QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☐ | Large accelerated filer | ☐ | Accelerated filer | |||
☒ | Smaller reporting company | |||||
Emerging growth company |
PART 1-FINANCIAL INFORMATION |
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3 |
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3 |
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4 |
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5 |
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7 |
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25 |
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34 |
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34 |
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36 |
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36 |
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36 |
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70 |
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Item 1. |
Unaudited Financial Statements |
March 31, |
December 31, |
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2022 |
2021 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Short-term investments |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Other noncurrent assets |
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Total Assets |
$ | $ | ||||||
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Liabilities and Stockholders’ Equity: |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
Accrued expenses |
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Current portion of operating lease liabilities |
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Unearned revenue |
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Current portion of stock option early exercise liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Unearned revenue, net of current portion |
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Stock option early exercise liabilities, net of current portion |
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Warrant liabilities |
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Total liabilities |
$ | $ | ||||||
Commitments and Contingencies (see Note 7) |
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Stockholders’ Equity: |
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Common stock $ as of March 31, 2022 and December 31, 2021, respectively |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
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Total stockholders’ equity |
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|
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Total Liabilities and Stockholders’ Equity |
$ | $ | ||||||
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|
Three Months Ended March 31, |
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2022 |
2021 |
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Revenue |
$ | $ | ||||||
Costs and expenses: |
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Cost of revenue (excluding depreciation and amortization) |
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Research and development |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Total operating costs and expenses |
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|
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Loss from operations |
( |
) |
( |
) | ||||
Change in fair value of warrant liabilities |
||||||||
Other income (expense), net |
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|
|||||
Loss before benefit for income taxes |
( |
) |
( |
) | ||||
Benefit for income taxes |
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|
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Net loss |
$ |
( |
) |
$ |
( |
) | ||
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|
|||||
Net loss per share attributable to common stockholders - basic and diluted |
$ | ( |
) | $ | ( |
) | ||
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|
|||||
Weighted average shares used in computing net loss per share attributable to common stockholders – basic and diluted |
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|
|
|
|
Three Months Ended March 31, |
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2022 |
2021 |
|||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Other comprehensive loss, net of reclassification adjustments: |
||||||||
Unrealized loss on available-for-sale securities, net |
( |
) | ||||||
Total other comprehensive loss |
( |
) | ||||||
|
|
|
|
|||||
Total comprehensive loss |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
Stockholders’ Equity |
||||||||||||||||||||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||
Balance, December 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||||||
Net loss |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock options exercised |
— | — | ||||||||||||||||||||||
Vesting of restricted common stock |
— | — | — | |||||||||||||||||||||
Issuance of common stock from the settlement of restricted stock units |
— | — | — | — | — | |||||||||||||||||||
Stock-based compensation |
— | — | — | — | ||||||||||||||||||||
Warrants exercised |
— | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, March 31, 2022 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
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|
|
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|
