UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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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. ☑
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TABLE OF CONTENTS
1
Cautionary Note Regarding Forward-looking Statements
Unless the context requires otherwise, references in this report to “Rigetti”, the “Company”, “we”, “us”, and “our” refer to Rigetti Computing, Inc. and its consolidated subsidiaries.
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,” “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 expectations with respect to when we will need to obtain additional capital, and our ability to raise additional capital when needed and on attractive terms, |
| ● | our ability to achieve milestones, and/or 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 strategies for sales of quantum computers and 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 have or may be instituted against us or others, |
| ● | 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 compliance with standards relating to 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, |
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| ● | 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 weakness 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 products and services, |
| ● | unfavorable conditions in our industry, the global economy or global supply chain (including any supply chain impacts from the ongoing military conflicts involving Russia and Ukraine and sanctions related thereto and the state of war between Israel and Hamas and the potential for a larger conflict), 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 |
| ● | 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 or otherwise, 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:
| ● | We believe that our existing cash, cash equivalents and marketable securities should be sufficient to meet our anticipated operating cash needs until midway through the first quarter of 2026, based on our current business plan, and expectations and assumptions considering current macroeconomic conditions. Accordingly, based on our estimates and current business plan, we expect that we will need to obtain additional capital to fund our research and development efforts and business objectives as currently planned. Our estimate does not assume any additional financing, and 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. |
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| ● | 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 our net operating loss carryforwards and research and development tax credit carryforwards for income tax purposes is subject to annual limitation because of prior cumulative changes in the Company’s ownership, and may be further limited in the future if additional ownership changes occur. |
| ● | 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, systems and offerings, including any future generations developed to potentially demonstrate narrow quantum advantage or broad quantum advantage, and our targeted fidelities, 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. |
| ● | There are no assurances that we will be able to successfully 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 systems depend 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. |
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| ● | 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 more slowly 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 and our partners and other third parties on which we rely 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 our partners or 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 a material weakness in our internal control over financial reporting related to the design and operation of our overall closing and financial reporting processes, and we have in the past and may in the future identify additional material weaknesses. A material weakness over the accounting for complex financial instruments, which has been remediated, resulted in errors in financial statements for prior periods. If we fail to remediate our remaining material weakness, 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. |
| ● | We have in the past been out of compliance with the continued listing standards of Nasdaq and we may be unable to maintain compliance with such standards. If we fail to maintain compliance with the listing requirements of the Nasdaq Capital Market or fail to cure any future deficiencies, we may be delisted and the price of our common stock and our ability to access the capital markets 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 recent bank failures, have had and may continue to have serious adverse consequences on our business, financial condition and share price. |
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| ● | Our Warrants, including our public Warrants, each entitling the holder to purchase one share of our common stock at an exercise price of $11.50 per share, that trade on the Nasdaq Capital Market under the ticker symbol “RGTIW” (“Public Warrants”) and private placement Warrants, each entitling the holder to purchase one share of our common stock at an exercise price of $11.50 per share (“Private Warrants”), along with our Sponsor Vesting Shares, are accounted for as liabilities and the changes in value of our Warrants and Sponsor Vesting Shares could have a material effect on our financial results. |
| ● | Our Warrants are exercisable for Common Stock, the exercise of which, or other sales and issuances of Common Stock, 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, 2023.
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 our Annual Report on Form 10-K for the year ended December 31, 2023 materialize, 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.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares and par value)
(unaudited)
| June 30, | December 31, | ||||
| 2024 |
| 2023 | |||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Available-for-sale investments | | | ||||
Accounts receivable | | | ||||
Prepaid expenses and other current assets | | | ||||
Total current assets | | | ||||
Property and equipment, net | | | ||||
Operating lease right-of-use assets | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities | | | ||||
Deferred revenue | | | ||||
Current portion of debt | | | ||||
Current portion of operating lease liabilities | | | ||||
Total current liabilities | | | ||||
Debt, less current portion | | | ||||
Operating lease liabilities, less current portion | | | ||||
Derivative warrant liabilities | | | ||||
Earn-out liabilities | | | ||||
Total liabilities | | | ||||
Commitments and contingencies (Note 17) |
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Stockholders’ equity: |
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Preferred stock, par value $ | | | ||||
Common stock, par value $ | | | ||||
Additional paid-in capital | | | ||||
Accumulated other comprehensive income | | | ||||
Accumulated deficit | ( | ( | ||||
Total stockholders’ equity | | | ||||
Total liabilities and stockholders’ equity | $ | | $ | | ||
See accompanying notes to condensed consolidated financial statements.
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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| Three Months Ended June 30, |
| Six Months Ended June 30, | |||||||||
| 2024 |
| 2023 |
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| 2023 | |||||
Revenue | $ | | $ | | $ | | $ | | ||||
Cost of revenue | | | | | ||||||||
Total gross profit | | | | | ||||||||
Operating expenses: |
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Research and development | | | | | ||||||||
Selling, general and administrative | | | | | ||||||||
Restructuring | | | | | ||||||||
Total operating expenses | | | | | ||||||||
Loss from operations | ( | ( | ( | ( | ||||||||
Other income (expense), net |
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Interest expense | ( | ( | ( | ( | ||||||||
Interest income | | | | | ||||||||
Change in fair value of derivative warrant liabilities | | ( | ( | ( | ||||||||
Change in fair value of earn-out liabilities | | ( | ( | ( | ||||||||
Total other income (expense), net | | ( | ( | ( | ||||||||
Net loss before provision for income taxes | ( | ( | ( | ( | ||||||||
Provision for income taxes | | | | | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss per share attributable to common stockholders – basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average shares used in computing net loss per share attributable to common stockholders – basic and diluted | | | | | ||||||||
See accompanying notes to condensed consolidated financial statements.
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RIGETTI COMPUTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
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| Three Months Ended June 30, |
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| 2024 |
| 2023 |
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| 2023 | |||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Other comprehensive (loss) income: |
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Foreign currency translation adjustments | ( | | ( | ( | ||||||||
Unrealized gains (losses) on available-for-sale debt securities | | | ( | | ||||||||
Total other comprehensive (loss) income before income taxes | ( | | ( | | ||||||||
Income taxes | | | | | ||||||||
Total other comprehensive (loss) income after income taxes | ( | | ( | | ||||||||
Total comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
See accompanying notes to condensed consolidated financial statements.
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RIGETTI COMPUTING INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation and amortization | | | ||||
Stock-based compensation | | | ||||
Change in fair value of earn-out liabilities | | | ||||
Change in fair value of derivative warrant liabilities | | | ||||
Change in fair value of forward contract | | | ||||
Impairment of deferred offering costs | | | ||||
Accretion of available-for-sale securities | ( | ( | ||||
Amortization of debt issuance costs, commitment fees and accretion of debt end-of-term liabilities | | | ||||
Non-cash lease expense | | | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | ( | ( | ||||
Prepaid expenses, other current assets and other assets | ( | ( | ||||
Deferred revenue | | ( | ||||
Accounts payable | ( | ( | ||||
Accrued expenses and operating lease liabilities | ( | ( | ||||
Net cash used in operating activities | ( | ( | ||||
Cash flows from investing activities: |
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Purchases of property and equipment | ( | ( | ||||
Purchases of available-for-sale securities | ( | ( | ||||
Maturities of available-for-sale securities | | | ||||
Net cash used in investing activities | ( | ( | ||||
Cash flows from financing activities: |
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Payments of principal of notes payable | ( | ( | ||||
Proceeds from sale of common stock from sales through Common Stock Purchase Agreement | | | ||||
Proceeds from sale of common stock from sales through At-The-Market (ATM) Offering | | | ||||
Payments of offering costs | ( | ( | ||||
Proceeds from issuance of common stock upon exercise of stock options and warrants | | | ||||
Net cash provided by financing activities | | | ||||
Effects of exchange rate changes on cash and cash equivalents | ( | ( | ||||
Net decrease in cash and cash equivalents | ( | ( | ||||
Cash and cash equivalents – beginning of period | | | ||||
Cash and cash equivalents – end of period | $ | | $ | | ||
Supplemental disclosures of other cash flow information: |
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Cash paid for interest | $ | | $ | | ||
Non-cash investing and financing activities: | ||||||
Capitalization of deferred costs to equity upon share issuance | | | ||||
Purchases of property and equipment recorded in accounts payable | | | ||||
Purchases of property and equipment recorded in accrued expenses | | | ||||
Purchases of deferred offering costs in accounts payable | | | ||||
Unrealized (Loss) Gain on short term investments | ( | | ||||
See accompanying notes to condensed consolidated financial statements.
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RIGETTI COMPUTING INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| (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. The Company markets a 9-qubit quantum processing unit (QPU) under the Novera™ QPU trade name. 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 is located and headquartered in Berkeley, California. The Company also operates in Fremont, California; London, United Kingdom; Adelaide, Australia and British Columbia, Canada. The Company’s revenue is derived primarily from operations in the United States and the United Kingdom.
(2) Summary of Significant Accounting Policies
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”). 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 $
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.
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 cash 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 because 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.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S” and such accounting principles, “GAAP”) for complete financial statements due to the permitted exclusion of certain disclosures for interim reporting. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary under GAAP for a fair presentation of results for the interim periods presented have been included. As a result of displaying amounts in thousands, rounding differences may exist in the condensed consolidated financial statements and footnote tables. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for other interim periods or future years.
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The condensed consolidated balance sheet as of December 31, 2023, included herein, is derived from the audited consolidated financial statements as of that date, however, it does not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 14, 2024.
Principles of Consolidation
The accompanying condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The 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.
Significant Accounting Policies
There were no material changes to the significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 14, 2024.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as reported amounts of revenues and expenses during the reporting period. Such management estimates include, but are not limited to, the fair value of share-based awards, the fair value of derivative warrant liabilities, the fair value of Sponsor Vesting Shares issued in connection with the Business Combination, 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 adjusts when facts and circumstances dictate. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.
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 the Company’s forecasts, the Company believes that its existing cash and cash equivalents and available for sale investments should be sufficient to meet its anticipated operating cash needs for at least the next 12 months from the issuance date of these financial statements based on the Company’s current business plan and expectations and assumptions considering current macroeconomic conditions.
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Macroeconomic Conditions
Economic conditions in some parts of the world have been worsening, with disruptions to, and volatility and uncertainty in, the credit and financial markets in the U.S. and worldwide resulting from the effects of inflation and interest rates. These conditions have been further exacerbated by recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, the ongoing military conflict involving Russia and Ukraine and sanctions related thereto, the state of war between Israel and Hamas and the related risk of a larger conflict. It is not possible at this time to estimate the long-term impact that these and related events could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted. If these conditions persist and deepen, the Company could experience an inability to access additional capital, or its 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.
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. ASU No. 2020-06 was effective for the Company as of January 1, 2024. The Company determined that the adoption of this standard did not have a material impact on the consolidated financial statements.
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 for annual periods beginning 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 November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting - Improvements to Reportable Segment Disclosures”. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for the Company for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures” requiring enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid.
This ASU is effective for the Company for annual periods beginning after December 15, 2024 on a prospective basis. Retrospective application is also permitted. The Company is still evaluating the impact of this pronouncement on the consolidated financial statements.
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(3) | Changes in Stockholders’ Equity |
Three and Six Months Ended June 30, 2024 (in thousands):
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Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | |||||||||||||
Shares |
| Amount | Capital | Income | Deficit | Equity | |||||||||||
Balance, March 31, 2024 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Issuance of common stock upon exercise of stock options | | — | | — | — | | |||||||||||
Issuance of common stock upon release of RSUs |
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Proceeds from sale of common stock through At-The-Market (ATM) Offering | | | | — | — | | |||||||||||
Capitalization of deferred costs to equity upon share issuance | — | — | ( | — | — | ( | |||||||||||
Stock-based compensation |
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Foreign currency translation loss |
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Change in unrealized loss on available-for-sale securities |
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Net loss |
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Balance, June 30, 2024 |
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Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | |||||||||||||
Shares |
| Amount | Capital | Income | Deficit | Equity | |||||||||||
Balance, December 31, 2023 | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Issuance of common stock upon exercise of stock options | | — | | — | — | | |||||||||||
Issuance of common stock upon release of RSUs |
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Proceeds from sale of common stock through Purchase Agreement - B. Riley | |
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Proceeds from sale of common stock through At-The-Market (ATM) Offering | |
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Capitalization of deferred costs to equity upon share issuance |
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Stock-based compensation |
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Foreign currency translation loss |
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Change in unrealized loss on available-for-sale securities |
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Net loss |
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Balance, June 30, 2024 |
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14
Three and Six Months Ended June 30, 2023 (in thousands):
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| Accumulated |
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Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | |||||||||||||
Shares |
| Amount | Capital | Income (loss) | Deficit | Equity | |||||||||||
Balance, March 31, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Issuance of common stock upon exercise of stock options | | — | | — | — | | |||||||||||
Issuance of common stock upon exercise of common stock warrants | | — | — | — | — | — | |||||||||||
Issuance of common stock upon release of RSUs | | — | — | — | — | — | |||||||||||
Proceeds from sale of common stock through Purchase Agreement - B. Riley | | | | — | — | | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Foreign currency translation gain | — | — | — | | — | | |||||||||||
Change in unrealized loss on available-for-sale securities | — | — | — | | — | | |||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||
Balance, June 30, 2023 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
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| Accumulated |
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Additional | Other | Total | |||||||||||||||
Common Stock | Paid-In | Comprehensive | Accumulated | Stockholders’ | |||||||||||||
Shares |
| Amount | Capital | Income (loss) | Deficit | Equity | |||||||||||
Balance, December 31, 2022 |
| | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Issuance of common stock upon exercise of stock options | | — | | — | — | | |||||||||||
Issuance of common stock upon exercise of common stock warrants | | — | | — | — | | |||||||||||
Issuance of common stock upon release of RSUs | | — | — | — | — | — | |||||||||||
Proceeds from sale of common stock through Purchase Agreement - B. Riley | | | | — | — | | |||||||||||
Capitalization of deferred costs to equity upon share issuance | — | — | ( | — | — | ( | |||||||||||
Stock-based compensation | — | — | | — | — | | |||||||||||
Foreign currency translation loss | — | — | — | ( | — | ( | |||||||||||
Change in unrealized loss on available-for-sale securities | — | — | — | | — | | |||||||||||
Net loss | — | — | — | — | ( | ( | |||||||||||
Balance, June 30, 2023 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
15
(4) | Investments |
All investments in fixed income securities are classified as available-for-sale in the condensed consolidated balance sheets. Fixed income securities are recorded at their estimated fair value.
June 30, 2024 | |||||||||||||
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||
| Cost |
| Gains |
| Losses |
| Value | ||||||
Available-for-sale investments: |
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U.S. treasury securities | $ | | $ | | $ | ( | $ | | |||||
Corporate bonds | | — | — | | |||||||||
Available-for-sale investments – short-term | $ | | $ | | $ | ( | $ | | |||||