Description of Business

6 Months Ended

Jun. 30, 2022

1. DESCRIPTION OF BUSINESS

Rigetti Computing Inc. and its subsidiaries (collectively, the “Company” or “Rigetti”), builds quantum computers and the superconducting quantum processors that power them. Through the Company’s Quantum Computing as a Service (“QCaaS”) platform, the Company’s machines can be integrated into any public, private or hybrid cloud. The Company offers product types of Platform, Research and Software Tools usage in application areas of benchmarking, chemical simulation, education/entertainment, machine learning, and optimization.

The Company is located and headquartered in Berkeley, California. The Company also operates in Fremont, California, London, United Kingdom, Adelaide, Australia, British Columbia, Canada and Munich, Germany. The Company’s revenue is derived primarily from operations in the United States and the United Kingdom.

Basis of Presentation

On March 2, 2022 (the “Closing Date”), a merger transaction between Rigetti Holdings, Inc. (“Legacy Rigetti”) and Supernova Partners Acquisition Company II, Ltd. (“SNII”) was completed (the “Business Combination”, see Note 3). In connection with the closing of the Business Combination, the Company changed its name to Rigetti Computing, Inc. and all of SNII Class A ordinary shares and SNII Class B ordinary shares automatically converted into shares of common stock, par value $0.0001, of the Company (the “Common Stock”) on a

one-for-one

basis. The SNII Public Warrants and the Private Warrants held by SNII became warrants for Common Stock. The Company’s common stock and Public Warrants trade on the Nasdaq Capital Market under the ticker symbols “RGTI” and “RGTIW,” respectively. For more information on this transaction, see Note 3.

The Company determined that Legacy Rigetti was the accounting acquirer in the Business Combination based on an analysis of the criteria outlined in Accounting Standards Codification (ASC) 805, Business Combination.

The determination was primarily based on the following facts:

•

Former Legacy Rigetti stockholders have a controlling voting interest in the Company;

•

The Company’s board of directors as of immediately after the closing is comprised of eight board members, six seats occupied by previous Rigetti board members and one seat being occupied by a previous Supernova representative. The final eighth seat was filled by an individual who did not have ties to either Rigetti or Supernova

pre-merger;

and

•

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

day-to-day

operations.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy Rigetti issuing stock for the net assets of SNII, accompanied by a recapitalization. The primary asset acquired from SNII was related to the cash amounts that was assumed at historical costs. Separately, the Company also assumed warrants that were deemed to be derivatives and meet liability classification subject to fair value adjustment measurements upon closing of the Business Combination (the “Closing”). No goodwill or other intangible assets were recorded as a result of the Business Combination.

While SNII was the legal acquirer in the Business Combination, because Legacy Rigetti was deemed the accounting acquirer, the historical financial statements of Legacy Rigetti became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy Rigetti prior to the Business Combination; (ii) the combined results of SNII and Legacy Rigetti following the closing of the Business Combination; (iii) the assets and liabilities of Legacy Rigetti at their historical cost; and (iv) the Company’s equity structure for all periods presented.

The equity structure has been retroactively restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s common stock, $0.0001

par value per share, issued to Legacy Rigetti shareholders and Legacy Rigetti convertible preferred shareholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy Rigetti redeemable convertible preferred stock and Legacy Rigetti common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination.

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. All intercompany transactions and balances have been eliminated in consolidation. All dollar amounts, except share and per share amounts, in the notes are presented in thousands, unless otherwise specified. The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The interim results are not necessarily indicative of the results for any future interim period or for the entire year. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes included as Exhibit 99.1 to the Company’s Current Report on Form

8-K,

dated March 7, 2022. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company’s financial position as of June 30, 2022 and results of operations for the three and six months ended June 30, 2022 and 2021.

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.

COVID-19—

As of June 30, 2022 and December 31, 2021, the Company’s financial position was not significantly impacted due to the effects of

COVID-19.

However, the duration and intensity of the

COVID-19

pandemic and any resulting disruption to the Company’s operations remains somewhat uncertain, and the Company will continue to assess the impact of the

COVID-19

pandemic on its financial position.

Change in Fiscal Year —

In October 2021, the board of directors of Rigetti approved a change to Rigetti’s fiscal

year-end

from January 31 to December 31, effective December 31, 2021. The Company believes the

year-end

change is important and useful to its financial statement users to allow for increased comparability with its industry peers. As a result of this change, the Company’s fiscal year now begins on January 1 and ends on December 31 of each year, starting on January 1, 2022. Year-over-year quarterly financial data has been and will continue to be recast to be comparative with the new fiscal quarter ends in the new fiscal year.

Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Errors

On November 14, 2022, the audit committee of the Company’s board of directors (the “Audit Committee” ), based on the recommendation of, and after consultation with, the Company’s management, concluded that the Company’s previously issued unaudited interim condensed consolidated financial statements for the quarters ended March 31, 2022 and June 30, 2022 (the “Affected Financials”), as previously filed with the SEC, should no longer be relied upon and should be restated due to the matters described below. The unaudited condensed consolidated financial statements for the quarter ended June 30, 2022 are restated in this Quarterly Report on Form

10-Q/A,

and the Company has restated the unaudited condensed consolidated financial statements and related information for the quarter ended March 31, 2022 in a separate amendment to the Quarterly Report on Form

10-Q

for such period.

