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10-Q

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, 2023

☐	TRANSITION PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

For the transition period from

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 No.)

775 Heinz Avenue Berkeley California		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, 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.

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

12b-2

of the Act). ☐ Yes ☑ No

As of May 5, 2023, there were 129,822,687 shares of the registrant’s Common Stock, no par value, issued and outstanding.

RIGETTI COMPUTING, INC. AND SUBSIDIARIES FORM 10-Q

TABLE OF CONTENTS


		PAGE
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			2

PART I — FINANCIAL INFORMATION			5

Item 1.	Financial Statements (Unaudited)		5
	Condensed Consolidated Balance Sheets		5
	Condensed Consolidated Statements of Operations		6
	Condensed Consolidated Statements of Comprehensive Loss		7
	Condensed Consolidated Statements of Cash Flows		8
	Notes to Condensed Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3.	Quantitative and Qualitative Disclosures About Market Risks		37
Item 4.	Controls and Procedures		37

PART II — OTHER INFORMATION			39

Item 1.	Legal Proceedings		39
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3.	Defaults Upon Senior Securities		39
Item 4.	Mine Safety Disclosures		39
Item 5.	Other Information		39
Item 6.	Exhibits		40

SIGNATURES			41

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. We have based these forward-looking statements on our current expectations and projections about future events. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “goal,” “objective,” “design,” “goal,” “seek,” “target,” “should,” “could,” “will,” “would” or the negative of such terms or other similar expressions.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

We caution you that these forward-looking statements are subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

•

the sufficiency of our cash resources, our expectation that we will need to raise additional capital by late 2024 or early 2025 and our ability to raise additional capital when needed and on attractive terms,

•

our ability to achieve milestones, technological advancements, including with respect to executing on our technology roadmap and developing practical applications,

•

the potential of quantum computing and estimated market size and market growth including with respect to our long-term business strategy for quantum computing as a service (“Quantum Computing as a Service,” or “QCaaS”),

•

the success of our partnerships and collaborations,

•

our ability to accelerate our development of multiple generations of quantum processors,

•

customer concentration and the risk that a significant portion of our revenue currently depends on contracts with the public sector,

•

the outcome of any legal proceedings that may be instituted against us or others with respect to the Business Combination (as defined herein) or other matters,

•

our ability to execute on our business strategy, including monetization of our products,

•

our financial performance, growth rate and market opportunity,

•

our ability to cure the current deficiency with respect to, and to regain compliance with and maintain, the listing of our common stock, par value $0.0001 per share (the “common stock”) and Public Warrants (as defined herein) on, the Nasdaq Capital Market (“Nasdaq”), and the potential liquidity and trading of such securities,

•

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, our ability to grow and manage growth profitably, maintain relationships with customers and suppliers and retain our management and key employees,

•

costs related to operating as a public company,

•

our ability to remediate the material weaknesses in, and establish and maintain, effective internal controls over financial reporting;

•

changes in applicable laws or regulations,

•

the possibility that we may be adversely affected by other economic, business, or competitive factors,

•

the evolution of the markets in which we compete,

•

our ability to implement our strategic initiatives, expansion plans and continue to innovate our existing services,

•

unfavorable conditions in our industry, the global economy or global supply chain (including any supply chain impacts from the ongoing military conflict involving Russia and Ukraine and sanctions related thereto), including inflation and financial and credit market fluctuations,

•

changes in applicable laws or regulations,

•

our success in retaining or recruiting, or changes required in, our officers, key employees or directors,

•

our estimates regarding expenses, profitability, future revenue, capital requirements and needs for additional financing,

•

our ability or decisions to expand or maintain our existing customer base; and

•

the continuing effects of the COVID-19 pandemic and macroeconomic conditions, including worsening global economic conditions, disruptions to and volatility and uncertainty in the credit and financial markets, increases in inflation and interest rates, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, on the foregoing.

These statements reflect our current views with respect to future events, are based on assumptions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These known and unknown risks, uncertainties and other factors include, without limitation:

•

Based on our estimates and current business plan, we expect that we will need to raise additional capital by late 2024 or early 2025 in order to continue our research and development efforts and achieve our business objectives. We cannot be sure that additional financing will be available. If we are unable to raise additional funding when needed and on attractive terms, we may be required to delay, limit or substantially reduce our quantum computing development efforts.

•

We are in our early stages and have a limited operating history, which makes it difficult to forecast our future results of operations.

•

We have a history of operating losses and expect to incur significant expenses and continuing losses for the foreseeable future.

•

Even if the market in which we compete achieves its anticipated growth levels, our business could fail to grow at similar rates, if at all.

•

Our ability to use net operating loss carryforwards and other tax attributes may be limited.

•

We have not produced quantum computers with high qubit counts and we face significant barriers in our attempts to produce quantum computers, including the need to invent and develop new technology. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail.

•

Any future generations of hardware, including any future generations developed to demonstrate narrow quantum advantage and broad quantum advantage and the anticipated release of an 84 qubit system, and 336 qubit system, each of which is an important anticipated milestone for our technology roadmap and commercialization, may not occur on our anticipated timeline or at all.

•

If our computers fail to achieve quantum advantage, our business, financial condition and future prospects may be harmed. Moreover, the standards by which we measure our progress may be based on assumptions and expectations that are not accurate or that may change as quantum computing evolves.

