Investing in our securities involves a high degree of risk.
−Removed: You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K before deciding to invest in our securities.
+Added: Before you make a decision to buy our securities, in addition to the risk and uncertainties described above under “Cautionary Note Regarding Forward-Looking Statements”, you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K.
If any of the events or developments described below were to occur, our business, prospects, operating results and financial condition could suffer materially, the trading price of our securities could decline, and you could lose all or part of your investment.
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Risks Related to Our Financial Condition and Status as an Early-Stage Company
−Removed: Based on our estimates and current business plan, we expect that we will need to raise additional capital by late 2024 or early 2025 in order to continue our research and development efforts and achieve our business objectives.
+Added: Based on our estimates and current business plan, we expect that we will need to raise additional capital by early in the third quarter of 2025 in order to continue our research and development efforts and achieve our business objectives.
We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations and may need additional capital sooner than planned to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available.
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We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations.
−Removed: For example, in addition to our continuing investment in our technology roadmap we may continue to invest in the expansion of and upgrades to our Fab-1 facility.
−Removed: In addition to increased electrical utility fees going forward, we may be required to pay additional amounts in taxes, penalties or otherwise related to the electrical utility fees that were unpaid and unrecognized in prior periods as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
−Removed: We have incurred and expect to incur costs related to, among other things, the reduction in workforce that we announced in February 2023 and our recent management transitions, in addition to expenses relating to the remediation of our material weaknesses in internal controls over financial reporting.
+Added: For example, in addition to our continuing investment in our technology roadmap we continue to invest in the expansion of and upgrades to our Fab-1 facility.
+Added: We have incurred and expect to incur costs related to, among other things, remediation of our material weaknesses in internal controls over financial reporting.
The actual amounts we may be required to spend on these and other matters may be greater and more significant than our expectations.
−Removed: We believe that our existing 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.
−Removed: 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.
+Added: We believe that our existing cash, cash equivalents and marketable securities should be sufficient to meet our anticipated operating cash needs into early in the third quarter of 2025 based on our current business plan, and expectations and assumptions considering current macroeconomic conditions.
+Added: Accordingly, based on our estimates and current business plan, we expect that we will need to obtain additional capital by early in the third quarter of 2025 in order to continue our research and development efforts and achieve our business objectives.
Our operating plan may change because of factors currently unknown, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations or other transactions.
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Any funds we raise may not be sufficient to enable us to continue to implement our long-term business strategy.
−Removed: Further, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from, the continuing impacts of the COVID-19 pandemic, recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures and military conflict with Russia and Ukraine and the related sanctions imposed against Russia.
+Added: Further, our ability to raise additional capital may be adversely impacted by worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from disruptions in access to bank deposits or lending commitments due to bank failures, the military conflict with Russia and Ukraine and the related sanctions imposed against Russia and the state of war between Israel and Hamas and the related risk of a larger regional conflict.
There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.
−Removed: A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for
−Removed: our products and services and our ability to raise additional capital when needed on acceptable terms, if at all.
−Removed: If the equity and credit markets continue to deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive.
−Removed: Failure to secure any necessary financing in a timely manner and on favorable terms could impair our ability to achieve our growth strategy, could harm our financial performance and stock price and could require us to delay or abandon our business plans.
+Added: A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our products and services and our ability to raise additional capital when needed on acceptable terms, if at all.
+Added: If the equity and credit markets continue to deteriorate, it may make any necessary financing more difficult, more costly, and more dilutive.
+Added: Failure to secure any necessary financing in a timely manner and on favorable terms could impair our ability to achieve our growth strategy, could harm our financial performance and stock price, could require us to delay or abandon our business plans, and could require us to delay, limit, or substantially reduce our quantum computing development efforts.
+Added: If we are unable to obtain sufficient capital we would be unable to fund our operations and may be required to evaluate alternatives, which could include dissolving and liquidating our assets in which case we may receive less than the value at which those assets are carried on our audited financial statements, and/or seeking protection under bankruptcy laws, and a determination to file for bankruptcy could occur at a time that is earlier than when we would otherwise exhaust our cash resources, and it is unclear to what extent we would be able to pay our obligations, and, accordingly, it is further unclear whether and to what extent any resources would be available for distribution to stockholders.
+Added: This could potentially cause us to cease operations and result in a complete or partial loss of your investment in our securities.
We cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
There can be no assurance that financing will be available to us on favorable terms, or at all.
−Removed: The inability to obtain financing when needed may make it more difficult for us to operate our business or implement our growth plans and we may be required to delay, limit or substantially reduce our quantum computing development efforts.
In addition, our ability to raise additional capital through the sale of securities could be significantly impacted by the resale of our securities by holders of our securities which could result in a significant decline in the trading price of our securities and potentially hinder our ability to raise capital at terms that are acceptable to us or at all.
−Removed: We are in our early stages and have a limited operating history, which makes it difficult to forecast our future results of operations.
+Added: We are in our early stages and have a limited operating history, which makes it difficult to forecast the future results of our operations.
Our business was founded in 2013 and has operated quantum computers over the cloud since 2017.
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In addition, we have in the past changed our technology roadmap, including anticipated milestones and timing thereof.
−Removed: For example, in 2018, we announced that we planned to build and deploy a 128-qubit system over the subsequent twelve months, but have not to date built a 128-qubit system.
−Removed: In addition, in 2022 we updated our technology roadmap, including anticipated timing for the 84Q Ankaa system, the 336Q Lyra system, 1,000+ qubit system, 4,000+ qubit system and incremental milestones relating to applications, access and production, Quantum Cloud Services (“Quantum Cloud Services” or “QCS”), quantum processing units and chip fabrication.
−Removed: We revised our technology roadmap in February 2023 to reflect our updated business strategy, including our plan to first concentrate on the goal of delivering the Ankaa-1 84-qubit system, then prioritize increasing the performance of the anticipated Ankaa-1 84-qubit system by focusing efforts on improving performance with an anticipated Ankaa-2 84-qubit system, and thereafter scale to develop the anticipated Lyra 336-qubit system, and after our internal deployment of Ankaa-1 in March 2023, we further refined this plan to reflect that we plan to continue to work to improve Ankaa-1 performance before the potential external release of the system to select customers.
+Added: We have in the past changed our technology roadmap, including the anticipated milestones and timing thereof, including in each of the years ended 2018, 2022 and 2023.
We may further update the technology roadmap in the future, including anticipated milestones and anticipated timeline for milestones.
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As a result, our historical results should not be considered indicative of our future performance.
−Removed: Further, in future periods, our growth could slow or decline for a number of reasons, including but not limited to slowing demand for our Quantum Cloud Services (“Quantum Cloud Services” or “QCS”), increased competition, changes to technology, inability to scale up or improve performance of our technology, a decrease in the growth of the market, or our failure, for any reason, to continue to take advantage of growth opportunities.
+Added: Further, in future periods, our growth could slow or decline for a number of reasons, including but not limited to slowing demand for our QCS, increased competition, changes to technology, inability to scale up or improve performance of our technology, a decrease in the growth of the market, or our failure, for any reason, to continue to take advantage of growth opportunities.
We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries.
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We have a history of operating losses and expect to incur significant expenses and continuing losses for the foreseeable future.
−Removed: We incurred net losses of $71.5 million and $41.7 million for the year ended December 31, 2022 and the twelve months ended December 31, 2021, respectively, and $38.2 million for the eleven months ended December 31, 2021.
+Added: We incurred net losses of $75.1 million and $71.5 million for the years ended December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2023, we had an accumulated deficit of $353.8 million.
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Even with significant production, our services may never become profitable.
−Removed: We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things, continue to incur significant expenses in connection with the design, development and manufacturing of our quantum computers;
+Added: We may incur significantly higher losses in future periods as we, among other things, continue to incur significant expenses in connection with the design, development and manufacturing of our quantum computers;
and as we expand our research and development activities;
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We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
−Removed: If we are unable to achieve and/or sustain profitability, or if we are unable to achieve the growth that we expect from these investments, it could have a material effect on our business, financial condition or results of operations.
+Added: If we are unable to achieve and/or sustain profitability, or if we are unable to achieve the growth that we expect from these investments, it could have a material adverse effect on our business, financial condition or results of operations.
Our business model is unproven and may never allow us to cover our costs.
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and global financial markets, an increase in interest rates or an increase in the cost of equity financing by market participants within the industry or other unanticipated events and circumstances, may decrease our projected cash flows or increase discount rates and could potentially result in an impairment charge.
−Removed: From time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or intangible and other long-lived assets is determined, which might have a materially adverse impact on our business operations and our financial position or results of operations.
+Added: From time to time, we may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our long-lived assets is determined, which might have a materially adverse impact on our business operations and our financial position or results of operations.
For example, in assessing our goodwill in connection with the preparation of the financial statements for the fourth quarter and fiscal year ended December 31, 2022, we concluded indicators of impairment were present due to the current macroeconomic conditions, including continued declines in our stock price.
−Removed: Based upon the results of the impairment test, we recorded a goodwill impairment charge of $5.4 million within the consolidated statement of operations.
+Added: Based upon the results of the impairment test, we recorded a goodwill impairment charge of $5.4 million within the consolidated statement of operations for the year ended December 31, 2022.
We may not be able to scale our business quickly enough to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies.
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Our ability to scale is dependent also upon components we must source from multiple industries including:
−Removed: from the electronics industry with low-noise microwave components, CPUs, GPUs, FPGAs;
−Removed: cryogenic industry with dilution refrigerators and associated helium gas products;
+Added: from the electronics and semi-conductor industries with low-noise microwave components, CPUs, GPUs, FPGAs;
+Added: from the cryogenic industry with dilution refrigerators and associated helium gas products;
and from the semiconductor industry with silicon wafers and other specialty materials, tooling and measurement equipment.
−Removed: Shortages or supply interruptions in any of these components will adversely impact our ability to deliver revenues.
+Added: Shortages or supply interruptions in any of these components will have an adverse impact on our ability to deliver revenues.
If large-scale development of our quantum computers commences, our computers may contain defects in design and manufacture that may cause them to not perform as expected or that may require repair and design changes.
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Even if the market in which we compete meets the size estimates and growth forecasted, our business could fail to grow at similar rates, if at all.
−Removed: Our growth is dependent upon our ability to successfully expand our solutions and services, retain customers, bring in new customers and retain critical talent.
+Added: Our growth is dependent upon our ability to successfully sell quantum computers, expand our solutions and services, retain customers, bring in new customers and retain critical talent.
