Rigetti Computing, Inc 10-Q for FY2023 Q1
Rigetti Computing, Inc. (RGTI)
About this 10-Q
Rigetti Computing, Inc filed this 10-Q on May 11, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.2M
- up 4.6% from $2.1M a year earlier
- Net loss
- $23.35M
- compared with a net loss of $17.64M a year earlier
- Diluted EPS
- -$0.19
- compared with -$0.33 a year earlier
Table of Contents
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) | |
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large Accelerated Filer |
☐ |
Accelerated Filer |
☐ | |||
☑ |
Smaller Reporting Company |
|||||
Emerging Growth Company |
||||||
Table of Contents
RIGETTI COMPUTING, INC. AND SUBSIDIARIES FORM 10-Q
TABLE OF CONTENTS
| PAGE | ||||||
| 2 | ||||||
| 5 | ||||||
| Item 1. |
Financial Statements (Unaudited) | 5 | ||||
| Condensed Consolidated Balance Sheets | 5 | |||||
| Condensed Consolidated Statements of Operations | 6 | |||||
| Condensed Consolidated Statements of Comprehensive Loss | 7 | |||||
| Condensed Consolidated Statements of Cash Flows | 8 | |||||
| Notes to Condensed Consolidated Financial Statements | 9 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 | ||||
| Item 3. |
37 | |||||
| Item 4. |
37 | |||||
| 39 | ||||||
| Item 1. |
39 | |||||
| Item 1A. |
39 | |||||
| Item 2. |
39 | |||||
| Item 3. |
39 | |||||
| Item 4. |
39 | |||||
| Item 5. |
39 | |||||
| Item 6. |
40 | |||||
| 41 | ||||||
1
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. We have based these forward-looking statements on our current expectations and projections about future events. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “goal,” “objective,” “design,” “goal,” “seek,” “target,” “should,” “could,” “will,” “would” or the negative of such terms or other similar expressions.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:
| • | the sufficiency of our cash resources, our expectation that we will need to raise additional capital by late 2024 or early 2025 and our ability to raise additional capital when needed and on attractive terms, |
| • | our ability to achieve milestones, technological advancements, including with respect to executing on our technology roadmap and developing practical applications, |
| • | the potential of quantum computing and estimated market size and market growth including with respect to our long-term business strategy for quantum computing as a service (“Quantum Computing as a Service,” or “QCaaS”), |
| • | the success of our partnerships and collaborations, |
| • | our ability to accelerate our development of multiple generations of quantum processors, |
| • | customer concentration and the risk that a significant portion of our revenue currently depends on contracts with the public sector, |
| • | the outcome of any legal proceedings that may be instituted against us or others with respect to the Business Combination (as defined herein) or other matters, |
| • | our ability to execute on our business strategy, including monetization of our products, |
| • | our financial performance, growth rate and market opportunity, |
| • | our ability to cure the current deficiency with respect to, and to regain compliance with and maintain, the listing of our common stock, par value $0.0001 per share (the “common stock”) and Public Warrants (as defined herein) on, the Nasdaq Capital Market (“Nasdaq”), and the potential liquidity and trading of such securities, |
| • | the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, our ability to grow and manage growth profitably, maintain relationships with customers and suppliers and retain our management and key employees, |
| • | costs related to operating as a public company, |
| • | our ability to remediate the material weaknesses in, and establish and maintain, effective internal controls over financial reporting; |
| • | changes in applicable laws or regulations, |
| • | the possibility that we may be adversely affected by other economic, business, or competitive factors, |
| • | the evolution of the markets in which we compete, |
| • | our ability to implement our strategic initiatives, expansion plans and continue to innovate our existing services, |
| • | unfavorable conditions in our industry, the global economy or global supply chain (including any supply chain impacts from the ongoing military conflict involving Russia and Ukraine and sanctions related thereto), including inflation and financial and credit market fluctuations, |
| • | changes in applicable laws or regulations, |
| • | our success in retaining or recruiting, or changes required in, our officers, key employees or directors, |
2
Table of Contents
| • | our estimates regarding expenses, profitability, future revenue, capital requirements and needs for additional financing, |
| • | our ability or decisions to expand or maintain our existing customer base; and |
| • | the continuing effects of the COVID-19 pandemic and macroeconomic conditions, including worsening global economic conditions, disruptions to and volatility and uncertainty in the credit and financial markets, increases in inflation and interest rates, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, on the foregoing. |
These statements reflect our current views with respect to future events, are based on assumptions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These known and unknown risks, uncertainties and other factors include, without limitation:
| • | 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. We cannot be sure that additional financing will be available. If we are unable to raise additional funding when needed and on attractive terms, we may be required to delay, limit or substantially reduce our quantum computing development efforts. |
| • | We are in our early stages and have a limited operating history, which makes it difficult to forecast our future results of operations. |
| • | We have a history of operating losses and expect to incur significant expenses and continuing losses for the foreseeable future. |
| • | Even if the market in which we compete achieves its anticipated growth levels, our business could fail to grow at similar rates, if at all. |
| • | Our ability to use net operating loss carryforwards and other tax attributes may be limited. |
| • | We have not produced quantum computers with high qubit counts and we face significant barriers in our attempts to produce quantum computers, including the need to invent and develop new technology. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail. |
| • | Any future generations of hardware, including any future generations developed to demonstrate narrow quantum advantage and broad quantum advantage and the anticipated release of an 84 qubit system, and 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. |
| • | If our computers fail to achieve quantum advantage, our business, financial condition and future prospects may be harmed. 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. |
| • | 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. |
| • | We depend on a limited number of customers for a significant percentage of our revenue and the loss or temporary loss of a major customer for any reason could harm our financial condition. |
| • | A significant portion of our revenue depends on contracts with the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business. |
| • | Our business is currently dependent upon our relationship with our cloud providers. There are no assurances that we will be able to commercialize quantum computers from our relationships with cloud providers. |
| • | We rely on access to high performance third party classical computing through public clouds, high performance computing centers and on-premises computing infrastructure to deliver performant quantum solutions to customers. We may not be able to maintain high quality business relationships and connectivity with these resources which could make it harder for us to reach customers or deliver solutions in a cost-effective manner. |
| • | We depend on certain suppliers to source products. Failure to maintain our relationship with any of these suppliers, or a failure to replace any of these suppliers, could have a material adverse effect on our business, financial position, results of operations and cash flows. |
| • | Our system depends on the use of certain development tools, supplies, equipment and production methods. If we are unable to procure the necessary tools, supplies and equipment to build our quantum systems, or are unable to do so on a timely and cost-effective basis, and in sufficient quantities, we may incur significant costs or delays which could negatively affect our operations and business. |
| • | Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs which render our quantum computing systems obsolete or inferior to other products. |
| • | We may be unable to reduce the cost of developing our quantum computers, which may prevent us from pricing our quantum systems competitively. |
3
Table of Contents
| • | The quantum computing industry is in its early stages and volatile, and if it does not develop, if it develops slower than we expect, if it develops in a manner that does not require use of our quantum computing solutions, if it encounters negative publicity or if our solution does not drive commercial engagement, the growth of our business will be harmed. |
| • | We could suffer disruptions, outages, defects and other performance and quality problems with our quantum computing systems, our production technology partners or with the public cloud, data centers and internet infrastructure on which we rely. |
| • | If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, which may adversely affect our business. |
| • | 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. The material weakness over accounting for complex financial instruments has resulted in errors in financial statements for prior periods. 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 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. |
| • | There can be no assurance that we will be able to regain compliance with the continued listing standards of Nasdaq. 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 could be negatively impacted. |
| • | Sales of our securities, or perceptions of sales, by us or holders of our securities in the public markets or otherwise could cause the market price for our securities to decline and even in such case certain holders of our securities may still have an incentive to sell our securities. |
| • | Delaware law and our Certificate of Incorporation and Bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable. |
| • | Unstable market and economic conditions, including the recent bank failure of Silicon Valley Bank, have had and may continue to have serious adverse consequences on our business, financial condition and share price. |
| • | 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. |
| • | 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. |
| • | The Warrants may never be in the money, and they may expire worthless. |
Additional discussion of the risks, uncertainties and other factors described above, as well as other risks material to our business, can be found under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. In addition, our goals and objectives are aspirational and are not guarantees or promises that such goals and objectives will be met. Should one or more of the risks or uncertainties described in this Quarterly Report on Form 10-Q, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Also, these forward-looking statements represent our plans, objectives, estimates, expectations, assumptions, and intentions only as of the date of this filing.
