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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number
001-40140
 
 
RIGETTI COMPUTING, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
88-0950636
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
   
775 Heinz Avenue
Berkeley, CA
 
94710
(Address of principal executive offices)
 
(Zip Code)
(510)
210-5550
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name
of
each exchange
on which registered
Common Stock, $0.0001 par value per share
 
RGTI
 
The Nasdaq Capital Market
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per share
 
RGTIW
 
The Nasdaq Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒
  
Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12-2
of the Exchange Act).    ☐  Yes    
  No
As of May 12, 2022,
 
113,820,970 shares of the registrant’s common stock, par value $0.0001 per share, were issued and outstanding.
 
 
 
 

Table of Contents
RIGETTI COMPUTING, INC. AND SUBSIDIARIES
FORM
10-Q
TABLE OF CONTENTS
 
 
  
Page
 
  
 
ii
 
  
 
iv
 
  
 
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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,” “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:
 
   
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 maintain the listing of our common stock and public warrants on the Nasdaq Capital Market (“Nasdaq”), and the potential liquidity and trading of such securities;
 
   
the risk that the Business Combination disrupts current plans and operations of Rigetti;
 
   
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 the Business Combination and operating as a public company;
 
   
our ability to 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;
 
   
our estimates of expenses and profitability;
 
   
the evolution of the markets in which we compete;
 
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our ability to implement our strategic initiatives, expansion plans and continue to innovate our existing services;
 
   
the expected use of proceeds of the Business Combination;
 
   
the sufficiency of our cash resources and our ability to raise additional capital;
 
   
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), 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;
 
   
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
 
   
our ability to expand or maintain our existing customer base; and
 
   
the effect of
COVID-19
on the foregoing.
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.
Should one or more of the risks or uncertainties described in this Quarterly Report on Form
10-Q
occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Additional information concerning these and other factors that may impact the operations and projections discussed herein can be found in the section entitled “Risk Factors” and in our periodic filings with the SEC. Our SEC filings are available publicly on the SEC’s website at www.sec.gov.
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.
 
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SUMMARY RISK FACTORS
The following is a summary of select risks and uncertainties that could materially adversely affect us and our business, financial condition and results of operations. Before you invest in our common stock, you should carefully consider all the information in this Quarterly Report on Form
10-Q,
including matters set forth under the heading “Risk Factors.” These risks include the following, among others:
 
   
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.
 
   
We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations and may need additional capital sooner than planned to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available. If we are unable to raise additional funding when needed, we may be required to delay, limit or substantially reduce our quantum computing development efforts.
 
   
Our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or other ownership changes.
 
   
We have not produced quantum computers with high qubit counts or at volume and 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 developed to demonstrate narrow quantum advantage and broad quantum advantage and the anticipated release of an 86 qubit system, 336 qubit system, 1,000+ qubit system and 4,000+ qubit system, each of which is an important anticipated milestone for our technical roadmap and commercialization, may not occur on our anticipated timeline or at all.
 
   
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.
 
   
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 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.
 
   
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 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 supplier, 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.
 
   
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.
 
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If our computers fail to achieve quantum advantage, our business, financial condition and future prospects may 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.
 
   
We have, in the past, identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future. 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, and may adversely affect investor confidence and business operations.
 
   
System security and data protection breaches, as well as cyber-attacks, including state-sponsored attacks, could disrupt our operations, which may damage our reputation and adversely affect our business.
 
   
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.
 
   
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.
 
   
We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations and may need additional capital sooner than planned to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available. If we are unable to raise additional funding when needed, we may be required to delay, limit or substantially reduce our quantum computing development efforts.
 
   
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
 
   
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 common stock to decline and future issuances of securities may adversely affect us, our common stock and may be dilutive to existing stockholders.
 
   
There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
 
   
Our warrants may be out of the money at the time they become exercisable and they may expire worthless.
 
   
With the approval by the holders of at least 50% of the then-outstanding public warrants, we may amend the terms of the warrants in a manner that may be adverse to holders.
 
v

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Part I—Financial Information
Item 1. Financial Statements
RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
                                                        (In thousands)
  
March 31,
 
 
December 31,
 
 
  
2022
 
 
2021
 
 
  
(Unaudited)
 
Assets
                
Current assets:
                
Cash
   $  206,626     $ 11,729  
Accounts receivable
     1,261       1,543  
Prepaid expenses and other current assets
     4,405       1,351  
Forward contract—assets
     2,740           
Deferred offering costs
     151       3,449  
    
 
 
   
 
 
 
Total current assets
     215,183       18,072  
Property and equipment, net
     23,943       22,497  
Restricted cash
     317       317  
Other assets
     1,083       165  
Goodwill
     5,377       5,377  
    
 
 
   
 
 
 
Total assets
   $ 245,903     $ 46,428  
    
 
 
   
 
 
 
Liabilities, redeemable convertible preferred stock and stockholders’ deficit
                
Current liabilities:
                
Accounts payable
   $ 3,453     $ 1,971  
Accrued expenses and other current liabilities
     5,230       3,806  
Convertible notes
             —    
Deferred revenue
     519       985  
Debt—current portion
     2,365       575  
Forward contract—liabilities
              230  
    
 
 
   
 
 
 
Total current liabilities
     11,567       7,567  
Debt—net of current portion
     27,678       24,216  
Derivative warrant liabilities
     24,001       4,355  
Earn-out
liabilities
     16,949           
Other liabilities
     278       295  
    
 
 
   
 
 
 
Total liabilities
     80,473       36,433  
Commitments and contingencies (Note 6)
            
Redeemable convertible preferred stock*, par value $0.0001 per share; 0 shares and 80,974,757 shares authorized at March 31, 2022 and December 31, 2021, respectively; 0 shares and 77,696,679 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
              81,523  
Stockholders’ deficit:
                
Preferred Stock, par value $0.0001 per share; 10,000,000 shares and 0 shares authorized at March 31, 2022 and December 31, 2021,
respectively;
 0 shares and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
                  
Common stock*, par value $0.0001 per share; 1,000,000,000 shares and 134,050,472 shares authorized at March 31, 2022 and December 31, 2021, respectively; 113,810,285 shares and 18,221,069 shares issued and outstanding at March 31, 2022 and December 31,
2021, respectively
     11       2  
Additional
paid-in
capital
     382,959       135,549  
Accumulated other comprehensive gain
     61       52  
Accumulated deficit
     (217,601     (207,131
    
 
 
   
 
 
 
Total stockholders’ equity (deficit)
     165,430       (71,528
    
 
 
   
 
 
 
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit
   $ 245,903     $ 46,428  
    
 
 
   
 
 
 
 
 
*
Shares of preferred stock and common stock have been retroactively restated to give effect to the Business Combination.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
(In thousands, except for share and per share amounts)
 
    
Three Months Ended
 
    
March 31,
 
    
2022
   
2021
 
    
(Unaudited)
 
Revenue
   $ 2,104     $ 2,360  
Cost of revenue
     414       273  
    
 
 
   
 
 
 
Total gross profit
     1,690       2,087  
Operating expenses:
                
Research and development
     12,449       6,934  
Sales and marketing
     1,475       312  
General and administrative
     11,560       2,521  
    
 
 
   
 
 
 
Total operating expenses
     25,484       9,767  
    
 
 
   
 
 
 
Loss from operations
     (23,794     (7,680
    
 
 
   
 
 
 
Other (expense) income, net:
                
Interest expense
     (1,205     (77
Change in fair value of derivative warrant liabilities
     5,822           
Change in fair value of
earn-out
liability
     9,634           
Transaction cost
     (927         
Other expense
              (30
    
 
 
   
 
 
 
Total other income (expense), net
     13,324       (107
Net loss before provision for income taxes
     (10,470     (7,787
Provision for income taxes
                  
    
 
 
   
 
 
 
Net loss
   $ (10,470)     $ (7,787)  
    
 
 
   
 
 
 