Unforeseen issues associated with scaling up and constructing quantum computing technology at commercially viable levels could negatively impact our business, financial condition and results of operations.
−Removed: Our growth is dependent upon our ability to successfully market and sell our quantum computing services and solutions.
+Added: Our growth is dependent upon our ability to successfully market and sell our quantum computers, and quantum computing services and solutions.
We do not have experience with the large-scale production and sale of quantum computing technology.
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Moreover, because of our unique technology, our customers will require particular support and service functions, some of which are not currently available, and may never be available.
−Removed: If we experience delays in adding such support capacity or servicing our customers efficiently, or experiences unforeseen issues with the reliability of our technology, we could overburden our servicing and support capabilities.
+Added: If we experience delays in adding such support capacity or servicing our customers efficiently, or experience unforeseen issues with the reliability of our technology, we could overburden our servicing and support capabilities.
Similarly, increasing the number of our products and services would require us to rapidly increase the availability of these services.
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This expansion will place a significant strain on our management, operational and financial resources.
−Removed: For example, the expansion of our Fab 1 facility is ongoing and we may not complete the expansion on terms originally anticipated, in a timely manner or at all, which could have a material impact on our business, financial condition or results of operations.
−Removed: Expansion will require significant cash investments and management resources and there is no guarantee that they will generate additional sales of our products or services, or that we will be able to avoid cost overruns or be able to hire additional personnel to support us.
−Removed: In addition, we will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products.
−Removed: To manage the growth of our operations and personnel, we must establish appropriate and scalable operational and financial systems, procedures and controls and establish and maintain a qualified finance, administrative and operations staff.
−Removed: The reduction in workforce that we announced in February 2023 may impair our ability to manage growth and maintain operations effectively, due to factors such as loss of institutional knowledge and expertise, employee attrition beyond our intended reduction in force, a reduction in morale among our remaining employees, greater-than-anticipated costs incurred in connection with implementing the restructuring, and the risk that we may not achieve the benefits from the restructuring to the extent or as quickly as we anticipate, all of which may have a material adverse effect on our business, results of operations or financial condition.
+Added: For example, expansion of and upgrades to our Fab 1 facility is continual and ongoing, and we may not complete the expansion and upgrades on terms originally anticipated, in a timely manner or at all, which could have a material impact on our business, financial condition or results of operations.
+Added: Expansion and upgrades require significant cash investments and management resources and there is no guarantee that they will generate additional sales of our products or services, or that we will be able to avoid cost overruns or be able to hire additional personnel to support us.
+Added: In addition, we also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products.
+Added: To manage the growth of our operations and personnel, we must establish, and maintain appropriate and scalable operational and financial systems, procedures and controls and establish and maintain a qualified finance, administrative and operations staff.
+Added: The reduction in workforce that we announced in February 2023 may impair our ability to manage growth and maintain operations effectively, due to factors such as loss of institutional knowledge and expertise, employee attrition beyond our intended reduction in force, and the risk that we may not achieve the benefits from the restructuring to the extent we anticipated, all of which may have a material adverse effect on our business, results of operations or financial condition.
We may be unable to acquire the necessary capabilities and personnel required to manage growth or to identify, manage and exploit potential strategic relationships and market opportunities.
−Removed: Our recent updates to our business plan and workforce reduction may not have the anticipated benefits and we may incur additional costs or other difficulties.
+Added: Our business plan and our 2023 workforce reduction may not have the anticipated benefits and we may incur additional costs or other difficulties.
In February 2023, we announced an updated business plan and implemented a workforce reduction.
−Removed: The objective of these initiatives is to focus our organization and its resources on nearer-term strategic priorities.
+Added: The objective of these initiatives was to focus our organization and its resources on nearer-term strategic priorities.
We believe these changes were needed to streamline our organization and reallocate our resources to better align with our current strategic goals.
−Removed: However, the changes to our business strategy and the reduction in workforce may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond our intended reduction-in-force, a reduction in morale among our remaining employees, and the risk that we may not achieve the anticipated benefits, all of which may have an adverse effect on our development activities, ability to progress our technology roadmap, and results of operations or financial condition.
+Added: However, the changes to our business strategy and the reduction in workforce may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond our intended reduction-in-force, and the risk that we may not achieve the anticipated benefits, all of which may have an adverse effect on our development activities, ability to progress our technology roadmap, and results of operations or financial condition.
We may also incur other charges, costs, future cash expenditures or impairments not currently contemplated due to events that may occur as a result of, or in connection with, the revised business plan and reduction in workforce.
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We may also discover that the reductions in workforce and cost cutting measures will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
−Removed: Moreover, there is no assurance we will be successful in our pursuit of any of our new goals.
+Added: Moreover, there is no assurance we will be successful in our pursuit of any of our goals.
Our failure to successfully accomplish any of the above activities and goals may have a material adverse impact on our business, financial condition, and results of operations.
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On March 10, 2021, we entered into a Loan and Security Agreement (as amended from time to time, the “Loan Agreement”) with Trinity Capital Inc.
−Removed: The credit facility had an available borrowing capacity of $32.0 million.
+Added: The Loan Agreement had an available borrowing capacity of $32.0 million.
As of December 31, 2023, we had total outstanding indebtedness of approximately $22.4 million consisting of outstanding borrowings under the Loan Agreement.
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● require us to use a portion of our cash flow from operations to make debt service payments instead of other purposes, thereby reducing the amount of cash flow available for future working capital, capital expenditures, acquisitions, or other general business purposes;
−Removed: expose us to the risk of increased interest rates as following the consummation of our initial public offering borrowings under the Loan Agreement are subject to interest at the greater of (i) a floating per annum rate equal to 7.5% above the prime rate, or (ii) a fixed per annum rate equal to 11.0%, also paid on a monthly basis;
+Added: ● expose us to the risk of increased interest rates and higher interest payments as borrowings under the Loan Agreement are subject to interest at the greater of (i) a floating per annum rate equal to 7.5% above the prime rate, or (ii) a fixed per annum rate equal to 11.0%, also paid on a monthly basis.
+Added: Because of this provision, we paid more for interest expense in 2023 due to increases in interest rates throughout the year;
● limit our flexibility to plan for, or react to, changes in our business and industry;
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● increase our cost of borrowing.
−Removed: The credit facility is secured by substantially all of our assets.
+Added: The Loan Agreement is secured by substantially all of our assets.
In addition, the Loan Agreement contains, and the agreements governing our future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest.
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It is uncertain if and to what extent various states will conform to current federal law.
−Removed: In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in our ownership.
+Added: In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our federal net operating loss carryforwards, federal research and development tax credit carryforwards and other tax attributes are subject to annual limitations because of prior cumulative changes in our ownership and may be further limited in the future if additional ownership changes occur.
An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
−Removed: Our ability to utilize our net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including changes in connection with the Business Combination or other transactions.
−Removed: Similar rules may apply under state tax laws.
−Removed: We have not yet determined the amount of the cumulative change in our ownership resulting from the Business Combination or other transactions, or any resulting limitations on our ability to utilize our net operating loss carryforwards and other tax attributes.
−Removed: If we earn taxable income, such limitations could result in increased future income tax liability and our future cash flows could be adversely affected.
+Added: Similar rules apply under state tax laws.
+Added: Our ability to utilize our federal net operating loss carryforwards, federal research and development tax credit carryforwards and other tax attributes to offset future taxable income or tax liabilities is limited because of prior ownership changes, including changes in connection with the Business Combination or other transactions, and may be further limited in the future if additional ownership changes occur.
+Added: See Note 19 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding our federal net operating loss carryforwards, federal research and development tax credit carryforwards and other tax attributes.
+Added: If we earn taxable income, such limitations will most likely result in increased future income tax liability and have an adverse effect on our future cash flows.
We have recorded a valuation allowance related to our net operating loss carryforwards and other deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.
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Even if we complete development and achieve volume production of our quantum computers, if the cost, accuracy, performance characteristics or other specifications of the quantum computer fall short of our expectations, our business, financial condition and results of operations would be adversely affected.
−Removed: Any future generations of hardware and software developed to demonstrate narrow quantum advantage and broad quantum advantage, and the anticipated release of an 84 qubit system and a subsequent 84 qubit system with reduced error rates, and the potential later release of a 336 qubit system, each of which is an important anticipated milestone for our technology roadmap and commercialization, may not occur on our anticipated timeline or at all.
−Removed: Our successful execution of our technology roadmap is based on the development of multiple generations of quantum computing systems, including hardware that demonstrates narrow quantum advantage and broad quantum advantage, and the anticipated release of an 84 qubit system and a subsequent 84 qubit system with error rates reduced to 1% or lower, in addition to the potential release of a 336 qubit system.
+Added: Any future generations of hardware and software developed to demonstrate narrow quantum advantage and broad quantum advantage, and the potential release of a 336 qubit system, each of which is an important anticipated milestone for our technology roadmap and commercialization, may not occur on our anticipated timeline or at all.
+Added: Our successful execution of our technology roadmap is based on the development of multiple generations of quantum computing systems, including hardware that demonstrates narrow quantum advantage and broad quantum advantage, and the potential release of a 336 qubit system, and the achievement of our targeted fidelities, each of which is an important anticipated milestone for our technology roadmap and commercialization.
The future success of our technology roadmap will depend upon our ability to continue to increase the number of qubits and decrease error rates in each subsequent generation of our quantum computer.
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If our computers fail to achieve quantum advantage, our business, financial condition and future prospects may be harmed.
−Removed: Moreover, the standards by which we measure our progress may be based on assumptions and expectations that are not accurate or that may change as quantum computing evolves.
Quantum advantage refers to the moment when a quantum computer can compute faster than traditional computers, while quantum supremacy is achieved once quantum computers are powerful enough to complete calculations that traditional supercomputers cannot perform at all.
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Quantum computing technology, including narrow quantum advantage and broad quantum advantage, may take years or decades to be realized, if ever.
−Removed: In addition, the standards by which we measure our progress may be based on assumptions and expectations that are not accurate or that may change as quantum computing evolves.
−Removed: For example, CLOPs as a speed test was originally developed by IBM in October 2021.
−Removed: To our knowledge, CLOPS as a speed test has not been investigated or verified by any independent third party.
−Removed: In addition, while we have applied CLOPs in testing the speed of our Aspen-M-2 and Aspen-11 systems, there is no guarantee that we applied the test in the same way as IBM and, as a result, any variability in the application of the test as between Rigetti, IBM or others in the industry that may apply CLOPS in the future could render CLOPS scores incomparable and actual relative performance may materially differ from reported results.