You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
4
Table of Contents
ITEM 1. |
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
| (In thousands, except share information) |
March 31, 2023 |
December 31, 2022 |
||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Available-for-sale |
||||||||
| Accounts receivable |
||||||||
| Prepaid expenses and other current assets |
||||||||
| Forward contract—assets |
||||||||
| Deferred offering costs |
||||||||
| |
|
|
|
|||||
| Total current assets |
||||||||
| |
|
|
|
|||||
| Property and equipment, net |
||||||||
| Operating lease – right-of-use |
||||||||
| Other assets |
||||||||
| |
|
|
|
|||||
| Total assets |
$ | $ | ||||||
| |
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Accounts payable |
$ | $ | ||||||
| Accrued expenses and other current liabilities |
||||||||
| Deferred revenue |
||||||||
| Debt – current portion |
||||||||
| Operating lease liabilities—current |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
||||||||
| |
|
|
|
|||||
| Debt – net of current portion |
||||||||
| Operating lease liabilities – noncurrent |
||||||||
| Derivative warrant liabilities |
||||||||
| Earn-out liabilities |
||||||||
| |
|
|
|
|||||
| Total liabilities |
||||||||
| |
|
|
|
|||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, par value $ |
||||||||
| Common stock, par value $ |
||||||||
| Additional paid-in capital |
||||||||
| Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total stockholders’ equity |
||||||||
| |
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | $ | ||||||
| |
|
|
|
|||||
Three Months Ended March 31, |
||||||||
| (In thousands, except per share amounts) |
2023 |
2022 |
||||||
| Revenue |
$ | $ | ||||||
| Cost of revenue |
||||||||
| |
|
|
|
|||||
| Total gross profit |
||||||||
| |
|
|
|
|||||
| Research and development |
||||||||
| Sales and marketing |
||||||||
| General and administrative |
||||||||
| Restructuring |
||||||||
| |
|
|
|
|||||
| Total operating expenses |
||||||||
| |
|
|
|
|||||
| Loss from operations |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Other income (expense), net |
||||||||
| Interest expense |
( |
) | ( |
) | ||||
| Interest income |
||||||||
| Change in fair value of derivative warrant liabilities |
( |
) | ||||||
| Change in fair value of earn-out liabilities |
( |
) | ||||||
| Transaction costs |
( |
) | ||||||
| |
|
|
|
|||||
| Total other income (expense), net |
( |
) | ||||||
| |
|
|
|
|||||
| Net loss before provision for income taxes |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Provision for income taxes |
||||||||
| |
|
|
|
|||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
| Net loss per share attributable to common stockholders – basic and diluted |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
| Weighted average shares used in computing net loss per share attributable to common stockholders -basic and diluted |
||||||||
| |
|
|
|
|||||
Three Months Ended March 31, |
||||||||
| (In thousands) |
2023 |
2022 |
||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Other comprehensive income (loss): |
||||||||
| Foreign currency translation adjustments |
( |
) | ||||||
| Unrealized gains on available-for-sale |
||||||||
| |
|
|
|
|||||
| Total other comprehensive income before income taxes |
||||||||
| Income taxes |
||||||||
| |
|
|
|
|||||
| Total other comprehensive income after income taxes |
||||||||
| |
|
|
|
|||||
| Total comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
Three Months Ended March 31, |
||||||||
(In thousands) |
2023 |
2022 |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
||||||||
Stock-based compensation |
||||||||
Change in fair value of earn-out liabilities |
( |
) | ||||||
Change in fair value of derivative warrant liabilities |
( |
) | ||||||
Change in fair value of forward contract |
( |
) | ||||||
Impairment of deferred offering costs |
||||||||
Amortization of debt issuance costs |
||||||||
Accretion of available-for-sale |
( |
) | ||||||
Accretion of debt commitment fee asset |
||||||||
Accretion of debt end-of-term |
||||||||
Non-cash lease expense |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
||||||||
Prepaid expenses and other current assets |
( |
) | ||||||
Other assets |
( |
) | ( |
) | ||||
Deferred revenue |
( |
) | ( |
) | ||||
Accounts payable |
( |
) | ||||||
Accrued expenses and other current liabilities |
||||||||
Other liabilities |
||||||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
Purchases of available-for-sale |
( |
) | ||||||
Maturities of available-for-sale |
||||||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Proceeds from Business Combination, net of transaction costs paid |
— | |||||||
Transaction costs paid directly by Rigetti |
( |
) | ||||||
Proceeds from issuance of notes payable |
||||||||
Payment on principal of notes payable |
( |
) | ||||||
Payments on deferred offering costs |
( |
) | ||||||
Payments on debt issuance costs |
( |
) | ||||||
Payment on loan and security agreement exit fees |
( |
) | ||||||
Proceeds from issuance of common stock upon exercise of stock options and warrants |
||||||||
Net cash (used in) provided by financing activities |
( |
) | ||||||
Effects of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
Net (decrease) increase in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents – beginning of period |
||||||||
Cash and cash equivalents – end of period |
$ | $ | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
Cash paid for interest |
$ | $ | ||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
Initial fair value of earn-out liability acquired in merger |
$ | $ | ||||||
Initial fair value of private placement and public warrant liability acquired in merger |
$ | $ | ||||||
Unrealized gain on short-term investments |
$ | $ | ||||||
Capitalization of deferred costs to equity upon share issuance |
$ | $ | ||||||
Purchases of property and equipment recorded in accounts payable |
$ | $ | ||||||
Purchases of property and equipment recorded in accrued expenses |
$ | $ | ||||||
| • | Former Legacy Rigetti stockholders have a controlling voting interest in the Company; |
• |
The Company’s board of directors as of immediately after the closing was comprised of eight board members, six seats occupied by previous Rigetti board members and one seat being occupied by a previous Supernova representative. The final eighth seat was filled by an individual who did not have ties to either Rigetti or Supernova pre-Business Combination; and |
| • | Legacy Rigetti management continues to hold executive management roles for the post-combination company and be responsible for the day-to-day |
(in thousands) |
||||
Cash – SNII trust and cash (net of redemption) |
$ | |||
Cash – PIPE |
||||
Cash – SNII operating account |
||||
Net proceeds from Business Combination and PIPE |
$ | |||
Common Stock—SNII Class A, outstanding prior to Business Combination |
||||
Less: redemption of SNII Class A ordinary shares |
( |
) | ||
Common Stock—SNII Class A ordinary shares |
||||
Common Stock—SNII Class B ordinary shares* |
||||
Shares issued in PIPE |
||||
Business Combination and PIPE shares |
||||
Common Stock—Legacy Rigetti** |
||||
Common Stock—exercise of Legacy Rigetti stock options immediately prior to the closing** |
||||
Common Stock—exercise of Legacy Rigetti warrants immediately prior to the closing** |
||||
Common Stock—upon conversion of Legacy Rigetti Series C preferred stock** |
||||
Common Stock—upon conversion of Legacy Rigetti Series C-1 preferred stock** |
||||
Total shares of Common Stock immediately after Business Combination |
||||
* |
Includes (i) shares of “Promote Sponsor Vesting Shares” and (ii) shares of “Sponsor Redemption-Based Vesting Shares”. |
** |
All outstanding shares of Legacy Rigetti Common Stock as of immediately prior to the Closing (including Legacy Rigetti Common Stock resulting from the Legacy Rigetti Preferred Stock Conversion), were exchanged at an exchange ratio of |
Valuation Assumptions |
March 31, 2023 |
December 31, 2022 |
March 2, 2022 |
|||||||||
Stock price |
$ | $ | $ | |||||||||
Simulated trading days |
||||||||||||
Annual volatility |
% | % | % | |||||||||
Risk-free rate |
% | % | % | |||||||||
Estimated time to expiration (years) |
||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive |
Accumulated Deficit |
Total Stockholders’ Equity (Deficit) |
||||||||||||||||||||
(In thousands) |
Shares |
Amount |
Gain (Loss) |
|||||||||||||||||||||
Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Issuance of common stock upon exercise of stock options |
— | — | — | |||||||||||||||||||||
Issuance of common stock upon exercise of common stock warrants |
— | — | — | |||||||||||||||||||||
Issuance of common stock upon release of restricted stock units |
— | — | — | — | ||||||||||||||||||||
Capitalization of deferred costs to equity upon share issuance |
( |
) | — | — | ( |
) | ||||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Foreign currency translation loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Change in unrealized loss on available-for-sale |
— | — | — | — | ||||||||||||||||||||
Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Redeemable Convertible Preferred Stock* |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Gain (Loss) |
Accumulated Deficit |
Total Stockholders’ Equity (Deficit) |
|||||||||||||||||||||||||||
(In thousands) |
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||
Balance, December 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
Issuance of common stock upon conversion of Legacy Series C and C-1 preferred stock in connection with the Business Combination (Note3) |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||
Issuance of common stock through Business Combination and PIPE Financing, net of transaction costs and derivative liabilities (Note 3) |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock upon exercise of common stock warrants |
— | — | — | — | — | |||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation gain |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balance, March 31, 2022 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
| * | Shares of legacy Redeemable Convertible Series C Preferred Stock, Redeemable Convertible Series C-1 Preferred Stock, legacy Class A Common Stock, and legacy Class B Common Stock have been retroactively restated to give effect to the Business Combination |
Three Months Ended March 31, |
||||||||
(In thousands) |
2023 |
2022 |
||||||
Collaborative research and other professional services |
$ | $ | ||||||
Access to quantum computing systems |
||||||||
| $ | $ | |||||||
Three Months Ended March 31, |
||||||||
(In thousands) |
2023 |
2022 |
||||||
Revenue recognized at a point in time |
$ | $ | ||||||
Revenue recognized over time |
||||||||
| $ | $ | |||||||
(In thousands) |
March 31, 2023 |
December 31, 2022 |
||||||
Trade receivables |
$ | $ | ||||||
Unbilled receivables |
$ | $ | ||||||
Deferred revenue |
$ | ( |
) | $ | ( |
) | ||
Three Months Ended March 31, |
||||||||
(In thousands) |
2023 |
2022 |
||||||
Balance at beginning of period |
$ | ( |
) | $ | ( |
) | ||
Deferral of revenue |
( |
) | ||||||
Recognition of deferred revenue |
||||||||
Total deferred revenue at end of period |
$ | ( |
) | $ | ( |
) | ||
March 31, 2023 |
||||||||||||||||
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
Cash equivalents |
||||||||||||||||
Money market funds |
$ | $ | $ | $ | ||||||||||||
Available-for-sale |
||||||||||||||||
U.S. treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
U.S. government agency bonds |
( |
) | ||||||||||||||
Commercial paper |
||||||||||||||||
Available-for-sale |
$ | $ | $ | ( |
) | $ | ||||||||||
December 31, 2022 |
||||||||||||||||
(In thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
Cash equivalents |
||||||||||||||||
Money market funds |
$ | $ | $ | $ | ||||||||||||
Available-for-sale |
||||||||||||||||
U.S. treasury securities |
$ | $ | $ | ( |
) | $ | ||||||||||
Corporate bonds |
( |
) | ||||||||||||||
Commercial paper |
||||||||||||||||
Available-for-sale |
$ | $ | $ | ( |
) | $ | ||||||||||
March 31, 2023 |
||||||||||||
| (In thousands) |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Assets: |
||||||||||||
| Cash equivalents: |
||||||||||||
| Money market funds |
$ | $ | $ | |||||||||
| Short-term investments: |
||||||||||||
| U.S. treasury securities |
||||||||||||
| U.S. government agency bonds |
||||||||||||
| Commercial paper |
||||||||||||
| Forward warrant agreement |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total Assets |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Liabilities |
||||||||||||
| Derivative warrant liability – Public Warrants |
$ | $ | $ | |||||||||
| Derivative warrant liability – Private Warrants |
||||||||||||
| Earn-out liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total Liabilities |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
December 31, 2022 |
||||||||||||
| (In thousands) |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Assets: |
||||||||||||
| Cash Equivalents: |
||||||||||||
| Money Market Funds |
$ | $ | $ | |||||||||
| Short-term investments: |
||||||||||||
| U.S treasury securities |
||||||||||||
| Corporate bonds |
||||||||||||
| Commercial paper |
||||||||||||
| Forward Warrant Agreement |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total Assets |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Liabilities |
||||||||||||
| Derivative warrant liability – Public Warrants |
$ | $ | $ | |||||||||
| Derivative warrant liability – Private Warrants |
||||||||||||
| Earn-out liabilities |
||||||||||||
| |
|
|
|
|
|
|||||||
| Total Liabilities |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| (in thousands) |
Derivative warrant liability – Trinity Warrants |
Derivative warrant liability – Private Warrants |
Forward Warrant Agreement |
Earn-out Liability |
||||||||||||
| Balance – December 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||
| Change in fair values |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance – March 31, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance – December 31, 2021 |
$ | |
$ | $ | $ | |||||||||||
| Initial measurement upon Business Combination March 2, 2022 (Note 3) |
||||||||||||||||
| Change in fair values |
( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Balance – March 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Options Outstanding |
Weighted Average Exercise Price Per Share |
|||||||
Outstanding, December 31, 2022 |
$ | |||||||
Granted |
||||||||
Exercised |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Expired |
||||||||
Outstanding, March 31, 2023 |
$ | |||||||
Exercisable, March 31, 2023 |
$ | |||||||
Valuation Assumptions |
Time-based Stock Option Grants |
|||
Stock price |
$ | |||
Strike price |
$ | |||
Annual volatility |
% | |||
Risk-free rate |
% | |||
Expected term (years) |
||||
Restricted stock units |
Shares |
Weighted Average Grant Date Fair Value |
||||||
Non-vested at December 31, 2022 |
$ | |||||||
Granted |
||||||||
Forfeited |
( |
) | ||||||
Vested |
( |
) | ||||||
Non-vested at March 31, 2023 |
$ | |||||||
Valuation Assumptions |
Market-based Performance RSUs |
|||
Stock price |
$ | |||
Simulated trading days |
||||
Annual volatility |
% | |||
Risk-free rate |
% | |||
Estimated time to expiration (years) |
||||
Three Months Ended March 31, |
||||||||
(In thousands) |
2023 |
2022 |
||||||
Research and development |
$ | $ | ||||||
Selling and marketing expenses |
( |
) | ||||||
General and administrative expenses |
||||||||
Total stock-based compensation expenses |
$ | $ | ||||||
(In thousands) |
March 31, 2023 |
December 31, 2022 |
||||||
Outstanding principal amount |
$ | $ | ||||||
Add: accreted liability of final payment fee |
||||||||
Less: unamortized debt discount, long-term |
( |
) | ( |
) | ||||
Less: current portion of long-term debt principal |
( |
) | ( |
) | ||||
Debt – net of current portion |
$ | $ | ||||||
Current portion of long-term debt – principal |
||||||||
Less: current portion of unamortized debt discount |
$ | ( |
) | $ | ( |
) | ||
Debt – current portion |
$ | $ | ||||||
(In thousands) |
March 31, 2023 |
December 31, 2022 |
||||||
2023 |
$ | $ | ||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
| $ | $ | |||||||
Common Stock Warrants |
||||
Stock-Based Awards—RSUs Outstanding |
||||
Stock-Based Awards—Options Outstanding |
||||
Total |
||||
Valuation Assumptions |
March 31, 2023 |
December 31, 2022 |
March 2, 2022 |
|||||||||
Stock Price |
$ | $ | $ | |||||||||
Strike Price |
$ | $ | $ | |||||||||
Volatility (annual) |
% | % | % | |||||||||
Risk-free rate |
% | % | % | |||||||||
Estimated time to expiration (years) |
||||||||||||
Dividend yield |
% | % | % | |||||||||
Valuation Assumptions |
March 31, 2022 |
|||
Stock price |
$ | |||
Strike price |
$ | |||
Annual volatility |
% | |||
Risk-free rate |
% | |||
Estimated time to expiration (years) |
||||
Dividend yield |
% | |||
March 31, 2023 |
December 31, 2022 |
|||||||
Vested Customer Warrant shares |
||||||||
Unvested Customer Warrant shares |
||||||||
Valuation Assumptions |
March 31, 2023 |
December 31, 2022 |
||||||
Holding period (in years) |
||||||||
Risk-free rate |
% | % | ||||||
Probability of the contingency occurring |
% | % | ||||||
Underlying value per share |
$ | $ | ||||||
Three Months Ended March 31 |
||||||||
2023 |
2022 |
|||||||
Customer A |
% | % | ||||||
Customer B |
% | * | ||||||
Customer C |
% | % | ||||||
Customer D |
* | % | ||||||
March 31, 2023 |
December 31, 2022 |
|||||||
Customer A |
% | % | ||||||
Customer B |
* |
% | ||||||
Customer C |
* |
% | ||||||
Customer D |
* |
* | ||||||
| * | Customer accounted for less than |
Three Months Ended March 31, |
||||||||
(In thousands) |
202 3 |
202 2 |
||||||
United States |
$ | $ | ||||||
Europe |
||||||||
Total revenue |
$ | $ | ||||||
(In thousands except per share amounts) |
Net Loss |
Weighted Average Shares Outstanding |
Per Share Amount |
|||||||||
Three Months Ended March 31, 2023 |
||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | ||||||
Dilutive effect of common equivalent shares |
— | — | — | |||||||||
Dilutive |
$ | ( |
) | $ | ( |
) | ||||||
(In thousands except per share amounts) |
Net Loss |
Weighted Average Shares Outstanding |
Per Share Amount |
|||||||||
Three Months Ended March 31, 2022 |
||||||||||||
Basic |
$ | ( |
) | $ | ( |
) | ||||||
Dilutive effect of common equivalent shares |
— | — | — | |||||||||
Dilutive |
$ | ( |
) | $ | ( |
) | ||||||
Three Months Ended March 31 |
||||||||
2023 |
2022 |
|||||||
Common Stock Warrants |
||||||||
Stock Options |
||||||||
Restricted Stock Units |
||||||||
(in thousands) |
||||
Initial restructuring charge recorded in February 2023 |
$ | |||
Payments in the three months ended March 31, 2023 |
( |
) | ||
Balance at March 31, 2023 |
$ | |||
Table of Contents
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” “will,” “continue,” “project,” “forecast,” “goal,” “should,” “could,” “would,” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those described under Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors.