|||||||||||||
Stockholders’ Equity |
||||||||||||||||||||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity |
|||||||||||||||||||||
Shares |
Amount |
|||||||||||||||||||||||
Balance, December 31, 2020 |
|
|
$ |
$ |
$ |
( |
) | $ |
||||||||||||||||
Net loss |
|
|
— | — | — | ( |
) | ( |
) | |||||||||||||||
Equity instruments issued in consideration for intellectual property and research and development arrangements |
|
|
— | — | — | |||||||||||||||||||
Stock options exercised |
|
|
— | — | ||||||||||||||||||||
Vesting of restricted common stock |
|
|
— | — | ||||||||||||||||||||
Stock-based compensation |
|
|
— | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, March 31, 2021 |
|
|
$ |
$ |
$ |
( |
) |
$ |
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|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
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2022 |
2021 |
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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 |
||||||||
Non-cash research and development arrangements |
||||||||
Amortization of customer warrant |
||||||||
Stock-based compensation |
||||||||
Change in fair value of warrant liabilities |
( |
) | ||||||
Other, net |
( |
) | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
||||||||
Prepaid expenses and other current assets |
( |
) | ||||||
Other noncurrent assets |
( |
) | ||||||
Accounts payable |
( |
) | ||||||
Accrued expenses |
||||||||
Operating lease liabilities |
( |
) | ||||||
Unearned revenue |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
Capitalized software development costs |
( |
) | ( |
) | ||||
Purchases of available-for-sale securities |
( |
) | ||||||
Maturities of available-for-sale securities |
||||||||
Intangible asset acquisition costs |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from stock options exercised |
||||||||
Proceeds from public warrants exercised |
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|
|||||
Net cash provided by financing activities |
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|
|||||
Net change in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents at the beginning of the period |
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|
|
|
|
|||||
Cash and cash equivalents at the end of the period |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosures of non-cash investing and financing transactions: |
||||||||
Issuance of common stock for intellectual property |
$ | $ | ||||||
Property and equipment purchases in accounts payable and accrued expenses |
$ | $ | ||||||
Intangible asset purchases in accounts payable and accrued expenses |
$ | $ | ||||||
Noncash reclassification of warrant liabilities to equity upon exercise |
$ |
$ |
• | Level 1—Observable inputs, which include quoted prices in active markets; |
• | Level 2—Observable inputs other than the quoted prices in active markets that are observable either directly or indirectly, such as quoted prices in markets that are not active, or other inputs such as broker quotes, benchmark yield curves, credit spreads and market interest rates for similar securities that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; |
• | Level 3—Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined using pricing models, discounted cash flow methodologies or similar techniques. |
March 31, 2022 |
December 31, 2021 |
|||||||
Billed accounts receivable |
$ | $ | ||||||
Unbilled accounts receivable |
||||||||
|
|
|
|
|||||
Total accounts receivable |
$ |
$ |
1. |
Identify the contract with the customer |
2. |
Identify the performance obligations |
3. |
Determine the transaction price |
4. |
Allocate the transaction price to the performance obligations |
5. |
Recognize revenue when (or as) the entity satisfies a performance obligation |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Numerator: |
||||||||
Net loss available to common stockholders |
$ | ( |
) | $ | ( |
) | ||
Denominator: |
||||||||
Weighted average shares used in computing net loss per share attributable to common stockholders – basic and diluted |
||||||||
Net loss per share attributable to common stockholders – basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Common stock options outstanding |
||||||||
Warrants to purchase common stock |
||||||||
Public warrants |
||||||||
Unvested restricted stock units |
||||||||
Unvested common stock |
||||||||
Total |
||||||||
AS OF MARCH 31, 2022 |
AS OF DECEMBER 31, 2021 |
|||||||||||||||||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
|||||||||||||||||||||||||
Cash and money market funds |
$ |
$ |
— |
$ |
— |
$ |
$ |
$ |
— |
$ |
— |
$ |
||||||||||||||||||||
Commercial paper |
( |
) | — | ( |
) | |||||||||||||||||||||||||||
Corporate notes and bonds |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Municipal bonds |
— |
( |
) | — | — | |||||||||||||||||||||||||||
US government and agency |
— |
( |
) | ( |
) | |||||||||||||||||||||||||||
Total cash equivalents and investments |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||||||||
1 Year or Less |
1 Year or Greater |
Total |
||||||||||
Cash and money market funds |
$ | $ |
— | $ | ||||||||
Commercial paper |
— | |||||||||||
Corporate notes and bonds |
||||||||||||
Municipal bonds |
||||||||||||
US government and agency |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