−Removed: Other than IBM, others in the industry have not announced CLOPS as a speed test.
−Removed: As a result, the speed of other competitors as measured by CLOPS is not currently known.
−Removed: In addition, the solution accuracy provided by quantum computers is another key factor, and a quantum computer that may be slower may be preferable to users if it provides a more accurate answer for certain applications.
−Removed: Moreover, the relative leads
−Removed: reflected by speed tests such as CLOPS can change as new generations of quantum computers are introduced by industry participants and, consequently, any advantages cannot be considered permanent and can be expected to change from time to time.
−Removed: Current CLOPS tests may not be indicative of the results of future tests.
If we cannot develop quantum computers that have quantum advantage, customers may not continue to purchase our products and services.
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For example, although we currently believe that quantum machine learning for finance is poised to be an early domain of quantum advantage through rapid value capture from quick integration, the risks associated with developing a product that can compute algorithms that scale efficiently to real-world size applications and will be applicable to multiple use cases and competition in creating such a product, among others, could outweigh the benefits.
−Removed: In addition, in February 2023, we announced an updated business strategy and revisions to our technology roadmap reflecting a nearer term reprioritization and focus on lower qubit systems than our prior business strategy and technology roadmap.
−Removed: We may fail to capitalize on the products, designs, sectors, or investments we choose to pursue, and our resource allocation decisions may cause us to or forego viable or more profitable products, designs, sectors or investments, which would have an adverse effect on our business, prospects and financial results.
+Added: In addition, in February 2023, we announced an updated business strategy and revisions to our technology roadmap reflecting a nearer term reprioritization and focus on higher fidelities and lower qubit systems than our prior business strategy and technology roadmap.
+Added: We may fail to capitalize on the products, designs, sectors, or investments we choose to pursue, and our resource allocation decisions may cause us to forego viable or more profitable products, designs, sectors or investments, which would have an adverse effect on our business, prospects and financial results.
The quantum computing industry is competitive on a global scale and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers.
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● new or emerging entrants seeking to develop competing technologies.
−Removed: We compete based on various factors, including technology, performance, multi-cloud availability, brand recognition and reputation, customer support and differentiated capabilities, including ease of administration and
−Removed: use, scalability and reliability, data governance and security.
+Added: We compete based on various factors, including technology, performance, multi-cloud availability, brand recognition and reputation, customer support and differentiated capabilities, including ease of administration and use, scalability and reliability, data governance and security.
Many of our competitors have substantially greater brand recognition, customer relationships, and financial, technical and other resources, including an experienced sales force and sophisticated supply chain management.
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We have historically generated most of our revenue from a limited number of customers.
−Removed: Our three largest customers, which differed by period, collectively accounted for 66% of our revenue for the fiscal year ended December 31, 2022, and 66% of our revenue for the eleven months ended December 31, 2021.
−Removed: As a consequence of the concentrated nature of our customer base, our quarterly revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any delay, reduction or cancellation of orders or services rendered or any acceleration or delay in anticipated purchases or grants and awards by our larger customers could materially affect our revenue and results of operations in any quarterly period.
−Removed: For further information regarding our customer concentration, refer to Note 2 to the notes to our audited consolidated financial statements for the year ended December 31, 2022, included elsewhere in this Annual Report on Form 10-K.
+Added: Revenue from U.S.
+Added: government entities accounted for 80.9% and 81.3% of our total revenue for the years ended December 31, 2023, and December 31, 2022, respectively.
+Added: Because of the concentrated nature of our customer base, our quarterly revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any delay, reduction or cancellation of orders or services rendered or any acceleration or delay in anticipated purchases or grants and awards by our larger customers could materially affect our revenue and results of operations in any quarterly period.
+Added: For further information regarding our customer concentration, refer to Note 18 of our audited consolidated financial statements for the years ended December 31, 2023, included elsewhere in this Annual Report on Form 10-K.
We may be unable to sustain or increase our revenue from our larger customers, grow revenues with new or other existing customers, or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers.
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federal and foreign governments and government agencies, and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts.
−Removed: We have historically derived, and expect to continue to derive,
−Removed: a significant portion of our revenue from contracts with agencies of the U.S.
+Added: We have historically derived, and expect to continue to derive, a significant portion of our revenue from contracts with agencies of the U.S.
federal and foreign governments, either directly by us or through other government contractors.
−Removed: In the year ended December 31, 2022 and the eleven months ended December 31, 2021, sales to government entities comprised 81.3% and 80.0% of our total revenue, respectively.
+Added: For the year ended December 31, 2023 and 2022, respectively, sales to government entities comprised 80.9% and 81.3% of our total revenue, respectively.
Contracts with government agencies are subject to a number of challenges and risks.
The bidding process for government contracts can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate revenue.
−Removed: We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts.
+Added: We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers with rights, many of which are not typically found in commercial contracts.
In addition, our perceived relationship with the U.S.
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● Increased or unexpected costs or unanticipated delays caused by other factors outside of our control.
−Removed: For example, following the second quarter 2022, we announced that we anticipate lower-than-expected new government contract opportunities and what we believe to be slower than anticipated timing of government funding and appropriations with respect to relevant projects in 2022.
+Added: For example, following the second quarter 2022, we experienced lower-than-expected new government contract opportunities and slower than anticipated timing of government funding and appropriations with respect to relevant projects in 2022.
Any such of the foregoing events or activities, among others, could cause governments and governmental agencies to delay or refrain from entering into contracts with us and/or purchasing our computers in the future, reduce the size or timing of payments with respect to our services to, or purchases from, existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
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In addition, our suppliers could discontinue selling products at any time for reasons that may or may not be in our control or the suppliers’ control, including shortages of raw materials, environmental and social supply chain issues, pandemic, labor disputes or weather conditions.
−Removed: Disruptions in transportation lines or the ongoing military conflict involving Russia and Ukraine may also cause global supply chain issues that affect us or our suppliers.
+Added: Disruptions in transportation lines or the ongoing military conflict involving Russia and Ukraine or the state of war between Israel and Hamas may also cause global supply chain issues that affect us or our suppliers.
We generally have multiple sources of supply, however, in some cases, materials are provided by a single supplier.
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In addition, we expect that larger cryogenic refrigerators required in connection with the potential development of systems greater than 100 qubits will be provided by a single supplier, at least for an initial period of time.
−Removed: We cannot assure that any of our suppliers or potential suppliers will have the capacity to supply larger cryogenic refrigerators on the terms, timing or scale that we expect.
+Added: We cannot assure you that any of our suppliers or potential suppliers will have the capacity to supply larger cryogenic refrigerators on the terms, timing or scale that we expect.
The loss of, or substantial decrease in the availability of, products from our suppliers, or the loss of a key supplier, temporarily or permanently, could result in a material shortage of products, which could lead to price escalations that we may be unable to offset by our prices to our customers.
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● a significant increase in the price of one or more components, including due to industry consolidation occurring within one or more component supplier markets or as a result of decreased production capacity at manufacturers;
−Removed: any reductions or interruption in supply, including disruptions on our global supply chain as a result of the COVID-19 pandemic, which we have experienced, and may in the future experience or as a result of the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia (including as a result of disruptions in global shipping, the transport of products, energy supply, cybersecurity incidents and banking systems as well as our ability to control input costs) or otherwise;
+Added: ● any reductions or interruption in supply, including disruptions on our global supply chain as a result of the ongoing military conflict between Russia and Ukraine and sanctions related thereto and the state of war between Israel and Hamas and the potential larger regional conflict) (including as a result of disruptions in global shipping, the transport of products, energy supply, cybersecurity incidents and banking systems as well as our ability to control input costs) or otherwise;
● financial problems of either manufacturers or component suppliers;
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A loss of a member of senior management, or an engineer or other key employee particularly to a competitor, could also place us at a competitive disadvantage.
−Removed: Effective succession planning is also important to our long-term success.
+Added: Effective succession planning is also important to our long-term success and may cause disruption to our business due to, among other things, diverting management’s attention away from the operations of the business or causing a deterioration to morale.
Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.
For example, our former President and Chief Executive Officer, Dr.
−Removed: Chad Rigetti, resigned in the fourth quarter of 2022 and has been replaced by our current President and Chief Executive Officer, Dr.
+Added: Chad Rigetti, resigned in the fourth quarter of 2022 and was replaced by our current President and Chief Executive Officer, Dr.
Subodh Kulkarni, following a transition period with an interim President and Chief Executive Officer.
−Removed: In addition, we recently announced the departure of our former Chief Financial Officer, Brian Sereda, and the appointment of Jeffrey Bertelsen as our new Chief Financial Officer, in addition to the departure of our former Chief Technology Officer, Michael Harburn, and promotion of David Rivas to such position.
−Removed: An inadequate transition in our management may cause disruption to our business due to, among other things, diverting management’s attention away from the operations of the business or causing a deterioration in morale.
−Removed: Furthermore, the reduction in workforce that we announced in February 2023 may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, employee attrition beyond our intended reduction in force, a reduction in morale among our remaining employees, greater-than-anticipated costs incurred in connection with implementing the restructuring, and the risk that we may not achieve the benefits from the restructuring to the extent or as quickly as we anticipate, all of which may have a material adverse effect on our business, results of operations or financial condition.
−Removed: These restructuring initiatives could place substantial demands on our management and employees, which could lead to the diversion of our management’s and employees’ attention from other business priorities.
+Added: In addition, in the first quarter of 2023, we announced the departure of our former Chief Financial Officer, Brian Sereda, and the appointment of Jeffrey Bertelsen as our current Chief Financial Officer.
+Added: Furthermore, the reduction in workforce that we announced in February 2023 may yield unintended consequences and costs, such as the loss of institutional knowledge and expertise, employee attrition beyond our intended reduction in force, and the risk that we may not achieve the benefits from the restructuring to the extent or as quickly as we anticipate, all of which may have a material adverse effect on our business, results of operations or financial condition.
In addition, we may discover that the workforce reduction and other restructuring efforts will make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel, which may require us to incur additional and unanticipated costs and expenses.
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If we fail to order sufficient quantities of product components in a timely manner, the delivery of quantum computers and related compute time to our potential customers could be delayed, which would harm our business, financial condition and operating results.
−Removed: Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations.
−Removed: We currently maintain offices and have sales personnel in the United States, the United Kingdom, Australia and Canada.