•

The quantum computing industry is competitive on a global scale and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers.

•

We depend on a limited number of customers for a significant percentage of our revenue and the loss or temporary loss of a major customer for any reason could harm our financial condition.

•

A significant portion of our revenue depends on contracts with the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.

•

Our business is currently dependent upon our relationship with our cloud providers. There are no assurances that we will be able to commercialize quantum computers from our relationships with cloud providers.

•

We rely on access to high performance third party classical computing through public clouds, high performance computing centers and on-premises computing infrastructure to deliver performant quantum solutions to customers. We may not be able to maintain high quality business relationships and connectivity with these resources which could make it harder for us to reach customers or deliver solutions in a cost-effective manner.

•

We depend on certain suppliers to source products. Failure to maintain our relationship with any of these suppliers, or a failure to replace any of these suppliers, could have a material adverse effect on our business, financial position, results of operations and cash flows.

•

Our system depends on the use of certain development tools, supplies, equipment and production methods. If we are unable to procure the necessary tools, supplies and equipment to build our quantum systems, or are unable to do so on a timely and cost-effective basis, and in sufficient quantities, we may incur significant costs or delays which could negatively affect our operations and business.

•

Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs which render our quantum computing systems obsolete or inferior to other products.

•

We may be unable to reduce the cost of developing our quantum computers, which may prevent us from pricing our quantum systems competitively.

•

The quantum computing industry is in its early stages and volatile, and if it does not develop, if it develops slower than we expect, if it develops in a manner that does not require use of our quantum computing solutions, if it encounters negative publicity or if our solution does not drive commercial engagement, the growth of our business will be harmed.

•

We could suffer disruptions, outages, defects and other performance and quality problems with our quantum computing systems, our production technology partners or with the public cloud, data centers and internet infrastructure on which we rely.

•

If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, which may adversely affect our business.

•

We have identified material weaknesses in our internal control over financial reporting related to the lack of effective review controls over the accounting for complex financial instruments and to the design and operation of our overall closing and financial reporting processes, and we may identify additional material weaknesses in the future. The material weakness over accounting for complex financial instruments has resulted in errors in financial statements for prior periods. If we fail to remediate such material weaknesses, if we identify additional material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, it may adversely affect our ability to accurately and timely report our financial results in the future, and may adversely affect investor confidence, our reputation, our ability to raise additional capital and our business operations and financial condition.

•

Our failure to obtain, maintain and protect our intellectual property rights could impair our ability to protect and commercialize our proprietary products and technology and cause us to lose our competitive advantage.

•

There can be no assurance that we will be able to regain compliance with the continued listing standards of Nasdaq. If we fail to cure our current deficiency and regain compliance with the listing requirements of the Nasdaq Capital Market or fail to comply with such listing requirements in the future or fail to cure any future deficiencies, we may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

•

Sales of our securities, or perceptions of sales, by us or holders of our securities in the public markets or otherwise could cause the market price for our securities to decline and even in such case certain holders of our securities may still have an incentive to sell our securities.

•

Delaware law and our Certificate of Incorporation and Bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

•

Unstable market and economic conditions, including the recent bank failure of Silicon Valley Bank, have had and may continue to have serious adverse consequences on our business, financial condition and share price.

•

Our warrants, including our Public Warrants, Private warrants and other warrants we have issued, are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.

•

Our warrants are exercisable for Common Stock, the exercise of which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

•

The Warrants may never be in the money, and they may expire worthless.

Additional discussion of the risks, uncertainties and other factors described above, as well as other risks material to our business, can be found under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. In addition, our goals and objectives are aspirational and are not guarantees or promises that such goals and objectives will be met. Should one or more of the risks or uncertainties described in this Quarterly Report on Form 10-Q, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. Also, these forward-looking statements represent our plans, objectives, estimates, expectations, assumptions, and intentions only as of the date of this filing.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

PART I. FINANCIAL INFORMATION

ITEM 1.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

RIGETTI COMPUTING, INC.

(Unaudited)


(In thousands, except share information)	March 31, 2023			December 31, 2022

ASSETS
Cash and cash equivalents	$	26,117		$	57,888
Available-for-sale investments		95,849			84,923
Accounts receivable		5,320			6,235
Prepaid expenses and other current assets		1,756			2,450
Forward contract—assets		1,129			2,229
Deferred offering costs		94			742

Total current assets		130,265			154,467

Property and equipment, net		42,575			39,530
Operating lease – right-of-use assets, net		8,937			9,316
Other assets		130			129

Total assets	$	181,907		$	203,442

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	1,664		$	1,938
Accrued expenses and other current liabilities		8,731			8,205
Deferred revenue		559			961
Debt – current portion		9,685			8,303
Operating lease liabilities—current		2,350			2,345

Total current liabilities		22,989			21,752

Debt – net of current portion		17,846			20,635
Operating lease liabilities – noncurrent		7,479			7,858
Derivative warrant liabilities		2,640			1,767
Earn-out liabilities		1,487			1,206

Total liabilities		52,441			53,218

Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, none outstanding		—			—
Common stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 129,171,170 shares issued and outstanding at March 31, 2023 and 125,257,233 shares issued and outstanding at December 31, 2022		12			12
Additional paid-in capital		431,466			429,025
Accumulated other comprehensive loss		(6	)		(161	)
Accumulated deficit		(302,006	)		(278,652	)

Total stockholders’ equity		129,466			150,224

Total liabilities and stockholders’ equity	$	181,907		$	203,442

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

RIGETTI COMPUTING, INC.