Fair Value Measured as of March 31, 2022: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Cash and money market funds (1) |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
Commercial paper |
— |
— |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cash equivalents |
— |
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Short-term investments: |
||||||||||||||||
Commercial paper |
— |
— |
||||||||||||||
Corporate notes and bonds |
— |
— |
||||||||||||||
Municipal bonds |
— |
— |
||||||||||||||
US government and agency |
— | — | ||||||||||||||
Total short-term investments |
— |
— | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Long-term investments |
||||||||||||||||
Corporate notes and bonds |
— | — | ||||||||||||||
Municipal bonds |
— | — | ||||||||||||||
US government and agency |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total long-term investments |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
$ |
$ |
$ |
— | $ |
|||||||||||
Liabilities |
||||||||||||||||
Public warrants |
$ |
$ |
— | $ |
— | $ |
||||||||||
|
|
|
|
|
|
|
|
Fair Value Measured as of December 31, 2021: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Assets |
||||||||||||||||
Cash equivalents: |
||||||||||||||||
Ca sh and m oney market funds(1) |
$ | $ | — | $ | — | $ | ||||||||||
Commercial paper |
— | — | ||||||||||||||
US government and agency |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cash equivalents |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Short-term investments: |
||||||||||||||||
Commercial paper |
— | — | ||||||||||||||
Corporate notes and bonds |
— | — | ||||||||||||||
Municipal bonds |
||||||||||||||||
US government and agency |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total short-term investments |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Long-term investments |
||||||||||||||||
Corporate notes and bonds |
— | — | ||||||||||||||
US government and agency |
— | — | ||||||||||||||
Total long-term investments |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
$ | $ | — | $ | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Public warrants |
$ | $ | — | $ | — | $ | ||||||||||
|
|
|
|
|
|
|
|
(1) |
Includes money market funds associated with the Company’s overnight investment sweep account. |
March 31, 2022 |
December 31, 2021 |
|||||||
Computer equipment and acquired computer software |
$ | $ | ||||||
Machinery, equipment, furniture and fixtures |
||||||||
Leasehold improvements |
||||||||
Quantum computing systems |
||||||||
|
|
|
|
|||||
Gross property and equipment |
||||||||
Less: accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Property and equipment, net |
$ |
$ |
||||||
|
|
|
|
• | acceleration of the issuance of common stock as if exercised through the License Agreement, |
• | additional consideration equal to the consideration which a holder of one-half of one percent ( |
• | in whole and not in part; |
• |
• |
• | if, and only if, the closing price of common stock equals or exceeds $18.00 per share (as adjusted) for any |
• | in whole and not in part; |
• | at $ |
• | if, and only if, the closing price of common stock equals or exceeds $10.00 per public share (as adjusted) for any |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Ris k -Free Interest Rate |
% | % | ||||||
Expected Term (in years) |
||||||||
Expected Volatility |
% | % | ||||||
Dividend Yield |
% | % |
Number of Option Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value (in millions) |
|||||||||||||
Outstanding as of December 31, 2020 |
$ | $ |
||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Cancelled/Forfeited |
||||||||||||||||
Outstanding as of March 31, 2021 |
$ | $ |
Number of Option Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value (in millions) |
|||||||||||||
Outstanding as of December 31, 2021 |
$ | $ |
||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Cancelled/Forfeited |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Outstanding as of March 31, 2022 |
$ | $ |
||||||||||||||
|
|
|||||||||||||||
Exercisable as of March 31, 2022 |
$ | $ |
||||||||||||||
|
|
|||||||||||||||
Exercisable and expected to vest at March 31, 2022 |
$ | $ |
||||||||||||||
|
|
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Total intrinsic value of options exercised |
$ | $ | ||||||
Aggregate grant-date fair value of options vested |
$ | $ | ||||||
Weighted-average grant date fair value per share for options granted |
$ | $ |
RSUs |
Weighted Average Grant Date Fair Value |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Fair Value (in millions) |
|||||||||||||
Outstanding as of December 31, 2021 |
$ | $ |
||||||||||||||
Granted |
||||||||||||||||
Vested |
( |
) | ||||||||||||||
Forfeited |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Outstanding as of March 31, 2022 |
$ | $ |
||||||||||||||
Expected to vest after March 31, 2022 |
$ | $ |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Cost of revenue |
$ | $ | ||||||
Research and development |
||||||||
Sales and marketing |
||||||||
General and administrative |
||||||||
|
|
|
|
|||||
Stock-based compensation, net of amounts capitalized |
||||||||
Capitalized stock-based compensation – Intangibles and fixed assets |
||||||||
|
|
|
|
|||||
Total stock-based compensation |
$ | $ | ||||||
|
|
Three Months Ended March 31, 2022 |
||||||||
Unrecognized Expense |
Weighted- Average Amortization Period (Years) |
|||||||
Restricted stock units |