Net loss per share attribute to common stockholders—basic and diluted
   $ (0.20)     $ (0.36)  
Weighted average shares used in computing net loss per share attributable to common stockholders
basic and
diluted*
     53,691,948       21,847,581  
 
*
Weighted-average shares have been retroactively restated to give effect to the Business Combination.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
 
(In thousands)
 
    
Three Months Ended
    
March 31,
    
2022
   
2021
 
    
(Unaudited)
 
Net loss
   $  (10,470   $  (7,787
Other comprehensive gain:
                
Foreign currency translation gain
     9       52  
    
 
 
   
 
 
 
Comprehensive loss
   $  (10,461   $  (7,735
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY (UNAUDITED)
 
(In thousands)
 
    
Redeemable Convertible
Preferred Stock
    
Common Stock
    
Additional
Paid-In

Capital
    
Accumulated
Other
Comprehensive
Gain 
    
Accumulated
Deficit
   
Total
Stockholders’
(Deficit) Equity
 
    
Shares
   
Amount
    
Shares
   
Amount
 
    
(In thousands, except share and per share data)
 
Balance, December 31, 2020
     98,726,505     $  81,523        20,975,317     $  —        $  133,144      $ 5      $  (165,405   $  (32,256
Retroactive application of Business Combination (Note 3)
     (21,029,826     —          (4,467,972    
2
      
(2
)
 
     —          —         —    
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Adjusted balance, beginning of period*
     77,696,679       81,523        16,507,345      
2
       133,142        5        (165,405     (32,256
Issuance of common stock upon exercise of stock options
     —         —          118,566       —          26        —          —         26  
Issuance of common stock upon exercise of common stock warrants
     —         —          —         —          —          —          —         —    
Stock-based compensation
     —         —          —         —          597        —          —         597  
Foreign currency translation gain
     —         —          —         —          —          52        —         52  
Net
loss
     —         —          —         —          —          —          (7,787     (7,787
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Balance, March 31, 2021
     77,696,679     $ 81,523        16,625,911     $
2
     $ 133,765      $  57      $  (173,192   $  (39,368
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
 
    
Redeemable Convertible
Preferred Stock
   
Common Stock
    
Additional
Paid-In

Capital
   
Accumulated
Other
Comprehensive
Gain
    
Accumulated
Deficit
   
Total
Stockholders’
(Deficit) Equity  
 
    
Shares
   
Amount
   
Shares
   
Amount
 
    
(In thousands, except share and per share data)
 
Balance, December 31, 2021
     98,726,505     $ 81,523       23,153,127     $  —        $  135,551     $  52      $  (207,131   $  (71,528
Retroactive application of Business Combination (Note 3)
     (21,029,826     —         (4,932,058     2        (2     —          —         —    
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Adjusted balance, beginning of period*
     77,696,679       81,523       18,221,069       2        135,549       52        (207,131     (71,528
Issuance of common stock upon conversion of legacy Series C and Series
C-1
preferred stock in connection with the Business Combination (Note 3)
     (77,696,679     (81,523     57,380,563       6        81,517       —          —         81,523  
Issuance of common stock upon exercise of legacy Rigetti stock options
     —         —         1,123,539       —          574       —          —         574  
Issuance of common stock upon exercise of legacy Rigetti common stock warrants
     —         —         2,234,408       —          28       —          —         28  
Issuance of common stock through Business Combination and PIPE financing, net of transaction costs and derivative liabilities (Note 3)
     —         —         34,850,706       3        153,810       —          —         153,813  
Stock-based compensation
     —         —         —         —          11,481       —          —         11,481  
Foreign currency translation gain
     —         —         —         —          —         9        —         9  
Net
loss
     —         —         —         —          —         —          (10,470     (10,470
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Balance, March 31, 2022
     —       $ —         113,810,285     $ 11      $ 382,959     $ 61      $  (217,601   $  165,430  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
 
*
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.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
(In thousands)
 
 
  
Three Months Ended
 
 
  
March 31,
 
 
  
2022
 
 
2021
 
 
  
(Unaudited)
 
Cash flows from operating activities
        
Net loss
   $  (10,470)     $  (7,787)  
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
     1,390       1,144  
Stock-based compensation
     11,481       597  
Change in fair value of earnout liability
     (9,634     —    
Change in fair value of derivative
warrant
 
liabilities
     (5,822     —    
Change in fair value of forward contract—liabilities
     (2,970     —    
Amortization of debt issuance costs
     236       —    
Accretion of debt end of term liabilities
     46       —    
Amortization of exit fee asset
     47       —    
Changes in operating assets and liabilities:
                
Accounts receivable
     282       191  
Prepaid expenses and other current assets
     (3,054     155  
Other assets
     (918     (1
Deferred revenue
     (466     (585
Accounts payable
     1,482       259  
Accrued expenses and other current liabilities
     2,606       334  
Other liabilities
     43       (102
    
 
 
   
 
 
 
Net cash used in operating activities
     (15,721     (5,795
    
 
 
   
 
 
 
Cash flows from investing activities
                
Purchases of property and equipment
     (2,836     (1,488
    
 
 
   
 
 
 
Net cash used in investing activities
     (2,836     (1,488
    
 
 
   
 
 
 
Cash flows from financing activities
                
Proceeds from Business Combination, net of transaction costs paid
     225,604       —    
Transaction costs paid directly by Rigetti
     (16,731     —    
Proceeds from issuance of debt and warrants
     5,000       12,000  
Payments on debt issuance costs
     (30     —    
Payment on loan and security agreement exit fees
     (1,000     —    
Proceeds from issuance of common stock upon exercise of stock options and warrants
     602       26  
    
 
 
   
 
 
 
Net cash provided by financing activities
     213,445       12,026  
    
 
 
   
 
 
 
Effect of changes in exchange rate on cash and restricted cash
     9       42  
Net increase in cash and restricted cash
     194,897       4,785  
Cash and restricted cash at beginning of period
     12,046       24,394  
    
 
 
   
 
 
 
Cash and restricted cash at end of period
   $  206,943     $  29,179  
    
 
 
   
 
 
 
Supplemental disclosure of cash flow information:
                
Cash paid for interest
   $ 878     $ 81  
Supplemental disclosure of
non-cash
financing activity:
                
Fair value of loan and security agreement warrant
liability
   $ 2,691     $ —    
Fair value of
earn-out
liability
   $ 26,583     $ —    
Fair value of private placement warrants
liability
   $ 22,487     $ —    
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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RIGETTI COMPUTING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Rigetti Computing Inc. and its subsidiaries (collectively, the “Company” or “Rigetti”), builds quantum computers and the superconducting quantum processors that power them. Through the Company’s Quantum Cloud Services (“QCaaS”) platform, the Company’s machines can be integrated into any public, private or hybrid cloud. The Company offers product types of Platform, Research and Software Tools usage in application areas of benchmarking, chemical simulation, education/entertainment, machine learning, and optimization.
The Company is located and headquartered in Berkeley, California. The Company also operates in Fremont, California, London, United Kingdom, Adelaide, Australia, British Columbia, Canada and Munich, Germany. The Company’s revenue is derived primarily from operations in the United States and United Kingdom.
Basis of Presentation
On March 2, 2022 (the “Closing Date”), a merger transaction between Rigetti Holdings, Inc. (“Legacy Rigetti”) and Supernova Partners Acquisition Company II, Ltd. (“SNII”) was completed (the “Business Combination”, see Note 3). In connection with the closing of the Business Combination, the Company changed its name to Rigetti Computing, Inc. and all of SNII Class A ordinary shares and SNII Class B ordinary shares automatically converted into shares of common stock, par value $0.0001,
of the Company (the “Common Stock”) on a one-for-one basis. The SNII public warrants and the private warrants held by SNII became warrants for Common Stock. The Company’s common stock and warrants trade on the Nasdaq Capital Market under the ticker symbols “RGTI” and “RGTIW,” respectively. For more information on this transaction, see Note 3. 
The Company determined that Legacy Rigetti was the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification 805. The determination was primarily based on the following facts:
 
   
Former Legacy Rigetti stockholders have a controlling voting interest in the Company;
 
   
The Company’s board of directors as of immediately after the closing is 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-merger; and 
 
   
Legacy Rigetti management continues to hold executive management roles for the post-combination company and be responsible for
the day-to-day operations.
Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Rigetti issuing stock for the net assets of SNII, accompanied by a recapitalization. The primary asset acquired from SNII was related to the cash amounts that was assumed at historical costs. Separately, the Company also assumed warrants that were deemed to be derivatives and meet liability classification subject to fair value adjustment measurements upon closing of the Business Combination (the “Closing”). No goodwill or other intangible assets were recorded as a result of the Business Combination.
While SNII was the legal acquirer in the Business Combination, because Legacy Rigetti was deemed the accounting acquirer, the historical financial statements of Legacy Rigetti became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Rigetti prior to the Business Combination; (ii) the combined results of SNII and Legacy Rigetti following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Rigetti at their historical cost; and (iv) the Company’s equity structure for all periods presented.
In accordance with guidance applicable to these circumstances, the equity structure has been retroactively restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common 
stock, $0.0001 par value per share, issued to Legacy Rigetti shareholders and Legacy Rigetti convertible preferred shareholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Rigetti redeemable convertible preferred stock and Legacy Rigetti common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. All intercompany transactions and balances have been eliminated in consolidation. All dollar amounts, except share and per share amounts, in the notes are presented
 
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in thousands, unless otherwise specified. The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included as Exhibit 99.1 to the Company’s Current Report on Form
8-K,
dated March 7, 2022.
Risks and Uncertainties
— The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology.
COVID-19
— As of March 31, 2022 and December 31, 2021, the Company’s financial position was not significantly impacted due to the effects of
COVID-19.
However, the duration and intensity of the
COVID-19
pandemic and any resulting disruption to the Company’s operations remains somewhat uncertain, and the Company will continue to assess the impact of the
COVID-19
pandemic on its financial position.
Liquidity 
— The Company has incurred net losses since inception, experienced negative cash flows from operations, and has an accumulated deficit of $217.6 million as of March 31, 2022. The Company expects operating losses and negative cash flows from operations to continue for the foreseeable future. On the Closing Date, the Company received $225.6 million combined net proceeds from the Business Combination and the PIPE investment (See Note 3 for further information). Therefore, as of the date on which these condensed consolidated financial statements were issued, the Company believes that its cash on hand, together with cash generated from sales to customers, will satisfy its working capital and capital requirements for at least the next twelve months. In the future, the Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. If such financing is not available when needed and at adequate levels, the Company may need to reevaluate its business plans.
Change in Fiscal Year
— In October 2021, the board of directors of Rigetti approved a change to Rigetti’s fiscal
year-end
from January 31 to December 31, effective December 31, 2021. The Company believes the
year-end
change is important and useful to its financial statement users to allow for increased comparability with its industry peers. As a result of this change, the Company’s fiscal year now begins on January 1 and ends on December 31 of each year, starting on January 1, 2022. Year-over-year quarterly financial data has been and will continue to be recast to be comparative with the new fiscal quarter ends in the new fiscal year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Growth Company
Following the Business Combination, the Company qualifies as an emerging growth company (‘‘EGC’’) as defined in the Jumpstart our Business Startups (‘‘JOBS’’) Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company intends to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is
no
longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
The Company anticipates that it will remain an EGC under the JOBS Act until the earliest of (a) the last day of Rigetti’s first fiscal year following the fifth anniversary of the completion of SNII’s initial public offering, (b) the last date of Rigetti’s fiscal year in which Rigetti has total annual gross revenue of at least $1.07 billion, (c) the date on which Rigetti is 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 Rigetti has issued more than $1.0 billion in
non-convertible
debt securities during the previous three years.
Use of Estimates
— The preparation of the unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Such management estimates include, but are not limited to, the fair value of share-based awards, the fair value of the convertible preferred stock warrants, fair
 
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value of the forward contract agreement, the fair value of derivative warrant liabilities, the fair value of earnouts issued in connection with the business combination (See Note 3), goodwill and intangible assets, accrued liabilities and contingencies, depreciation and amortization periods, revenue recognition and accounting for income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the unaudited condensed consolidated financial statements; therefore, actual results could differ from those estimates.
Reclassifications
Certain amounts reported previously have been reclassified to conform to the current quarter presentation, with no effect on stockholders’ equity or net loss as previously presented.
Deferred Offering Costs
—The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with the Business Combination or issuance of shares under a registration statement filed with the SEC. After consummation of the Business Combination or issuance of shares, costs allocated to equity-classified instruments are recorded as a reduction to additional
paid-in
capital. Costs allocated to liability-classified instruments are expensed.
Deferred Financing Costs
— The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the consolidated statement of operations. Unamortized deferred financing costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.
Segments
— Operating segments are defined as components of an entity for which discrete financial information is available and that information is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is its CODM, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment.
Foreign Currency
— The Company’s reporting currency is the US dollar. The functional currencies of the Company’s foreign subsidiaries are the local currencies (UK pounds sterling and Australian dollars), as it is the monetary unit of account of the principal economic environment in which the Company’s foreign subsidiaries operate. All assets and liabilities of the foreign subsidiaries are translated at the current exchange rate as of the end of the period, and revenue and expenses are translated at average exchange rates in effect during the period. The gain or loss resulting from the process of translating foreign currency financial statements into US dollars is reflected as a foreign currency cumulative translation adjustment and reported as a component of accumulated other comprehensive gain (loss). Foreign currency transaction gains and losses resulting from or expected to result from transactions denominated in a currency other than the functional currency are recognized in other income (expense), net in the consolidated statements of operations.
Comprehensive Loss
— Comprehensive loss consists of net loss and changes in equity during a period from transactions and other equity and circumstances generated from
non-owner
sources. Comprehensive loss consists of two components including, net loss and other comprehensive loss. The Company’s other comprehensive gain/(loss) consists of foreign currency translation adjustments that result from consolidation of its foreign entities.
Cash and Restricted Cash
— The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash. As of March 31, 2022 and December 31, 2021, cash consists primarily of checking and savings deposits. The Company’s restricted cash balance classifies all cash whose use is limited by contractual provisions. As of March 31, 2022 and December 31, 2021, restricted cash consists of cash secured as collateral for letters of credit in favor of the Company’s landlord and its corporate credit card program. The Company may not access these funds until it vacates this office space (leases expire in 2026).
The following table provides a reconciliation of cash and restricted cash in the consolidated balance sheets to the total amount shown in the consolidated statements of cash flows: (In thousands)
 
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March 31,
2022
 
  
December 31,
2021
 
 
  
(In thousands)
 
Cash
   $ 206,626      $ 11,729  
Restricted cash
     317        317  
    
 
 
    
 
 
 
Total cash and restricted cash
   $ 206,943      $ 12,046  
    
 
 
    
 
 
 
Accounts Receivable
— Accounts receivable are recorded at invoice value, net of allowance for doubtful accounts. Unbilled receivables are included in accounts receivable and include amounts that were invoiced subsequent to
year-end
for which revenue was recognized in advance of the right to invoice. On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write-offs, collections, and current credit conditions. A receivable is considered past due if the Company has not received payments based on agreed-upon terms. As of March 31, 2022 and December 31, 2021, the Company does not have any allowances for doubtful accounts.
Public and Private Warrants
— Prior to the Business Combination, SN II 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 the Company’s common stock at a price of $11.50 per share, subject to adjustments and will expire five years after the Business Combination 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 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 the Company’s stock and should be classified as a liability. Since the Private Warrants meet the definition of a derivative, the Company recorded the Private Warrants as liabilities on the condensed consolidated balance sheet at fair value upon the Closing, with subsequent changes in the fair value recognized in the condensed consolidated statements of comprehensive loss 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 on which there is not an effective registration statement, the warrant holders have a cap, 0.361 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 an option pricing model.
On the consummation of the Business Combination, the Company recorded a liability related to the Private Warrants of $9.2 million, with an offsetting entry to
additional paid-in capital.
On March 31, 2022, the fair value of the Private Warrants decreased to $6.6 million, with the gain on fair value change recorded in the condensed consolidated statement of comprehensive loss for the three months ended March 31, 2022. See Note 10, for further information on fair value.
Similarly, on consummation of the Business Combination, the Company recorded a liability related to the public warrants of $16.3 million, with an offsetting entry to
additional paid-in capital.
On March 31, 2022, the fair value of the Private Warrants decreased to $11.2 million with the gain on fair value change recorded in the condensed consolidated statement of comprehensive loss for the three months ended March 31, 2022. See Note 10, for further information on fair value.
Derivative Warrant Liabilities
— The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 815, “Derivatives and Hedging” (“ASC 815”) at the initial recognition.
Other than the Public and Private Placement warrants noted above, the Company also has other warrants issued and outstanding which are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period until exercised. The fair value of the warrant liabilities issued were initially measured using the Black-Scholes model and will be subsequently remeasured at each reporting period with changes recorded as a component of other income in the Company’s consolidated statement of operations. 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.
 
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Earn-Out
 Liability
— At Closing, Supernova Partners II LLC (the “Sponsor”) subjected certain shares (“Sponsor
Earn-Out
Shares”) of Common Stock held by the Sponsor to forfeiture and vesting as of the Closing Date 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 that remain unvested after the fifth anniversary of the Closing will be forfeited. See Note 3, Business Combination for more detail on terms of Sponsor
Earn-Out
Shares.
These Sponsor Earn-Out Shares are
accounted for as liability classified instruments
because the Earn-Out Triggering Events
that determine the number
of Sponsor Earn-Out Shares to
be earned back by the Sponsor include outcomes that are not solely indexed to the common stock of the Company. The aggregate fair value of the
Sponsor Earn-Out Shares
on the Closing date was estimated using a Monte Carlo simulation model and was determined to be $26.6 million at Closing. As of March 31, 2022,
the Earn-Out Triggering
Events were not achieved for any of the tranches and as such the Company adjusted the carrying amount of the liability to its estimated fair value of $16.9 million. The change in the fair value of $9.6 million is included in gain on fair value change, net in the condensed consolidated statements of comprehensive loss.
Significant inputs into the respective models at the March 2, 2022 (the initial recognition) and March 31, 2022 are as follows:
 
Valuation Assumptions
  
Initial Recognition
on March 2, 2022
   
March 31,
2022
 
Stock Price
   $ 9.43     $ 6.30  
Simulated trading days
     1,198.00       1,178.00  
Volatility (annual)
     77.00     86.00
Risk-free rate
     1.74     2.42
Estimated time to expiration (years)
     5       5  
Revenue Recognition
The Company generates revenue through its Quantum Cloud Services (“QCaaS”) and development contracts and other services. 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 (“QCaaS”) is recognized over time as access to the systems is provided on a ratable basis over the subscription term, which can range from six months to two years. This time-based input measure of progress provides a faithful depiction of the transfer of the services because the customer obtains generally equal benefit from its access to the systems throughout the subscription term. 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. This output method provides a faithful depiction of the transfer of the services because the customer has purchased a specified quantity of hours of usage that diminishes each time an hour is expended and therefore each hour of access to the systems is considered a discrete delivery of underlying services in these arrangements. 
Development contracts are generally multi-year,
non-recurring
arrangements in which the Company provides professional services regarding 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 that will provide commercial value to the customer in areas of business interest. Development contracts are typically fixed fee arrangements invoiced on a milestone basis but may also be invoiced on a time and materials or cost reimbursement basis in certain cases. Revenue related to development contracts and other services is recognized over time as the services are provided using an input measure based on actual labor hours incurred to date relative to total estimated labor hours needed to complete the program or total contracted hours over the program period. This input measure of progress provides a faithful depiction of the transfer of the services because it closely depicts the Company’s efforts or inputs to the satisfaction of the performance obligation. Revenue related to the sale of custom quantum computing components is recognized at a point in time upon acceptance by the customer.
 
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Net income (loss) per share
— Basic net loss per common share is computed by dividing the net loss available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Diluted net loss per common share is computed by dividing the net loss available to common stockholders adjusted by any preferred stock dividends declared during the period by the weighted average number of common shares and potential common shares outstanding when the impact is not antidilutive. Potential common shares from stock options, unvested restricted stock units and common stock warrants are computed using the treasury stock method, while those from convertible Series C and
C-1
Preferred Stock are computed using the
if-converted
method. Contingently issuable shares are included in basic EPS only when there is no circumstance under which those shares would not be issued. Shares issuable for little or no cash consideration shall be considered outstanding common shares and included in the computation of basic EPS.
Stock-Based Compensation
— The Company accounts for share-based compensation in accordance with ASC 718,
Compensation – Stock Compensation
. The Company’s share-based compensation awards are all equity-classified and consist of stock options and restricted stock units (“RSU”). Stock options have service vesting conditions ranging from 1 to 5 years. RSUs granted under our 2013 equity incentive plan generally have a 4-year
service vesting condition and a performance condition linked to the occurrence of a liquidity event defined as a change-in-control event, successful initial public offering or successful merger with a special purpose acquisition company, which was satisfied by the closing. 
Compensation expenses are based on the grant-date fair value of the awards and recognized over the requisite service period using a straight-line method for stock options and a grad
e
d vesting method for RSUs. The Company has elected to account for forfeitures of employee stock awards as they occur.
Concentrations of Credit Risk
— Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and trade accounts receivable. The Company’s cash is placed with high-credit-quality financial institutions, and at times exceeds federally insured limits. To date, the Company has not experienced any credit loss relating to its cash.
Significant customers are those that represent 10% or more of revenue are set forth in the following tables:
 
    
March 31,
Customer
  
2022
 
2021
Customer A
   47%   *
Customer B
   23%   21%
Customer C
   13%   60%
*Customer accounted for less than 10% of revenue in the respective period
All revenues derived from major customers noted above are included in the United States region in Note 15.
Significant customers are those that represent 10% or more of accounts receivable are set forth in the following tables:
 
    
March 31,
   
December 31,
 
Customer
  
2022
   
2021
 
Customer A
     53     *  
Customer B
     25     35
Customer C
     21     *  
Customer D
     *       34
Customer E
     *       29
*Customer accounted for less than 10% of accounts receivable in the respective period
Recently Issued Accounting Pronouncements
— In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842). ASU
2016-02 is
amended by ASU
2018-01, ASU2018-10, ASU
2018-11, ASU
2018-20 and ASU
2019-01,
which FASB issued in January 2018, July 2018, July 2018, December 2018 and March 2019, respectively (collectively, the amended ASU
2016-02).
The amended ASU
2016-02 requires
lessees to recognize on the balance sheet a
right-of-use
asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from
 