−Removed: In the year ended December 31, 2022 and the eleven months ended December 31, 2021, our non-U.S.
−Removed: revenue was approximately 15.0% and 28.9% of our total revenue, respectively.
−Removed: Depending on customer opportunities and our ability to access quantum engineering talent, we may continue to expand our international operations, which may include opening offices in new jurisdictions.
−Removed: Any additional international expansion efforts that we are undertaking and may undertake may not be successful.
−Removed: In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States or other countries where we currently operate.
−Removed: These risks include, among other things:
−Removed: unexpected costs and errors in the localization of our platform and solutions, including translation into foreign languages and adaptation for local culture, practices and regulatory requirements;
−Removed: lack of familiarity and burdens of complying with foreign laws, legal standards, privacy and cybersecurity standards, regulatory requirements, tariffs and other barriers, and the risk of penalties to our customers and individual members of management or employees if our practices are deemed to not be in compliance;
−Removed: practical difficulties of enforcing intellectual property rights in countries with varying laws and standards and reduced or varied protection for intellectual property rights in some countries;
−Removed: an evolving legal framework and additional legal or regulatory requirements for data privacy and cybersecurity, which may necessitate the establishment of systems to maintain data in local markets, requiring us to invest in additional data centers and network infrastructure, and the implementation of additional employee data privacy documentation (including locally-compliant data privacy notice and policies), all of which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business;
−Removed: unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;
−Removed: difficulties in managing systems integrators and technology partners;
−Removed: differing technology standards;
−Removed: different pricing environments, longer sales cycles, longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
−Removed: increased financial accounting and reporting burdens and complexities;
−Removed: difficulties in managing and staffing international operations including the proper classification of independent contractors and other contingent workers, differing employer/employee relationships and local employment laws;
−Removed: increased costs involved with recruiting and retaining an expanded employee population outside the United States through cash and equity-based incentive programs and unexpected legal costs and regulatory restrictions in issuing our shares to employees outside the United States;
−Removed: global political and regulatory changes that may lead to restrictions on immigration and travel for our employees;
−Removed: fluctuations in exchange rates that may decrease the value of foreign-based revenue;
−Removed: potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems, restrictions on the repatriation of earnings, and transfer pricing requirements;
−Removed: permanent establishment risks and complexities in connection with international payroll, tax and social security requirements for international employees.
−Removed: Additionally, operating in international markets also requires significant management attention and financial resources.
−Removed: We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.
−Removed: Compliance with laws and regulations applicable to our global operations also substantially increases our cost of doing business in foreign jurisdictions.
−Removed: We have limited experience in marketing, selling and supporting our platform outside of the United States.
−Removed: Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
−Removed: If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, financial condition, revenues, results of operations or cash flows will suffer.
−Removed: We may be unable to keep current with changes in government requirements as they change from time to time.
−Removed: Failure to comply with these regulations could harm our business.
−Removed: In many countries, it is common for others to
−Removed: engage in business practices that are prohibited by our internal policies and procedures or other regulations applicable to us.
−Removed: Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners and agents will comply with these laws and policies.
−Removed: Violations of laws or key control policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences or the prohibition of the importation or exportation of our solutions and could harm our business, financial condition, revenues, results of operations or cash flows.
−Removed: Our international sales and operations subject us to additional risks and costs, including the ability to engage with customers in new geographies, exposure to foreign currency exchange rate fluctuations, that can adversely affect our business, financial condition, revenues, results of operations or cash flows.
−Removed: We derive a significant portion of revenue from our customers in the United States.
−Removed: We may expand our international operations if we are able to achieve narrow or broad quantum advantage.
−Removed: However, there are a variety of risks and costs associated with our international sales and operations, which may include making additional investments prior to the proven adoption of our solutions, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.
−Removed: Furthermore, we cannot predict the rate at which our platform and solutions will be accepted in international markets by potential customers.
−Removed: We currently have sales, customer support and engineering personnel outside the United States in the United Kingdom, Australia and Canada, and have established an entity in Germany;
−Removed: however, our sales, support and engineering organization outside the United States is smaller than our U.S.
−Removed: sales organization.
−Removed: We believe our ability to attract new customers to subscribe to our platform or to attract existing customers to renew or expand their use of our platform is directly correlated to the level of engagement we obtain with the customer.
−Removed: To the extent we are unable to effectively engage with non-U.S.
−Removed: customers due to our limited sales force capacity, we may be unable to effectively grow in international markets.
−Removed: Given our international presence, we are exposed to the effects of fluctuations in currency exchange rates.
−Removed: While we have primarily transacted with customers in U.S.
−Removed: dollars, we expect to continue to generate some revenues, denominated in foreign currencies.
−Removed: Additionally, fluctuations in the value of the U.S.
−Removed: dollar and foreign currencies may make our subscriptions more expensive for international customers, which could harm our business.
−Removed: Additionally, we incur expenses for employee compensation and other operating expenses at our non-U.S.
−Removed: locations in the local currency for such locations.
−Removed: Fluctuations in the exchange rates between the U.S.
−Removed: dollar and other currencies could result in an increase to the U.S.
−Removed: dollar equivalent of such expenses.
−Removed: These fluctuations could cause our results of operations to differ from our expectations or the expectations of our investors.
−Removed: Additionally, such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.
−Removed: Our international operations may subject us to greater than anticipated tax liabilities.
−Removed: The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
−Removed: The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
−Removed: If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
−Removed: Our financial statements could fail to reflect adequate reserves to cover such a contingency.
−Removed: Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
Our quantum computing systems may not be compatible with some or all industry-standard software and hardware in the future, which could harm our business.
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If a proprietary (not open source) software toolset became the standard for quantum application development in the future by a competitor, usage of our hardware might be limited as a result which would have a negative impact on the Company.
−Removed: Similarly, if a piece of hardware became a necessary component for quantum computing (for instance, quantum networking) and we cannot integrate with, the result might have a negative impact on the Company.
+Added: Similarly, if a piece of hardware became a necessary component for quantum computing (for instance, quantum networking) and we cannot integrate with it the result might have a negative impact on the Company.
If our customers are unable to achieve compatibility between other software and hardware and our hardware, it could impact our relationships with such customers or with customers, generally, if the incompatibility is more widespread.
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Any adverse impacts from the incompatibility of our quantum computing solutions could adversely affect our business, operating results and financial condition.
−Removed: We may rely heavily on future collaborative partners and third parties to develop key, relevant algorithms and programming to make our quantum systems commercially viable.
+Added: If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborative partnerships, our future growth and development could be negatively impacted.
+Added: We rely on our current collaborative partners and third parties and may rely heavily on future collaborative partners and third parties to develop key, relevant algorithms and programming to make our quantum systems commercially viable.
We have entered into, and may enter into, strategic partnerships to develop and commercialize our current and future research and development programs with other companies to accomplish one or more of the following:
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and other adverse consequences, which may adversely affect our business.
−Removed: In the ordinary course of our business, we and the third parties upon which we rely, process proprietary, confidential, and sensitive data, including personal data, intellectual property, and trade secrets (collectively, sensitive information).
−Removed: Cyber-attacks, malicious internet-based activity, online and offline fraud, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including phishing) and other similar activities threaten the confidentiality, integrity, and availability of our
−Removed: sensitive information and information technology systems, and those of the third parties upon which we rely.
+Added: In the ordinary course of our business, we and the third parties upon which we rely, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process), proprietary, confidential, and sensitive data, including personal data, intellectual property, controlled unclassified information and trade secrets (collectively, sensitive information).
+Added: Cyber-attacks, malicious internet-based activity, online and offline fraud, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks) and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems, and those of the third parties upon which we rely.
Such threats are prevalent in the technology industry and our customers’ industries and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
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During times of war and other major conflicts, we, the third parties upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
−Removed: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
+Added: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
+Added: Remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
+Added: In addition, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
+Added: Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts.
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While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
−Removed: Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
−Removed: A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform/products/services.
We may expend significant resources or modify our business activities to try to protect against security incidents.
Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information.
−Removed: While we and our third-party cloud providers have implemented security measures designed to protect against security breaches, these measures could fail or may be insufficient, resulting in the unauthorized disclosure, modification, misuse, destruction, or loss of sensitive or confidential information.
−Removed: We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.
−Removed: Therefore, such vulnerabilities could be exploited but may not be detected until
−Removed: after a security incident has occurred.
−Removed: These vulnerabilities pose material risks to our business.
+Added: While we and our third-party cloud providers have implemented security measures designed to protect against security breaches, can be of no assurance that these measures will be effective and these measures could fail or may be insufficient, resulting in the unauthorized disclosure, modification, misuse, destruction, or loss of sensitive or confidential information.
+Added: We take steps designed to detect, mitigate, and remediate vulnerabilities, in our information systems (such as our hardware and/or software, including that of third parties upon which we rely), but we may not be able to detect and remediate all vulnerabilities on a timely basis because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature.
+Added: Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
+Added: Any unremediated vulnerabilities pose material risks to our business.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
−Removed: Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents.
+Added: Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
+Added: A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our platform, products , and services.
+Added: Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information.
+Added: In addition, applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors of security incidents.
Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
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monetary fund diversions;
+Added: diversions of management attention;
interruptions in our operations (including availability of data);
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Our results of operations have varied and may continue to vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers.
−Removed: Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, natural catastrophes, warfare, and terrorist attacks on the United States or elsewhere, could cause a decrease in business investments, including the progress on development of quantum technologies, and negatively affect the growth of our business.
+Added: Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, international trade relations, pandemics, political turmoil, natural catastrophes, warfare, and terrorist attacks on the United States or elsewhere, could cause a decrease in business investments, including the progress on development of quantum technologies, and negatively affect the growth of our business.
In addition, in challenging economic times, our current or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products and services.
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For example, recent bank failures have resulted in volatility in the capital markets.
−Removed: Similarly, the ongoing military conflict between Russia and Ukraine has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.
+Added: Similarly, the ongoing military conflict between Russia and Ukraine, and the war between Israel and Hamas, have created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets.
Any volatility and disruptions may have adverse consequences on us or the third parties on whom we rely.
−Removed: If general economic conditions were to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed and the trading price of our Common Stock could decline.
−Removed: Significant decline of stock price has caused, and may cause in the future, a triggering event for impairment testing of fair-valued assets, including goodwill and other long-lived assets.
+Added: If general economic conditions were to deteriorate or remain uncertain for an extended period, our liquidity and ability to repay our outstanding debt may be harmed and the trading price of our Common Stock could decline.