$ |
|
||||||
Stock options |
$ |
|
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Revenue |
$ |
$ |
||||||
Cost of revenue |
— | |||||||
Research and development (1) |
||||||||
Sales and marketing |
— | |||||||
General and administrative |
(1) |
Included in research and development expenses for the three months ended March 31, 2022 and 2021, respectively, is non-cash amortization associated with the Exclusive Option Agreements with UMD and Duke of $ |
March 31, 2022 |
December 31, 2021 |
|||||||
Assets |
||||||||
Prepaid expenses and other current assets |
$ |
$ |
||||||
Operating lease right-of-use asset |
||||||||
Other noncurrent assets |
||||||||
Liabilities |
||||||||
Accounts payable |
||||||||
Current operating lease liabilities |
||||||||
Unearned revenue |
||||||||
Non-current operating lease liabilities |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Announced a major commercial deal with Hyundai Motor Company to develop quantum algorithms that may improve the charging, discharging, durability, capacity, and safety of electric vehicle batteries. |
• | Highlighted our collaboration with Oak Ridge National Laboratory to research metal hydrides, which can benefit the development of technologies including batteries and hydrogen storage for hydrogen powered vehicles. |
• | Announced that the IonQ Aria system achieved a record 20 algorithmic qubits, representing a massive leap forward not just for IonQ. |
• | Announced that IonQ Aria will soon be accessible on Microsoft Azure’s Quantum Cloud, bringing the world’s most powerful quantum computer out of private beta and giving full access to the public. This will enable developers everywhere to learn about and begin leveraging quantum and demonstrates our dedication to spearheading access in the industry. |
• | Recent results showed that IonQ’s new barium qubits are already delivering on their promise of more accurate quantum computing with a 13-fold reduction in state preparation and measurement errors. |
• | Secured a sustainable, perpetual source of barium qubits through a partnership with the U.S. Department of Energy’s Pacific Northwest National Laboratory (PNNL). |
• | Announced the invention of a new family of quantum gates in collaboration with the Duke Quantum Center (DQC) at Duke University. We believe these new gates will eventually lead to more efficient quantum algorithms requiring many fewer qubits. Importantly, the gates can only be run using the unique architecture employed by IonQ and DQC systems. |
• | We were part of a group of private companies and universities that received a research and development award from DARPA to fund a quantum algorithms benchmarking project. While contracting is still being finalized, we are the only quantum hardware maker selected for this multi-year award. |
• | In May 2022, we announced that the team has completed construction on IonQ Forte, the next generation in IonQ’s series of quantum computers. Forte is a ytterbium system that uses IonQ’s in-house ion trap chip. The system incorporates a new beam-steering technology for the lasers that control its qubits and is designed to allow IonQ to work with larger numbers of qubits and deliver stable beams which we believe can more precisely address and encode those qubits. Forte is expected to launch with select developer, partner, and research access in the second half of this year and broader customer access in 2023. |
• | Named as one of TIME’s 100 Most Influential Companies, honoring IonQ in the “New Frontiers” category for the Company’s impact across the globe. |
• | Hired world-class talent, with key positions filled by Laurie Babinski as General Counsel and Secretary (Intuit’s Credit Karma) and Anant Sanchetee as Senior Director of Marketing (Meta, Dreem). |
Three Months Ended March 31, | ||||||||
2022 |
2021 |
|||||||
(in thousands) | ||||||||
Revenue |
$ | 1,953 | $ | 125 | ||||
Costs and expenses: |
||||||||
Cost of revenue (excluding depreciation and amortization) (1) |
568 | 181 | ||||||
Research and development (1) |
7,338 | 3,654 | ||||||
Sales and marketing (1) |
1,871 | 227 | ||||||
General and administrative (1) |
9,194 | 2,956 | ||||||
Depreciation and amortization |
1,266 | 445 | ||||||
|
|
|
|
|||||
Total operating costs and expenses |
20,237 | 7,463 | ||||||
|
|
|
|
|||||
Loss from operations |
(18,284 | ) | (7,338 | ) | ||||
Change in fair value of warrant liabilities |
13,448 | — | ||||||
Other income (expense), net |
609 | 3 | ||||||
|
|
|
|
|||||
Loss before benefit for income taxes |
$ | (4,227 | ) | (7,335 | ) | |||
Benefit for income taxes |
— | — | ||||||
|
|
|
|
|||||
Net loss |
$ | (4,227 | ) | $ | (7,335 | ) | ||
|
|
|
|
(1) | Cost of revenue, research and development, sales and marketing, and general and administrative expenses for the periods include stock-based compensation expense as follows: |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
(in thousands) |
||||||||
Cost of revenue |
$ | 104 | $ | — | ||||
Research and development |
1,698 | 454 | ||||||
Sales and marketing |
73 | — | ||||||
General and administrative |
4,797 | 977 |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Revenue |
$ | 1,953 | $ | 125 | $ | 1,828 | 1,462 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Cost of revenue (excluding depreciation and amortization) |
$ | 568 | $ | 181 | $ | 387 | 214 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Research and development |