(Unaudited)


	Three Months Ended March 31,
(In thousands, except per share amounts)	2023			2022
Revenue	$	2,201		$	2,104
Cost of revenue		510			414

Total gross profit		1,691			1,690

Research and development		13,707			13,927
Sales and marketing		518			1,475
General and administrative		8,495			11,560
Restructuring		991			—

Total operating expenses		23,711			26,962

Loss from operations		(22,020	)		(25,272	)

Other income (expense), net
Interest expense		(1,464	)		(1,205	)
Interest income		1,284			—
Change in fair value of derivative warrant liabilities		(873	)		3,771
Change in fair value of earn-out liabilities		(281	)		5,991
Transaction costs		—			(927	)

Total other income (expense), net		(1,334	)		7,630

Net loss before provision for income taxes		(23,354	)		(17,642	)

Provision for income taxes		—			—

Net loss	$	(23,354	)	$	(17,642	)

Net loss per share attributable to common stockholders – basic and diluted	$	(0.19	)	$	(0.33	)

Weighted average shares used in computing net loss per share attributable to common stockholders -basic and diluted		124,778			53,692

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

RIGETTI COMPUTING, INC.

(Unaudited)


	Three Months Ended March 31,
(In thousands)	2023			2022

Net loss	$	(23,354	)	$	(17,642	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(83	)		9
Unrealized gains on available-for-sale debt securities		238			—

Total other comprehensive income before income taxes		155			9
Income taxes		—			—

Total other comprehensive income after income taxes		155			9

Total comprehensive loss	$	(23,199	)	$	(17,633	)

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

RIGETTI COMPUTING INC.

(Unaudited)


	Three Months Ended March 31,
(In thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(23,354	)	$	(17,642	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,089			1,390
Stock-based compensation		1,703			11,481
Change in fair value of earn-out liabilities		281			(5,991	)
Change in fair value of derivative warrant liabilities		873			(3,771	)
Change in fair value of forward contract		1,100			(2,970	)
Impairment of deferred offering costs		742			—
Amortization of debt issuance costs		237			236
Accretion of available-for-sale securities		(506	)		—
Accretion of debt commitment fee asset		82			46
Accretion of debt end-of-term liabilities		72			47
Non-cash lease expense		379			—
Changes in operating assets and liabilities:
Accounts receivable		915			282
Prepaid expenses and other current assets		694			(3,054	)
Other assets		(1	)		(918	)
Deferred revenue		(402	)		(466	)
Accounts payable		(484	)		1,482
Accrued expenses and other current liabilities		32			4,084
Other liabilities		—			43

Net cash used in operating activities		(15,548	)		(15,721	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(4,804	)		(2,836	)
Purchases of available-for-sale securities		(38,528	)		—
Maturities of available-for-sale securities		28,346			—

Net cash used in investing activities		(14,986	)		(2,836	)

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 notes payable		—			5,000
Payment on principal of notes payable		(1,798	)		—
Payments on deferred offering costs		(107	)		—
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		751			602

Net cash (used in) provided by financing activities		(1,154	)		213,445

Effects of exchange rate changes on cash and cash equivalents		(83	)		9

Net (decrease) increase in cash and cash equivalents		(31,771	)		194,897
Cash and cash equivalents – beginning of period		57,888			12,046

Cash and cash equivalents – end of period	$	26,117		$	206,943

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	1,072		$	878
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Initial fair value of earn-out liability acquired in merger	$	—		$	20,413
Initial fair value of private placement and public warrant liability acquired in merger	$	—		$	22,932
Unrealized gain on short-term investments	$	238		$	—
Capitalization of deferred costs to equity upon share issuance	$	13		$	—
Purchases of property and equipment recorded in accounts payable	$	210		$	—
Purchases of property and equipment recorded in accrued expenses	$	120		$	—

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

Table of Contents

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RIGETTI COMPUTING INC.

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 Computing as a Service (“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 the 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

ommon

tock, 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 Public 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 (ASC) 805, Business Combination.

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 was comprised of eight board members, six seats occupied by previous Rigetti board members and one seat being occupied by a previous Supernova representative. The final eighth seat was filled by an individual who did not have ties to either Rigetti or Supernova pre-Business Combination; and

•

Legacy Rigetti management continues to hold executive management roles for the post-combination company and be responsible for the

day-to-day

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.

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. The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. All dollar amounts, except share and per share amounts, in the notes to the unaudited interim condensed consolidated financial statements are presented in thousands, unless otherwise specified.

Table of Contents

The condensed consolidated balance sheet as of December 31, 2022, 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. The unaudited interim condensed consolidated financial statements for this period are not necessarily indicative of the results for any future interim period or for the full fiscal year. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included with the Company’s Annual Report on Form

10-K

for the year ended December 31, 2022.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company’s financial position as of March 31, 2023, and the results of its operations and cash flows for the three-month periods ended March 31, 2023 and March 31, 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.

Based on our forecasts, we believe that our existing cash and cash equivalents and

available-for-sale

investments should be sufficient to meet our anticipated operating cash needs for at least the next 12 months from the issuance of these financial statements based on our current business plan and expectations and assumptions considering current macroeconomic conditions.