For purposes of this discussion, “Rigetti,” “the Company,” “we,” “us” or “our” refer to Rigetti Computing, Inc. and its subsidiaries unless the context otherwise requires.
Overview
On March 2, 2022 (the “Closing Date”), we consummated the transactions contemplated by that certain Agreement and Plan of Merger dated as of October 6, 2021, as amended on December 23, 2021 and January 10, 2022 (as amended, the “Merger Agreement”), by and among Supernova Partners Acquisition Company II, Ltd., a Cayman Islands exempted company (“Supernova”), Supernova Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Supernova (the “First Merger Sub”), Supernova Romeo Merger Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Supernova (the “Second Merger Sub”), and Rigetti Holdings, Inc., a Delaware corporation (“Legacy Rigetti”). As contemplated by the Merger Agreement, on March 1, 2022 Supernova was domesticated as a Delaware corporation and changed its name to “Rigetti Computing, Inc.” (the “Domestication”). On the Closing Date, (i) First Merger Sub merged with and into Legacy Rigetti, the separate corporate existence of First Merger Sub ceased and Legacy Rigetti survived as a wholly owned subsidiary of Rigetti Computing, Inc. (the “Surviving Corporation” and, such merger, the “First Merger”), and (ii) immediately following the First Merger, the Surviving Corporation merged with and into the Second Merger Sub, the separate corporate existence of the Surviving Corporation ceased and Second Merger Sub survived as a wholly owned subsidiary of Rigetti Computing, Inc. and changed its name to “Rigetti Intermediate LLC” (such merger transaction, the “Second Merger” and, together with the First Merger, the “Merger”, and, collectively with the Domestication, the “PIPE Financing” (as defined below) and the other transactions contemplated by the Merger Agreement, the “Business Combination”). The closing of the Business Combination is herein referred to as “the Closing.”
We build quantum computers and the superconducting quantum processors that power them. We believe quantum computing represents one of the most transformative emerging capabilities in the world today. By leveraging quantum mechanics, we believe our quantum computers process information in fundamentally new, more powerful ways than classical computers. When scaled, it is anticipated that these systems will be poised to solve problems of staggering computational complexity at unprecedented speed.
With the goal of unlocking this opportunity, we have developed the world’s first multi-chip quantum processor for scalable quantum computing systems. We believe that this patented and patent pending, modular chip architecture is the building block for new generations of quantum processors that we expect to achieve a clear advantage over classical computers. Our long-term business model centers on revenue generated from quantum computing systems made accessible via the cloud in the form of Quantum Computing as a Service (“QCaaS’) products. However, the substantial majority of our revenues are derived from development contracts, and we anticipate this market opportunity will exist for at least the next several years as we work to ramp up our QCaaS business. Additionally, we are working to further develop a revenue stream and forging important customer relationships by entering into technology development contracts with various partners.
We are a vertically integrated company. We own and operate Fab-1, a dedicated and integrated laboratory and manufacturing facility, through which we own the means of producing our breakthrough multi-chip quantum processor technology. We leverage our chips through a full-stack product development approach, from quantum chip design and manufacturing through cloud delivery. We believe this full-stack development approach offers both the fastest and lowest risk path to building commercially valuable quantum computers.
We have been generating revenue since 2018 through partnerships with government agencies and commercial organizations; however, we have not yet generated profits. We have incurred significant operating losses since inception. Our net losses were $71.5 million and $38.2 million for the year ended December 31, 2022, and 11 months ended December 31, 2021, respectively. Our net losses were $23.4 million for the three months ended March 31, 2023. We expect to continue to incur additional losses for the foreseeable future as we invest in research, development and infrastructure consistent with our long-term business strategy. As of March 31, 2023, we had an accumulated deficit of $302.0 million.
Based on our estimates and current business plan, we expect that we will need to obtain additional capital by late 2024 or early 2025 in order to continue our research and development efforts and achieve our business objectives. There is no assurance that additional financing will be available. If we are unable to raise additional funding when needed and on attractive terms, we may be required to delay, limit or substantially reduce our quantum computing development efforts.
28
Table of Contents
In February 2023, we announced an updated business strategy, including revisions to our technology roadmap. In connection with this updated strategy, we implemented a workforce reduction beginning in February 2023 in order to focus the organization and our resources on nearer-term strategic priorities. In March 2023, we further refined our business strategy after internally deploying Ankaa-1, our 84-qubit system delivering denser qubit spacing and tunable couplers, within our company for testing. We plan to concentrate on refining the performance of Ankaa-1. Upon the anticipated external launch of the Ankaa-1 84-qubit system, which is expected to be to select customers, we plan to continue efforts to improve the performance of the system with the goal of reaching at least 98% 2-qubit gate fidelity to support the anticipated Ankaa-2 84-qubit system. We then plan to launch the anticipated Ankaa-2 84 qubit system, continuing to work to improve performance with the goal of reaching at least 99% gate fidelity on Ankaa-2. If these targets are achieved, we plan to shift focus to scaling to develop Lyra, an anticipated 336-qubit system. We believe that this business plan should enable us to concentrate our software application development strategy on what we believe to be the highest likelihood applications for demonstrating nearer term narrow quantum advantage.
The reduction in the workforce impacted approximately 50 employees or 28% of our workforce. We began implementing activities with respect to the revised business plan and reduction in workforce in February 2023. Affected employees were offered separation benefits, including severance payments and temporary healthcare coverage assistance. We incurred a $1.0 million restructuring charge in the first quarter of 2023 for severance payments and temporary healthcare coverage for effected employees. In addition to the restructuring charge, we also incurred $1.0 million of expense for contractual severance benefits related to executive officers of the Company that were terminated in the three months ended March 31, 2023.
The Business Combination and PIPE Financing
On October 6, 2021, SNII entered into the Merger Agreement by and among Supernova, First Merger Sub, Second Merger Sub, and Legacy Rigetti. On March 2, 2022, the Business Combination was consummated. While the legal acquirer in the Merger Agreement was Supernova, for financial accounting and reporting purposes under United States generally accepted accounting principles (“U.S. GAAP”), Rigetti was the accounting acquirer, and the Merger was accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of Rigetti represent the continuation of the financial statements of Legacy Rigetti in many respects. Under this method of accounting, Supernova was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Rigetti was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Rigetti (i.e., a capital transaction involving the issuance of stock by Supernova for the stock of Rigetti).
As a result of the Business Combination, all of the shares of Legacy Rigetti Common Stock outstanding immediately prior to the Closing (including Legacy Rigetti Common Stock resulting from the Legacy Rigetti preferred stock conversion) were converted into the right to receive an aggregate of 78,959,579 shares of our Common Stock, par value $0.0001 per share (“Common Stock”). Additionally, each issued and outstanding share of Supernova Class A and Class B Common Stock held by Supernova automatically converted to 20,209,462 shares of Common Stock (of which 3,059,273 shares are subject to vesting under certain conditions). Upon consummation of the Business Combination, the most significant change in our reported financial position and results of operations was an increase in cash of $205.0 million, including $225.6 million of proceeds from the Business Combination and PIPE Financing, net of transaction costs incurred by us of $20.6 million.
Additional direct and incremental transaction costs were also incurred by Rigetti in connection with the Business Combination. Generally, costs (e.g., SPAC shares) are recorded as a reduction to additional paid-in capital. Costs allocated to liability-classified instruments that are subsequently measured at fair value through earnings (e.g., certain SPAC warrants) are expensed. Rigetti’s transaction costs totaled $20.6 million, of which $19.7 million was allocated to equity-classified instruments and recorded as a reduction to additional paid-in capital, and the remaining $0.9 million was allocated to liability-classified instruments that are subsequently measured at fair value through earnings and recognized as expense in the consolidated statements of operations.
As a result of the Business Combination, we became subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, and listing standards of the Nasdaq Capital Market, which has and will necessitate us to hire additional personnel and implement procedures and processes to address such public company requirements. We expect to incur additional ongoing expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources.
Our future results of consolidated operations and financial position may not be comparable to historical results for a variety of reasons, including as a result of the Business Combination.
Macroeconomic Considerations
Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including the continuing effects of the COVID-19 pandemic, rising inflation, the U.S. Federal Reserve raising interest rates, the Russia-Ukraine war, and recent bank failures have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, including the risk factor titled “Unstable market and economic conditions have had and may continue to have serious adverse consequences on our business, financial condition and share price.”