$ | 7,338 | $ | 3,654 | $ | 3,684 | 101 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Sales and marketing |
$ | 1,871 | $ | 227 | $ | 1,644 | 724 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
General and administrative |
$ | 9,194 | $ | 2,956 | $ | 6,238 | 211 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Depreciation and amortization |
$ | 1,266 | $ | 445 | $ | 821 | 184 | % |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Change in fair value of warrant liabilities |
$ | 13,448 | $ | — | $ | 13,448 | NM | |||||||||
NM—Not Meaningful |
Three Months Ended March 31, |
$ Change |
% Change |
||||||||||||||
2022 |
2021 |
|||||||||||||||
(in thousands) |
||||||||||||||||
Other income (expense), net |
$ | 609 | $ | 3 | $ | 606 | 20,200 | % |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
(in thousands) |
||||||||
Net cash used in operating activities |
$ | (8,324 | ) | $ | (3,898 | ) | ||
Net cash used in investing activities |
$ | (304,098 | ) | $ | (2,154 | ) | ||
Net cash provided by financing activities |
$ | 148 | $ | 5,363 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 4. |
Controls and Procedures |
• | Although we recently added accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S. GAAP and SEC rules, the Company is still in process of formalizing its processes and procedures, establishing clear authorities and approvals and segregating duties to facilitate accurate and timely financial reporting. |
• | Our financial accounting system has limited functionality and does not facilitate effective information technology general controls relevant to financial reporting. Additionally, elements of our close process are managed and processed outside the accounting system, increasing the risk of error. |
• | Hired additional full-time accounting personnel with appropriate levels of experience, and augmented skills gaps with external experts; |
• | Established and implemented policies surrounding the approval of transactions, related to, but not limited to, account reconciliations and journal entries; and |
• | Selected and began implementing a financial accounting system that can support effective information technology general controls as well as the anticipated growth of the business. |
Item 1. |
Legal Proceedings. |
Item 1A. |
Risk Factors. |
• | We are an early-stage company 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. |
• | We may not be able to scale our business quickly enough to meet customer and market demand, which could result in lower profitability or cause us to fail to execute on our business strategies. |
• | Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate. |
• | Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all. |
• | Our management has limited experience in operating a public company. |
• | We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, this may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations or cause our access to the capital markets to be impaired. |
• | We may need additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available. |
• | We have not produced a scalable quantum computer and face significant barriers in our attempts to produce quantum computers. If we cannot successfully overcome those barriers, our business will be negatively impacted and could fail. |
• | The quantum computing industry is competitive on a global scale and we may not be successful in competing in this industry or establishing and maintaining confidence in our long-term business prospects among current and future partners and customers. |
• | Our business is currently dependent upon our relationship with our cloud providers. There are no assurances that we will be able to commercialize quantum computers from our relationships with cloud providers. |
• | 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 per qubit, 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. |
• | If our computers fail to achieve a broad quantum advantage, our business, financial condition and future prospects may be harmed. |
• | We could suffer disruptions, outages, defects and other performance and quality problems with our quantum computing systems or with the public cloud and internet infrastructure on which they rely. |
• | We may face unknown supply chain issues that could delay the introduction of our product and negatively impact our business and operating results. |
• | If we cannot successfully execute on our strategy, including in response to changing customer needs and new technologies and other market requirements, or achieve our objectives in a timely manner, our business, financial condition and results of operations could be harmed. |
• | Our products may not achieve market success, but will still require significant costs to develop. |
• | We are highly dependent on our co-founders, and our ability to attract and retain senior management and other key employees, such as quantum physicists and other key technical employees, is critical to our success. If we fail to retain talented, highly-qualified senior management, engineers and other key employees or attract them when needed, such failure could negatively impact our business. |
• | Our future growth and success depend on our ability to sell effectively to large customers. |
• | We may not be able to accurately estimate the future supply and demand for our quantum computers, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays. |
• | Our systems depend on the use of a particular isotope of an atomic element that provides qubits for our ion trap technology. If we are unable to procure these isotopically enriched atomic samples, 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. |
• | If our quantum computing systems are not compatible with some or all industry-standard software and hardware in the future, our business could be harmed. |
• | If we are unable to maintain our current strategic partnerships or we are unable to develop future collaborate partnerships, our future growth and development could be negatively impacted. |
• | Our business depends on our customers’ abilities to implement useful quantum algorithms and sufficient quantum resources for their business. If they are unable to do so due to the nature of their algorithmic challenge or other technical or personnel dilemmas, our growth may be negatively impacted. |
• | System security and data protection breaches, as well as cyber-attacks, could disrupt our operations, which may damage our reputation and adversely affect our business. |
• | Unfavorable conditions in our industry or the global economy, could limit our ability to grow our business and negatively affect our results of operations. |
• | Government actions and regulations, such as tariffs and trade protection measures, may limit our ability to obtain products from our suppliers. |
• | Our operating and financial results forecast relies in large part upon assumptions and analyses we developed. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results. |
• | We have been, and may in the future be, adversely affected by the global COVID-19 pandemic, its various strains or future pandemics. |
• | We are subject to requirements relating to environmental and safety regulations and environmental remediation matters which could adversely affect our business, results of operation and reputation. |
• | Licensing of intellectual property is of critical importance to our business. For example, we license patents (some of which are foundational patents) and other intellectual property from the University of Maryland and Duke University on an exclusive basis. If the license agreement with these universities terminates, or if any of the other agreements under which we acquired or licensed, or will acquire or license, material intellectual property rights is terminated, we could lose the ability to develop and operate our business. |
• | If we are unable to obtain and maintain patent protection for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected. Moreover, our trade secrets could be compromised, which could cause us to lose the competitive advantage resulting from these trade secrets. |
• | We may face patent infringement and other intellectual property claims that could be costly to defend, result in injunctions and significant damage awards or other costs (including indemnification of third parties or costly licensing arrangements (if licenses are available at all)) and limit our ability to use certain key technologies in the future or require development of non-infringing products, services, or technologies, which could result in a significant expenditure and otherwise harm our business. |
• | Some of our in-licensed intellectual property, including the intellectual property licensed from the University of Maryland and Duke University, has been conceived or developed through government-funded research and thus may be subject to federal regulations providing for certain rights for the U.S. government or imposing certain obligations on us, such as a license to the U.S. government under such intellectual property, “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and compliance with such regulations may limit our exclusive rights and our ability to contract with non-U.S. manufacturers. |
• | effectively manage organizational change; |
• | design scalable processes; |
• | accelerate and/or refocus research and development activities; |
• | expand manufacturing, supply chain and distribution capacity; |
• | increase sales and marketing efforts; |
• | broaden customer-support and services capabilities; |
• | maintain or increase operational efficiencies; |
• | scale support operations in a cost-effective manner; |
• | implement appropriate operational and financial systems; and |
• | maintain effective financial disclosure controls and procedures. |
• | Although we recently added accounting and financial reporting personnel with requisite knowledge and experience in the application of U.S. GAAP and SEC rules, the Company is still in process of formalizing its processes and procedures, establishing clear authorities and approvals and segregating duties to facilitate accurate and timely financial reporting. |
• | Our financial accounting system has limited functionality and does not facilitate effective information technology general controls relevant to financial reporting. Additionally, elements of our close process are managed and processed outside the accounting system, increasing the risk of error. |
• | Hired additional full-time accounting personnel with appropriate levels of experience, and augmented skills gaps with external experts; |
• | Established and implemented policies surrounding the approval of transactions, related to, but not limited to, account reconciliations and journal entries; and |