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current GAAP. The amended ASU
2016-02 retains
a distinction between finance leases (i.e., capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amended ASU
2016-02 also
requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach is permitted to be used when an entity adopts the amended ASU
2016-02,
which includes a number of optional practical expedients that entities may elect to apply. The Company plans to adopt the ASC Topic 842 on December 31, 2022 with an effective date on January 1, 2022. The Company is still in the process of evaluating the impact of the adoption of ASC Topic 842 on the consolidated results of the operations. No other new accounting pronouncement recently issued or newly effective had or is expected to have a material impact on the condensed consolidated financial statements.
3. BUSINESS COMBINATION
As discussed in Note 1, on March 2, 2022, the Business Combination was completed. Pursuant to the Company’s certificate of incorporation, as amended on March 2, 2022, the Company is authorized to issue 1,000,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.0001, of the Company (the “Preferred Stock”). The holders of shares of Common Stock are entitled to one vote for each share of common stock held. The Preferred Stock is
non-voting.
No shares of Preferred Stock were issued and outstanding as of March 31, 2022.
On March 1, 2022, prior to the Closing, as contemplated by the Merger Agreement and following approval by SNII’s shareholders at an extraordinary general meeting of shareholders held on February 28, 2022 (the “Extraordinary General Meeting”), SNII filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation (the “Certificate of Incorporation”) and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SNII was domesticated and continues as a Delaware corporation, changing its name to “Rigetti Computing, Inc.”
As a result of and upon the effective time of the Domestication (which occurred on March 1, 2022), among other things:(1) each then issued and outstanding Class A ordinary share, par value $0.0001 per share, of SNII (“SNII Class A ordinary share”) converted automatically, on
a one-for-one basis,
into a share of Common Stock; (2)each then issued and outstanding Class B ordinary share, par value $0.0001 per share, of SNII (“SNII Class B ordinary share”) converted automatically, on
a one-for-one basis,
into a share of Common Stock; (3) each then issued and outstanding whole warrant of SNII to purchase one SNII Class A ordinary shares converted automatically into a warrant to acquire one share of Common Stock at an exercise price of $11.50 per share (the “Warrants”) pursuant to the Warrant Agreement, dated March 1, 2021, between SNII and American Stock Transfer & Trust Company, as warrant agent; (4) and each then issued and outstanding unit of SNII (the “SNII Units”) was separated and converted automatically into one share of Common Stock
and one-fourth of
one Warrant.
Immediately prior to the effective time of the Business Combination, each share of Legacy Rigetti’s Series C preferred stock and
Series C-1 preferred
stock (collectively, the “Legacy Rigetti Preferred Stock”) with Par Value of $0.000001 converted into shares of common stock of Legacy Rigetti (“Legacy Rigetti Common Stock”) in accordance with the Amended and Restated Certificate of Incorporation of Legacy Rigetti (such conversion, the “Legacy Rigetti Preferred Conversion”).
As a result of the Business Combination, among other things (1) 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 0.7870 (the “Exchange Ratio”) for an aggregate of 78,959,579
shares of Common Stock; (2) each warrant to purchase Legacy Rigetti Common Stock converted into a warrant to purchase shares of Common Stock (“Assumed Warrant”), with each Assumed Warrant subject to the same terms and conditions as were applicable to the original Legacy Rigetti warrant and having an exercise price and number of shares of Common Stock purchasable based on the Exchange Ratio and other terms contained in the Merger Agreement; (3) each option to purchase Legacy Rigetti Common Stock converted into an option to purchase shares of Common Stock (“Assumed Option”), with each Assumed Option subject to the same terms and conditions as were applicable to the original Legacy Rigetti option and with an exercise price and number of shares of Common Stock purchasable based on the Exchange Ratio and other terms contained in the Merger Agreement, and; (4) each Legacy Rigetti restricted stock unit award converted into a restricted stock unit award to receive shares of Common Stock (“Assumed RSU Award”), with each Assumed RSU Award subject to the same terms and conditions as were applicable to the Legacy Rigetti restricted stock unit award, and with the number of shares of Common Stock to which the Assumed RSU Award based on the Exchange Ratio and other terms contained in the Merger Agreement. 
 
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In connection with the execution of the Merger Agreement, SNII entered into a sponsor support agreement (the “Sponsor Support Agreement”) with the Sponsor, Legacy Rigetti and SNII’s directors and officers. Pursuant to the Sponsor Support Agreement, the Sponsor and SNII’s directors and officers (“Sponsor Holders”), among other things, agreed to vote all of their shares of SNII capital stock in favor of the approval of the Business Combination. In addition, pursuant to the Sponsor Support Agreement, (i) 2,479,000 shares of Common Stock held by the Sponsor Holders became unvested and subject to forfeiture as of the Closing and will only vest if, during the five year period following the Closing, the volume weighted average price of Common Stock equals or exceeds $12.50 for any twenty trading days within a period of thirty consecutive trading days, and (ii) 580,273 shares of Common Stock held by the Sponsor Holders became unvested and subject to forfeiture as of the Closing and will only vest if, during the five year period following the Closing, the volume weighted average price of Common Stock equals or exceeds $15.00 for any twenty trading days within a period of thirty consecutive trading days. Any such shares held by the Sponsor Holders that remain unvested after the fifth anniversary of the Closing will be forfeited. (Refer to Note 2 for related significant accounting policy for Sponsor
Earn-Out
Liability)
Concurrently with the execution of the Merger Agreement, SNII entered into Subscription Agreements (the “Initial Subscription Agreements”) with certain investors (together, the “Initial PIPE Investors”), pursuant to which the Initial PIPE Investors agreed to subscribe for and purchase, and SNII agreed to issue and sell to the Initial PIPE Investors, an aggregate of 10,251,000 shares of Common Stock at a price of $10.00 per share, for aggregate gross proceeds of $102.5 Million (the “Initial PIPE Financing”). On December 23, 2021, SNII entered into Subscription Agreements (the “Subsequent Subscription Agreements”, and together with the Initial Subscription Agreements, the “Subscription Agreements”) with two “accredited investors” (as such term is defined in Rule 501 of Regulation D) (the “Subsequent PIPE Investors”, and together with the Initial PIPE Investors, the “PIPE Investors”) pursuant to which the Subsequent PIPE Investors agreed to subscribe for and purchase, and SNII agreed to issue and sell to the Subsequent PIPE Investors, an aggregate of 4,390,244 shares of Common Stock at a price of $10.25 per share, for aggregate gross proceeds of $45.0 Million (the “Subsequent PIPE Financing”, and together with the Initial PIPE Financing, the “PIPE Financing”). Pursuant to the Subscription Agreements, Rigetti agreed to provide the PIPE Investors with certain registration rights with respect to the shares purchased as part of the PIPE Financing. The PIPE Financing was consummated immediately prior to the Merger.
The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, SNII was treated as the “acquired” company for financial reporting purposes (See Note 1).
In accounting for the Business Combination and after redemptions, net proceeds received by the Company totaled $225.6 million. The table below shows the net proceeds from business combination and PIPE financing:
 
    
Amount (in thousands)
 
Cash - SNII trust and cash (net of redemption)
   $ 115,879  
Cash - PIPE
     147,510  
Cash - SNII operating account
     325  
Less: SNII transaction cost
     (38,110
    
 
 
 
Net Proceeds from Business Combination and PIPE
  
$
225,604
 
    
 
 
 
Transaction costs consist of direct legal, accounting and other fees relating to the consummation of the Merger. Legacy Rigetti transaction costs specific and directly attributable to the business combination totaled $20.65 million. These costs were initially capitalized
and
incurred in deferred offering assets on the consolidated balance sheets. Upon the Closing, transaction costs related to the issuance of shares were recognized in stockholders’ equity (deficit) while costs associated with the Public Warrants, Private Placement Warrants and Sponsor Earnout Warrants liabilities were expensed in the consolidated statements of operations. Of the total transaction cost of $20.65 million, $19.75 million was recorded to additional
paid-in
capital as a reduction of proceeds and the remaining $0.9 million was recognized in the condensed consolidated statements of operations during the three months ended March 31, 2022. Transaction cost paid through cash during the three months ended March 31, 2022 equals $16.7 million.
The amount recorded to additional
paid-in-capital
was $153.8 million, comprised of $225.6 million net proceeds less $19.75 million transaction costs,
 
of which $3.4 million was initially recorded as deferred offering costs at December 31, 202
1
and fully paid as of March 31, 2022,
 $16.3 million recognized for the Public Warrant liabilities, $9.2 million recognized for the Private Placement Warrant liabilities, and $26.6 million recognized for the earnout liabilities.
The number of shares of common stock issued immediately following the consummation of the Business Combination was as follows:
 
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Common Stock - SNII Class A, outstanding prior to Business Combination
     34,500,000  
Less: redemption of SNII Class A ordinary shares
     (22,915,538
Common Stock - SNII Class A ordinary shares
     11,584,462  
Common Stock - SNII Class B ordinary shares*
     8,625,000  
Shares issued in PIPE
     14,641,244  
Business Combination and PIPE shares
     34,850,706  
Common stock - Legacy Rigetti**
     18,221,069  
Common stock - exercise of Legacy Rigetti stock options immediately prior to the closing**
     1,123,539  
Common stock - exercise of Legacy Rigetti warrants immediately prior to the closing**
     2,234,408  
Common stock - upon conversion of Legacy Rigetti Series C preferred stock**
     54,478,261  
Common stock - upon conversion of Legacy Rigetti Series
C-1
preferred stock**
     2,902,302  
    
 
 
 
Total shares of common stock immediately after Business Combination
     113,810,285  
 
*
Includes (i) 2,479,000 shares of Common Stock held by the Sponsor (the “Promote Sponsor Vesting Shares”) and (ii) 580,273 shares of Common Stock held by the Sponsor (“Sponsor Redemption-Based Vesting Shares”).
**
(i)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 0.7870 (the “Exchange Ratio”). (ii) the conversion ratio to Legacy Riegtti Common Stock for the Legacy Series C Preferred Stock was
one-for-one
and for Legacy Series
C-1
Preferred Stock was
eight-for-one.
 
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4. REVENUE RECOGNITION
The following tables depict the disaggregation of revenue according to the type of good or service and timing of transfer of goods or services:​​​​​​​
 
    
Three Months Ended
March 31,
 
    
2022
    
2021
 
Type of Goods or Service
  
(In thousands)
 
Collaborative research and other professional services
   $ 1,515      $ 1,603  
Access to quantum computing systems
     589        757  
    
 
 
    
 
 
 
Quantum computing components
   $ 2,104      $ 2,360  
    
 
 
    
 
 
 
Timing of Revenue Recognition
                 
Revenue recognized at a point in time
   $ —        $     
Revenue recognized over time
     2,104        2,360  
    
 
 
    
 
 
 
     $ 2,104      $ 2,360  
    
 
 
    
 
 
 
Selected condensed consolidated balance sheet line items that reflect accounts receivable, contract assets and liabilities as of March 31, 2022 and December 31, 2021 were as follows:
 
    
March 31,
    
December 31,
 
    
2022
    
2021
 
    
(In thousands)
 
Trade receivables
   $ 1,147      $ 961  
Unbilled receivables
   $ 114      $ 581  
Deferred revenue
   $ (519    $ (985
Changes in deferred revenue from contracts with customers were as follows:
 
    
March 31,
 
    
2022
 
    
(In thousands)
 
Balance at beginning of period
   $ (985
Deferral of revenue
     (92
Recognition of deferred revenue
     558  
    
 
 
 
Balance at end of period
   $ (519
    
 
 
 
Remaining performance obligations represent the portion of the transaction price that has not yet been satisfied or achieved. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $10.6 million. The Company expects to recognize estimated revenues related to performance obligations that are unsatisfied (or partially satisfied) in the amounts of approximately $5.3 million during the remainder of year ended December 31, 2022, and $5.3 million during the years ended December 31, 2023 and December 31, 2024.
Deferred Contract Acquisition and Fulfillment Costs
—The Company has not identified any costs that are incremental to the acquisition of customer contracts that would be capitalized as deferred costs on the balance sheet in accordance with ASC
340-40.
Incremental costs incurred to fulfill the Company’s contracts that meet the capitalization criteria in ASC
340-40
have historically been immaterial. Accordingly, the Company has not capitalized any contract fulfillment costs as of March 31, 2022 and March 31, 2021.
 
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5. FAIR VALUE MEASUREMENTS
The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1—
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—
Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3—
Inputs are unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.
The fair value measurements of financial assets and liabilities that are measured at fair value at March 31, 2022 are as follows:
 
    
Fair Value Hierarchy
 
    
Level 1
    
Level 2
    
Level 3
 
    
(in thousands)
 
Assets:
                          
Forward Warrant Agreement
   $         $          $ 2,740  
    
 
 
    
 
 
    
 
 
 
Total Assets
   $         $         $ 2,740  
    
 
 
    
 
 
    
 
 
 
Liabilities:
                          
Derivative warrant liability - Trinity Warrants
   $         $         $ 6,203  
Derivative warrant liability-Private Placement Warrants
                         6,586  
Derivative warrant liability-Public Warrants
     11,212                   
Earn-out
Liability
                         16,949  
    
 
 
    
 
 
    
 
 
 
Total Liabilities
  
$
11,212
 
  
$
  
 
  
$
29,738
 
    
 
 
    
 
 
    
 
 
 
As of March 31, 2022, the Company has recorded the following financial instruments subject to fair value measurements: 1) Derivative warrant liability – Trinity Warrants, 2) Derivate warrant liabilities—Public Warrants liability and Private Placement Warrants, 3) Forward Warrant Agreement, and 4) Contingent Earnout liability. The Private Placement Warrants, Public Warrants and Contingent Earnout liability were recorded in connection with the business combination (Note 1 and Note 3).
The fair value of the Public Warrants has been measured based on the observable listed prices for such warrants, a Level 1 measurement. All other financial are classified as Level 3 liabilities as they all include unobservable inputs. Derivative warrant liability – Trinity Warrants were fair valued based on a Black-Scholes option model with unobservable inputs which included volatility. The Company estimates the volatility of its ordinary share warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants.
The Private Placement Warrants were initially measured at fair value using a Black Scholes model. The Company estimated the fair value of the Forward Warrant Agreement using a forward analysis with unobservable inputs which included selected risk-free rate and probability outcomes. The Company has further discussed the key aspects of the fair value measurements described above in Note 10 and 11 to the financial statements.
The aggregate fair value of the
Sponsor Earn-Out Shares
on the Closing date was estimated using a Monte Carlo simulation model. The Company has further discussed the key aspect of the valuation inputs in Note 2 significant accounting policy for Sponsor
Earn-Out
Liability.
 
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There have been no changes in fair value measurement techniques during the three months ended March 31, 2022. There were no transfers between Level 1 or Level 2, or transfers in or out of Level 3 of the fair value hierarchy during the three months ended March 31, 2022.
A summary of the changes in the fair value of the Company’s Level 3 financial instruments as of March 31, 2022 and December 31, 2021 are as follows:
 
 
  
Derivative warrant
liability - Trinity
Warrants
 
  
Derivative warrant
liability-Private
Placement Warrants
 
 
Derivative
warrant liability-
Public Warrants
 
 
Forward
Warrant
Agreement
 
 
Earn-out

Liability
 
Balance - December 31, 2021
   $ 4,355      $ —       $ —       $ 230     $ —    
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Initial measurement on March 2, 2022 upon Business Combination (Note 3)
              9,167       16,301               26,583  
Change in fair values
     1,848        (2,581     (5,089     (2,970     (9,634
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance - March 31, 2022
   $ 6,203        6,586     $ 11,212     $ (2,740   $ 16,949  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
6. COMMITMENTS AND CONTINGENCIES
Leases
—The Company leases office spaces under noncancelable operating lease agreements, which expire in 2026. The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities and will be required to pay any increases over the base year of these expenses on the remainder of the Company’s facilities.
The Company recognizes rent expense on a straight-line basis over the lease term. Rent expense for operating leases for the
three
 months ended March 31, 2022 and 2021 was $0.4 million and $0.5 million, respectively. The Company has accrued $0.3 million and $0.4 million in deferred rent as of March 31, 2022 and December 31, 2021, respectively, primarily relating to one of its office spaces. Deferred rent that will be paid within the 12 months after the balance sheet date is included within accrued expenses and other current liabilities, the remaining balance is recorded within other liabilities on the Company’s consolidated balance sheets.
Future minimum lease payments under
non-cancelable
operating leases as of March 31, 2022 are as follows:
 
As of March 31, 2022 (in thousands)
      
Remainder of 2022
   $ 1,314  
2023
     901  
2024
     928  
2025
     956  
2026
     81  
    
 
 
 
Total minimum future lease payments
   $ 4,180  
    
 
 
 
Litigation
— The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business. Management believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.
 
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7. FINANCING ARRANGEMENTS
Loan and Security Agreement
In March 2021, the Company entered into an agreement (the “Loan Agreement”) with Trinity Capital Inc. (“Trinity”) to secure a debt commitment of $12.0 million (the “Tranche A”) which was drawn at the closing. The term loan is collateralized by a first-priority, senior secured interest in substantially all of the Company’s assets. In conjunction with the Loan Agreement, the Company issued Trinity a warrant to purchase shares of common stock (the “Trinity Warrants”) which is recorded at fair value using Black-Scholes model, see Note 10 for the fair value assumptions.
The Loan Agreement contains customary representations, warranties and covenants, however the debt agreement does not include any financial covenants. In May 2021, the debt agreement was modified to increase the overall debt commitment by $15.0 million (the “Tranche B” or the “Amendment”) and $8.0 million of the additional commitment was drawn at the closing and the remaining commitment of $7.0 million was available at the Company’s option at any time through March 10, 2022 subject to certain conditions. The Company drew the $7.0 million in November 2021. In conjunction with the Amendment, the Company cancelled the Initial Warrants and issued 995,099 warrant shares to purchase the common stock which was an incremental cost allocated between Tranche A and Tranche B, see Note 10 for further information on these warrants. The Amendment to the debt agreement was considered a modification for accounting purposes. The Company capitalized $2.8 million of debt issuance costs which consist of incremental cost incurred for the lenders and third party legal firms as well as the fair value of the warrant issued in conjunction with the origination of the term loan.
Under the Amendment, the maturity date was modified to be the date equal to 48 months from the first payment date of each specific cash advance. Subject to an interest only period of 19
months following each specific cash advance date, the term loan incurs interest at the greater of a variable interest rate based on prime rate or
11%
per annum, payable monthly. The Term Loan includes certain negative covenants, primarily consisting of restrictions on the Company’s ability to incur indebtedness, pay dividends, execute fundamental change transactions, and other specified actions.
In addition, the Company is required to pay a final payment fee equal to 2.75% of the aggregate amount of all term loan advances. The final payment fee is being accreted and amortized into interest expense using the effective interest rate method over the term of the loan. The effective interest was between 16.4917.31% for all tranches of the debt.
In January 2022, the debt agreement was modified to increase the overall debt commitment by $5.0 
million (the “Tranche C” or the “Third Amendment”) which was drawn on January
 27, 2022. Subject to an interest only period of 19 months,
Tranche C incurs interest at the greater of a variable interest rate based on prime rate or
11% per annum, payable monthly, until the maturity date, February 1, 2026. The Company paid an exit fee of $1.0 million which is the 20% of the Tranche C amount upon the consummation of a merger. The exit fee is not applicable to Tranche A and Tranche B.
 
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The book value of debt approximates its fair value given its maturity and variable interest rate.
Long term debt and the unamortized discount balances are as follows:
 
    
March 31,
2022
    
December 31,
2021
 
    
(in thousands)
 
Outstanding principal amount
   $ 32,000      $ 27,000  
Add: accreted liability of final payment fee
     188        125  
Less: unamortized debt discount, long term
     (1,421      (1,618
Less: current portion of long term debt - principal
     (3,089      (1,291
    
 
 
    
 
 
 
Debt—net of current portion
   $ 27,678      $ 24,216  
    
 
 
    
 
 
 
Current portion of long term debt - principal
   $ 3,089      $ 1,291  
Less: current portion of unamortized debt discount
     (724      (716
    
 
 
    
 
 
 
Debt—current portion
   $ 2,365      $ 575  
    
 
 
    
 
 
 
For the three months ended March 31, 2022, the Company
 has recorded interest expense of $1.2 million, the accretion of the end of term liability of $45.9 thousand, the amortization of commitment fee asset of $47.5 thousand and the amortization of debt issuance cost of $0.2 million. The unamortized issuance cost of $2.1 million at March 31, 2022 is offset against the carrying value of the term loan in the accompanying condensed consolidated balance sheet. See Deferred Financing Cost policy at Note 2.
Scheduled principal payments on total outstanding debt, as of March 31, 2022, are as follows:
 
    
March 31,
2022
    
December 31,
2021
 
    
(in thousands)
 
2022
   $ 702      $ 702  
2023
     9,273        8,682  
2024
     12,914        11,008  
2025
     8,734        6,608  
2026
     377        —    
    
 
 
    
 
 
 
     $ 32,000      $ 27,000  
    
 
 
    
 
 
 
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Legacy Rigetti was authorized to issue 73,389,000 shares of Series C preferred stock and 62,537,577 shares of Series
C-1
Preferred Stock with a par value of $0.000001
per share for each class of preferred Stock. Legacy Rigetti’s board of directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, option or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Immediately prior to the effective time of the Business Combination (Note 3), all Legacy Rigetti preferred stock outstanding converted into shares of common stock of Legacy Rigetti (All shares in this Note does not factor in the exchange ratio). 

 
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9. COMMON STOCK
As discussed in Note 3, on March 2, 2022, the Company consummated a Business Combination which has been accounted for as a reverse capitalization. Pursuant to the certificate of incorporation as amended on March 2, 2022, the Company is authorized to issue 1,000,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. The holders of shares of Common Stock are entitled to one vote for each share of common stock held. The Preferred Stock is
non-voting.
No shares of Preferred Stock were issued and outstanding as of March 31, 2022.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, and after payment to the holders of shares of Preferred Stock of their liquidation preferences, the holders of the common stock are entitled to the entire remaining assets of the Company on a pro rata basis.
As a result of the Business Combination (see Note 3), the Company has retroactively adjusted the warrants and stock based awards outstanding prior to March 2, 2022 to give effect to the Exchange Ratio used to determine the number of shares of common stock into which they were converted.
As of March 31, 2022, the Company has reserved the following shares of common stock for issuance upon the conversion, exercise or vesting of the underlying instruments:
 
    
 Common Stock
 
Common Stock Warrants
     19,354,087  
Stock-Based Awards - Options Outstanding
     10,114,849  
Stock-Based Awards - RSUs Outstanding
     9,077,015  
    
 
 
 
Total
     38,545,951  
    
 
 
 
10. WARRANTS
As a result of the Business Combination (see Note 3), the Company has retroactively adjusted the Rigetti warrants outstanding and corresponding strike price prior to March 2, 2022 to give effect to the Exchange Ratio used to determine the number of shares of common stock into which they were converted.
Liability Classified Warrants
Public Warrants
Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 8,625,000 Public Warrants issued and
outstanding (Refer to Note 5 for fair value measurement). 
Private Placement Warrants
The Private Placement Warrants may not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Placement Warrants have terms and provisions identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period, except if the Private Placement Warrants are held by someone other than the initial purchasers’ permitted transferees, then the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. On the Closing Date, there were 4,450,000 Private Warrants issued and outstanding.
 
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Table of Contents
The fair value of the Private Placement Warrant presented above were measured using the Black Scholes model approach. Significant inputs into the respective models at the March 2, 2022 (the initial recognition) and March 31, 2022 are as follows:
 
Valuation Assumptions
  
Initial Recognition
on March 2, 2022
   
March 31,
2022
 
Stock Price
   $ 9.43     $ 6.30  
Strike Price
   $ 11.50     $ 11.50  
Volatility (annual)
     29.50     44.25
Risk-free rate
     1.74     2.42
Estimated time to expiration (years)
     5       5  
Dividend yield
        
Trinity Warrants
The Trinity Warrants of 313,252 common stock warrants were issued in March of 2021. An incremental 469,877 common stock warrants were issued as part of the Amendment in May of 2021, thus there were total of 783,129 common stock warrants issued in conjunction with Loan and Security Agreement in 2021. The Company utilized Black-Scholes model to determine grant fair value of the warrants which was approximately $2.7 million which was recorded as part of the Debt Issuance Cost. The change in fair value of the warrants from issuance date through March 31, 2022 of $3.5 million was driven primarily by an increase in the fair value of the Company’s stock that occurred as a result of the Merger Agreement discussed in Note 1. The outstanding common stock warrants were recognized as liabilities on the consolidated balance sheet and were measured at their inception date fair value using the Black-Scholes model and will be subsequently remeasured at each reporting period with change recorded as a component of other income in the Company’s consolidated statement of operations. See below for the March 31, 2022 balance summary:
 
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Warrant Class
  
Shares
    
Issuance Date
    
Strike Price per Share
    
Expiration Date
 
Common Stock Warrants
     783,129        May 18, 2021      $ 0.270        May 18, 2031  
The warrant issued in conjunction with the Loan and Security Agreement is classified as liability under ASC 480, “Distinguishing Liabilities from Equity”. See Deferred Financing Cost disclosure at Note 2 Summary of Significant Accounting Policies.
The fair value of the common stock warrant liabilities presented above were measured using the Black Scholes model approach. Significant inputs into the respective models at March 31, 2022 is as follow:
 
Valuation Assumption -
Common Stock Warrants
  
March 31, 2022
 
Stock price
   $ 6.30  
Strike price
   $ 0.27  
Volatility (annual)
     105.10
Risk-free rate
     2.29
Estimated time to expiration (years)
     9  
Dividend yield
    
The Company recorded a total loss of $1.8 
million to Change in Fair Value of Warrant Liability as a component of other income in the consolidated statement of operations for the three months ended March 31, 2022. 
Equity Classified Warrants
Series C Preferred Stock Financing Warrants
In conjunction with the Series C Preferred Stock Financing (see Note 8), the Company issued a total of 5,248,183 Warrants to purchase Class A Common Stock to the Series C investors. The Warrants have a $0.01 exercise price per share and have a
10-year
term to expiration. The Warrants can be exercised for cash or on a cashless basis. The Company determined that the Warrants met the requirements for equity classification under ASC 480 and ASC 815. The Company estimated the fair value of the Warrants using the Black-Scholes model (see below for key inputs) and allocated approximately $1.2 million in proceeds from the Series C Preferred Stock to the value of the Warrants on a relative fair value basis, which was recorded to additional paid in capital.
Customer Warrants
In February 2020, the Company issued a Warrant to purchase 2,680,596 shares of Class A Common Stock to a customer in conjunction with a revenue arrangement (the “Customer Warrant”). The Customer Warrants have a $1.152 exercise price per share and have a
10-year
term to expiration. The Warrants vest upon the achievement of certain performance conditions (i.e., sales milestones) defined in the agreement, and upon a change of control, either 50% or 100% of the then unvested Customer Warrants will become fully vested, dependent on the acquiring party in the change of control transaction. The Warrants can be exercised for cash or on a cashless basis.
The Company followed the guidance in ASC 718 and ASC 606 for the accounting of
non-cash
consideration payable to a customer. The Company determined that the Customer Warrants met the requirements for equity classification under ASC 718, and measured the Customer Warrants based on their grant date fair value, estimated to be $0.2
million. The 
Company recorded this amount as a deferred asset and additional paid in capital as of the issuance date, as the Company believes it is probable that all performance conditions (i.e., sales milestones) in the Customer Warrants will be met.
During the three months
 ended March 31, 2022, the Company recorded a reduction of revenue related to the arrangement with the customer totaling $1.5 thousand as of March 31, 2022, the deferred asset balance outstanding is $93.6 thousand, which will be recognized as a reduction in revenue in future periods.
 
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The vesting status of the Customer Warrant is as follows at March 31, 2022 and December 31, 2021:
 
    
March 31,
2022
    
December 31,
2021
 
Vested Customer warrants
     1,072,237        1,072,237  
Unvested Customer warrants
     1,608,359        1,608,359  
    
 
 
    
 
 
 
       2,680,596        2,680,596  
    
 
 
    
 
 
 
11. FORWARD WARRANT AGREEMENT
In connection with the execution of the Merger Agreement in October 2021 (See Note 1), Rigetti entered into a warrant subscription agreement (“Forward Warrant Agreement”) with a strategic partner 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 Rigetti and the strategic partner. The parties entered into the collaboration agreement in January 2022. The strategic partner is required to pay $5.0 million to Rigetti no later than (i) the Closing and (ii) June 30, 2022, and upon such payment the warrant will vest and be exercisable by the strategic partner with respect to 500,000 shares of Common Stock pursuant to the terms of the warrant. The strategic partner is required to pay an additional $5.0 million to Rigetti no later than the second anniversary of the date of the warrant subscription agreement, and upon such payment, the warrant will vest and be exercisable by the strategic partner with respect to the remaining 500,000 shares of Common Stock pursuant to the terms of the warrant.
The Company evaluated the Forward Purchase Agreement as a derivative in conjunction with the guidance of ASC 480, “Distinguishing Liabilities from Equity”. The Company calculated fair value of the Forward Purchase Agreement by using the Forward Contract Pricing methodology at inception and at the end of March 31, 2022. The fair value of the Forward Warrant Agreement was estimated based on the following key inputs and assumptions 1) Assumed holding period 2) Related risk-free rate and 3) Likelihood of the outcome of the various contingencies outlined below. Based on these inputs and assumption, the Company calculated the fair value of the forward contract to be ($0.2 million) derivative liability and $2.7 
million derivative asset at December 31, 2021 and March 31, 2022, respectively. The Company has included the derivative liability in other liabilities (current) and derivative asset separately as forward contract asset on the balance sheet line in the accompanying consolidated balance sheet as of December 31, 2021 and March 31, 2022, respectively.
The change in fair value is recorded as part of the general and administrative operating activities in the Company’s condensed consolidated statements of operations. The following table represents key valuation assumptions as of the quarter ended March 31, 2022. ​​​​​​​
 
Key Valuation Assumptions
 
Holding period (in years)
     0.250 - 0.878  
Risk free rate
    
0.52% -1.49
Probability of occurring the contingency
     50% - 100
Underlying value per share
   $ 6.30  
12. EQUITY PLANS
2013 Equity Incentive Plan
In 2013, the Company adopted the Rigetti & Co., Inc. 2013 Equity Incentive Plan (the “2013 Plan”), which provides for the grant of qualified incentive stock options and nonqualified stock options, restricted stock, restricted stock units (“RSU”) or other awards to the Company’s employees, officers, directors, advisors, and outside consultants. Upon the Closing Date and consummation of the Business Combination effective March 2, 2022, no additional awards are being made pursuant to the 2013 Plan. Awards outstanding under the 2013 Plan will continue to be governed by such plan; however, we will not grant any further awards under the 2013 Plan.
 
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2022 Equity Incentive Plan
In connection with the Business Combination (Note 3), the shareholders approved the Rigetti Computing, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) on February 23, 2022, which became effective immediately upon the Closing Date. The 2022 Plan provides for the grant of ISOs , NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of Company’s affiliates. The aggregate number of shares of common stock reserved for future issuance under the 2022 Plan is 18,332,215 shares. However, the Company has not issued any grants under the 2022 Plan.
Stock Options
A summary of activity related to stock option is summarized as below (in thousands, except for share and per share data):
 
    
Number of
Options
    
Weighted-Average

Exercise Price
    
Average Remaining
Contractual Term (In Years)
    
Aggregate Intrinsic
Value
 
 
 
Outstanding - December 31, 2021
     11,468,275      $ 0.36        8.1      $ 46,839  
Granted
                                    
Exercised
     (1,123,539)      $ 0.27               $ 4,668  
Forfeited and expired
     (229,887)      $ 0.27