29
Table of Contents
The World Health Organization has declared COVID-19 is no longer a global public emergency. Specifically, the COVID-19 pandemic has limited and could further limit the ability of suppliers and business partners to perform, including third-party suppliers’ ability to provide components, services and materials. We have experienced and may experience further increases in the cost of raw materials. Furthermore, we have experienced supply chain challenges, which we largely attribute to the COVID-19 pandemic and the general disruptions resulting from the ongoing conflict between Ukraine and Russia and related sanctions, as well as increases in costs of component parts, labor and raw materials, which we largely attribute to rising inflation and high demand as a result of restricted supply. We expect these increased costs to remain high from any resulting disruption to the Company’s operations post COVID-19 pandemic, the Ukraine-Russia conflict and as their respective effects persist. As global economic conditions recover from the COVID-19 pandemic, the Ukraine-Russia conflict and the related sanctions, business activity may not recover as quickly as anticipated, and it is not possible at this time to estimate the long-term impact that these and related events could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. For instance, product demand may be reduced due to an economic recession, a decrease in corporate capital expenditures, prolonged unemployment, rising inflation and interest rates, labor shortages, reduction in consumer confidence, adverse geopolitical and macroeconomic events, or any similar negative economic condition. In addition, global economic conditions have been worsening, with disruptions to, and volatility and uncertainty in, the credit and financial markets in the U.S. and worldwide resulting from the effects of COVID-19 and increases in inflation, interest rates and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures. If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted. If we are unable to raise capital when needed and on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and other efforts. However, like many other companies, we are taking actions to monitor our operations to account for the increases in the cost of capital. Specifically, this includes efforts to enhance our operational efficiency, maximize our R&D spend through strategic collaborations, and being highly selective in hiring top-tier talent.
Results of Operations—Three Months Ended March 31, 2023 Compared to Three months Ended March 31, 2022
The following table sets forth our results of operations for the periods indicated:
| Three Months Ended March 31, | 2023 vs. 2022 | |||||||||||||||
| (In thousands, except per share amounts) |
2023 | 2022 | $ Change | % Change | ||||||||||||
| Revenue |
$ | 2,201 | $ | 2,104 | 97 | 4.6 | ||||||||||
| Cost of revenue |
510 | 414 | 96 | 23.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total gross profit |
1,691 | 1,690 | 1 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Research and development |
13,707 | 13,927 | (220 | ) | (1.6 | ) | ||||||||||
| Sales and marketing |
518 | 1,475 | (957 | ) | (64.9 | ) | ||||||||||
| General and administrative |
8,495 | 11,560 | (3,065 | ) | (26.5 | ) | ||||||||||
| Restructuring |
991 | — | 991 | 100.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
23,711 | 26,962 | (3,251 | ) | (12.1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(22,020 | ) | (25,272 | ) | 3,252 | 12.9 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income (expense), net |
||||||||||||||||
| Interest expense |
(1,464 | ) | (1,205 | ) | (259 | ) | 21.5 | |||||||||
| Interest income |
1,284 | — | 1,284 | 100.0 | ||||||||||||
| Change in fair value of derivative warrant liabilities |
(873 | ) | 3,771 | (4,644 | ) | (123.2 | ) | |||||||||
| Change in fair value of earn-out liabilities |
(281 | ) | 5,991 | (6,272 | ) | (104.7 | ) | |||||||||
| Transaction costs |
— | (927 | ) | 927 | 100.0 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense), net |
(1,334 | ) | 7,630 | (8,964 | ) | (117.5 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss before provision for income taxes |
(23,354 | ) | (17,642 | ) | (5,712 | ) | (32.4 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Provision for income taxes |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (23,354 | ) | $ | (17,642 | ) | (5,712 | ) | (32.4 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
Revenue
We generate revenue through our development contracts, as well as from our QCaaS offerings and other services including training and provision of quantum computing components. Development contracts are generally multi-year, non-recurring arrangements pursuant to which we provide professional services regarding collaborative research in practical applications of quantum computing to technology and business problems within the customer’s industry or organization and assists the customer in developing quantum algorithms and applications to assist customers in areas of business interest.
Revenue increased by $0.1 million, or 4.6%, to $2.2 million in the three months ended March 31, 2023, from $2.1 million in the three months ended March 31, 2022. The increase was inconsequential and reflects typical variability in the timing of revenue recognition from development contracts.
For the next few years, we expect the majority of our revenue to be generated from development contracts. Our development contracts are typically fixed price milestone or cost share-based contracts and the timing and amounts of revenue recognized in any given quarter will vary significantly based on the delivery of the associated milestones and/or the work performed. Revenue from these contracts is expected to vary in terms of timing and size, resulting in significant quarter-to-quarter fluctuations in revenue levels. There may be some near-term reduction in revenue as we align to our updated strategy announced in February 2023.
30
Table of Contents
Cost of Revenue
Cost of revenue consists primarily of all direct and indirect cost associated with development contracts and providing QCaaS offerings and other services, including employee costs for program management and personnel associated with the delivery of goods and services to customers and sub-contract costs for work performed by third parties. Cost of revenue also includes an allocation of facility costs, depreciation and amortization directly related to the development contracts and QCaaS offerings and other services.
Cost of revenue increased by $0.1 million, or 23.2%, to $0.5 million in the three months ended March 31, 2023, from $0.4 million in the three months ended March 31, 2022. The increase was inconsequential and was mainly due to the associated $0.1 increase in revenue in the three months ended March 31, 2023. Cost revenue and gross margins can vary significantly from quarter-to-quarter due to significant variability in the pricing and terms of our development contracts.
Operating Expenses
Our operating expenses primarily consist of research and development, sales and marketing and general and administrative expenses.
Research and development
Research and development expenses include compensation, employee benefits, stock-based compensation, outside consultant fees, facility costs, depreciation and amortization, materials and components purchased for research and development. We expect research and development expenses to increase as we continue to invest in quantum computing and the superconducting quantum processors needed for quantum computers. We do not currently capitalize any research and development expenditures. Research and development costs are expensed as incurred.
Research and development expenses decreased by $0.2 million, or 1.6%, to $13.7 million in the three months ended March 31, 2023, from $13.9 million in the three months ended March 31, 2022. Increases in the three months ended March 31, 2023 for employee wages and benefits related to new employees of $1.2 million, depreciation of $0.6 million, facility costs of $0.2 million, and contractual executive severance costs of $0.3 million, were more than offset by a decrease in electricity expenses of $1.3 million, stock compensation costs of $0.8 million and material costs for research projects of $0.4 million. In the three months ended March 31, 2022, we recognized a $1.3 million out-of-period adjustment for electrical utility fees and $1.6 million of cumulative deferred stock compensation expense related to the satisfaction of a liquidity condition because of the closing of the Business Combination.
Current R&D expenditures are primarily focused on our technology roadmap and long-term goal of achieving broad quantum advantage.
Sales and Marketing
Sales and marketing expenses consist primarily of compensation including stock-based compensation, employee benefits, outside consultant’s fees, travel and marketing promotion costs.
Sales and marketing expenses decreased by $1.0 million, or 64.9%, to $0.5 million in the three months ended March 31, 2023, from $1.5 million in the three months ended March 31, 2022. The decrease was due to lower employee wages and benefits of $0.4 million related to our restructuring in February 2023, when compared to the three months ended March 31, 2022, and a $0.9 reduction in stock compensation costs related to recognition of cumulative deferred stock compensation expense in March 2022 because of the closing of the Business Combination. These decreases were partially offset by contractual executive severance costs of $0.3 million. We reduced sales and marketing headcount in February 2023 in connection with our updated business strategy and nearer term focus on our technology roadmap. We expect selling and marketing expenses to increase over the longer term, after we achieve quantum advantage, and subsequently enhance our service offerings, expand our customer base, and implement new marketing strategies.
General and Administrative
General and administrative expenses include compensation, employee benefits, stock-based compensation, insurance, facility costs, professional service fees, and other general overhead costs other than those associated with providing development contracts, QCaaS offerings and other services.
General and administrative expenses decreased by $3.1 million, or 26.5%, to $8.5 million in the three months ended March 31, 2023, from $11.6 million in the three months ended March 31, 2022. The decrease was primarily due to a reduction in stock-based compensation costs of $8.0 million and bonus expenses of $1.8 million, partly offset by a $4.0 million unfavorable change in the fair value of the Ampere Forward Warrant Agreement, higher costs for professional fees and insurance totaling $1.6 million, a $0.7 million impairment charge for deferred offering costs, and contractual executive severance costs of $0.3 million. The decline in stock-based compensation costs and bonus expenses in the three months ended March 31, 2023, when compared to the three months ended March 31, 2022, reflect the fact that we recognized $6.9 million of previously deferred stock-based compensation expenses and $2.1 million of transaction bonuses in connection with the closing of the Business Combination in March 2022. The higher costs for professional fees and insurance in the three months ended March 31, 2023 are related to being a public company for the entirety of the first quarter of 2023, compared to only one month in the first quarter of 2022.
31
Table of Contents
Restructuring
In February 2023, we announced an updated business strategy, including revisions to the Company’s technology roadmap. In connection with this updated strategy, the Company implemented a workforce reduction in order to focus the organization and its resources on nearer-term strategic priorities. The reduction in the workforce impacted approximately 50 employees or approximately 28% of the Company’s then workforce. Affected employees were offered separation benefits, including severance payments and temporary healthcare coverage assistance.
The Company began implementing activities with respect to the revised business plan, updated technology roadmap and reduction in workforce in February 2023, resulting in a $1.0 million restructuring charge in the three months ended March 31, 2023. The Company currently expects that the remaining balance in its restructuring accrual at March 31, 2023 will be paid by September 30, 2023.
Other income and (expense), net
Interest expense
Our outstanding debt carries a variable rate of interest. Interest expense increased by $0.3 million to $1.5 million in the three months ended March 31, 2023, from $1.2 million in the three months ended March 31, 2022. We paid a higher rate of interest on our debt in 2023 due to the increases in the prime interest rate that occurred throughout 2022.
Interest income
Interest income was $1.3 million in the three months ended March 31, 2023. We did not have any interest income in the three months ended March 31, 2022. The increase in interest income is due to higher rates of interest earned on available-for-sale securities and higher average invested balances, given that the Business Combination and PIPE financing closed on March 2, 2022.
Change in Fair Value of Warrant Liabilities
A discussion of the change in the fair value of warranty liabilities is included in Note 12 to our condensed consolidated financial statements for the three months ended March 31, 2023, included elsewhere in this Quarterly Report on Form 10-Q. The change in fair value of warrant liabilities was an expense of $0.9 million in the three months ended March 31, 2023, compared to income of $3.8 million in the three months ended March 31, 2022.
Change in Fair Value of Earn-Out Liability
A discussion of the change in the fair value of the earn-out liability is included in Note 4 to our condensed consolidated financial statements for the three months ending March 31, 2023, included elsewhere in this Quarterly Report on Form 10-Q. The change in fair value of our earn-out liability in the three months ended March 31, 2023 was an expense of $0.3 million, compared to income $6.0 million in the three months ended March 31, 2022.
Transaction Costs
Transaction costs allocated to liability-classified instruments must be expensed as incurred. Changes in these instruments are subsequently measured at fair value through earnings. In the three months ending March 31, 2022, transaction costs allocated to liability-classified instruments arising from the Business Combination totaled $0.9 million. No transaction costs were incurred in the three months ending March 31, 2023.
Provision for Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. We have recorded a full valuation allowance against our deferred tax assets. The Company did not record income tax expense for the three months ended March 31, 2023 or the three months ended March 31, 2022 due to the Company’s loss position and full valuation allowance.
Liquidity and Capital Resources
We have incurred net losses since inception and negative cash flows from operations. Prior to the Business Combination, we financed our operations primarily through the issuance of preferred stock, warrants, convertible notes, venture backed debt and revenues. During the year ended December 31, 2022 and the three months ended March 31, 2023, we incurred net losses of $71.5 million and $23.4 million, respectively. As of March 31, 2023, we had an accumulated deficit of $302.0 million, and we expect to incur additional losses for the foreseeable future. In connection with the closing of the Business Combination on March 2, 2022, we received net proceeds of $225.6 million. We believe that our existing balances of cash, cash equivalents and available-for-sale investments should
32
Table of Contents
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. Based on our estimates and current business plan, we expect that we will need to obtain additional capital by late 2024 or early 2025 to continue our research and development efforts and achieve our business objectives. We cannot be sure that additional financing will be available. If we are unable to raise additional funding when needed and on attractive terms, we may be required to delay, limit or substantially reduce our quantum computing development efforts. We have based these estimates on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect, and future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section under Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q. Global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide resulting from the continuing effects of the COVID-19 pandemic, disruptions in the banking system, international conflicts and otherwise. If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted. If we are unable to raise capital when needed and on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or other efforts. A recession or additional market corrections resulting from the impact of the continuing effects of the COVID-19 pandemic, disruptions in the banking system, and macroeconomic conditions could materially affect our business and the value of our securities.