• | Selected and began implementing a financial accounting system that can support effective information technology general controls as well as the anticipated growth of the business. |
• | gate fidelity, error correction and miniaturization may not commercialize from the lab and scale as hoped or at all; |
• | it could prove more challenging and take materially longer than expected to operate parallel gates within a single ion trap and maintain gate fidelity; |
• | the photonic interconnect between ion traps could prove more challenging and take longer to perfect than currently expected. This would limit our ability to scale beyond a single ion trap of approximately 22 logical qubits; |
• | it could take longer to tune the qubits in a single ion trap, as well as preserve the stability of the qubits within a trap as we seek to maximize the total number of qubits within one trap; |
• | the gate speed in our technology could prove more difficult to improve than expected; and |
• | the scaling of fidelity with qubit number could prove poorer than expected, limiting our ability to achieve larger quantum volume. |
• | large, well-established tech companies that generally compete in all of our markets, including Honeywell, Google, Microsoft, Amazon, Intel and IBM; |
• | countries such as China, Russia, Canada, Australia and the United Kingdom, and those in the European Union and we believe additional countries in the future; |
• | less-established public and private companies with competing technology, including companies located outside the United States; and |
• | new or emerging entrants seeking to develop competing technologies. |
• | our inability to enter into agreements with suppliers on commercially reasonable terms, or at all; |
• | difficulties of suppliers ramping up their supply of materials to meet our requirements; |
• | a significant increase in the price of one or more components, including due to industry consolidation occurring within one or more component supplier markets or as a result of decreased production capacity at manufacturers; |
• | any reductions or interruption in supply, including disruptions on our global supply chain as a result of the COVID-19 pandemic, which we have experienced, and may in the future experience; |
• | any supply chain disruptions due to Russia’s recent incursion in the Ukraine and any indirect effects thereof which could further complicate existing supply chain constraints; |
• | financial problems of either manufacturers or component suppliers; |
• | significantly increased freight charges, or raw material costs and other expenses associated with our business; |
• | other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis; |
• | a failure to develop our supply chain management capabilities and recruit and retain qualified professionals; |
• | a failure to adequately authorize procurement of inventory by our contract manufacturers; or |
• | a failure to appropriately cancel, reschedule, or adjust our requirements based on our business needs. |
• | pricing and the perceived value of our systems relative to its cost; |
• | delays in releasing quantum computers with sufficient performance and scale to the market; |
• | failure to produce products of consistent quality that offer functionality comparable or superior to existing or new products; |
• | ability to produce products fit for their intended purpose; |
• | failures to accurately predict market or customer demands; |
• | defects, errors or failures in the design or performance of our quantum computing system; |
• | negative publicity about the performance or effectiveness of our system; |
• | strategic reaction of companies that market competitive products; and |
• | the introduction or anticipated introduction of competing technology. |
• | obtain expertise in relevant markets; |
• | obtain sales and marketing services or support; |
• | obtain equipment and facilities; |
• | develop relationships with potential future customers; and |
• | generate revenue. |
• | success and timing of development activity; |
• | customer acceptance of our quantum computing systems; |
• | breakthroughs in classical computing or other computing technologies that could eliminate the advantages of quantum computing systems rendering them less practical to customers; |
• | competition, including from established and future competitors; |
• | whether we can obtain sufficient capital to sustain and grow our business; |
• | our ability to manage our growth; |
• | our ability to retain existing key management, integrate recent hires and attract, retain and motivate qualified personnel; and |
• | the overall strength and stability of domestic and international economies. |
• | the scope of rights granted under the license agreement and other interpretation-related issues; |
• | whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; |
• | our right to sublicense patent and other rights to third parties; |
• | our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product and technology, and what activities satisfy those diligence obligations; |
• | the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and the company; |
• | our right to transfer or assign the license; and |
• | the effects of termination. |