+Added: A significant decline of stock price has caused, and may cause in the future, a triggering event for impairment testing of fair-valued assets and long-lived assets.
For example, in assessing our goodwill in connection with the preparation of the financial statements for the fourth quarter and fiscal year ended December 31, 2022, we concluded indicators of impairment were present due to the current macroeconomic conditions, including continued declines in our stock price.
Based upon the results of the impairment test, we recorded a goodwill impairment charge of $5.4 million within the consolidated statement of operations for the twelve months ended December 31, 2022.
−Removed: If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive, and we could be forced to delay, reduce or eliminate our research and development programs and other efforts.
+Added: If the equity and credit markets further deteriorate, including as a result of political unrest or war, it may make any necessary financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive, and we could be forced to delay, reduce or eliminate our research and development programs and other efforts.
Increased inflation rates have and are expected to adversely affect us by increasing our costs, including labor and employee benefit costs, and costs for equipment and system components associated with system development.
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Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition.
−Removed: On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank (“SVB”) and appointed Federal Deposit Insurance Corporation (the “FDIC”) receiver.
−Removed: On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB and Signature Bank would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception.
−Removed: As of March 14, 2023, we had approximately $1.0 million of cash with SVB, our sole depositor.
−Removed: We are making arrangements to open accounts with a new financial institution and could experience disruption with customer receivables and vendor payments during the transition process.
−Removed: The majority of our other cash, cash equivalents and investments, consisting of a variety of short-term and high-credit treasury and corporate bonds and other liquid investments, is held in custodial accounts with U.S.
−Removed: Bank for which SVB Asset Management is the advisor.
−Removed: Despite our proactive measures and the measures taken by the United States federal government, there is great uncertainty in the markets regarding the stability of regional banks and
−Removed: the safety of deposits in excess of the FDIC insured deposit limits.
−Removed: The ultimate outcome of these events, and whether further regulatory actions will be taken, cannot be predicted.
−Removed: These events may have a material adverse effect on our liquidity and financial condition if our ability to access funds at SVB and our ability to transfer our other cash, cash equivalents and investments to other financial institutions are impaired.
−Removed: In addition, if in the future a financial institution in which we hold funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of such uninsured funds or be subject to a delay in accessing all or a portion of such uninsured funds.
+Added: If in the future a financial institution in which we hold funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of such uninsured funds or be subject to a delay in accessing all or a portion of such uninsured funds.
Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our operating expense obligations.
−Removed: Further, these events may make equity or debt financing more difficult to obtain, and additional equity or debt financing might not be available on reasonable terms, if at all;
−Removed: difficulties obtaining equity or debt financing could have a material adverse effect on our financial condition, as well as our ability to continue to grow our operations.
+Added: Further, these events may make financings more difficult to obtain, and additional financing might not be available on reasonable terms, if at all;
+Added: difficulties obtaining financing could have a material adverse effect on our financial condition, as well as our ability to continue to grow our operations.
If our cost and time estimates for fixed fee arrangements do not accurately anticipate the cost of servicing those arrangements, we could experience losses on these arrangements and our profitability could be reduced.
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We corrected the immaterial error in our condensed consolidated financial statements as of and for the period ended June 30, 2022 and restated our financial statements for the quarters ended March 31, 2022 and June 30, 2022 as described below, and reversed such prior correction and instead reflected such correction in the restated financial statements for the quarter ended March 31, 2022.
−Removed: In connection with the preparation of the financial statements for the third quarter of 2022, we discovered that the previously identified material weakness led to additional material errors related to the valuation of the Earn-out liability and the Private Warrant liability that affected the previously issued unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022 and June 30, 2022.
+Added: In connection with the preparation of the financial statements for the third quarter of 2022, we discovered that the previously identified material weakness led to additional material errors related to the valuation of the Earn-out liabilities and the Private Warrant liability that affected the previously issued unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022 and June 30, 2022.
These errors were corrected in the unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022 and June 30, 2022 through a restatement of previously filed financial statements for such periods.
Our management previously concluded that this material weakness in our internal control over financial reporting was due to the fact that at the time we initially identified the material weakness, we did not have sufficient accounting resources and did not have the necessary business processes and related internal controls formally designed and implemented to address the accounting and financial reporting requirements related to these complex instruments.
−Removed: This material weakness continued to exist as of December 31, 2022 due to the reasons described above and due to the shorter period of time that has elapsed since the identification of the additional errors in prior periods related to the material weakness discussed above.
−Removed: Additionally, in connection with the preparation of the financial statements for the year ended December 31, 2022 appearing elsewhere in this Annual Report on Form 10-K, we identified a material weakness in our internal control over financial reporting related to the design and operation of our overall closing and financial reporting processes, including the timely preparation of account reconciliations, effective segregation of duties, and a lack of timely review over the financial statement close process.
−Removed: We have concluded that this material weakness is due to the fact that, between the date the company went public pursuant to the Business Combination and December 31, 2022, the company had limited resources and did not have the necessary business processes and related internal controls formally designed and implemented coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee our closing and financial reporting processes.
−Removed: As a result of the foregoing, management concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the quarterly periods ended March 31, 2022, June 30, 2022, September 30, 2022 and December 31, 2022.
−Removed: Our management is in the process of undertaking a remediation plan and is taking steps to remediate the material weaknesses.
+Added: This material weakness continued to exist as of December 31, 2023 because the controls that were implemented as part of our plan to remediate this material weakness have not been operating for a sufficient period of time to allow management to conclude through testing that the controls are effective.
+Added: Additionally, in connection with the preparation of the financial statements for the year ended December 31, 2022, we identified a material weakness in our internal control over financial reporting related to the design and operation of our overall closing and financial reporting processes, including the timely preparation of account reconciliations, effective segregation of duties, particularly with respect to IT systems and a lack of timely review over the financial statement close process.
+Added: We concluded that this material weakness is due to the fact that, between the date the Company went public pursuant to the Business Combination and December 31, 2022, the Company had limited resources and did not have the necessary business processes and related internal controls formally designed and implemented coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee our closing and financial reporting processes.
+Added: This material weakness continued to exist as of December 31, 2023 because the necessary controls to remediate the material weaknesses have only been partially implemented and have not yet been sufficiently tested.
The material weaknesses will not be considered remediated until such time as management designs and implements effective controls that operate for a sufficient period of time and concludes through testing, that these controls are effective.
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Any failure to remediate the material weaknesses or otherwise develop or maintain effective controls or any difficulties encountered in their implementation or improvement could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in additional material misstatements of our annual or interim financial statements.
−Removed: In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to the listing requirements of the Nasdaq.
−Removed: For example, in connection with the identification of the material weakness related to the lack of effective review controls over the accounting for complex financial instruments as described above, we were unable to file our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 by the deadline prescribed by the SEC and, as a result, we are not eligible to utilize a Form S-3 registration statement.
−Removed: In addition, we could be
−Removed: subject to sanctions or investigations by the SEC, the Nasdaq Stock Market or other regulatory authorities as well as shareholder litigation which would require additional financial and management resources, and investors may lose confidence in our financial reporting and our stock price may decline as a result.
−Removed: Riley has the right to terminate the Purchase Agreement under specified circumstances, including if the related registration statement is unavailable for a specified period of time, including as a result of errors or missing information in our SEC filings.
−Removed: If we fail to make timely and complete filings with the SEC in the future, B.Riley may terminate the Purchase Agreement under specified circumstances.
+Added: In such a case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to the listing requirements of the Nasdaq.
+Added: In addition, we could be subject to sanctions or investigations by the SEC, the Nasdaq Stock Market or other regulatory authorities as well as shareholder litigation which would require additional financial and management resources, and investors may lose confidence in our financial reporting and our stock price may decline as a result.
As a result, our ability to obtain any additional financing, or additional financing on favorable terms, could be materially and adversely affected, which in turn, could materially and adversely affect our business, financial condition and the market value of our common stock and require us to incur additional costs to improve our internal control systems and procedures.
In addition, perceptions of the Company among customers, suppliers, lenders, investors, securities analysts and others could also be adversely affected.
−Removed: We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, its various strains or future pandemics.
−Removed: We face various risks related to epidemics, pandemics, and other outbreaks, including the recent COVID-19 pandemic, including newly discovered strains of the virus.
−Removed: In response to the COVID-19 pandemic, governments have implemented significant measures, including, but not limited to, business closures, quarantines, travel restrictions, shelter-in-place, stay-at-home and other social distancing directives, intended to control the spread of the virus.
−Removed: Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses.
−Removed: To the extent that these restrictions remain in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19 or future pandemics, there is likely to be an adverse impact on our potential customers, our employees and global economic conditions, and consumer confidence and spending, which could materially and adversely affect our operations and demand for our products.
−Removed: The spread of COVID-19 has and may continue to impact our suppliers by disrupting the manufacturing, delivery and the overall supply chain of parts required to manufacture our quantum computers.
−Removed: In addition, various aspects of our business cannot be conducted remotely, such as the fabrication of quantum processors and the assembly of our quantum computers.
−Removed: Future measures by government authorities may remain in place for a significant period of time and they are likely to adversely affect our future manufacturing plans, sales and marketing activities, business and results of operations.
−Removed: We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, suppliers, vendors and business partners.
−Removed: Due to the fluid nature of the COVID-19 pandemic, uncertainties regarding the related economic impact are likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows.
−Removed: During 2020, we scaled back our recruiting efforts to control costs and experienced weeklong onsite work stoppages due to quarantining related to the COVID-19 pandemic.
−Removed: The extent of COVID-19’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape.
−Removed: As a result, it is not currently possible to ascertain the overall impact of COVID-19 on our business.
−Removed: However, if the pandemic continues to persist as a severe worldwide health crisis, the disease could negatively impact our business, financial condition results of operations and cash flows, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
−Removed: Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business as a result of COVID-19’s global economic impact, including any recession that has occurred or may occur in the future.
Our facilities or operations could be damaged or adversely affected as a result of prolonged power outages, natural disasters and other catastrophic events.
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A significant power outage may disrupt our operations and could have a material adverse impact on our business, financial condition, results of operations and cash flows.
−Removed: Further, the British National Grid recently warned that the United Kingdom, where we have significant operations, could face planned power cuts to homes and businesses throughout the winter of 2022 and 2023 if the country is unable to import electricity from Europe and it struggles to attract enough gas imports to fuel its gas-fired power plants.