Our short-term cash requirements include capital expenditures for materials and components for research and development and quantum computing fridges; working capital requirements; and strategic collaborative arrangements and investments.
Our long-term requirements include expenditures for expansion of our quantum chip fabrication facility; planned development of multiple generations of quantum processors; and anticipated additional investments to scale our QCaaS offering.
We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations. Until such time as we can generate significant revenue from sales of our development contracts and other services, including our QCaaS offering, we expect to finance our cash needs primarily through our existing cash, cash equivalents and available-for-sale investments on hand, our committed equity financing with B. Riley (subject to the price of our Common Stock trading above $1.00 as described below), and other potential securities financings or other capital sources, including development contract revenue with government agencies and strategic partnerships. To the extent that we raise additional capital through the sale of equity or convertible debt securities, including through the use of our committed equity financing with B. Riley, the ownership interest of our stockholders will be, or could be, diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed and on attractive terms, we may be required to delay, limit, or substantially reduce our quantum computing development efforts. Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section under Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and elsewhere in this Quarterly Report on Form 10-Q.
In addition, actual sales, if any, of shares of our Common Stock to B. Riley pursuant to the committed equity financing will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our Common Stock (including the condition that the price of our Common Stock is trading above $1.00) and determinations by us as to appropriate sources of funding for our business and operations. We cannot guarantee the extent to which we may utilize the committed equity financing.
Loan and Security Agreement
In January 2022, we entered into the Third Amendment to the Loan Agreement with Trinity to increase the debt commitment by $5.0 million to $32.0 million thereunder. The amendment allowed us to draw an additional $5.0 million immediately with an additional $8.0 million to be drawn at the sole discretion of the lender. We drew the additional $5.0 million upon signing the amendment. The Third Amendment also included an extension of the requirement to raise an additional $75.0 million of equity which was satisfied through the Business Combination and a defined exit fee for the additional $5.0 million to be at 20% of the advanced funds under the Third Amendment. In conjunction with the amendment, we also guaranteed payment of all monetary amounts owed and performance of all covenants, obligations and liabilities. As of March 31, 2023, the total principal amount outstanding under the Loan Agreement was $28.9 million. We use borrowings under the Loan Agreement for working capital purposes. The Loan Agreement is secured by a first-priority security interest in substantially all of our assets. As of the date of this Quarterly Report on Form 10-Q, we are in compliance with all covenants under the Loan Agreement.
Our cash commitments at March 31, 2023 were primarily as follows:
| (in thousands) |
Total | Short-term | Long-term | |||||||||
| Financing obligations |
$ | 28,911 | $ | 10,819 | $ | 18,092 | ||||||
| Estimated cash interest on financing obligations |
5,989 | 3,831 | 2,158 | |||||||||
| Operating lease |
9,829 | 2,284 | 7,545 | |||||||||
|
|
|
|
|
|
|
|||||||
| $ | 44,729 | $ | 16,934 | $ | 27,795 | |||||||
|
|
|
|
|
|
|
|||||||
Financing obligations consist of payments related to the Loan and Security Agreement. Operating lease obligations consist of obligations under non-cancelable operating leases for our offices and facilities. The cash requirements in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.
33
Table of Contents
Cash Flows Used in Operating Activities
Our cash flows from operating activities are significantly affected by our ability to achieve significant growth to offset expenditures related to research and development, sales and marketing, and general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.
Net cash used in operating activities during the three months ended March 31, 2023 was $15.5 million, resulting primarily from our net loss of $23.4 million, adjusted for non-cash charges of $7.1 million. These non-cash charges were partially offset by adjustments for changes in operating assets and liabilities. Changes in operating assets and liabilities providing cash totaled $0.8 million, which primarily consisted of a decrease in accounts receivable of $0.9 million and a decrease in prepaid and other current assets of $0.7 million, offset in party by a decrease in accounts payable, accrued expenses and other current liabilities of $0.5 million and a decrease in deferred revenue of $0.4 million. The decrease in accounts receivable was due to higher sales in the fourth quarter of 2022, with collection of the related receivables in the first quarter of 2023. The decrease in prepaid expenses and other current assets was mainly due to recognition of previously paid premiums for Directors and Officers insurance. The decrease in accounts payable, accrued expenses and other liabilities was mainly due to slightly higher payments to vendors and payment of monthly rentals for operating lease liabilities. The decrease in deferred revenue was due to a decrease in prepayment by customers for goods or services that were yet to be delivered.
Net cash used in operating activities during the three months ended March 31, 2022 was $15.7 million, resulting primarily from our net loss of $17.6 million, adjusted for non-cash charges of $0.5 million. These non-cash charges were partially offset by adjustments for changes in operating assets and liabilities. Changes in operating assets and liabilities were $1.5 million, which primarily consisted of a decrease in accounts receivable of $0.3 million, an increase in prepaid and current assets of $3.1 million, an increase in accounts payable, accrued expenses and other current liabilities of $5.6 million, an increase in other assets of $0.9 million, and a decrease in deferred revenue of $0.5 million. The increase in prepaid expenses and other current assets was due to advance payment for goods or services that were expected to be recognized or realized within 12 months of March 31, 2022. The increase in accounts payable, accrued expenses and other liabilities was due to increased operating expenses in the three months ended March 31, 2022. The decrease in deferred revenue was due to a decrease in prepayment by customers for goods or services that were yet to be delivered, and the increase in accounts receivable was due to the timing of customer invoicing and payments.
Cash used in operating activities was reduced by $0.2 million to $15.5 million in the three months ended March 31, 2023 from $15.7 million in the three months ended March 31, 2022. Our net loss from operations increased by $5.7 million to $23.4 million in the three months ended March 31, 2023 from $17.6 million in the three months ended March 31, 2022. Non-cash charges favorably impacting our net loss from operations as reflected in the accompanying interim condensed consolidated statement of cash flows increased by $6.6 million to $7.1 million in the three months ended March 31, 2023, from $0.5 million in the three months ended March 31 2022. Changes in working capital favorably impacting cash used by operations declined by $0.7 million to $0.8 million in the three months ended March 31, 2023, from $1.5 million in the three months ended March 31, 2022.
Cash Flows Used in Investing Activities
Cash used in investing activities during the three months ended March 31, 2023 totaled $15.0 million, resulting from $4.8 million of additions to property and equipment, and purchases of available for sale securities, net of maturities, totaling $10.2 million. Investments in property and equipment during this period primarily relate to quantum computing equipment and leasehold improvements for our chip fabrication facility.
Cash used in investing activities during the three months ended March 31, 2022 was $2.8 million, resulting solely from additions to property and equipment. Investments in property and equipment during this period relate primarily to process computing equipment, quantum computing equipment and development tools for our chip fabrication facility.
Net cash used in investing activities in the three months ended March 31, 2023 increased by $12.2 million when compared to the three months ended March 31, 2022, mainly due to increased purchases of property and equipment and available for sale securities.
Cash Flows Used in or Provided by Financing Activities
Cash used in financing activities during the three months ended March 31, 2023 totaled $1.2 million, reflecting $1.8 million of principal payments under the Loan Agreement and payments of $0.1 million for deferred financing costs, offset in part by proceeds from the exercise of stock options and warrants totaling $0.8 million.
Cash provided by financing activities during the three months ended March 31, 2022 totaled $213.4 million, reflecting $225.2 million of proceeds from the Business Combination and PIPE Investment, net of transaction costs ,and offset by Rigetti transaction costs of $16.7 million, additional proceeds from the issuance of debt and warrants of $5.0 million associated with the third amendment to the Loan Agreement, less debt issuance costs and exit fees totaling $1.0 million, and proceeds from the exercise of stock options and warrants totaling $0.6 million.
Net cash provided by financing activities during the three months ended March 31, 2023 decreased by $214.6 million when compared to three months ended March 31, 2022, largely from the close of the Business Combination and PIPE Investment net of transaction costs, and additional proceeds from the issuance of debt and warrants during the three months ended March 31, 2022. We expect to continue to finance our cash needs primarily through cash, cash equivalents and available-for-sale investments on hand, our committed equity financing with B. Riley (subject to the price of our Common Stock trading above $1.00), and other potential securities financings or capital sources.
34
Table of Contents
Critical Accounting Policies and Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions that affect revenue and expenses during the reporting periods. Our estimates are based on historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
While our significant accounting policies are described in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, we believe the following critical accounting policies and estimates are most important to understanding and evaluating our reported financial results.
Public and Private Warrants
Prior to the Business Combination, Supernova issued 4,450,000 private placement warrants (“Private Warrants”) and 8,625,000 public warrants (“Public Warrants” and collectively, “Warrants”). Each whole warrant entitles the holder to purchase one share of our Common Stock at a price of $11.50 per share, subject to adjustments and will expire five years after the Merger or earlier upon redemption or liquidation.
The Private Warrants do not meet the derivative scope exception and are accounted for as derivative liabilities. Specifically, the Private Warrants contain provisions that cause the settlement amounts to be dependent upon the characteristics of the holder of the warrant which is not an input into the pricing of a fixed-for-fixed option on equity shares. Therefore, the Private Warrants are not considered indexed to our stock and should be classified as a liability. Since the Private Warrants meet the definition of a derivative, we recorded the Private Warrants as liabilities in the consolidated balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in the fair value recognized in the consolidated statements of operations at each reporting date. The fair value of the Private Warrants was measured using the Black-Scholes option-pricing model at each measurement date. The Public Warrants also fail to meet the indexation guidance in ASC 815 and are accounted for as liabilities as the Public Warrants include a provision whereby in a scenario in which there is not an effective registration statement, the warrant holders have a cap, 0.361 shares of Common Stock per warrant (subject to adjustment), on the issuable number of shares in a cashless exercise.
Subsequent to the separate listing and trading of the Public Warrants, the fair value of the Public Warrants has been measured based on the observable listed prices for such warrants and the fair value of the Private Warrants are measured using a Monte Carlo Pricing Model.
On the consummation of the Business Combination, we recorded a liability related to the Private Warrants of $9.6 million, with an offsetting entry to additional paid-in capital. As of March 31, 2023, the fair value of the Private Warrants decreased to $1.7 million, with the change in fair value of the derivative warrant liabilities recorded in the consolidated statements of operations each reporting period.
Similarly, on the consummation of the Business Combination, we recorded a liability related to the Public Warrants of $16.3 million, with an offsetting entry to additional paid-in capital. As of March 31, 2023, the fair value of the Public Warrants decreased to $0.9 million with the change in fair value of derivative warrant liabilities recorded in the consolidated statements of operations each reporting period.
Other Derivative Warrant Liabilities
We currently do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815, “Derivatives and Hedging” (“ASC 815”) at the initial recognition date.
Other than the Public Warrants and Private Warrants noted above, we also issued a total of 783,129 Common Stock warrants in conjunction with the Loan Agreement in 2021. Such derivative warrant liabilities are classified as non-current as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. We utilized the Black-Scholes model to determine the inception date fair value of the warrants of approximately $2.7 million which was recorded as part of Debt Issuance Cost. The outstanding Common Stock warrants were subsequently remeasured at each reporting period using the Black-Scholes model with the change in fair value recorded as a component of other income in the Company’s consolidated statements of operations.
On June 2, 2022, the 783,129 Common Stock warrants that were issued in connection with the Loan Agreement were exercised and the $6.4 million warrant liability was reclassified to equity. We recorded a loss of $2.0 million from the change in the fair value of the warrant liability for the year ended December 31, 2022.
Earn-Out Liability
At Business Combination Closing, Supernova Sponsor subjected certain shares (“Sponsor Vesting Shares”) of Common Stock held by Supernova Sponsor and its permitted transferees (the “Sponsor Holders”) to forfeiture and vesting as of the Closing if thresholds related to the weighted average price of Common Stock are not met for the duration of various specified consecutive day trading periods during the five-year period following the Closing (the “Earn-out Triggering Events”). Any such shares held by the Sponsor Holders that remain unvested after the fifth anniversary of the Closing will be forfeited.
35
Table of Contents
The Sponsor Vesting Shares are accounted for as liability classified instruments because the Earn-Out Triggering Events that determine the number of Sponsor Vesting Shares to be earned back by the Sponsor Holders include outcomes that are not solely indexed to our Common Stock. The aggregate fair value of the Sponsor Vesting Shares at the time of the Business Combination Closing was estimated using a Monte Carlo simulation model and was determined to be $20.4 million.
As of March 31, 2023, the Earn-Out Triggering Events were not achieved for any of the tranches, and as such, the Company adjusted the carrying amount of the liability to its estimated fair value of $1.5 million with the change in fair value of the earn-out liability recorded in the consolidated statements of operations each reporting period.
Forward Warrant Agreement
In connection with the execution of the Merger Agreement in October 2021, we entered into the Forward Warrant Agreement with Ampere for the purchase of a warrant for an aggregate purchase price (including amounts from exercise) of $10.0 million. The Forward Warrant Agreement provides for the issuance of a warrant for the purchase of an aggregate of 1,000,000 shares of Common Stock at an exercise price of $0.0001. The purchase of the warrant was conditioned upon, among other things, the consummation of the Business Combination and the entry into a collaboration agreement between Ampere and us. The collaboration agreement was entered into in January 2022. Ampere was required to pay $5.0 million to us no later than the later of (i) the Closing and (ii) June 30, 2022.
On June 30, 2022, pursuant to the Forward Warrant Agreement, we issued the warrant to Ampere upon receipt of an aggregate of $5.0 million (including the exercise price), and upon such payment and issuance, 500,000 shares of our Common Stock vested under the warrant and were immediately exercised by Ampere pursuant to the terms of the warrant. Ampere is required to pay an additional $5.0 million to us no later than the closing date of the listing of Ampere’s capital stock on a stock exchange, provided that if the listing has not occurred by the second anniversary of the Forward Warrant Agreement, Ampere is not obligated to make the additional payment and we are not obligated to issue the remaining shares underlying the warrants. The Forward Warrant Agreement further provides that we will use commercially reasonable efforts to file a registration statement to register the resale of the shares issued or issuable pursuant to the warrant and upon such payment the warrant will vest and be exercisable by Ampere with respect to 500,000 shares of Common Stock pursuant to the terms of the warrant. We filed such registration statement, and it became effective in the year ended December 31, 2022.
We evaluated the Forward Warrant Agreement as a derivative in accordance with the guidance of ASC 480, “Distinguishing Liabilities from Equity”. We calculated the fair value of the Forward Warrant Agreement by using the Forward Contract Pricing methodology at inception and at the end of March 31, 2023. The fair value of the Forward Warrant Agreement was estimated based on the following key inputs and assumptions 1) Assumed holding period 2) Related risk-free rate and 3) Likelihood of the outcome of the various contingencies specified in the agreement. In the three months ended March 31, 2023, we reduced the estimated probability of occurrence for the forward warrant agreement from 50% to 25% due to less than favorable market conditions and reduced time until expiration.
Based on these inputs and assumptions, we calculated the fair value of the Forward Warrant Agreement to be a derivative asset of $1.1 million as of March 31, 2023, and a derivative asset of $2.2 million as of December 31, 2022. We have included the derivative as a forward contract asset in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. The change in fair value is recorded as part of general and administrative expense in our consolidated statements of operations.
Revenue Recognition
Revenue consists primarily of our contracts that provide access to Rigetti quantum computing systems, collaborative research services, professional services, and the sale of custom quantum computing components. Access to Rigetti quantum computing systems can be purchased as a quantum computing subscription, or on a usage basis for a specified quantity of hours. Revenue related to subscription-based access to Rigetti quantum computing systems (i.e., quantum computing subscriptions) is recognized on a ratable basis over the subscription term, which can range from three months to two years. Revenue related to usage-based access to Rigetti quantum computing systems is recognized over time as the systems are accessed using an output method based on compute credit hours expended. Revenue related to collaborative research services and professional services is recognized over time based on completed milestones or hours or costs incurred as appropriate. Revenue for partially completed milestones deemed probable of being met is recognized using an input measure based on actual labor hours incurred to date relative to total estimated labor hours needed to complete the milestone. Revenue related to cost share contracts is recognized as the reimbursable costs are incurred. For fixed price milestone-based contracts, revenue is recognized based on the input measure explained above as control is expected to transfer over the time period a milestone is completed. Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer.
Our fixed fee development contracts vary in term from one to five years, with the majority of such contracts having a term of 18 months to two years. When establishing the pricing for our fixed fee arrangements, we determine the pricing based on estimated costs to complete and expected margins taking into account the scope of work outlined within the contract being evaluated and our historical experience with similar services and contracts. Actual costs incurred over the period in which these contracts are fulfilled could vary from these estimates and therefore, these estimates are subject to uncertainty. On a quarterly basis, management reviews the progress with respect to each contract and its related milestones and evaluates whether any changes in estimates exist. As a result of the quarterly reviews, revisions in the estimated effort to complete the contract are reflected in the period in which the change is identified. These revisions may impact the overall progress related to transfer of control and therefore result in either increases or decreases in revenues as well as increase or decreases in fulfillment costs and contract margins. In accordance, with ASC No. 250, Accounting Changes and Error Corrections, any changes in estimates are reflected in our consolidated statements of operations in the period in which the circumstances that give rise to the revision become known to management. To date, we have not experienced any changes in estimates that have had a material impact on our results from operations or financial position.
36
Table of Contents
When our contracts with customers contain multiple performance obligations, the transaction price is allocated on a relative standalone selling price basis to each performance obligation. We typically determine standalone selling price based on observable selling prices of our products and services. In instances where standalone selling price is not directly observable, standalone selling price is determined using information that may include market conditions and other observable inputs. Stand-alone selling price is typically established as a range. In situations in which the stated contract price for a performance obligation is outside of the applicable standalone selling price range and has a different pattern of transfer to the customer than the other performance obligations in the contract, we will reallocate the total transaction price to each performance obligation based on the relative standalone selling price of each.
The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer. Revenue is recorded based on the transaction price, which includes fixed consideration and estimates of variable consideration. The amount of variable consideration included in the transaction price is constrained and is included only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Our contracts with customers may include renewal or other options at fixed prices. Determining whether such options are considered distinct performance obligations that provide the customer with a material right and therefore should be accounted for separately requires significant judgment. Judgment is required to determine the standalone selling price for each renewal option to determine whether the renewal pricing is reflective of standalone selling price or is reflective of a discount that would provide the customer with a material right. Based on our assessment of standalone selling prices, we determined that there were no significant material rights provided to our customers requiring separate recognition.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 of our condensed consolidated financial statements for the period ended March 31, 2023 included elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Following the Business Combination, we still qualify as an emerging growth company and plan to take advantage of the extended transition period that emerging growth company status permits. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used.
We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2026, the last day of our first fiscal year following the fifth anniversary of the completion of SNII’s initial public offering, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.24 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
| ITEM 3 | – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
We are a smaller reporting company as defined by Rule12b- of the Exchange Act and are not required to provide the information required under this item.
| ITEM 4 | – CONTROLS AND PROCEDURES |
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d15(e) under the Securities Exchange Act) as of March 31, 2023. Based on the evaluation of our disclosure controls and procedures, our management concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective due to the material weaknesses described below.
37
Table of Contents
We are adding additional controls over review of complex financial instrument valuations and our year-end and quarter-end close process, which are still being implemented, as well as additional technical accounting resources. 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 has concluded, through testing, that these controls are effective.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
After giving full consideration to the material weaknesses and the additional procedures that we performed, management has concluded that the interim consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP for interim financial statements; however, the material weaknesses could have resulted in a misstatement of account balances or disclosures that would be considered material to the annual or interim consolidated financial statements and certain of the material weaknesses did result in errors in the financial statements and related disclosures as described below for the quarters ended March 31, 2022 and June 30, 2022, which we restated in 2022.
Material Weaknesses
As previously disclosed, in connection with our unaudited condensed consolidated financial statements for the nine months ended October 31, 2021, we identified a material weakness in our internal control over financial reporting related to the lack of effective review controls over the accounting for complex financial instruments. Specifically, the controls failed to identify an error in the accounting for complex warrant instruments. The error related to the Company not properly accounting for the liability associated with the warrants to purchase common stock issued to Trinity Capital Inc. that was subsequently cancelled and reissued for a new warrant in connection with an amendment to the Loan Agreement.
In addition, in connection with the preparation of the financial statements for the second quarter of 2022, we also identified and corrected an immaterial error related to the revaluation of the liability associated with the same warrants issued to Trinity Capital.
In connection with the preparation of the financial statements for the third quarter of 2022, we discovered that the previously identified material weakness led to additional material errors related to the valuation of the Earn-out liability and the Private Warrant liability that affected the previously issued unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2022 and June 30, 2022. These errors were corrected in the 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 concluded that the previously identified material weakness in our internal control over financial reporting related to complex financial instruments 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 complex financial instruments. This material weakness continued to exist as of March 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.
Additionally, as previously disclosed, 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, and a lack of timely review over the financial statement close process. 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. This material weakness continued to exist as of March 31, 2023 due to the reasons described above, the relatively short period of time since the material weakness was first identified, and because all of the necessary controls to remediate the material weakness have not yet been implemented and sufficiently tested.
Remediation Plan
Our remediation plan related to the material weakness over the accounting for complex financial instruments includes:
| • | incorporating additional controls and procedures over the review of complex financial instrument valuations as well as technical accounting resources to identify the inventory of complex accounting and financial instruments that require accounting analysis and evaluation; |
| • | enhancing the precision of review controls over complex financial instruments; and |
| • | augmenting the review process relating to the valuation analyses performed by the third-party valuation experts and accounting firms that are utilized by the Company. |
38
Table of Contents
Our remediation plan related to the material weakness over our overall closing and financial reporting processes includes:
| • | hiring sufficient personnel with technical accounting and financial reporting experience to augment our current staff, to achieve appropriate segregation of duties and to improve the effectiveness of our closing and financial reporting processes; and |
| • | implementing improved accounting and financial reporting procedures and systems to improve the completeness, timeliness and accuracy of our financial reporting and disclosures, including the assessment of more judgmental areas of accounting. |
The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. As management continues to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address the material weaknesses. These material weaknesses will not be considered remediated unless and until such time as management designs and implements effective controls that operate for a sufficient period of time and concludes, through testing, that these controls are effective. Until the controls have been operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively, the material weaknesses described above will continue to exist. Management will monitor the progress of the remediation plan and report regularly to the audit committee of the board of directors on the progress and results of the remediation plan, including the identification, status and resolution of internal control deficiencies. We can provide no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weakness or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Changes in Internal Control over Financial Reporting
For the three months ended March 31, 2023, other than the remediation efforts described above, there have been no other changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
.
PART II. OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
ITEM 1A – RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of material factors that make an investment in our ordinary shares speculative or risky.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
None.
ITEM 5 – OTHER INFORMATION
None.
39
Table of Contents
ITEM 6 – EXHIBITS
| * | Filed herewith |
| # | Indicates management contract or compensatory plan or arrangement |
40
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RIGETTI COMPUTING, INC. |
| /s/ Subodh Kulkarni |
| By Subodh Kulkarni, President and Chief Executive Officer |
| (Principal Executive Officer and Duly Authorized Officer) |
| /s/ Jeffrey A. Bertelsen |
| By Jeffrey A. Bertelsen, Chief Financial Officer |
| (Principal Accounting Officer and Duly Authorized Officer) |
Dated: May 11, 2023
41
Exhibit 10.4
Rigetti Computing, Inc.
February 13, 2023
Mike Harburn
583 Battery Street
Apt 2803
Seattle, WA 98121
Dear Mike:
As you know, your employment with Rigetti Computing, Inc. (the “Company”) will terminate effective February 15, 2023 (the “Separation Date”) in a reduction in force resulting from the Company’s decision to eliminate and restructure certain positions in order to reduce operational costs in current challenging market conditions, and we desire to resolve any and all issues relating to your employment and the conclusion of your employment with the Company amicably and on mutually satisfactory terms. Accordingly, this letter sets forth the terms of the separation agreement (the “Agreement”) the Company is offering you to reach an amicable separation.
Do not sign and return this Agreement before the Separation Date
1. Separation. Your employment termination date will be the Separation Date. You will be deemed to have resigned, effective as of the Separation Date, from all positions, titles, duties, authorities, and responsibilities at or with the Company and its affiliates, and you agree to execute all additional documents and take such further steps as the Company may require to effectuate such resignation.
2. Accrued Obligations. No later than the Company’s next regular pay day following the Separation Date, unless sooner required by law, you will receive your accrued but unpaid salary through the Separation Date. You agree that, within ten (10) days after the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses in accordance with the Company’s standard expense reimbursement policies. You shall also be entitled to vested benefits owed to you under any qualified retirement plan or health and welfare benefit plan in which you were a participant in accordance with applicable law and the provisions of such plan.
Page 2
3. Severance Benefits. If you timely sign and return this Agreement to the Company, allow it to become effective, and comply fully with your obligations hereunder, then in full satisfaction of any obligations for the Company to provide you with severance benefits under your Amended and Restated Executive Employment Agreement, dated February 2, 2022 (the “Employment Agreement”), the Company will provide you with the following severance benefits (the “Severance Benefits”):
(a) Severance Payment. The Company shall pay you as severance an amount equal to twelve (12) months of your base salary in effect as of the Separation Date (“Severance Payment”). The Severance Payment will be paid in equal installments on the Company’s normal payroll schedule following the Separation Date, with the first payment beginning within sixty (60) days following the Separation Date (but no earlier than the Effective Date) (such date, the “Severance Pay Commencement Date”), and the remaining installments occurring on the Company’s regularly scheduled payroll dates thereafter; provided that on the Severance Pay Commencement Date, the Company will pay in a lump sum the aggregate amount of the cash severance payments that the Company would have paid you through such date had the payments commenced on the Company’s first regularly scheduled payroll date after the Separation Date.
(b) COBRA Premium Payments. If you timely elect continued coverage under COBRA for you and your covered dependents under the Company’s group health plans following the Separation Date, then the Company shall pay the COBRA premiums necessary to continue you and your covered dependents’ health insurance coverage in effect for you (and your covered dependents) on the Separation Date until the earliest of: (i) twelve (12) months following the termination date; (ii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date you cease to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the Separation Date through the earlier of (i)-(iii), the “COBRA Payment Period”). You agree to notify the Company of the occurrence of (ii) or (iii), as applicable, in advance, in writing, c/o Senior Vice President, Human Resources. Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on your behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this section, the Company shall pay you on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period. Nothing in this Agreement shall deprive you of your rights under COBRA or ERISA for benefits under plans and policies arising under your employment by the Company.
4. Equity Awards. Under the terms of your equity award agreement and the applicable plan documents, vesting of any of your equity awards will cease as of the Separation Date. Your right to exercise any vested shares, and all other rights and obligations with respect to your equity awards, will be as set forth in your award agreement, grant notice and applicable plan documents.
5. Other Compensation or Benefits. By executing this Agreement, you acknowledge and agree that the Company’s obligations to provide you with any severance benefits or any other payments are hereby extinguished (except for the benefits described in this Agreement). You further expressly acknowledge and agree that the Severance Benefits, and other
Page 3
benefits provided herein, are in full and complete satisfaction of the Company’s obligations, if any, to pay you severance benefits or any other payments pursuant your Employment Agreement, or any other agreements, plans or policies, and that this Agreement hereby supersedes and extinguishes any severance benefits you are or could be eligible to receive under your Employment Agreement, or any other employment agreement, plan, policy or other agreement applicable to you. You also acknowledge that, except as expressly provided in this Agreement, you have not earned and will not receive from the Company any additional compensation, severance, or benefits on or after the Separation Date, with the exception of any vested right you may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account). By way of example, you acknowledge that you have not earned and are not owed any bonus, vacation, incentive compensation, commissions, or equity.
6. Release of Claims.
(a) General Release of Claims. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, advisors, predecessors, successors, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities, demands, causes of action, and obligations, both known and unknown, arising from or in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date you sign this Agreement.
(b) Scope of Release. This general release includes, but is not limited to: (i) all claims arising from or in any way related to your employment with the Company or the termination of that employment; (ii) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act (“ADEA”), the California Labor Code (as amended), the California Family Rights Act, the California Fair Employment and Housing Act (as amended), the Washington Law Against Discrimination (RCW chapter 49.60; WAC 162-04-10, et seq.), the Washington Family Leave Act, the Washington Industrial Welfare Act, and the Washington Minimum Wage Act.
(c) ADEA Release. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you have under the ADEA, and that the consideration given for the waiver and releases you have given in this Agreement is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (a) your waiver and release does not apply to any rights or claims arising after the date you sign this Agreement; (b) you should consult with an attorney prior to signing this
Page 4
Agreement (although you may choose voluntarily not to do so); (c) you have forty-five (45) days to consider this Agreement (although you may choose voluntarily to sign it sooner); (d) you have seven (7) days following the date you sign this Agreement to revoke this Agreement (in a written revocation sent to the Company by email, c/o Senior Vice President, Human Resources, at jakaweck@rigetti.com); and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth calendar day after you sign this Agreement provided that you do not revoke it (the “Effective Date”). You hereby further acknowledge that the Company has provided you with ADEA disclosure information (under 29 U.S.C. § 626(f)(1)(H)), attached hereto as Exhibit A.
(d) Section 1542 Waiver. In giving the release herein, which includes claims which may be unknown to you at present, you acknowledge that you have read and understand Section 1542 of the California Civil Code, which reads as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
You hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to your release of claims herein, including but not limited to your release of unknown claims.
(e) Exceptions. Notwithstanding the foregoing, you are not releasing the Company hereby from: (i) any obligation to indemnify you pursuant to the Articles and Bylaws of the Company, any valid fully executed indemnification agreement with the Company, applicable law, or applicable directors and officers liability insurance; (ii) any claims that cannot be waived by law; or (iii) any claims for breach of this Agreement.
(f) Protected Rights. You understand that nothing in this Agreement limits your ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). You further understand this Agreement does not limit your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Agreement does not limit your right to receive an award for information provided to the Securities and Exchange Commission, you understand and agree that, to maximum extent permitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you have released and any rights you have waived by signing this Agreement. Nothing in this Agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or any other conduct that you have reason to believe is unlawful or in violation of public policy.
Page 5
7. Return of Company Property. You agree that, within five (5) days after the Separation Date (or earlier if requested by the Company), you will return to the Company all Company documents (and all copies thereof) and other Company property in your possession or control, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, drafts, financial and operational information, research and development information, sales and marketing information, customer lists, prospect information, pipeline reports, sales reports, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computing and electronic devices, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions or embodiments thereof in whole or in part). You agree that you will make a diligent search to locate any such documents, property and information by the close of business on the Separation Date or as soon as possible thereafter. If you have used any personally owned computer or other electronic device, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials or information, within five (5) days after the Separation Date, you shall provide the Company with a computer-useable copy of such information and then permanently delete and expunge such Company confidential or proprietary information from those systems; and you agree to provide the Company access to your system as requested to verify that the necessary copying and/or deletion is completed. Your timely compliance with this paragraph is a condition to your receipt of the severance benefits provided under this Agreement.
8. Confidential Information Obligations. You acknowledge and reaffirm your continuing obligations under your Confidential Information and Invention Assignment Agreement, a copy of which is attached hereto as Exhibit B and incorporated herein by reference.
9. No Voluntary Adverse Action. You agree that you will not voluntarily (except in response to legal compulsion or as permitted under the section of this Agreement entitled “Protected Rights”) assist any person in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the Released Parties.
10. Cooperation. You agree to provide reasonable cooperation to the Company in connection with its actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation, making yourself available to the Company upon reasonable notice, without subpoena, to provide complete, truthful and accurate information in witness interviews, depositions, and trial testimony. The Company will reimburse you for reasonable out-of-pocket expenses you incur in connection with any such cooperation (excluding foregone wages, salary, or other compensation) and will make reasonable efforts to accommodate your scheduling needs and for more than de minimis service, you and the Company will agree on a mutually agreeable per diem rate. In addition, in the event you are receiving Severance Benefits, for twelve (12) months after the Separation Date, you agree to reasonably cooperate with the Company in all matters relating to the transition of your work and responsibilities on behalf of the Company,
Page 6
including, but not limited to, any present, prior or subsequent relationships and the orderly transfer of any such work and institutional knowledge to such other persons as may be designated by the Company. Such transition assistance described in the previous sentence shall not be subject to additional compensation, and the Company will make reasonable efforts to accommodate your scheduling needs.
11. No Admissions. You understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission.
12. Representations. You hereby represent that you have: been paid all compensation owed and for all hours worked; received all leave and leave benefits and protections for which you are eligible pursuant to the Family and Medical Leave Act or otherwise; and not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim.
13. Dispute Resolution. You and the Company recognize that litigation in federal or state courts or before federal or state administrative agencies of disputes arising out of your employment with the Company or out of this Agreement, or your termination of employment, may not be in the best interests of either you or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty. Except where prohibited by law, you and the Company agree that any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or your employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive Retirement Income Security Act, and any similar federal, state or local law, statute, regulation, or any common law doctrine, whether that dispute arises during or after employment, shall be settled by binding arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. The location for the arbitration shall be in King County, Washington. Any award made by such panel shall be final, binding and conclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by the Company; provided however, that at your option, you may voluntarily pay up to one-half the costs and fees. You and the Company acknowledge and agree that our obligations to arbitrate under this section survive the termination of this Agreement and continue after the termination of the employment relationship between you and the Company. You and the Company each further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each party expressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in this Agreement. By election arbitration as the means for final settlement of all claims, you and the Company hereby waive their respective rights to, and agree not to, sue each other in any action in a Federal, State or local court with respect to such claims, but may seek to enforce in court an arbitration award rendered pursuant to this Agreement. You and the Company specifically agree to waive their respective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial by jury.
Page 7
14. Miscellaneous. This Agreement, including its attachments and exhibits, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to its subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable to the fullest extent permitted by law, consistent with the intent of the parties. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of Washington without regard to conflict of laws principles. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing and shall not be deemed to be a waiver of any successive breach. This Agreement may be executed in counterparts and electronic or facsimile signatures will suffice as original signatures.
(Signatures on following page)
Signature Page
If this Agreement is acceptable to you, please sign below and return the original to me no later than forty-five (45) days after the date you receive it, but no earlier than the Separation Date. The Company’s offer contained herein will automatically expire and become null and void if you do not sign and return it within this timeframe.
You acknowledge that you have been advised that you have the right to consult an attorney regarding this Agreement and that you were given a reasonable time period as set forth above in which to do so. You further acknowledge and agree that, in the event you sign this Agreement prior to the end of the reasonable time period provided by the Company, your decision to accept such shortening of time is knowing and voluntary and is not induced by the Company through fraud, misrepresentation, or a threat to withdraw or alter the offer prior to the expiration of the reasonable time period, or by providing different terms to employees who sign such an agreement prior to the expiration of the time period.
| Sincerely, | ||
| By: | /s/ Jackie Kaweck | |
| Jackie Kaweck | ||
| SVP, HR | ||
I have read, understand and agree fully to the foregoing Agreement:
| /s/ Mike Harburn |
| Mike Harburn |
| 2/15/2023 |
| Date |
EXHIBIT A
ADEA Disclosure Information
(See attached)
Exhibit B
Confidential Information and Invention Assignment Agreement
(See attached)
Exhibit 10.5
Rigetti Computing, Inc.
