance of debt and warrants during the year ended December 31, 2022.

We expect to continue finance our cash needs primarily through our arrangements with Ampere, our committed equity financing with B.

Riley, and other potential securities financings or capital sources.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements included in this Annual Report on Form 10-K, which have been prepared in accordance with U.S.

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 that affect revenue and expenses during the reporting periods.

Our estimates are based on 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 consolidated financial statements for the year ended December 31, 2022, included elsewhere in this Annual Report on Form 10-K, we believe the following critical accounting policies and estimates 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 placement 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 to be 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 in the consolidated balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in the fair value recognized in the 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 in which there is not an effective registration statement, the warrant holders have a cap, 0.361 shares of 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.

As of December 31, 2022, the fair value of the Private Warrants decreased to $1.1 million, with the gain on the change in fair value of derivative warrant liabilities recorded in the consolidated statements of operations for the year ended December 31, 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.

As of December 31, 2022, the fair value of the Public Warrants decreased to $0.7 million with the gain on the change in fair value of derivative warrant liabilities recorded in the consolidated statements of operations for the year ended December 31, 2022.

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 date.

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 the Black-Scholes model to determine the inception date fair value of the warrants of approximately $2.7 million which was recorded as part of Debt Issuance Cost.

The outstanding Common Stock warrants were subsequently remeasured at each reporting period using the Black-Scholes model with the change in fair value recorded as a component of other income in the Company’s consolidated statements of operations.

On June 2, 2022, the 783,129 Common Stock warrants that were issued in connection with the Loan Agreement were exercised and the $6.4 million warrant liability was reclassified to equity.

We recorded a loss of $2.0 million from the change in the fair value of the warrant liability for the year ended December 31, 2022.

Earn-Out Liability

At Business Combination Closing, Supernova Sponsor subjected certain shares (“Sponsor Vesting Shares”) of Common Stock held by Supernova Sponsor and its permitted transferees (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 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 Holders include outcomes that are not solely indexed to our Common Stock.

The aggregate fair value of the Sponsor Vesting Shares at the time of the Business Combination Closing was estimated using a Monte Carlo simulation model and was determined to be $20.4 million.

As of December 31, 2022, the Earn-Out Triggering Events were not achieved for any of the tranches, and as such, the Company adjusted the carrying amount of the liability to its estimated fair value of $1.2 million.

The change in the fair value of $19.2 million is included in change in fair value of earn-out liability in the consolidated statements of operations for the year ended December 31, 2022.

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 warrant subscription 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 filed such registration statement and it became effective in the year ended December 31, 2022.

We evaluated the Forward Warrant Agreement as a derivative in accordance 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 December 31, 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 specified in the agreement.

Based on these inputs and assumption, we calculated the fair value of the Forward Warrant Agreement to be a $2.2 million derivative asset at December 31, 2022 and a $0.2 million derivative liability at December 31, 2021.

We have included the derivative asset separately as a forward contract asset and the derivative liability as a forward contract liability in the accompanying consolidated balance sheets as of December 31, 2022 and December 31, 2021, respectively.

The change in fair value is recorded as part of general and administrative expense in our consolidated statements of operations.

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 based on completed milestones or hours or costs incurred as appropriate.

Revenue for partially completed milestones deemed probable of being met is recognized using an input measure based on actual labor hours incurred to date relative to total estimated labor hours needed to complete the milestone.

Revenue related to cost share contracts is recognized as the reimbursable costs are incurred.

For Fixed price Milestone based contracts, revenue is recognized based on the input measure explained above as control is expected to transfer over the time period a milestone is completed.

Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer.

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 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.

Goodwill Impairment Review

In December 2022, we tested our goodwill for impairment.

See Note 5 – Goodwill of our consolidated financial statements for the year ended December 31, 2022 included elsewhere in this Annual Report on Form 10-K for additional information on how the impairment was measured.

We have determined that the Company is a single reporting unit.

As such, management estimated the fair value of the Company based on its market capitalization as of December 31, 2022, as adjusted for a control premium based on recent market comparable transactions.

Based on our analysis, we determined that the carrying value of the Company (stockholder’s equity) exceeded its fair value.

As a result, we recorded a non-tax-deductible goodwill impairment charge of $5.4 million for the year ended December 31, 2022.

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 consolidated financial statements for the year ended December 31, 2022 included elsewhere in this Annual Report on Form 10-K.

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 plan to take advantage of the extended transition period that 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) December 31, 2026, 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 $1.24 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.

Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

We are a smaller reporting company as defined by Rule12b- of the Exchange Act and are not required to provide the information required under this item.

Financial Statements and Supplementary Data.

Reference is made to Pages F-1 through F-24 comprising a portion of this Annual Report on Form 10-K.

The financial statements required by this item are set forth beginning on page F-1 of this Annual Report on Form 10-K.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis