General form of registration statement for all companies including face-amount certificate companies

Warrants

v3.22.1
Warrants
3 Months Ended
Mar. 31, 2022
Rigetti Computing, Inc [Member]  
Class of Warrant or Right [Line Items]  
Warrants
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.
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:
 
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.
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