−Removed: A significant power outage could have a material adverse impact on our business, financial condition, results of operations and cash flows.
+Added: Risks Related to Our International Expansion
+Added: Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations.
+Added: We currently maintain offices and have sales personnel in the United States, the United Kingdom, Australia and Canada.
+Added: In the years ended December 31, 2023 and December 31, 2022, our non-U.S.
+Added: revenue was approximately 7.6% and 15.0% of our total revenue, respectively.
+Added: Depending on customer opportunities and our ability to access quantum engineering talent, we may continue to expand our international operations, which may include opening offices in new jurisdictions.
+Added: Any additional international expansion efforts that we are undertaking and may undertake may not be successful.
+Added: In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States or other countries where we currently operate.
+Added: These risks include, among other things:
+Added: ● unexpected costs and errors in the localization of our platform and solutions, including translation into foreign languages and adaptation for local culture, practices and regulatory requirements;
+Added: ● lack of familiarity and burdens of complying with foreign laws, legal standards, privacy and cybersecurity standards, regulatory requirements, foreign export control rules, tariffs and other barriers, and the risk of penalties to our customers and individual members of management or employees if our practices are deemed to not be in compliance;
+Added: ● practical difficulties of enforcing intellectual property rights in countries with varying laws and standards and reduced or varied protection for intellectual property rights in some countries;
+Added: ● an evolving legal framework and additional legal or regulatory requirements for data privacy and cybersecurity, which may necessitate the establishment of systems to maintain data in local markets, requiring us to invest in additional data centers and network infrastructure, and the implementation of additional employee data privacy documentation (including locally-compliant data privacy notice and policies), all of which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business;
+Added: ● unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;
+Added: ● difficulties in managing systems integrators and technology partners;
+Added: ● differing technology standards;
+Added: ● different pricing environments, longer sales cycles, longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
+Added: ● increased financial accounting and reporting burdens and complexities;
+Added: ● difficulties in managing and staffing international operations including the proper classification of independent contractors and other contingent workers, differing employer/employee relationships and local employment laws;
+Added: ● increased costs involved with recruiting and retaining an expanded employee population outside the United States through cash and equity-based incentive programs and unexpected legal costs and regulatory restrictions in issuing our shares to employees outside the United States;
+Added: ● global political and regulatory changes that may lead to restrictions on immigration and travel for our employees;
+Added: ● fluctuations in exchange rates that may decrease the value of foreign-based revenue;
+Added: ● potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems, restrictions on the repatriation of earnings, and transfer pricing requirements;
+Added: ● permanent establishment risks and complexities in connection with international payroll, tax and social security requirements for international employees.
+Added: Additionally, operating in international markets also requires significant management attention and financial resources.
+Added: We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.
+Added: Compliance with laws and regulations applicable to our global operations also substantially increases the cost of doing business in foreign jurisdictions.
+Added: We have limited experience in marketing, selling and supporting our platform outside of the United States.
+Added: Our limited experience in operating our business internationally increases the risk that any potential future expansion efforts that we may undertake will not be successful.
+Added: If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, financial condition, revenues, results of operations or cash flows will suffer.
+Added: We may be unable to keep current with changes in government requirements as they change from time to time.
+Added: Failure to comply with these regulations could harm our business.
+Added: In many countries, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or other regulations applicable to us.
+Added: Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners and agents will comply with these laws and policies.
+Added: Violations of laws or key control policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences or the prohibition of the importation or exportation of our solutions and could harm our business, financial condition, revenues, results of operations or cash flows.
+Added: Our international sales and operations subject us to additional risks and costs, including the ability to engage with customers in new geographies, exposure to foreign currency exchange rate fluctuations, that can adversely affect our business, financial condition, revenues, results of operations or cash flows.
+Added: We derive a significant portion of revenue from our customers in the United States.
+Added: We may expand our international operations if we are able to achieve narrow or broad quantum advantage.
+Added: However, there are a variety of risks and costs associated with our international sales and operations, which may include making additional investments prior to the proven adoption of our solutions, the cost of conducting our business internationally and hiring and training international employees and the costs associated with complying with local law.
+Added: Furthermore, we cannot predict the rate at which our platform and solutions will be accepted in international markets by potential customers.
+Added: We currently have sales, customer support and engineering personnel outside the United States in the United Kingdom, Australia and Canada;
+Added: however, our sales, support and engineering organization outside the United States is smaller than our U.S.
+Added: sales organization.
+Added: We believe our ability to attract new customers to purchase our QPUs or subscribe to our platform, or to attract existing customers to expand their purchase of our QPUs or to renew or expand their use of our platform is directly correlated to the level of engagement we obtain with the customer.
+Added: To the extent we are unable to effectively engage with non-U.S.
+Added: customers due to our limited sales force capacity, we may be unable to effectively grow in international markets.
+Added: Given our international presence, we are exposed to the effects of fluctuations in currency exchange rates.
+Added: While we have primarily transacted with customers in U.S.
+Added: dollars, we expect to continue to generate some revenues, denominated in foreign currencies.
+Added: Additionally, fluctuations in the value of the U.S.
+Added: dollar and foreign currencies may make our QPUs or subscriptions more expensive for international customers, which could harm our business.
+Added: Additionally, we incur expenses for employee compensation and other operating expenses at our non-U.S.
+Added: locations in the local currency for such locations.
+Added: Fluctuations in the exchange rates between the U.S.
+Added: dollar and other currencies could result in an increase to the U.S.
+Added: dollar equivalent of such expenses.
+Added: These fluctuations could cause our results of operations to differ from our expectations or the expectations of our investors.
+Added: Additionally, such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations.
+Added: Our international operations may subject us to greater than anticipated tax liabilities.
+Added: The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.
+Added: The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.
+Added: If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
+Added: Our financial statements could fail to reflect adequate reserves to cover such a contingency.
+Added: Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
Risks Related to Litigation and Government Regulation
We are subject to stringent and evolving U.S.
−Removed: state, federal and foreign laws and regulations, rules, contractual obligations, policies and other obligations related to privacy, data use and security.
+Added: state, federal and foreign laws, regulations and rules, contractual obligations, industry standards, policies and other obligations related to privacy, data use and security.
Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;
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and otherwise could adversely affect us and our business.
−Removed: In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “processing”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, and intellectual property.
+Added: In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process”) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, and intellectual property.
We are, therefore, subject to numerous data privacy and security obligations, such as state and federal laws and regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations related to privacy, data use and security.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).
−Removed: In addition, several states have enacted privacy or security breach legislation requiring varying levels of consumer notification in the event of a security breach.
−Removed: For example, the California Consumer Privacy Act (“CCPA”), applies to personal information of consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and grants consumers resident in California new rights with respect to the collection of their personal data.
−Removed: The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
−Removed: In addition, the California Privacy Rights Act of 2020 (“CPRA”) expands the CCPA’s requirements, including by adding a new right for individuals to correct their personal information and establishing a new regulatory agency to implement and enforce the law.
−Removed: Several other states such as Virginia and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.
+Added: In the past few years, numerous U.S.
+Added: states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
+Added: As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.
+Added: The exercise of these rights may impact our business and ability to provide our products and services.
+Added: Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments.
+Added: These state laws allow for statutory fines for noncompliance.
+Added: For example, the California Consumer Privacy Act amended by the California Privacy Rights Act of 2020 (“CCPA”), applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
+Added: The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
+Added: Similar laws are being considered in several other states, as well as at the federal and local levels.
These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, and the third parties upon whom we rely.
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In particular, the United Kingdom’s GDPR (“UK GDPR”) imposes strict requirements for processing personal data.
−Removed: For example, under the UK GDPR, companies may face temporary or definitive bans on data processing and
−Removed: other corrective actions;
+Added: For example, under the UK GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;
fines of up to 17.5 million pounds or 4% of annual global revenue, whichever is greater;
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We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
−Removed: For example, certain privacy laws, such as the UK GDPR CCPA, require our customers to impose specific contractual restrictions on their service providers.
+Added: For example, certain privacy laws, such as the UK GDPR and CCPA, require our customers to impose specific contractual restrictions on their service providers.
We publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security.
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New tax laws, statutes, rules, regulations, or ordinances could be enacted at any time.
−Removed: For instance, the recently enacted Inflation Reduction Act imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.
+Added: For instance, the Inflation Reduction Act imposes, among other rules, a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on certain corporate stock repurchases.
Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time.
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Risks Related to Intellectual Property
−Removed: Our failure to obtain, maintain and protect our intellectual property rights could impair our ability to protect and commercialize our proprietary products and technology and cause us to lose our competitive advantage.
+Added: Any failure to obtain, maintain and protect our intellectual property rights could impair our ability to protect and commercialize our proprietary products and technology and cause us to lose our competitive advantage.
Our success depends, in significant part, on our ability to obtain, maintain, enforce and defend our intellectual property rights, including patents and trade secrets.
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The rights granted under any issued patents may not provide us with meaningful protection or competitive advantages.
−Removed: The intellectual property rights of others could bar us from licensing and exploiting any patents that issue from our pending applications, and the claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing technologies
−Removed: that are similar or that achieve results similar to ours.
+Added: The intellectual property rights of others could bar us from licensing and exploiting any patents that issue from our pending applications, and the claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours.
In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that it needs to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.
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Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.
−Removed: addition, the U.S.
+Added: In addition, the U.S.
government requires that any products embodying any of these inventions or produced through the use of any of these inventions be manufactured substantially in the United States, and some of our license agreements require that we comply with this requirement.
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government funding, the provisions of the Bayh-Dole Act may similarly apply.
−Removed: Additional Risks Related to Ownership of Our Securities
−Removed: The price of our Common Stock and Public Warrants has been and may continue to be volatile.
−Removed: The price of our Common Stock and Public Warrants has been and may continue to be volatile.
−Removed: From March 2, 2022, the date our Common Stock and Public Warrants began trading on Nasdaq, through March 22, 2023, our stock price fluctuated from a high of $11.368 to a low of $0.464, and the price of our Public Warrants fluctuated from a high of $2.20 to a low of $0.0899.
+Added: Risks related to an Investment in our Securities and other General Matters
+Added: The market price of our Common Stock and Public Warrants has been and may continue to be volatile, which could cause the value of your investment to decline.
+Added: The price of our Common Stock and Public Warrants has been and may continue to be volatile and has and may fluctuate or decline significantly in response to numerous factors, some of which are beyond our control.
+Added: The securities markets have experienced and continue to experience significant volatility.