• | cease selling or using solutions or services that incorporate the intellectual property rights that allegedly infringe, misappropriate or violate the intellectual property of a third party; |
• | make substantial payments for legal fees, settlement payments or other costs or damages; |
• | obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; |
• | redesign the allegedly infringing solutions to avoid infringement, misappropriation or violation, which could be costly, time-consuming or impossible; or |
• | indemnify organizations using our platform or third-party service providers. |
• | variations in quarterly operating results or dividends, if any, to stockholders; |
• | additions or departures of key management personnel; |
• | publication of research reports about our industry; |
• | rumors and market speculation involving us or other companies in our industry, which may include short seller reports; |
• | litigation and government investigations; |
• | changes or proposed changes in laws or regulations or differing interpretations or enforcement of laws or regulations affecting our business; |
• | adverse market reaction to any indebtedness incurred or securities issued in the future; |
• | changes in market valuations of similar companies; |
• | announcements by competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, or capital commitments; |
• | the impact of the COVID-19 pandemic or other geopolitical events such as Russia’s incursion into Ukraine; and |
• | the impact of any of the foregoing on our management, employees, partners, customers, and operating results. |
• | labor availability and costs for hourly and management personnel; |
• | profitability of our products, especially in new markets; |
• | changes in interest rates; |
• | impairment of long-lived assets; |
• | macroeconomic conditions, both nationally and locally; |
• | size and scope of our revenue arrangements with our customers; |
• | negative publicity relating to products we serve; |
• | changes in consumer preferences and competitive conditions; |
• | expansion to new markets; and |
• | fluctuations in commodity prices. |
• | existing stockholders’ proportionate ownership interest in us will decrease; |
• | the amount of cash available per share, including for payment of dividends, if any, may decrease; |
• | the relative voting strength of each previously outstanding common stock may be diminished; and |
• | the market price of our common stock may decline. |
• | a classified board; |
• | advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; |
• | certain limitations on convening special stockholder meetings; |
• | limiting the persons who may call special meetings of stockholders; |
• | limiting the ability of stockholders to act by written consent; |
• | restrictions on business combinations with interested stockholder; |
• | in certain cases, the approval of holders representing at least 66 2/3% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal the Bylaws, or amend or repeal certain provisions of the Certificate of Incorporation; |
• | no cumulative voting; |
• | the required approval of holders representing at least 66 2/3% of the total voting power of the shares entitled to vote at an election of the directors to remove directors; and |
• | the ability of the board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions. |
• | any derivative action or proceeding brought on behalf of us; |
• | any action asserting a claim of breach of fiduciary duty owed by any director, officer, agent or other employee or stockholder to us or our stockholders; |
• | any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), the Certificate of Incorporation or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; |
• | any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws; or |
• | any action asserting a claim governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. It further provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolutions of any complaint asserting a cause of action arising under the Securities Act. The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, or any other claim for which the federal courts have exclusive jurisdiction. Although these provisions are expected to benefit us by providing increased consistency in the application of applicable law in the types of lawsuits to which they apply, the provisions may have the effect of discouraging lawsuits against directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings and there is uncertainty as to whether a court would enforce such provisions. In addition, investors cannot waive compliance with the federal securities laws and the |
Item 6. |
Exhibits. |
(a) | Exhibits. |
+ | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601. The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
# | Indicates a management contract or compensatory plan, contract or arrangement. |
* | Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act (whether made before or after the date of this Quarterly Report on Form10-Q), irrespective of any general incorporation language contained in such filing. |
IonQ, Inc. | ||||||
Date: May 16, 2022 |
/s/ Peter Chapman | |||||
Name: | Peter Chapman | |||||
Title: | President and Chief Executive Officer (Principal Executive Officer) | |||||
Date: May 16, 2022 |
/s/ Thomas Kramer | |||||
Name: | Thomas Kramer | |||||
Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |