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Warrants | 6 Months Ended
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Jun. 30, 2022
Class of Warrant or Right [Line Items] |
Warrants | 9. WARRANTS As a result of the Business Combination (see Note 3), the Company has retroactively adjusted the Rigetti warrants outstanding and corresponding strike price prior to March 2, 2022 to give effect to the Exchange Ratio used to determine the number of shares of common stock into which they were converted. Liability Classified Warrants Public Warrants Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. As of June 30, 2022, there were 8,625,000 Public Warrants issued and outstanding (Refer to Note 11 for fair value measurement). Private Warrants The Private Warrants may not be redeemed by the Company so long as the Private Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Warrants have terms and provisions identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period, except if the Private Warrants are held by someone other than the initial purchasers’ permitted transferees, then the Private Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. As of June 30, 2022, there were 4,450,000 Private Warrants issued and outstanding. The fair value of the Private Warrant was measured using the Black Scholes model approach. Significant inputs into the respective models at March 2, 2022 (the initial recognition) and June 30, 2022 are as follows:
Valuation Assumptions |  | Initial Recognition on March 2, 2022 |  |  | June 30, 2022 |
|  | As Restated (1) |  |  | As Restated (1) |
Stock Price |  | $ | 9.43 |  |  | $ | 3.67 |
Strike Price |  | $ | 11.50 |  |  | $ | 11.50 |
Volatility (annual) (1) |  |  | 30.66 | % |  |  | 79.03 | %
Risk-free rate |  |  | 1.74 | % |  |  | 3.01 | %
Estimated time to expiration (years) |  |  | 5 |  |  |  | 4.672 |
Dividend yield |  |  | — | % |  |  | — | %
(1) | As restated and discussed in Note 1 — Description of Business — Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors
Trinity Warrants The Trinity Warrants were issued in March of 2021 for warrants to purchase 313,252 shares of common stock, and additional warrants to purchase 469,877 shares of common stock were issued in connection with the Tranche B Amendment, see Note 6. Therefore, there were total of 783,129 common stock warrants issued in conjunction with the Loan and Security Agreement in 2021. The Company utilized Black-Scholes model to determine grant fair value of the warrants which was approximately $2.7 million which was recorded as part of the Debt Issuance Cost. The outstanding common stock warrants were recognized as liabilities on the consolidated balance sheet and were measured at their inception date fair value using the Black-Scholes model and were subsequently remeasured at each reporting period with change recorded as a component of other income in the Company’s consolidated statement of operations. The warrant liability balance was $6.4 million as of June 2, 2022, at which time all outstanding Trinity Warrants of 783,129 were exercised into shares of the Company’s Common Stock and the warrant liability reclassified to equity upon such exercise. The fair value of the warrant liability of $6.4 million was reclassified to equity upon such exercise. The Company recorded a total loss of $1.5 million and $2.0 million to Change in Fair Value of Warrant Liability as a component of other income in the condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively, after applying the revised valuation inputs as described in Note 1. The warrant issued in conjunction with the Loan and Security Agreement is classified as a liability under ASC 480, “Distinguishing Liabilities from Equity”. See Deferred Financing Cost disclosure at Note 2 Summary of Significant Accounting Policies. The fair value of the Trinity Warrant liabilities presented above were measured using the Black Scholes model approach. Significant inputs into the respective models at June 2, 2022, the exercise date of the Trinity Warrants, are as follows:
Valuation Assumption - Common Stock Warrants |  | June 2 2022 |
Stock price |  | $ | 8.23 |
Strike price |  | $ | 0.27 |
Volatility (annual) |  |  | 105.10 | %
Risk-free rate |  |  | 2.94 | %
Estimated time to expiration (years) |  |  | 9 |
Dividend yield |  |  | — | %
Equity Classified Warrants Series C Preferred Stock Financing Warrants In conjunction with the Series C Preferred Stock Financing (see Note 7), the Company issued a total of 5,248,183 Warrants to purchase Class A Common Stock to the Series C investors. The Warrants have a $0.01 exercise price per share and have a 10-year term to expiration. The Warrants can be exercised for cash or on a cashless basis. The Company determined that the Warrants met the requirements for equity classification under ASC 480 and ASC 815. The Company estimated the fair value of the Warrants using the Black-Scholes model (see below for key inputs) and allocated approximately $1.2 million in proceeds from the Series C Preferred Stock to the value of the Warrants on a relative fair value basis, which was recorded to additional paid in capital. Customer Warrants In February 2020, the Company issued a Warrant to purchase 2,680,607 shares of Class A Common Stock to a customer in conjunction with a revenue arrangement (the “Customer Warrant”). The Customer Warrants have a $1.152 exercise price per share and have a 10-year term to expiration. The Warrants vest upon the achievement of certain performance conditions (i.e., sales milestones) defined in the agreement, and upon a change of control, either 50% or 100% of the then unvested Customer Warrants will become fully vested, dependent on the acquiring party in the change of control transaction. The Warrants can be exercised for cash or on a cashless basis. The Company followed the guidance in ASC 718 and ASC 606 for the accounting of non-cash consideration payable to a customer. The Company determined that the Customer Warrants met the requirements for equity classification under ASC 718 and measured the Customer Warrants based on their grant date fair value, estimated to be $0.2 million. The Company recorded this amount as a deferred asset and additional paid in capital as of the issuance date, as the Company believes it is probable that all performance conditions (i.e., sales milestones) in the Customer Warrants will be met. During the three and six months ended June 30, 2022, the Company recorded a reduction of revenue related to the arrangement with the customer totaling $2.4 thousand and $3.9 thousand, respectively, as of June 30, 2022, the deferred asset balance outstanding is $91.2 thousand, which will be recognized as a reduction in revenue in future periods. The vesting status of the Customer Warrant is as follows at June 30, 2022 and December 31, 2021:
|  | June 30, 2022 |  |  | December 31, 2021 |
Vested Customer warrants |  |  | 1,072,237 |  |  |  | 1,072,237 |
Unvested Customer warrants |  |  | 1,608,370 |  |  |  | 1,608,359 |
|  |  | 2,680,607 |  |  |  | 2,680,596 |

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