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Item 1. Business

2024-03-14 compared with 2023-03-27 · 113 added, 81 removed, 401 unchanged (33% of the section changed)

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The availability of scalable quantum computers is expected to enable scientists and engineers to address problems in areas like climate change, fusion energy, quantitative finance, drug development and discovery, materials science, and artificial intelligence.

A July 2021 Boston Consulting Group report predicts that fully fault tolerant quantum computers could ultimately produce between $450 billion and $850 billion in annual value creation on an operating income basis for end users after 2040.

A May 2023 Boston Consulting Group report predicts that fully fault tolerant quantum computers could ultimately produce between $450 billion and $850 billion in annual value creation on an operating income basis for end users after 2035.

In August 2023, International Data Corporation ( IDC ) published a forecast for the worldwide quantum computing market, projecting customer spend for quantum computing to grow from $1.1 billion in 2022 to $7.6 billion in 2027, representing a five-year compound annual growth rate (CAGR) of 48.1%.

The forecast includes base quantum computing as a service as well as enabling and adjacent quantum computing as a service.

To unlock this opportunity, we have developed the world’s first multi-chip quantum processor for scalable quantum computing systems.

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We offer our full-stack quantum computing platform as a cloud service to a wide range of end-users, directly through our Rigetti QCS platform, and also through cloud service providers.

We began selling quantum computers to end users in 2023.

In the third quarter of 2023, we expanded our quantum processing unit (QPU) customer base with the delivery of a 9-qubit QPU to another premier national laboratory.

This follows our first QPU sale in the second quarter of 2023 to Fermilab in which we delivered a 9-qubit QPU as part of our partnership with the Superconducting Quantum Materials and Systems Center (SQMS).

We also launched the Novera™ QPU in December 2023, our first commercially available QPU, which includes a 9-qubit chip that features tunable couplers for fast 2-qubit operations and a 5-qubit chip for testing single-qubit operations.

The Novera QPU is based on our fourth generation Ankaa™-class architecture.

In the fourth quarter of 2023, we made our 84-qubit Ankaa-2 quantum system available publicly via our Quantum Cloud Services (QCS) platform.

The Ankaa-2 system is our highest qubit count QPU available to the public and is based on our fourth-generation chip architecture that features tunable couplers and a square lattice, enabling high fidelity 2-qubit operations compared to our previous systems.

The Ankaa-2 system has achieved a 98% median 2-qubit fidelity based on our testing, representing a 2.5x improvement in error performance compared to our previous QPUs, and a 2-qubit gate time of 68 nanoseconds — the shortest gate time demonstrated by a Rigetti QPU.

We have developed strong customer relationships and collaborative partnerships to accelerate the development of key technologies for high-value use cases to potentially unlock strategic market opportunities.

Our partners and customers include commercial enterprises such as Amazon Web Services, Ampere, Astex Pharmaceuticals, Deloitte, Microsoft, Nasdaq and Standard Chartered Bank, along with U.S.

government organizations such as DARPA, DOE, and NASA.

Our partners and customers include commercial enterprises such as Amazon Web Services (“AWS”), Nasdaq, Standard Chartered Bank and HSBC, along with U.S.

government organizations such as Defense Advanced Research Projects Agency (“DARPA”), Department of Energy (“DOE"), and Air Force Research Laboratory(“AFRL”) and international government entities.

Recently, in February 2024, Rigetti UK Limited, a wholly owned subsidiary of our Company, announced that it was awarded a Small Business Research Initiative grant funded by Innovate UK to develop and deliver a 24-qubit quantum computer to the National Quantum Computing Centre.

The Company is enabled by a deep technical team that includes global experts in quantum chip design and manufacturing, quantum computing systems architecture, quantum software, and quantum algorithms and applications.

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Demand for computing power capable of solving computationally complex problems is increasing.

Many of these types of problems are approached through the use of High Performance Computing (“HPC”), which relies primarily on large classical computers located either in the cloud or on-premise.