COVID-19

and Macroeconomic Conditions

— As of March 31, 2023 and December 31, 2022, the Company’s financial position was not significantly impacted by the effects of

COVID-19.

The World Health Organization has declared COVID-19 is no longer a global public emergency. However, any resulting disruption to the Company’s operations remains somewhat uncertain. Global economic conditions have been worsening, with disruptions to, and volatility in, the credit and financial markets, disruption to banking systems, and rising inflation and interest rates in the U.S. and worldwide resulting from the effects of

COVID-19

and otherwise. If these conditions persist and deepen, the Company could experience an inability to access additional capital, or our liquidity could otherwise be impacted. If the Company is unable to raise capital when needed and on attractive terms, it would be forced to delay, reduce or eliminate its research and development programs and other efforts.

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, fair value of the Forward Warrant Agreement (as defined below), the fair value of derivative warrant liabilities, the fair value of earnouts issued in connection with the Business Combination (See Note 3), 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.

2. RECENT ACCOUNTING DEVELOPMENTS

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU

2016-02,

Leases and related subsequently issued ASUs (collectively, “Topic 842”), which supersedes Topic 840. From a lessee perspective, the core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a

right-of-use

(“ROU”) asset representing its right to use the underlying asset for the lease term. The Company adopted Topic 842 on December 31, 2022, effective as of January 1, 2022, using the modified retrospective transition option of applying the new standard at the adoption date for all leases with an original term greater than 12 months. Adoption of the standard resulted in the recognition of operating lease ROU assets and operating lease liabilities of $6.3 million and $6.6 million, respectively, and a $0.3 million adjustment to deferred rent, with no impact to accumulated deficit as of January 1, 2022. Adoption of the standard did not have an impact on the Company’s consolidated statement of operations or cash flows. The Company’s condensed consolidated financial statements for the three months ended March 31, 2022 continue to be presented in accordance with the presentation requirements of Topic 840.

In April 2019, the FASB issued ASU

2019-04,

Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU

No. 2019-04

was issued as part of the FASB’s ongoing project to improve upon its Accounting Standards Codification (ASC), and to clarify and improve areas of guidance related to recently issued standards on credit losses, hedging, and recognition and measurement. For entities that have not yet adopted the guidance in Update

2016-13,

the effective dates and the transition requirements for these amendments are the same as the effective date and transition requirements in Update

2016-13.

The amendments related to ASC 326 were effective for the Company as of January 1, 2023. The adoption of the ASU did not have a material impact on the consolidated financial statements.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2022, the FASB issued ASU

2022-03,

ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB issued this update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The ASU is effective for the Company after December 15, 2024, and interim periods within those fiscal years, with early adoption permitted. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.

In August 2020, the FASB issued ASU

No. 2020-06,

Debt—(Topic 815) (“ASU

No. 2020-06”),

which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. The amendments in ASU

No. 2020-06

are effective for public companies, other than smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is still evaluating the impact of this pronouncement on the 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, 2023 or December 31, 2022.

On March 1, 2022, prior to the Closing, as contemplated by that certain Agreement and Plan of Merger dated as of October 6, 2021, as amended on December 23, 2021 and January 10, 2022 (as amended, the “Merger Agreement”), by and among SNII, Supernova Merger Sub, Inc., Supernova Romeo Merger Sub, LLC and Legacy Rigetti 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 Public Warrant to acquire one share of Common Stock at an exercise price of $11.50 per share 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 converted 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 Supernova Partners II, LLC (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

(such shares, the “Promote Sponsor Vesting Shares”), 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

(such shares, the “Sponsor Redemption-Based Vesting Shares,” and, collectively with the Promote Sponsor Vesting Shares, the “Sponsor Vesting Shares”). Any such shares held by the Sponsor Holders that remain unvested after the fifth anniversary of the Closing will be forfeited (Refer to Note 4 for related significant accounting policy for the

Earn-Out

Liability related to the Sponsor Vesting Shares).

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 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 Business Combination.

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.

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:


	(in thousands)
Cash – SNII trust and cash (net of redemption)	$	77,769
Cash – PIPE		147,510
Cash – SNII operating account		325

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 Business Combination. Legacy Rigetti transaction costs specific and directly attributable to the business combination totaled

$20.65

million. These costs were initially capitalized as 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 Warrants and the earnout related to the Sponsor Vesting Shares were expensed in the condensed consolidated statements of operations. Of the total transaction costs 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 expensed in the three months ended March 31, 2022. Cash transaction costs paid in the three months ended March 31, 2022 totaled $16.7 million. Bonuses paid to certain employees related to the business combination in the three months ended March 31, 2022 totaled $2.1 million.

The amount recorded to additional

paid-in-capital

was $159.55 million (as discussed in Note 1), comprised of $225.6 million net proceeds less $19.75 million transaction costs, $16.3 million recognized for the Public Warrant liabilities, $9.6 million (as discussed in Note 1) recognized for the Private Warrant liabilities, and $20.4 million recognized for the

earnout liability related to the Sponsor Vesting Shares.

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The number of shares of Common Stock issued immediately following the consummation of the Business Combination was as follows:


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 “Promote Sponsor Vesting Shares” and (ii) 580,273 shares of “Sponsor Redemption-Based Vesting Shares”.

All outstanding shares of Legacy Rigetti Common Stock as of immediately prior to the Closing (including Legacy Rigetti Common Stock resulting from the Legacy Rigetti Preferred Stock Conversion), were exchanged at an exchange ratio of 0.7870 (the “Exchange Ratio”). (ii) the conversion ratio to Legacy Rigetti 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.

EARN-OUT

LIABILITY

At the closing of the Business Combination, the Sponsor subjected the Sponsor Vesting Shares to forfeiture as of the Closing Date for a five-year period following the Closing, with vesting occurring only if thresholds related to the weighted average price of Common Stock are met as described above in Note 3. Business Combination (the “Earn-Out Triggering Events”). Any such shares held by the Sponsor that have not vested by the fifth anniversary of the Closing will be forfeited.

The Sponsor Vesting Shares are accounted for as liability classified instruments because the

Earn-Out

Triggering Events that determine the number of Sponsor Vesting Shares to be earned back by the Sponsor include outcomes that are not solely indexed to the Common Stock of the Company. The aggregate fair value of the Sponsor Vesting Shares on the Closing Date was estimated using a Monte Carlo simulation model and was determined to be $20.4 million at the Closing Date. The

Earn-out

liability is adjusted to fair value each reporting period using the Monte Carlo simulation model until such time as the

Earn-Out

Triggering Events are achieved or the Sponsor Vesting Shares are forfeited.

The calculated fair value of the Earn-out liability with respect to the Sponsor Vesting Shares at March 31, 2023 and December 31, 2022

was

1.5

million and $

1.2

million, respectively. The change in the fair value of the

Earn-out

liabilit

y included in the condensed consolidated statements of operations in the three months ended March 31, 2023 and March 31, 2022 was a loss of $0.3 million and a gain of $6.0 million, respectively.

Significant inputs into the Monte Carlo simulation models at March 31, 2023, December 31, 2022 and March 2, 2022 (the initial recognition) are as follows:


Valuation Assumptions	March 31, 2023			December 31, 2022			March 2, 2022
Stock price	$	0.72		$	0.73		$	9.43
Simulated trading days		988			1,050			1,198
Annual volatility		130.7	%		109.30	%		30.50	%
Risk-free rate		3.68	%		4.04	%		1.74	%
Estimated time to expiration (years)		3.92			4.17			5.00

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5. CHANGES IN STOCKHOLDERS’ EQUITY(DEFICIT)

A reconciliation of the changes in stockholders’ equity (deficit)

is as follows:

Three Months Ended March 31, 2023:


	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(In thousands)	Shares		Amount		Additional Paid-In Capital			Gain (Loss)			Accumulated Deficit			Total Stockholders’ Equity (Deficit)

Balance, December 31, 2022		125,257	$	12	$	429,025		$	(161	)	$	(278,652	)	$	150,224
Issuance of common stock upon exercise of stock options		2,860		—		750			—			—			750
Issuance of common stock upon exercise of common stock warrants		127		—		1			—			—			1
Issuance of common stock upon release of restricted stock units		927		—		—			—			—			—
Capitalization of deferred costs to equity upon share issuance						(13	)		—			—			(13	)
Stock-based compensation		—		—		1,703			—			—			1,703
Foreign currency translation loss		—		—		—			(83	)		—			(83	)
Change in unrealized loss on available-for-sale securities		—		—		—			238			—			238
Net loss		—		—		—			—			(23,354	)		(23,354	)

Balance, March 31, 2023		129,171	$	12	$	431,466		$	(6	)	$	(302,006	)	$	129,466

Three Months Ended March 31, 2022:


	Redeemable Convertible Preferred Stock*						Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
(In thousands)	Shares			Amount			Shares		Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit			Total Stockholders’ Equity (Deficit)

Balance, December 31, 2021		77,697		$	81,523			18,221	$	2	$	135,549	$	52	$	(207,131	)	$	(71,528	)
Issuance of common stock upon conversion of Legacy Series C and C-1 preferred stock in connection with the Business Combination (Note3)		(77,697	)		(81,523	)		57,380		6		81,517		—		—			81,523
Issuance of common stock through Business Combination and PIPE Financing, net of transaction costs and derivative liabilities (Note 3)		—			—			34,851		3		159,535		—		—			159,538
Issuance of common stock upon exercise of stock options		—			—			1,124		—		574		—		—			574
Issuance of common stock upon exercise of common stock warrants		—			—			2,234		—		28		—		—			28
Stock-based compensation		—			—			—		—		11,481		—		—			11,481
Foreign currency translation gain		—			—			—		—		—		9		—			9
Net loss		—			—			—		—		—		—		(17,642	)		(17,642	)

Balance, March 31, 2022		—		$	—			113,810	$	11	$	388,684	$	61	$	(224,773	)	$	163,983

*	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

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6. 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 for the three months ended March 31, 2023 and March 31, 2022:


	Three Months Ended March 31,
(In thousands)	2023		2022
Collaborative research and other professional services	$	1,811	$	1,515
Access to quantum computing systems		390		589

	$	2,201	$	2,104



	Three Months Ended March 31,
(In thousands)	2023		2022
Revenue recognized at a point in time	$	—	$	—
Revenue recognized over time		2,201		2,104