As a result of this volatility, investors in our common stock may not be able to sell their shares at or above the prices they paid.
Further, as a result of this volatility it may be difficult for us to attract new investments, including additional offerings of our securities, on terms we consider reasonable, or at all.
−Removed: The price of our Common Stock and Public Warrants may fluctuate due to a variety of factors, including, without limitation:
+Added: In the twelve-month period ended December 31, 2023, the market price of our Common Stock varied between a high of $3.25 on August 1, 2023 and a low of $0.375 on May 3, 2023 and the market price of our Public Warrants varied between a high of $0.53 on August 2, 2023 and a low of $0.05 on April 27, 2023.
+Added: Market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our Common Stock or Public Warrants regardless of our operating performance.
+Added: Our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including:
● our ability to meet our technological milestones, including any delays;
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● variations in our operating performance and the performance of our competitors in general;
−Removed: material and adverse impact of the COVID-19 pandemic or the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia on the markets and the broader global economy;
+Added: ● material and adverse impact of the ongoing military conflict between Russia and Ukraine and sanctions related thereto and the state of war between Israel and Hamas and the potential for larger regional conflict and the broader global economy;
● actual or anticipated fluctuations in our quarterly or annual operating results;
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We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act, which could result in sanctions or other penalties that would adversely impact our business.
−Removed: As a public company, and particularly after we are no longer an “emerging growth company,” we will incur significant legal, accounting, and other expenses that we did not incur as a private company, including costs resulting from public company reporting obligations under the Securities Act or the Exchange Act, and regulations regarding corporate governance practices.
+Added: As a public company, and particularly after we are no longer an “emerging growth company,” we have and will continue to incur significant legal, accounting, and other expenses that we did not incur as a private company, including costs resulting from public company reporting obligations under the Securities Act or the Exchange Act, and regulations regarding corporate governance practices.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules of the SEC, the listing requirements of the Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
−Removed: We have begun to hire additional accounting, finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company, and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements.
−Removed: These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
−Removed: We are currently evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
−Removed: These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
−Removed: This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
−Removed: We cannot predict or estimate the amount of additional costs we will incur as a result of recently becoming a public company or the timing of such costs.
−Removed: Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.
+Added: We hired, and plan to hire in the future, additional accounting, finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company, and our management and other personnel devote a substantial amount of time towards maintaining compliance with these requirements.
+Added: These requirements have increased our legal and financial compliance costs and made some activities more time-consuming and costly.
+Added: Changes we have made and any changes we make in the future to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.
These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.
−Removed: Pursuant to Sarbanes-Oxley Act Section 404, we will be required to furnish a report by our management on our internal control over financial reporting in our Annual Reports on Form 10-K with the SEC.
−Removed: In order to continue to maintain effective internal controls to support growth and public company requirements, we will need additional financial personnel, systems and resources.
+Added: Pursuant to Sarbanes-Oxley Act Section 404, we are required to furnish a report by our management on our internal control over financial reporting in our Annual Reports on Form 10-K with the SEC.
+Added: In order to achieve effective internal controls to support growth and public company requirements, we will need additional financial personnel, systems and resources.
However, while we remain an emerging growth company, we are not required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
−Removed: To achieve compliance with Sarbanes-Oxley Act Section 404 within the prescribed period, we will be engaged in a process to enhance our documentation and evaluate our internal control over financial reporting, which is both costly and challenging.
−Removed: In this regard, we will need to
−Removed: continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting.
−Removed: Despite our efforts, there is a risk that we will not be able to conclude in the future, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Sarbanes-Oxley Act Section 404.
+Added: To achieve compliance with Sarbanes-Oxley Act Section 404, we have engaged in a process to enhance our documentation and evaluate our internal control over financial reporting, which was both costly and challenging.
+Added: Despite our efforts, we have not been able to conclude, and there is a risk that we will not be able to conclude in the future, that our internal control over financial reporting is effective as required by Sarbanes-Oxley Act Section 404.
We have identified material weaknesses with respect to our internal control over financial reporting.
+Added: In this regard, we will need to continue to dedicate internal and external resources, continue steps to improve control processes as appropriate, and validate through testing that controls are functioning as documented.
See We have identified material weaknesses in our internal control over financial reporting related to the lack of effective review controls over the accounting for complex financial instruments and to the design and operation of our overall closing and financial reporting processes, and we may identify additional material weaknesses in the future.
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Our management team may not successfully or efficiently manage the transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors.
−Removed: These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of the business, which could adversely affect our business, financial condition, and results of operations.
+Added: These obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of the business, which could adversely affect our business, financial condition, and results of operations.
Concentration of ownership among our executive officers, directors and their respective affiliates may limit other stockholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over us.
Our current executive officers and directors and their respective affiliates beneficially own, in the aggregate, approximately 16.3% of our outstanding Common Stock as of March 1, 2024.
−Removed: This significant concentration of ownership may have a negative impact on the trading price for our Common Stock because investors often perceive disadvantages in owning stock in companies where there is a concentration of ownership in a small
−Removed: number of stockholders.
+Added: This significant concentration of ownership may have a negative impact on the trading price for our Common Stock because investors often perceive disadvantages in owning stock in companies where there is a concentration of ownership in a small number of stockholders.
In addition, these stockholders will be able to exercise influence over all matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of us or our assets.
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If analysts cease coverage of us, the market price and volume for our securities could be adversely affected.
−Removed: There can be no assurance that we will regain compliance with the continued listing standards of Nasdaq.
−Removed: If we fail to cure our current deficiency and regain compliance with the listing requirements of the Nasdaq Capital Market or fail to comply with such listing requirements in the future or fail to cure any future deficiencies, we may be delisted and the price of our common stock and our ability to access the capital markets would be negatively impacted.
+Added: There can be no assurance that we will maintain compliance with the continued listing standards of Nasdaq.
+Added: If we fail to maintain compliance with the listing requirements of the Nasdaq Capital Market or fail to cure any future deficiencies, we may be delisted and the price of our common stock and our ability to access the capital markets would be negatively impacted.
Our common stock is currently listed for quotation on the Nasdaq Capital Market.
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● net income from continuing operations of $500,000.
−Removed: On January 25, 2023, we received a letter from the Listing Qualifications Department of Nasdaq, indicating that, based on the closing bid price for the previous 30 consecutive business days, the listing of our common stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) to maintain a minimum bid price of $1.00 per share (the “Bid Price Rule”).
−Removed: Under Nasdaq Listing Rule 5810(c)(3)(A), we were given a period of 180 calendar days, or until July 24, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Rule.
−Removed: If at any time during this 180-day period the closing bid price of our common stock is at least $1.00 for a minimum of ten consecutive business days, we will regain compliance.
−Removed: If we are unable to regain compliance before the Compliance Date, we may be eligible for an additional 180 calendar days to satisfy the Bid Price Rule.
−Removed: To qualify, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market with the exception of the Bid Price Rule, and will need to provide written notice of our intention to cure the deficiency during such additional compliance period, by effecting a reverse stock split, if necessary.
−Removed: However, if it appears to Nasdaq staff that we will not be able to cure the deficiency, or if we are otherwise not eligible for the additional compliance period, and we do not regain compliance by the Compliance Date, the Nasdaq Capital Market will provide written notification to us that our common stock is subject to delisting.
−Removed: At that time, we may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.
−Removed: However, there can be no assurance that, if the Company does appeal the delisting determination by Nasdaq to the panel, such appeal would be successful.
−Removed: There can be no assurance that we will be able to regain compliance with respect to the current deficiency including by effecting a reverse share split, or that we will be able to maintain compliance with the Nasdaq Capital Market continued listing requirements in the future or regain compliance with respect to any future deficiencies.
+Added: In January 2023 we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market, LLC, indicating that, based on the closing bid price for the previous 30 days, the listing of our Common Stock was not in compliance with Nasdaq Listing Rule 5550(a)(2) to maintain a minimum bid price of $1.00 per share.
+Added: While we regained compliance in July 2023, there can be no assurance that we will be able to maintain compliance with the Nasdaq Capital Market continued listing requirements in the future or regain compliance with respect to any future deficiencies.
This could impair the liquidity and market price of our common stock.
−Removed: In addition, the delisting of our common stock from a national exchange would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of our common stock as a result of that delisting would adversely affect our ability to raise capital on terms acceptable to us, or at all.
−Removed: We intend to actively monitor the closing bid price of our listed Common Stock and, as appropriate, will consider available options to resolve the deficiency and regain compliance with the Bid Price Rule, including potentially seeking to effect a reverse share split, if necessary.
+Added: In addition, the delisting of our common stock from a national exchange would have a material adverse effect on our access to capital markets, and any limitation on market liquidity or reduction in the price of our common stock because of that delisting would adversely affect our ability to raise capital on terms acceptable to us, or at all.
“Penny stock” rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our securities.
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These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock.
−Removed: Pursuant to registration rights we have with certain holders of our securities, we filed a resale shelf registration statement covering the resale of up to an aggregate of 96,941,181 shares of our Common Stock, which was declared effective on June 1, 2022.
−Removed: We have also agreed to register the resale of 1,000,000 shares of our Common Stock issued or issuable upon exercise of the Ampere Warrant.
−Removed: As of March 1, 2023, the number of shares of our Common Stock that have been registered for resale by holders represented approximately 61.58% of our shares outstanding (after giving effect to the issuance of shares upon exercise of outstanding Public Warrants, Private Warrants, the exercise or settlement of outstanding warrants, options or restricted stock units of Legacy Rigetti assumed in the Business Combination and exercise of the Ampere Warrant in full).
+Added: Pursuant to registration rights we have with certain holders of our securities, we filed a resale shelf registration statement covering the resale of up to an aggregate of 96,941,181 shares of our Common Stock.
+Added: We also filed a resale registration statement covering the resale of 500,000 shares of our Common Stock that were issued upon exercise of the Ampere Warrant.
+Added: As of March 1, 2024, the number of shares of our Common Stock that have been registered for resale by these holders represented approximately 54.6% of our shares outstanding (after giving effect to the issuance of shares upon exercise of outstanding Public Warrants, Private Warrants, the exercise or settlement of outstanding warrants, options or restricted stock units of Legacy Rigetti assumed in the Business Combination and the 500,000 Ampere Shares).
In addition, on August 11, 2022, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B.
Riley Principal Capital II, LLC (“B.