Company management estimates the global market for HPC to be approximately $55 billion by 2028.

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Stages of Evolution of Quantum Computing Maturation

We believe that market demand for our quantum computers will grow in phases that map to the increasing capabilities of our commercially available quantum computing systems similar to that of classical computer technology.

With each new phase, we expect quantum computers to solve an ever-increasing breadth of high-impact commercial problems and to do so with greater speed and accuracy.

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Currently, our quantum computers are of sufficient scale and capability to be useful in applied research for quantum algorithm development, the exploration of potential applications of quantum computing, and for understanding the skill gaps an organization must resolve in order to be prepared to take advantage of quantum computing capabilities.

We consider the eQA phase to have begun three years ago, and during this time we have worked with business and government researchers, commercial software developers and academic institutions who access our quantum computers via cloud-based services.

We anticipate that indications that this phase is coming to a close will occur when there are repeated demonstrations solving practical problems, of substantial commercial or customer value, with a level of performance that is competitive with the best available classical computing performance.

We consider the eQA phase to have begun four years ago, and during this time we have worked with business and government researchers, commercial software developers and academic institutions who access our quantum computers via cloud-based services.

We have also sold our QPUs to U.S.

national labs who wish to have their own quantum computer on-site and have launched Novera, our first commercially available QPU, which features a 9-qubit chip, tunable couplers for fast 2-qubit operations and a 5-qubit chip for testing single-qubit operations.

We anticipate that this phase will come to a close when there are repeated demonstrations solving practical problems, of substantial commercial or customer value, with a level of performance that is competitive with the best available classical computing performance.

Narrow Quantum Advantage (“nQA”) Phase

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Large-Scale Fault Tolerant Quantum Computing (“lFTQC”)

We will consider the phase of lFTQC to begin when systems are available with hundreds of logical qubits, which can be universally controlled and measured with substantially error-free operation through the full course of a quantum computation.

We will consider the phase of lFTQC to begin if and when systems are available with hundreds of logical qubits, which can be universally controlled and measured with substantially error-free operation through the full course of a quantum computation.

It is currently believed in the quantum computing industry that this likely requires systems with 10,000 to 1,000,000 physical qubits.

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As quantum computing further matures through this phase, systems will likely continue to grow in scale and performance, culminating in full-scale fault tolerance that operates using potentially thousands of effectively perfect logical qubits.

This ultimate goal of full-scale fault tolerance represents the largest commercial opportunity at an estimated $850 billion per year in potential annual value creation for end users and technology providers.

This ultimate goal of full-scale fault tolerance represents the largest commercial opportunity.

Boston Consulting Group estimates that quantum computing could create value of $450 billion to $850 billion annually by 2035.

Value of $5 billion to $10 billion could start accruing to users and providers as soon as the next few years.

Business Strategy

Our approach to developing and sustaining strong competitive advantage relies on a four-pronged strategy:

Our approach to developing and sustaining what we believe is strong competitive advantage relies on a four-pronged strategy:

● Create high performance quantum computing systems through full-stack product development.

From the outset, we have approached the market opportunity with a strategy to build quantum computers, the superconducting processors that power them, and the software required to access and program these systems.

We believe that vertical integration, from chip manufacturing through cloud delivery, unlocks the fastest and lowest risk path to broad commercialization and the largest, long-term market opportunity.

We believe that vertical integration, from chip manufacturing through sales of QPUs and cloud delivery, unlocks the fastest and lowest risk path to broad commercialization and the largest, long-term market opportunity.

This was underscored by our announcement of the industry’s first multi-chip quantum processor for scalable quantum computers, a capability realized through many innovations from Fab-1.

Leverage cloud to provide broad access to our quantum computers.

We have been providing cloud access to our quantum computers since 2017 and have since expanded the availability of our machines through distribution agreements with other solution providers including Amazon Braket, Microsoft, Oak Ridge National Laboratory (“ORNL”) and Strangeworks.

● Provide broad access to our quantum computers.

We sold our first QPU in 2023 and recently launched Novera™ our first commercially available QPU, which features a 9-qubit chip with tunable couplers for fast 2-qubit operations and a 5-qubit chip for testing single-qubit operations.

We have been providing cloud access to our quantum computers since 2017 and have since expanded the availability of our machines through distribution agreements with other solution providers including Amazon Bracket and Oak Ridge National Laboratory (“ORNL”), among others.

Cloud services efficiently simplify access to our quantum computers and allow for pricing that enables a broad range of scientific, commercial and academic developers to readily participate in the development of quantum computing algorithms, applications and software development tools.

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We have formed commercial partnerships with business and government entities that are designed to advance their mutual understanding of the opportunities, challenges and solutions necessary for quantum computing to excel in specific real-world applications.

Examples of these partnerships include our contracted relationships with DARPA, the DOE’s Fermi National Accelerator Laboratory (“Fermilab”) and ORNL.

Examples of these partnerships include our contracted relationships with DARPA, the DOE’s Fermi National Accelerator Laboratory (“Fermilab”) and AFRL.

We believe these types of highly collaborative, multi-year relationships will yield specialized and proprietary market insights and technological advancements.

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We have invested heavily in a world-class and multidisciplinary team of scientists, hardware and software engineers, system designers and algorithm and application developers to rapidly innovate, invent, engineer and commercialize our quantum computing technologies.

We have also developed numerous proprietary technologies required to create quantum computing chips, quantum computer systems, software and cloud-based services and we rigorously protect our unique intellectual property through a portfolio of 165 patents issued and pending (as of the date hereof).

We intend to continue deeply investing in finding and fostering the talent required to remain at the forefront of quantum computing innovation, while protecting our growing base of intellectual property.

In February 2023, we updated our business strategy and revised our technology roadmap to focus on nearer-term priorities and focus efforts to achieve narrow quantum advantage.

We made further refinements following our internal deployment for testing in March 2023 of Ankaa-1, our 84-qubit system delivering denser qubit spacing and tunable couplers.

We now 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, 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.

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

In 2023, we updated our business strategy and revised our technology roadmap to focus on nearer-term priorities and our efforts to achieve narrow quantum advantage.

Key achievements in 2023 include the launch of the 84 qubit Ankaa™-2 system to customers via Rigetti Quantum Cloud Services (QCS).

The Ankaa-2 system achieved 98% median 2-qubit fidelity, which represents a 2.5x performance improvement compared to our previous QPUs.

We continue to plan to:

● Continue working to improve the performance of our QPUs with the goal of reaching at least 99% 2-qubit gate fidelity on an anticipated Ankaa-3 84 qubit system by the end of 2024.

● If the above target is achieved, we plan to shift focus to scaling to develop Lyra, an anticipated 336-qubit system.

● Pursue sales of Novera™ , our first commercially available QPU, which features a 9-qubit chip, tunable couplers for fast 2-qubit operations and a 5-qubit chip for testing single-qubit operations.

Business Model & Services

Currently, we generate the majority of our revenues from technology development contracts with various partners.

We believe our longer term business model will be more weighted towards recurring revenues generated from quantum computing systems made accessible via the cloud in the form of QCaaS products.

We believe our longer term business model will be more weighted towards QPU sales and recurring revenues generated from quantum computing systems made accessible via the cloud in the form of QCaaS products.

Rigetti Quantum Processing Units .

Our QPUs contain fabricated silicon-based chips featuring superconducting qubits.

These high-performance chips provide fast gate times, low latency conditional logic, and fast program execution times.

Our QPUs are designed and fabricated at Fab-1, leveraging novel manufacturing methods to create state-of-the art superconducting qubits.

Novera™ , our first commercially available QPU, includes a 9-qubit chip that features tunable couplers for fast 2-qubit operations and a 5-qubit chip for testing single-qubit operations.

The Novera™ QPU is based on our fourth generation Ankaa-class architecture.