February 15, 2023
Brian Sereda
809 Montevino Dr.
Pleasanton, CA 94566
Dear Brian:
As you know, your employment with Rigetti Computing, Inc. (the “Company”) is terminated effective March 27, 2023 (the “Separation Date”), and we desire to resolve any and all issues relating to your employment and the conclusion of your employment with the Company amicably and on mutually satisfactory terms. Accordingly, this letter sets forth the terms of the separation agreement (the “Agreement”) the Company is offering you to reach an amicable separation.
Do not sign and return this Agreement before the Separation Date
1. SEPARATION. Your last day of work with the Company and your employment termination date is the Separation Date. You are hereby deemed to have resigned, effective as of the Separation Date, from all positions, titles, duties, authorities, and responsibilities at or with the Company and its affiliates, and you agree to execute all additional documents and take such further steps as the Company may require to effectuate such resignation.
2. ACCRUED OBLIGATIONS. On the Separation Date, you will receive your accrued but unpaid salary through the Separation Date. You agree that, within ten (10) days after the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses in accordance with the Company’s standard expense reimbursement policies. You shall also be entitled to vested benefits owed to you under any qualified retirement plan or health and welfare benefit plan in which you were a participant in accordance with applicable law and the provisions of such plan.
3. SEVERANCE BENEFITS. If you timely sign and return this Agreement to the Company, allow it to become effective, and comply fully with your obligations hereunder, then in full satisfaction of any obligations for the Company to provide you with severance benefits under your Amended and Restated Executive Employment Agreement, dated February 2, 2022 (the “Employment Agreement”), the Company will provide you with the following severance benefits (the “Severance Benefits”):
(a) Severance Payment. The Company shall pay you as severance an amount equal to twelve (12) months of your base salary in effect as of the Separation Date (“Severance Payment”). The Severance Payment will be paid in equal installments on the
Page 2
Company’s normal payroll schedule following the Separation Date, with the first payment beginning within sixty (60) days following the Separation Date (but no earlier than the Effective Date) (such date, the “Severance Pay Commencement Date”), and the remaining installments occurring on the Company’s regularly scheduled payroll dates thereafter; provided that on the Severance Pay Commencement Date, the Company will pay in a lump sum the aggregate amount of the cash severance payments that the Company would have paid you through such date had the payments commenced on the Company’s first regularly scheduled payroll date after the Separation Date.
(b) COBRA Premium Payments. If you timely elect continued coverage under COBRA for you and your covered dependents under the Company’s group health plans following the Separation Date, then the Company shall pay the COBRA premiums necessary to continue you and your covered dependents’ health insurance coverage in effect for you (and your covered dependents) on the Separation Date until the earliest of: (i) twelve (12) months following the termination date; (ii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date you cease to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the Separation Date through the earlier of (i)-(iii), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on your behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this section, the Company shall pay you on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period. Nothing in this Agreement shall deprive you of your rights under COBRA or ERISA for benefits under plans and policies arising under your employment by the Company.
4. EQUITY AWARDS. Under the terms of your equity award agreement and the applicable plan documents, vesting of any of your equity awards will cease as of the Separation Date. Your right to exercise any vested shares, and all other rights and obligations with respect to your equity awards, will be as set forth in your award agreement, grant notice and applicable plan documents.
5. OTHER COMPENSATION OR BENEFITS. By executing this Agreement, you acknowledge and agree that the Company’s obligations to provide you with any severance benefits or any other payments are hereby extinguished (except for the benefits described in this Agreement). You further expressly acknowledge and agree that the Severance Benefits, and other benefits provided herein, are in full and complete satisfaction of the Company’s obligations, if any, to pay you severance benefits or any other payments pursuant your Employment Agreement, or any other agreements, plans or policies, and that this Agreement hereby supersedes and extinguishes any severance benefits you are or could be eligible to receive under your Employment Agreement, or any other employment agreement, plan, policy or other agreement applicable to you. You also acknowledge that, except as expressly provided in this
Page 3
Agreement, you have not earned and will not receive from the Company any additional compensation, severance, or benefits on or after the Separation Date, with the exception of any vested right you may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account). By way of example, you acknowledge that you have not earned and are not owed any bonus, vacation, incentive compensation, commissions, or equity.
6. RELEASE OF CLAIMS.
(a) General Release of Claims. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, advisors, predecessors, successors, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities, demands, causes of action, and obligations, both known and unknown, arising from or in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date you sign this Agreement.
(b) Scope of Release. This general release includes, but is not limited to: (i) all claims arising from or in any way related to your employment with the Company or the termination of that employment; (ii) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act (“ADEA”), the California Labor Code (as amended), the California Family Rights Act, and the California Fair Employment and Housing Act (as amended).
(c) ADEA Release. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you have under the ADEA, and that the consideration given for the waiver and releases you have given in this Agreement is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (a) your waiver and release does not apply to any rights or claims arising after the date you sign this Agreement; (b) you should consult with an attorney prior to signing this Agreement (although you may choose voluntarily not to do so); (c) you have at least twenty-one (21) days to consider this Agreement (although you may choose voluntarily to sign it sooner); (d) you have seven (7) days following the date you sign this Agreement to revoke this Agreement (in a written revocation sent to the Company); and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after you sign this Agreement provided that you do not revoke it (the “Effective Date”).
Page 4
(d) Section 1542 Waiver. In giving the release herein, which includes claims which may be unknown to you at present, you acknowledge that you have read and understand Section 1542 of the California Civil Code, which reads as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
You hereby expressly waive and relinquish all rights and benefits under that section and any law of any other jurisdiction of similar effect with respect to your release of claims herein, including but not limited to your release of unknown claims.
(e) Exceptions. Notwithstanding the foregoing, you are not releasing the Company hereby from: (i) any obligation to indemnify you pursuant to the Articles and Bylaws of the Company, any valid fully executed indemnification agreement with the Company, applicable law, or applicable directors and officers liability insurance; (ii) any claims that cannot be waived by law; or (iii) any claims for breach of this Agreement.
(f) Protected Rights. You understand that nothing in this Agreement limits your ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the California Department of Fair Employment and Housing, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). You further understand this Agreement does not limit your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Agreement does not limit your right to receive an award for information provided to the Securities and Exchange Commission, you understand and agree that, to maximum extent permitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you have released and any rights you have waived by signing this Agreement. Nothing in this Agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or any other conduct that you have reason to believe is unlawful or in violation of public policy.
7. RETURN OF COMPANY PROPERTY. You agree that, within five (5) days after the Separation Date (or earlier if requested by the Company), you will return to the Company all Company documents (and all copies thereof) and other Company property in your possession or control, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, drafts, financial and operational information, research and development information, sales and marketing information, customer lists, prospect information, pipeline reports, sales reports, personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computing and electronic devices, mobile telephones, servers), credit cards, entry
Page 5
cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions or embodiments thereof in whole or in part). You agree that you will make a diligent search to locate any such documents, property and information by the close of business on the Separation Date or as soon as possible thereafter. If you have used any personally owned computer or other electronic device, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials or information, within five (5) days after the Separation Date, you shall provide the Company with a computer-useable copy of such information and then permanently delete and expunge such Company confidential or proprietary information from those systems; and you agree to provide the Company access to your system as requested to verify that the necessary copying and/or deletion is completed. Your timely compliance with this paragraph is a condition to your receipt of the severance benefits provided under this Agreement.
8. CONFIDENTIAL INFORMATION OBLIGATIONS. You acknowledge and reaffirm your continuing obligations under your Confidential Information and Invention Assignment Agreement, a copy of which is attached hereto as Exhibit A and incorporated herein by reference.
9. NO VOLUNTARY ADVERSE ACTION. You agree that you will not voluntarily (except in response to legal compulsion or as permitted under the section of this Agreement entitled “Protected Rights”) assist any person in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the Released Parties.
10. COOPERATION. You agree to provide reasonable cooperation to the Company in connection with its actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation, making yourself available to the Company upon reasonable notice, without subpoena, to provide complete, truthful and accurate information in witness interviews, depositions, and trial testimony. The Company will reimburse you for reasonable out-of-pocket expenses you incur in connection with any such cooperation (excluding foregone wages, salary, or other compensation) and will make reasonable efforts to accommodate your scheduling needs and for more than de minimis service, you and the Company will agree on a mutually agreeable per diem rate. In addition, in the event you are receiving Severance Benefits, for twelve (12) months after the Separation Date, you agree to reasonably cooperate with the Company in all matters relating to the transition of your work and responsibilities on behalf of the Company, including, but not limited to, any present, prior or subsequent relationships and the orderly transfer of any such work and institutional knowledge to such other persons as may be designated by the Company. Such transition assistance described in the previous sentence shall not be subject to additional compensation, and the Company will make reasonable efforts to accommodate your scheduling needs.
Page 6
11. NO ADMISSIONS. You understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission.
12. REPRESENTATIONS. You hereby represent that you have: been paid all compensation owed and for all hours worked; received all leave and leave benefits and protections for which you are eligible pursuant to the Family and Medical Leave Act, the California Family Rights Act, or otherwise; and not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim.
13. DISPUTE RESOLUTION. You and the Company recognize that litigation in federal or state courts or before federal or state administrative agencies of disputes arising out of your employment with the Company or out of this Agreement, or your termination of employment, may not be in the best interests of either you or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty. Except where prohibited by law, you and the Company agree that any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or your employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the Executive Retirement Income Security Act, and any similar federal, state or local law, statute, regulation, or any common law doctrine, whether that dispute arises during or after employment, shall be settled by binding arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. The location for the arbitration shall be in Alameda County, California. Any award made by such panel shall be final, binding and conclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by the Company; provided however, that at your option, you may voluntarily pay up to one-half the costs and fees. You and the Company acknowledge and agree that our obligations to arbitrate under this section survive the termination of this Agreement and continue after the termination of the employment relationship between you and the Company. You and the Company each further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each party expressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in this Agreement. By election arbitration as the means for final settlement of all claims, you and the Company hereby waive their respective rights to, and agree not to, sue each other in any action in a Federal, State or local court with respect to such claims, but may seek to enforce in court an arbitration award rendered pursuant to this Agreement. You and the Company specifically agree to waive their respective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial by jury.
Page 7
14. MISCELLANEOUS. This Agreement, including its attachments and exhibits, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to its subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable to the fullest extent permitted by law, consistent with the intent of the parties. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of California without regard to conflict of laws principles. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing and shall not be deemed to be a waiver of any successive breach. This Agreement may be executed in counterparts and electronic or facsimile signatures will suffice as original signatures.
(Signatures on following page)
SIGNATURE PAGE
| Sincerely, | ||
| By: | /s/ Subodh Kulkarni | |
| Subodh Kulkarni | ||
| CEO | ||
I HAVE READ, UNDERSTAND AND AGREE FULLY TO THE FOREGOING AGREEMENT:
| /s/ Brian Sereda |
| Brian Sereda |
| 3/28/2023 |
| Date |
EXHIBIT A
Confidential Information and Invention Assignment Agreement
(See Inclusion in Offboarding Envelope)
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Subodh Kulkarni, certify that:
1. I have reviewed this Form 10-Q of Rigetti Computing, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2023
| /s/ Subodh Kulkarni |
| Signature |
| Subodh Kulkarni |
| President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey A. Bertelsen, certify that:
1. I have reviewed this Form 10-Q of Rigetti Computing, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2023
| /s/ Jeffrey A. Bertelsen |
| Signature |
| Jeffrey A. Bertelsen |
| Chief Financial Officer |
Exhibit 32.1
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Subodh Kulkarni, Chief Executive Officer of Rigetti Computing, Inc. (the “Company”), and Jeffrey A. Bertelsen, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Period Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: May 11, 2023
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 11th day of May, 2023.
| /s/ Subodh Kulkarni |
| Subodh Kulkarni |
| President and Chief Executive Officer |
| May 11, 2023 |
| /s/ Jeffrey A. Bertelsen |
| Jeffrey A. Bertelsen |
| Chief Financial Officer |
| May 11, 2023 |