	$	2,201	$	2,104

Selected condensed consolidated balance sheet line items that reflect accounts receivable, contract assets and liabilities as of March 31, 2023 and December 31, 2022 were as follows:


(In thousands)	March 31, 2023			December 31, 2022
Trade receivables	$	4,646		$	6,143
Unbilled receivables	$	674		$	92
Deferred revenue	$	(559	)	$	(961	)

Changes in deferred revenue from contracts with customers were as

follows:


	Three Months Ended March 31,
(In thousands)	2023			2022
Balance at beginning of period	$	(961	)	$	(985	)
Deferral of revenue		—			(92	)
Recognition of deferred revenue		402			558

Total deferred revenue at end of period	$	(559	)	$	(519	)

Deferred revenue recognized in the three months ended March 31, 2023 and the three months ended March 31, 2022 was included in the balance at the beginning of the period. Remaining performance

obligations represent the portion of the transaction price that has not yet been satisfied or achieved. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately

$7.5 million. The Company expects to recognize estimated revenues related to performance obligations that are unsatisfied (or partially satisfied) in the amounts of approximately $5.6 million during the remainder of the year ended December 31, 2023, and $1.9 million during the year ended December 31, 2024.

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, 2023 and December 31, 2022.

7. INVESTMENTS:

Money market funds are classified as cash equivalents and investments in fixed income securities are classified as

available-for-sale

in the consolidated balance sheets.

Available-for-sale

fixed income securities are recorded at their estimated fair va

lue.

The amortize

d cost, gross unrealized holding gains and losses included in other comprehensive income and the fair value of the

available-for-sale

fixed income securities at March 31, 2023 and December 31, 2022 are presented in the tables below.


	March 31, 2023
(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents
Money market funds	$	21,785	$	—	$	—		$	21,785
Available-for-sale investments
U.S. treasury securities	$	35,740	$	2	$	(133	)	$	35,609
U.S. government agency bonds		36,829		58		(3	)		36,884
Commercial paper		23,356		—					23,356

Available-for-sale investments – short-term	$	95,925	$	60	$	(136	)	$	95,849

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	December 31, 2022
(In thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents
Money market funds	$	36,346	$	—	$	—		$	36,346
Available-for-sale investments
U.S. treasury securities	$	58,514	$	—	$	(304	)	$	58,210
Corporate bonds		3,581		—		(10	)		3,571
Commercial paper		23,142		—		—			23,142

Available-for-sale investments – short-term	$	85,237	$	—	$	(314	)	$	84,923

The Company invests in highly rated investment grade debt securities. All of the Company’s

available-for-sale

securities have final maturities of one year or less. The Company reviews the individual securities that have unrealized losses on a regular basis. The Company evaluates whether it has the intention to sell any of these investments and whether it is more likely than not that it will be required to sell any of them before recovery of the amortized cost basis. Neither of these criteria were met as of March 31, 2023 or December 31, 2022. The Company additionally evaluates whether the decline in fair value of the securities below their amortized cost basis is related to credit losses or other factors. Based on this evaluation, the Company determined that the unrealized losses for its

available-for-sale

securities were primarily attributable to changes in interest rates and

non-credit-related

factors. Accordingly, the Company determined that none of the unrealized losses were other-than-temporary, and that recognition of an impairment charge was not required as of March 31, 2023 or December 31, 2022. As of March 31, 2023, there were

securities that were in

unrealized loss position with a market value of $

33.8

million, with the largest loss for any single security being less than $

0.1

million. None of the Company’s

available-for-sale

securities have been in an unrealized loss position for more than one year. No

available-for-sale

securities were sold in the three months ended March 31, 2023 or the three months ended March 31, 2022.

See Note 8 for additional information regarding the fair value of the Company’s

available-for-sale

securities.

8. 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 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 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 fair value measurements of financial assets and liabilities that are measured at fair value at March 31, 2023 and December 31, 2022 are as follows:


	March 31, 2023
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds	$	21,785	$	—	$	—
Short-term investments:
U.S. treasury securities		35,609		—		—
U.S. government agency bonds		—		36,884		—
Commercial paper		—		23,356		—
Forward warrant agreement		—		—		1,129

Total Assets	$	57,394	$	60,240	$	1,129

Liabilities
Derivative warrant liability – Public Warrants	$	949	$	—	$	—
Derivative warrant liability – Private Warrants		—		—		1,691
Earn-out liabilities		—		—		1,487

Total Liabilities	$	949	$	—	$	3,178

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	December 31, 2022
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash Equivalents:
Money Market Funds	$	36,346	$	—	$	—
Short-term investments:
U.S treasury securities		58,210		—		—
Corporate bonds		—		3,571		—
Commercial paper		—		23,142		—
Forward Warrant Agreement		—		—		2,229

Total Assets	$	94,556	$	26,713	$	2,229

Liabilities
Derivative warrant liability – Public Warrants	$	699	$	—	$	—
Derivative warrant liability – Private Warrants		—		—		1,068
Earn-out liabilities		—		—		1,206

Total Liabilities	$	699	$	—	$	2,274

As of March 31, 2023 and December 31, 2022, the Company has recorded the following financial instruments subject to fair value measurements: 1) Derivative warrant liabilities—Public Warrants liability and Private Warrants, 2) Forward Warrant Agreement, and 3)

Earn-out

liability. The Company also has long-term debt and a line of credit that provides for variable interest, and therefore, the carrying value approximates the fair value. The carrying values as of March 31, 2023 and December 31, 2022 represent the original principal amounts borrowed less principal payments and debt issuance costs.

The fair value of the Public Warrants has been measured based on the observable listed prices for such warrants, a Level 1 measurement. The Company’s money market funds and U.S. Treasury securities are classified within Level 1 due to the highly liquid nature of these assets with quoted prices in active markets. The investments in

available-for-sale

securities (i.e., U.S government agency bonds, corporate bonds and commercial paper and corporate debt securities) and long-term debt and a line of credit issued by the Company are classified within Level 2. The fair value of the Company’s Level 2 financial assets and liabilities is determined by using inputs based on quoted market prices for similar instruments. All other financial instruments are classified as Level 3 liabilities as they all include unobservable inputs.

The Private 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 Notes 12 and 13 to the condensed consolidated financial statements.

The fair value of the

Earn-out

liability is estimated using a Monte Carlo simulation model. The Company has further discussed the key aspects of the valuation inputs in Note 4 to the financial statements.

As of December 31, 2021, the Company recorded a derivative warrant liability for the Trinity Warrants (as defined below) at fair value using a Black-Scholes option model with unobservable inputs including volatility. The Company estimates the volatility of its ordinary share warrants based on implied volatility from the Company’s publicly traded warrants and from historical volatility of select peer company’s ordinary shares that matches the expected remaining life of the warrants. On June 2, 2022, all outstanding Trinity Warrants were exercised into shares of the Company’s Common Stock

In the three months ended March 31, 2023, the Company reduced the estimated probability of occurrence for the forward warrant agreement from

50% to 25% due to less than favorable market conditions and reduced time until expiration (see Note 13). There were no other changes in fair value measurement techniques in the three months ended March 31, 2023, or the year ended December 31, 2022, (other than the change in valuation assumptions described in Note 1). There were no transfers between Level 1 or Level 2, or transfers in or out of Level 3, of the fair value hierarchy in the three months ended March 31, 2023 or the year ended December 31, 2022. The fair value estimates are based on pertinent information available to management as of March 31, 2023 and December 31, 2022. Although management is not aware of any factors, other than those noted above, that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for the purpose of these financial statements. Current estimates of fair value may differ from the amounts presented.

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A summary of the changes in the fair value of the Company’s Level 3 financial instruments in the three months ended March 31, 2023 and March 31, 2022 are as follows:


(in thousands)	Derivative warrant liability – Trinity Warrants		Derivative warrant liability – Private Warrants		Forward Warrant Agreement			Earn-out Liability
Balance – December 31, 2022	$	—	$	1,068	$	(2,229	)	$	1,206
Change in fair values		—		623		1,100			281

Balance – March 31, 2023	$	—	$	1,691	$	(1,129	)	$	1,487

Balance – December 31, 2021	$	4,355	$	—	$	230		$	—
Initial measurement upon Business Combination March 2, 2022 (Note 3)		—		9,612		—			20,413
Change in fair values		517		801		(2,970	)		(5,991	)

Balance – March 31, 2022	$	4,872	$	10,413	$	(2,740	)	$	14,422

9. SHARE-BASED COMPENSATION:

2013 Equity Incentive Plan

In 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”) which provides for the grant of qualified incentive stock options (“ISO”) and nonqualified stock options (“NSO”), restricted stock, restricted stock units (“RSU”) or other awards to the Company’s employees, officers, directors, advisors, and outside consultants. After the Closing Date and consummation of the Business Combination effective March 2, 2022, no additional awards were issued under the 2013 Plan. Awards outstanding under the 2013 Plan will continue to be governed by such plan; however, the Company will not grant any further awards under the 2013 Plan.

2022 Equity Incentive Plan

connection with the Business Combination (Note 3), the shareholders approved the Rigetti Computing, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) in February, 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 (RSUs), 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 initially reserved for issuance under the 2022 Plan was

20,184,797 shares. As of March 31, 2023, 9,899,540 shares were available for future issuance under the 2022 Plan. The number of shares reserved for issuance under the 2022 Plan will automatically increase on January 1st of each year for a period of nine years commencing on January 1, 2023 and ending on (and including) January 1, 2032, in an amount equal to 5% of the Common Stock of all classes outstanding on December 31 of the preceding year; provided, however, that the board of directors of the Company may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock.

Stock Option Activity

The following is a summary of stock option activity in the three months ended March 31, 2023:


	Options Outstanding			Weighted Average Exercise Price Per Share
Outstanding, December 31, 2022		8,845,903		$	0.38
Granted		500,000			0.60
Exercised		(2,860,010	)		0.27
Forfeited		(365,809	)		0.27
Expired		—			—

Outstanding, March 31, 2023		6,120,084		$	0.58

Exercisable, March 31, 2023		2,785,023		$	0.27

The weighted-average grant date

fair value of stock options granted during the three months ended March 31, 2023 was $0.55 per share. No stock options were granted in the three months ended March 31, 2022. The intrinsic value of an option is the amount by which the market price of the underlying common stock exceeds the option’s exercise price. For options outstanding at March 31, 2023, the weighted average remaining contractual term of all outstanding options was 8.05 years and their aggregate intrinsic value was $0.9 million. At March 31, 2023, the weighted average remaining contractual term of options that were exercisable was 7.18 years and their aggregate intrinsic value was $1.3 million. The aggregate intrinsic value of stock options exercised was $1.2 million in the three months ended March 31, 2023 and $4.7 million in the three months ended March 31, 2022. We received proceeds from stock option exercises of $0.8 million in the three months ended March 31, 2023 and $0.6 million in the three months ended March 31, 2022.