We recently announced our most technically advanced QPU yet, the 84-qubit Ankaa-2, featuring 98% median 2-qubit fidelity, which represents a 2.5x performance improvement compared to our previous QPUs.

We intend to design and fabricate more advanced QPUs in the future with improved fidelities, faster gate speeds and higher qubit counts.

We believe these anticipated improvements and advances in technology will hopefully lead to nQA, bQA and LFTOC in the coming years.

Quantum Computing as a Service (QCaaS)

We design, build, own, and operate quantum computers and sell access to these systems through cloud-based services, commonly referred to as QCaaS.

We sell access to our quantum computers through cloud-based services, commonly referred to as QCaaS.

This approach enables us to serve a wide range of customers without the complexity and cost associated with shipping, operating and servicing complex and cryogenic computing equipment on customer premises.

Rigetti Quantum Cloud Services

The company’s flagship product is Rigetti Quantum Cloud Services.

QCS is a platform to deliver high-performance quantum computing over the cloud.

Rigetti Quantum Cloud Services (QCS) is a proprietary platform to deliver high-performance quantum computing over the cloud.

QCS features a hybrid quantum-classical computing environment that incorporates Rigetti quantum computers operating in tandem with cloud infrastructure.

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The product is designed to meet the needs of a diverse set of customers that all benefit from the high-performance nature of its core computational capabilities.

Central to QCS are two very powerful sets of technologies developed by our quantum processing units (“QPUs”), and our quantum operating system, as described below.

Rigetti Quantum Processing Units .

At the heart of QCS are the proprietary QPUs that perform quantum computations.

Our QPUs contain fabricated silicon-based chips featuring superconducting qubits.

These high-performance chips provide fast gate times, low latency conditional logic, and fast program execution times.

Rigetti QPUs are designed and fabricated at Fab-1, leveraging novel manufacturing methods to create state-of-the-art superconducting qubits.

Production versions of QCS currently utilize our Aspen-M series chips with 80 qubits.

Central to QCS are two very powerful sets of technologies developed by us, our quantum processing units (“QPUs”), described above, and our quantum operating system, as described below:

Quantum Operating System Software .

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government entity that provides state-of-the-art computational infrastructure to government researchers.

Similarly, we have signed a distribution agreement with Strangeworks, a provider of quantum computing enablement software, services and computational resources.

Key Technology Development Partnerships

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DOE’s Superconducting Quantum Materials and Systems Center (“SQMS”), to advance the development of scalable and high performance quantum processors;

● AFRL to harness our fabrication capabilities for quantum networking hardware research and development.

● DARPA and National Aeronautics and Space Administration (“NASA”) to create quantum computing systems, software and algorithms for optimization applications;

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Rigetti Foundry Services

Rigetti Foundry Services leverages the company’s US-based in-house fabrication facility to deliver superconducting quantum chips to advance and accelerate quantum information science and technology research and development efforts.

Rigetti Foundry Services leverages the company’s US-based in-house fabrication facility (“Fab-1”) to deliver superconducting quantum chips to advance and accelerate quantum information science and technology research and development efforts.

Customers include researchers spanning academia, defense laboratories, and national laboratories.

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We are exploring the application of our quantum computers for high value optimization problems including a partnership with NASA and DARPA for secure dynamic message scheduling using high-demand space and national security assets.

In January 2022, we were selected to deliver hardware, software and benchmarks for Phase 2 of DARPA’s ONISQ program to develop quantum computers capable of solving complex scheduling optimization problems, with a focus on quantum advantage for currently available or soon to be available quantum processors.

The award was based upon us successfully completing our performance milestones in Phase I of the program, and is targeting Rigetti’s Aspen-M 80 processor, and our next generation Ankaa processor.

In March 2022, we were selected to lead a program to develop benchmarks for quantum application performance on large-scale quantum computers as part of DARPA’s Quantum Benchmarking Program.