−Removed: Pursuant to the Purchase Agreement, subject to the satisfaction of the conditions set forth in the Purchase Agreement, we have the right to sell shares of our common stock in an aggregate amount up to the lesser of (i) $75.0 million and (ii) an amount not to exceed 23,648,889 shares of our common stock, subject to certain limitations and conditions.
−Removed: We filed a registration statement on Form S-1 under the Securities Act to register the resale of shares of common stock sold pursuant to the Purchase Agreement, which became effective on September 14, 2022.
+Added: Pursuant to the Purchase Agreement, subject to the satisfaction of the conditions set forth in the Purchase Agreement, we had the right to sell shares of our common stock in an aggregate amount up to the lesser of (i) $75.0 million and (ii) an amount not to exceed 23,648,889 shares of our common stock, subject to certain limitations and conditions.
+Added: As of February 15, 2024, we had sold the maximum 23,648,889 shares allowed under the Purchase Agreement (inclusive of 171,008 shares issued to B.
+Added: Riley in 2022 as consideration for the Purchase Agreement) and received net proceeds of $33.4 million.
+Added: Accordingly, there are no shares remaining to be sold under the Purchase Agreement;
+Added: the agreement has terminated.
+Added: We filed a registration statement to register the resale of shares of common stock sold pursuant to the Purchase Agreement.
Given this substantial number of shares available for resale, the sale of shares by such holders, or the perception in the market that holders of a large number of shares intend to sell shares, could increase the volatility of the market price of our common stock or result in a significant decline in the public trading price of our common stock.
−Removed: Even if our trading price is significantly below $10.00, the offering price for
−Removed: the units offered in Supernova’s IPO, certain holders of our securities may still have an incentive to sell shares of our common stock because they purchased the shares at prices lower than the public investors or the current trading price of our common stock.
−Removed: Further, the purchase price for the shares that we may sell to B.
−Removed: Riley under our committed equity financing will fluctuate based on the price of our common stock.
−Removed: Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.
−Removed: If and when we do sell shares to B.
−Removed: Riley, after B.
−Removed: Riley has acquired the shares, B.
−Removed: Riley may resell all, some, or none of those shares at any time or from time to time in its discretion.
−Removed: Therefore, sales to B.
−Removed: Riley by us could result in substantial dilution to the interests of other holders of our common stock.
−Removed: Additionally, the sale of a substantial number of shares of our common stock to B.
−Removed: Riley, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
−Removed: The decision to sell any shares of our common stock to sell to B.
−Removed: Riley under the committed equity financing will depend on market conditions, the trading prices of our common stock and other considerations, and we cannot guarantee the extent to which we may utilize the committed equity financing.
−Removed: Future issuances of debt securities and equity securities may adversely affect us, including the market price of our Common Stock and may be dilutive to existing stockholders.
+Added: Even if our trading price is significantly below $10.00, the offering price for the units offered in Supernova’s IPO, certain holders of our securities may still have an incentive to sell shares of our common stock because they purchased the shares at prices lower than the public investors or the current trading price of our common stock.
+Added: In addition, B.
+Added: Riley may resell all, some, or none of the shares purchased from us under our prior Purchase Agreement with B.
+Added: Riley at any time or from time to time in its discretion.
+Added: Future issuances of our securities may adversely affect us, including the price of our securities and may be dilutive to existing securities holders.
We expect that significant additional capital will be needed in the near future to continue our planned operations.
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Common Stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
−Removed: The aggregate number of shares of our Common Stock initially reserved for future issuance under the Rigetti Computing, Inc.
−Removed: 2022 Equity Incentive Plan (the “2022 Plan”) is 18,332,215 shares.
−Removed: We have filed a registration statement on Form S-8 under the Securities Act, which became effective on June 10, 2022, to register the issuance of the 18,332,215 shares reserved under the 2022 Plan, the issuance of Common Stock under the Rigetti Computing, Inc.
−Removed: 2022 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), which has an initial reserve of 3,055,370 shares, the resale of up to 18,367,696 shares subject to equity awards issued under the Rigetti & Co, Inc.
−Removed: 2013 Equity Incentive Plan (the “2013 Plan”) and the resale of up to 2,053 shares subject to equity awards issued under QxBranch, Inc.
−Removed: 2018 Equity Compensation Plan (the “QxBranch Plan”).
−Removed: We have also filed post-effective amendments to this registration statement on Form S-8, which became effective on June 15, 2022 and August 19, 2022, to add “control securities” acquired by certain executive officers under, and since the filing of, the original registration statement on Form S-8.
−Removed: In addition, we may file one or more registration statements on Form S-8 under the Securities Act to register additional shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity incentive plans and employee stock purchase plan, including additional registration statements on Form S-8 to register additional shares of Common Stock pursuant to the “evergreen” provision under the 2022 Plan, which provides for an annual increase under such plan on January 1 of each year for a period of ten years commencing on January 1, 2023 and ending on (and including) January 1, 2032 by an amount equal to (i) 5% of the total number of shares of our capital stock
−Removed: outstanding on a fully diluted basis on December 31 of the preceding year or (ii) a lesser amount determined by our board of directors, and the “evergreen” provision under the Employee Stock Purchase Plan, which provides for an annual increase under such plan on January 1 of each year for a period of ten years commencing on January 1, 2023 and ending on (and including) January 1, 2032 by an amount equal to the lesser of (i) 1% of the total number of shares of our capital stock outstanding on a fully diluted basis on December 31st of the preceding calendar year, (ii) 3,055,370 shares of Common Stock or (iii) a lesser amount determined by our board of directors.
−Removed: Any such Form S-8 registration statements will automatically become effective upon filing.
−Removed: Accordingly, shares registered under such registration statements may be immediately available for sale in the open market.
+Added: We have filed registration statements on Form S-8 under the Securities Act registering the issuance of shares of Common Stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans and employee stock purchase plan.
+Added: In addition, we have filed and may file in the future one or more registration statements on Form S-8 under the Securities Act to register additional shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity incentive plans and employee stock purchase plan, including additional registration statements on Form S-8 to register additional shares of Common Stock pursuant to the “evergreen” provision thereunder.
+Added: Shares registered under these registration statements on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options and the restrictions of Rule 144 in the case of our affiliates.
Sales of a substantial number of shares of our Common Stock in the public market could occur at any time.
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● may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock;
−Removed: could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
−Removed: may adversely affect prevailing market prices for our Common Stock.
+Added: ● could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, and could result in the resignation or removal of our present officers and directors;
+Added: ● may adversely affect prevailing market prices for our securities.
+Added: Furthermore, we currently have on file with the SEC an effective shelf registration statement on Form S-3, which allows us to offer and sell up to an aggregate amount of $250.0 million of any combination of common stock, common stock or preferred stock upon conversion of debt securities, common stock upon conversion of preferred stock, or common stock, preferred stock or debt securities upon exercise of warrants from time to time, which may be dilutive to existing securities holders and could cause the price of our securities to decline.
We are currently an “emerging growth company” and “smaller reporting company” within the meaning of the Securities Act, and to the extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
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The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
−Removed: We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has
−Removed: different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
+Added: We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private
+Added: companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Furthermore, investors cannot waive compliance with the federal securities laws and rules and regulations thereunder.
−Removed: Our warrants, including our Public Warrants, Private Warrants and other warrants we have issued, are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.
+Added: Our warrants, including our Public Warrants, Private Warrants and other warrants we have issued, and our Sponsor Vesting Shares are accounted for as liabilities and the changes in value of our Warrants and Sponsor Vesting Shares could have a material effect on our financial results.
We are subject to complex securities laws and regulations and accounting principles and interpretations.
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Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our Warrants.
−Removed: As a result of the SEC Statement, Rigetti reevaluated the accounting treatment of the 8,625,000 Public Warrants and 4,450,000 Private Warrants, and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
−Removed: As a result, included in Rigetti’s balance sheet as of December 31, 2022 contained in this Annual Report on Form 10-K are derivative liabilities related to embedded features contained within our Warrants.
+Added: As a result of the SEC Statement, we reevaluated the accounting treatment of our 8,625,000 Public Warrants and 4,450,000 Private Warrants and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
+Added: As a result, included in our balance sheets as of December 31, 2023 and December 31, 2022 contained in this Annual Report on Form 10-K are derivative liabilities related to embedded features contained within our Warrants.
Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statements of operations.
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The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.
−Removed: No assurance can be given that additional guidance or new regulations or accounting principles and interpretations will not be released that would require us to reclassify our Warrants as liabilities measured at fair value, with changes in fair value reported each period in earnings and/or require a restatement of our financial statements with respect to treatment of the Warrants.
+Added: No assurance can be given that additional guidance or new regulations or accounting principles and interpretations will not be released that would require a restatement of our financial statements with respect to treatment of the Warrants or the Sponsor Vesting Shares.
Any such restatement of our financial results could, among other potential adverse effects:
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For example, in connection with the preparation of our Report on Form 10-Q for the quarterly period ended September 30, 2022, the audit committee of our board of directors, based on the recommendation of, and after consultation with, our management, and as discussed with our independent registered public accounting firm, concluded that our previously issued unaudited interim condensed consolidated financial statements for the quarters ended March 31, 2022 and June 30, 2022 could no longer be relied upon and require restatement in order to revise the volatility assumption in the valuation methodology with respect to Sponsor Vesting Shares, revise the fair value for our Private Warrants and correct an immaterial error related to the valuation of the warrant liability with respect to the warrants issued to Trinity Capital Inc., in addition to other matters.
−Removed: As a result, we filed amendments to our Reports Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022 restating our financial statements for such periods and were unable to file our Report on Form 10-Q for the quarter ended September 30, 2022 by the prescribed deadline.
−Removed: See “ We have identified material weaknesses in our internal control over financial reporting related to the lack of effective review controls over the accounting for complex financial instruments and to the design and operation of our overall closing and financial reporting processes, and we may identify additional material weaknesses in the future.
−Removed: The material weakness over accounting for complex financial instruments has resulted in errors in financial statements for prior periods.
−Removed: If we fail to remediate such material weaknesses, if we identify additional material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, it may adversely affect our ability to accurately and timely report our financial results in the future, and may adversely affect investor confidence, our reputation, our ability to raise additional capital and our business operations and financial condition .”
Our Warrants are exercisable for Common Stock, the exercise of which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
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We may be subject to securities litigation, which is expensive and could divert management attention.
−Removed: The market price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.
+Added: The market price of our Common Stock is volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation.
We may be the target of this type of litigation in the future.
Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.
−Removed: Unresolved Staff Comments.
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.