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Fair Value of Stock Option Grants

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the table below. Expected volatility for the Company’s Common Stock was determined based on an average of the historical volatility of a peer group of similar public companies. The expected term of options granted was calculated using the simplified method, which represents the average of the contractual term and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate is based upon the U.S. Treasury yield curve in effect at the time of grant for the period equivalent to the expected life of the option. In determining the exercise prices for options granted, the Company’s board of directors has considered the fair value of the Common Stock as of the grant date. Before the Company’s common stock was publicly traded, the fair value of the Common Stock had been determined by the board of directors at each award grant date based upon a variety of factors, including the results obtained from an independent third-party valuation, the Company’s financial position and historical financial performance, the status of technological developments within the Company’s products, the composition and ability of the current engineering and management team, an evaluation or benchmark of the Company’s competition, the current business climate in the marketplace, the illiquid nature of the Common Stock,

arm’s-length

sales of the Company’s capital stock (including redeemable convertible preferred stock), the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidity event, among others.

No stock options were granted in the three months ended March 31, 2022. All stock options granted in the three months ended March 31, 2023 were time-based grants. Significant inputs to the Black-Scholes option-pricing model used to value stock options grants in the three months ended March 31, 2023 were as follows:


Valuation Assumptions	Time-based Stock Option Grants
Stock price	$	0.60
Strike price	$	0.60
Annual volatility		140.5	%
Risk-free rate		3.54	%
Expected term (years)		6.02

Stock-based compensation expense related to stock options granted to employees was $0.4 million and $0.3 million in the three months ended March 31, 2023 and March 31, 2022, respectively. As of March 31, 2023, the unrecognized compensation expense related to unvested stock options was approximately $2.2 million which is expected to be recognized over a weighted-average period of approximately 2.18 years.

Restricted Stock Units

The following is a summary of activity in RSUs in the three months ended March 31, 2023:


Restricted stock units	Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		11,332,591		$	4.36
Granted		4,769,545			0.57
Forfeited		(3,486,438	)		4.64
Vested		(933,325	)		4.16

Non-vested at March 31, 2023		11,682,373		$	2.74

On March 2, 2022, the performance condition of all outstanding RSUs was met due to the closing of the Business Combination. As a result, the Company recorded a cumulative

catch-up

compensation expense for the vesting period that was satisfied as of March 2, 2022 and continues amortizing compensation expenses for unvested RSUs over their remaining vesting period.

The aggregate fair value of outstanding RSUs based on the closing share

price of our common stock as of March 31, 2023 was $8.5 million. The aggregate fair value of the RSUs that vested, based on the closing price of our common stock on the vesting date, in the three months ended March 31, 2023 was $0.7 million.

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Fair Value RSUs Awards

In the three months ended March 31, 2023, the Company issued 919,545

time-based RSUs and

3,850,000

market-based performance RSUs. The time-based RSUs vest over periods ranging from

1-4

years and require continuous employment. The market-based performance RSUs vest only if certain share price thresholds are achieved and require continuous employment. Based upon the terms of such awards,

50%

of the shares vest if the Company’s Common Stock trades at or above

$2.00

per share, and the other

50%

of the shares vest if the Company’s Common Stock trades at above

$4.00

per share, for

20 out of 30

trading days through the fifth anniversary of the grant date. The fair value of the Company’s time-based RSUs was calculated based on the fair market value of the Company’s stock on the date of grant. The fair value of the Company’s market-based performance RSUs was calculated using a Monte Carlo simulation model at the date of grant. The weighted-average grant date fair value for market-based RSUs granted in the three months ended March 31, 2023 was

$0.56 per RSU.

Significant inputs into the Monte Carlo simulation model used to value market-based RSUs granted in the three months ended March 31, 2023 were as follows:


Valuation Assumptions	Market-based Performance RSUs

Stock price	$	0.60
Simulated trading days		1,260
Annual volatility		140.5	%
Risk-free rate		3.63	%
Estimated time to expiration (years)		5.00

Stock-based compensation expense related to RSUs granted to employees was $1.3 million and $11.2 million in the three months ended March 31, 2023 and March 31, 2022, respectively. As of March 31, 2023, the unrecognized compensation expense related to unvested RSUs was approximately $27.3 million which is expected to be recognized over a weighted-average period of approximately 3.40 years.

Summarized Stock-Based Compensation Expenses

The table below summarizes total stock-based compensation expenses in the three months ended March 31, 2023 and March 31, 2022:


	Three Months Ended March 31,
(In thousands)	2023			2022
Research and development	$	1,527		$	2,389
Selling and marketing expenses		(453	)		441
General and administrative expenses		629			8,651

Total stock-based compensation expenses	$	1,703		$	11,481

10. FINANCING ARRANGEMENTS

Loan and Security Agreement

In March 2021, the Company entered into an agreement (the “L

n 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 the Black-Scholes model, see Note 12 for the fair value assumptions.