The goal of this program is to re-invent key quantum computing metrics, make those metrics testable, and estimate the required quantum and classical resources needed to reach critical performance thresholds

In September 2023, we were awarded a DARPA project as part of the Imagining Practical Applications for a Quantum Tomorrow (IMPAQT) program to advance the state-of-the-art in quantum algorithms for solving combinatorial optimization problems.

Our project, “Scheduling Problems with Efficient Encoding of Qubits” (SPEEQ), seeks to develop a novel and efficient encoding of optimization problems onto qubits, with the goal of enabling larger problems to be mapped to currently available NISQ-era quantum computers.

The project will specifically address scheduling problems, which are among the best-known and most pervasive types of combinatorial optimization problems across numerous industries, as well as some of the most challenging to solve.

In November 2023, we were awarded Phase 2 of the DARPA Quantum Benchmarking Program to develop benchmarks for quantum application performance on large-scale quantum computers.

The goal of the DARPA Benchmarking Program is to create key quantum computing metrics for fault tolerant quantum computing, make those metrics testable, and estimate the required quantum and classical resources needed to reach critical performance thresholds.

Rigetti was awarded Phase 1 in March 2022.

The key output of Phase 1 of this program was the development of a resource estimation framework to provide insight into the requirements of a superconducting quantum computing system necessary for solving large-scale, complex problems.

Phase 2 is expected to entail refining and optimizing our estimates for selected utility-scale problems, delivering new upper bounds on these requirements.

Another anticipated benefit of this resource estimation framework is to enable a cost benefit analysis into whether the resources needed to run a quantum application will be met by the value of solving the particular problem.

A challenge in developing quantum algorithms is understanding how a problem will scale, and at what point a dataset is large or complex enough to benefit from the unique properties of quantum computing.

Estimating the amount of time, the number of qubits, and the energy required could accelerate the work towards designing an optimized algorithm.

Phase 2 is expected to be heavily focused on researching fault-tolerant quantum applications.

Of particular interest are dynamical chemistry simulations and modeling the dynamics of quantum systems.

Machine Learning

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The potential market opportunity for machine-learning is currently estimated at $26 billion with expected compound annual growth rates through 2030 of 36%, according to market research from Fortune Business Insights.

Boston Consulting Group projects that machine learning applications with fully fault tolerant quantum computers could produce $150 billion to $220 billion in annual potential value creation for end users and technology providers.

Boston Consulting Group projects that machine learning applications with fully fault tolerant quantum computers could produce $150 billion to $220 billion globally in annual potential value creation for end users and technology providers by 2050.

At the core of any machine learning application is a series of computations, typically expressed in linear algebra, applied to vast amounts of data in order to do things such as reliably classifying objects and making data-driven predictions.

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● Defense and intelligence - for reliably enhancing low resolution satellite imagery into high resolution photography.

In 2022, we previously partnered with researchers at a U.S.

government agency on a generative modeling application for weather forecasting.

In this instance, we leveraged a combination of classical and QML techniques to produce high-quality synthetic weather radar data.

Meteorological scoring metrics for storm prediction were in some cases augmented using the QML relative to the purely classical implementation.

With additional refinement to the underlying methods, combined with the current pace of scaling and performance improvements in quantum hardware, the researchers believe the synthetic weather data application could be a strong candidate for quantum advantage and operational deployment.

In addition, we believe QML for finance is poised to be an early domain of quantum advantage.

We recently partnered with Standard Chartered using QML to provide a deeper understanding of QML capabilities and the value of their datasets.

The following are examples of our work related to machine learning:

I n November 2023 we were awarded an Innovate UK grant as part of the Feasibility Studies in Quantum Computing Applications competition.

Joining us in this work are Amazon Web Services (AWS), Imperial College London, and Standard Chartered.

The consortium aims to use quantum computing to improve current classical machine learning techniques used by financial institutions to analyze complex data streams.

Financial institutions need to continuously interpret complex data streams to extract information necessary for providing accurate credit risk evaluation, managing market-making services, and predicting emissions in the context of green finance, among other things.

Classical machine learning techniques used to assist and provide insights to these services have limitations as these data streams are, in general, complex.

Combining quantum computing with classical machine learning methodology could offer more powerful resources for processing these data streams, given the potential for quantum computers to process some types of information more efficiently than with classical resources alone.

The aim of the consortium is to address the following research objectives:

(1) further develop quantum signature kernels and quantum-enhanced feature maps, (2) benchmark the results against classical machine learning methods for streamed data, and (3) build and study quantum algorithms for computing signatures and signature kernels for long and high-dimensional data streams efficiently.

In October 2023, we were awarded an Innovate UK grant as part of the Feasibility Studies in Quantum Computing Applications competition.

Joining us in this work is HSBC, the Quantum Software Lab (QSL) based at the University of Edinburgh, and the National Quantum Computing Centre (NQCC).

Together, the consortium aims to enhance existing anti-money laundering techniques by using quantum machine learning techniques with the goal of improving the performance of current-state-of-the-art machine learning algorithms.

Money laundering poses a significant threat to financial institutions and society.

Machine learning technology has the power to detect and prevent financial crime by flagging suspicious transactions and adapting to ever-changing criminal behavior.

Quantum computing has the potential to enhance existing classical computing workflows, and in turn could offer improved machine learning methods.

In this work, the consortium will aim to extend current anomaly detection quantum machine learning models to detect anomalous behavior indicating money laundering.

Classical computers have been used for decades in critical applications that model real-world processes or systems in order to study their behaviors over time.

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We have several active partnerships with clients developing simulations of quantum mechanical systems.

One such partnership is with Astex Pharmaceuticals, a United Kingdom-based company, which is working with our quantum computers on approaches that may speed up the process of drug discovery.

We are also partnering with two U.S.

DOE agencies on simulation applications in the areas of nuclear fusion and high energy physics.

Two such partnerships are with U.S.

DOE agencies for simulation applications in the areas of nuclear fusion and high energy physics.

Our Technology

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As an example, in June 2011, the largest algorithms demonstrated on programmable, gate model quantum computers across these modalities were in the range of a few qubits.

In the ensuing ten-year period from 2011 to 2021, superconducting systems have successfully scaled up to the range of 30 to 60 or more qubits, including demonstrations of quantum supremacy.

In the ensuing eleven-year period from 2012 to 2023, superconducting systems have successfully scaled up to the range of 80 or more qubits, including demonstrations of quantum supremacy.

This rate of scaling has easily outpaced other approaches.

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This in-house fab capability has enabled us to accumulate the hands-on experience and intellectual property, including know-how, patents, and trade secrets, to produce quantum computer chips within our scalable, proprietary architecture.

Furthermore, we believe Fab-1 has enough wafer capacity to supply all of our chip needs for at least the next four years.

Furthermore, we believe Fab-1 has enough wafer capacity to supply all of our chip needs for at least the next three years.

Like all high-performance computing systems, Rigetti quantum computers require an advanced cooling system.

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fidelity advancements can be developed on the individual core processor chips, and these improvements can be rapidly integrated into scaled processors through our multi-chip integration technology.

Our commercially available 80-qubit Aspen systems typically have similar gate fidelities to its 32-qubit systems.

Significantly, our 80-qubit multi-chip processors leverage our interchip coupling technology to form an 80-qubit lattice of similar fidelity to the 40-qubit chips on which they are based.

Looking forward, we plan to combine core elements of this multi-chip scaling technology with the expected higher performance and connectivity of our next generation chips.

We currently see higher performance in test devices of our next generation core quantum processor, the Ankaa-1 84 qubit system, which we recently deployed internally within the company in March 2023 for testing.

This next-generation chip design uses tunable couplers to enable active cancellation of unwanted interactions between qubits to improve control and decrease error.

Recent tests on a 9-qubit system utilizing these new chips have demonstrated mean two-qubit gate fidelities of 98.3%, median fidelities of 98.1% and maximum fidelities of 99.6%.

Our 84-qubit Ankaa™-2 quantum system was made publicly available to customers via our QCS on December 20, 2023.

The Ankaa-2 system is based on our fourth generation chip architecture that features tunable couplers and a square lattice, enabling high fidelity 2-qubit operations compared to our previous systems.

Ankaa-2 is also our highest qubit count quantum processing unit (QPU) available to the public.

Following the internal deployment of Ankaa-1 in March 2023, we made iterative improvements through internal R&D to support enhancements to Ankaa-2.

As a result, Ankaa-2 achieved a 2% median 2-qubit gate error rate — less than half the error rate of our previous systems.

These fidelity improvements can be attributed to a variety of technology updates to the Ankaa-2 system:

● Implementation of a new chip fabrication process, leading to qubits with fewer atomic defects that would otherwise reduce quantum coherence times;

● Incorporation of new superconducting PCB technology that improves thermal performance;

● Electronics improvements that generate control signals with less noise.

Improving our median 2-qubit fidelities is a crucial part of our mission to build the world’s most powerful computers.

Useful quantum computers will need not only a large number of qubits, but also high-quality qubits.

Reaching 98% fidelity on the Ankaa-2 system based on our internal testing is the result of years of innovation and commitment from our teams across the technology stack.

We have already designed and deployed a modular architecture, tiling multiple chips together demonstrating what we believe is the way forward towards building larger systems.

We believe a densely connected square lattice with tunable couplers that allows us to control qubit interactions is the foundation for driving qubit performance.

We believe a 2.5x increase in error performance against our previous QPUs, increasing our fidelities by 3%, coupled with our scaling approach, shows that we have a promising strategy for building increasingly higher performing QPUs to help our customers solve their most pressing problems.

As development has progressed, we continue to see high two-qubit gate fidelities around 99% on test devices.

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As in conventional computing, faster gate speeds also equate to higher throughput in commercial deployment and therefore greater potential revenue opportunity.

In February 2022, we announced speed test results for Circuit layer operations per second, or CLOPS, for our Aspen 11 and Aspen-M series processors.

CLOPs is a quantum computer performance metric initially developed and published by IBM in October 2021.

Conducting tests based on 100 shots, as set forth in the original published definition, the 40-qubit Aspen-11 system demonstrated a CLOPS of 844, while the 80-qubit Aspen-M system demonstrated a CLOPS of 892.

These results suggest that our current systems perform as well or better on this CLOPS speed test as the number of qubits in the system increases.

To reflect what users can potentially expect in typical use cases, we also evaluated CLOPS using 1000 shots.

In this case, Aspen-11 performed at 7512 CLOPS and Aspen-M performed at 8333 CLOPS, demonstrating that comparable or better system speed persists at both higher shot counts and higher qubit counts.

In July and August, 2022, we successfully achieved a CLOPS performance greater than 4,000 on both our 80-qubit Aspen-M-2 system and our 40-qubit Aspen-11 system, respectively, representing a 4.5 times acceleration since February.

These speed tests were conducted using our production QCS environment.

CLOPS, characterizes quantum processing speeds inclusive of gate speeds, reprogrammability, and co-processing capabilities, among other factors.

CLOPS is calculated as M × K × S × D / time taken where:

M = number of templates = 100;

K = number of parameter updates = 10;

S = number of shots = 100 or 1000;

and D = number of QV layers = log2 QV.

Co-processing

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We rely upon a combination of protections afforded to owners of patents, copyrights, trade secrets, and trademarks, along with confidentiality and proprietary rights agreements with employees, consultants, contractors, vendors and business partners to establish and protect our intellectual property rights.

As of the date hereof, we have 165 issued and pending patents that are designed to protect our full-stack technology across hardware, software, and services.

As of the date hereof, we have 84 patents issued and 106 patents pending that are designed to protect our full-stack technology across hardware, software, and services.

These patents cover a broad range of key technology areas of the business including (i) quantum computing systems, software and access;

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Our sales and marketing efforts are focused on technology development and distribution partnerships with the leading organizations in these markets.

government, for example, the Department of Defense, the DOE and the Intelligence Community have each been making significant investments in quantum computing, and we have technology development partnerships with leading agencies and national laboratories.

We are pursuing similar arrangements with customers in other important vertical market segments, like finance, where we are developing specific expertise in several application areas and are collaborating with Nasdaq and Standard Chartered Bank.

government, for example, the Department of Defense, the DOE, AFRL and the Intelligence Community have each been making significant investments in quantum computing, and we have technology development partnerships with leading agencies and national laboratories.

We also have distribution relationships with customers like Amazon Web Services, Microsoft, ORNL and Strangeworks.

As we work to develop new generations of our hardware with the goal of continuing to scale and achieve nQA and then BQA, we anticipate increasing our investment in both sales and marketing to expand the number of enterprise companies directly licensing our QCS platform.

However, with the reorganization and reduction in force announced in February 2023, we anticipate that the costs will decrease in the near term until we achieve narrow quantum advantage, at which point we expect costs to increase.

In connection with our reorganization announced in February 2023, we reduced our investment and expenses in sales and marketing to focus our resources on technology development.

As we work to develop new generations of our hardware with the goal of continuing to scale and achieve nQA and then BQA, we anticipate increasing our investment and expenses in both sales and marketing in the future to expand the number of enterprise companies buying our QPUs and directly licensing our QCS platform.

Customers & Key Partners

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To date, we have focused on developing a range of client relationships and research partnerships with:

enterprise-sized organizations working on quantum-assisted breakthroughs in applications areas like drug discovery, network optimization, financial modeling, weather forecasting and fusion energy with organizations like Astex Pharmaceuticals, Deloitte, NASA, Nasdaq, Standard Chartered Bank, the U.S.

● Enterprise-sized organizations working on quantum-assisted breakthroughs in applications areas like drug discovery, network optimization, financial modeling, weather forecasting and fusion energy like NASA, Nasdaq, Standard Chartered Bank, HSBC, AFRL, the U.S.

DOE and certain military branches within the U.S.

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● Quantum-focused software and algorithm companies like 1Qbit, Phasecraft, Riverlane, Q-CTRL and Zapata;

Cloud service providers like Amazon Web Services, Microsoft Azure, and Strangeworks;

● Cloud service providers like Amazon Web Services and Microsoft Azure;

● We also enter into multi-year technology development partnerships with organizations that possess specialized technical expertise and strong interests in advancing the development of quantum computing (as referenced in Business - Key Technology Development Partnerships ).

These organizations include DARPA, SQMS, and Innovate UK.

During the years ended December 31, 2023 and December 31, 2022, sales to U.S.

government entities comprised 80.9% and 81.3% of the Company’s total revenue, respectively.

The quantum computing market is evolving and highly competitive.

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Our current and prospective competitors include companies engaged in the research, development, and operation of quantum computing capabilities.

Major companies now developing both quantum hardware and software include IBM, Google, Microsoft, IonQ, Quantinuum, PsiQuantum, Xanadu and ColdQuanta.

Major companies now developing both quantum hardware and software include IBM, Google, Microsoft, IonQ, D-Wave, Quantinuum, PsiQuantum, Xanadu and ColdQuanta.

In addition, because of the importance of quantum computing, most large public cloud providers and traditional chip makers are researching and investing in quantum computing initiatives, in some cases seeking to build quantum computers.

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These regulations mandate uniform policies and procedures for the administration of government funded programs.

This includes requiring compliance with eligibility and responsibility requirements, contractor qualifications, financial and reporting requirements, as well as subjecting the company audits and to other government reviews covering issues such as cost, performance, internal controls and accounting practices.

This includes requiring compliance with eligibility and responsibility requirements, contractor qualifications, financial and reporting requirements, as well as subjecting the company to audits and to other government reviews covering issues such as cost, performance, internal controls and accounting practices.

Employees & Core Values

21 unchanged sentences

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 1. Business