Earn-out

Liability Valuation

At the closing of the Company’s business combination with Supernova Partners Acquisition Company II Ltd. on March 2, 2022 (the “Closing”), (i) 2,479,000 shares of the Company’s “Common Stock, held by Supernova Partners II LLC (the “SPAC Sponsor”) (such shares, the “Promote Sponsor Vesting Shares”) became subject to vesting and are considered unvested and will only vest if, during the five year period following the Closing, the volume weighted average price of the Common Stock equals or exceeds $12.50 for any twenty trading days within a period of thirty consecutive trading days, and (ii) 580,273 shares of Common Stock held by the SPAC Sponsor (“Sponsor Redemption-Based Vesting Shares”) became subject to vesting and considered unvested and will only vest if, during the five year period following the Closing, the volume weighted average price of the Common Stock equals or exceeds $15.00 for any twenty trading days within a period of thirty consecutive trading days (collectively, the Promote Sponsor Vesting Shares and Sponsor Redemption-Based Vesting Shares, “Sponsor Vesting Shares”). Any Sponsor Vesting Shares that remain unvested after the fifth anniversary of the Closing will be forfeited.

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

earn-out

triggering events that determine the number of Sponsor Vesting Shares to be earned back by the SPAC Sponsor include outcomes that are not solely indexed to the Common Stock. As part of the Company’s accounting for the

earn-out

liability related to the Sponsor Vesting Shares in connection with the preparation of the financial statements for the three months ended September 30, 2022, the Company evaluated the valuation assumptions utilized in estimating the fair value of the Sponsor Vesting Shares using a Monte Carlo simulation model. During this evaluation, it was determined that the volatility assumption used in the valuation of the

earn-out

liability related to the Sponsor Vesting Shares, which is based on a weighted average of the volatilities of the trading price of the common stock for a group of comparable public companies, the trading price of the Company’s common stock and the trading price of the Company’s Public Warrants (as defined below), should be revised to include a greater weight for the volatility of the trading price of the Company’s Public Warrants and should have included such greater weighting in calculating the values of the

earn-out

liability used in preparation of the Affected Financials.

The Company assessed the materiality of the error, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin No. 99, and concluded that the error is material to the Affected Financials based upon quantitative aspects of the error. The revised weighting used for the volatility assumption in the estimation of the fair value of the Sponsor Vesting Shares had the following impact on the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2022 included in the Affected Financials:

•

a decrease in the

Earn-out

Liabilities recorded on the unaudited condensed consolidated balance sheet as of June 30, 2022 included in the Affected Financials;

•

a decrease in the gain from Change in the Fair Value of

Earn-out

Liability recorded in the unaudited condensed consolidated statement of operations for the period ended June 30, 2022 included in the Affected Financials;

•

an increase in Net Loss and Net Loss per Share recorded in the unaudited condensed consolidated statement of operations for the period ended June 30, 2022 included in the Affected Financials; and

•

a decrease in the Change in the Fair value of

Earn-out

Liability recorded in the unaudited condensed consolidated statements of cash flows as supplemental disclosure of

non-cash

financing activities for the period ended June 30, 2022 included in the Affected Financials (the

Earn-out

Liabilities related adjustments are marked with an “(a)” in the table below).

Private Warrant Valuation

Prior to the Business Combination, SNII issued 4,450,000 private placement warrants (“Private Warrants”). Each whole warrant entitles the holder to purchase one share of the Company’s Common Stock at a price of $11.50 per share, subject to adjustments and will expire five years after the Business Combination or earlier upon redemption or liquidation. The Company reassessed the calculations of fair value for its Private Warrants that are treated as derivative warrant liabilities for the periods ended March 31, 2022 and June 30, 2022.

As part of the Company’s accounting for the derivative warrant liability related to the Private Warrants in connection with the preparation of the financial statements for the three months ended September 30, 2022, the Company evaluated the valuation assumptions used in estimating the fair value of the Private Warrants. During this evaluation, it was determined that the calculated volatility used in the valuation of the derivative warrant liability related to the Private Warrants was based on the assumption that such warrants were not subject to redemption at $10 per share but were subject to redemption at $18 per share. The Private Warrants, however, are not redeemable at either of these prices as long as the warrants are held by either the Sponsor or its permitted transferees. During the first two quarters of the 2022 fiscal year, the Private Warrants were held by the Sponsor; therefore, the Private Warrants were not redeemable at either price during such periods. The Company revised this assumption in the calculation of the volatility of the Private Warrants, which impacted the valuation of the liability related to the Private Warrants included in the Affected Financials.

The Company assessed the materiality of the error, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin No. 99, and concluded that the error is material to the Affected Financials based upon quantitative aspects of the error. The revised assumption used for the calculation of the volatility in the estimation of the fair value of the Private Warrants had the following impact on the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2022 included in the Affected Financials:

•

an increase in the Derivative Warrant Liabilities recorded on the unaudited condensed consolidated balance sheet as of June 30, 2022 included in the Affected Financials;

•

an increase in the gain from the Change in the Fair Value of Derivative Warrant Liabilities for the three months ended June 30, 2022 and a decrease in the gain from the Change in the Fair Value of Derivative Warrant Liabilities for the six months ended June 30, 2022 included in the Affected Financials;

•

a decrease in Net Loss and Net Loss per Share for the three months ended June 30, 2022 and an increase in Net Loss and Net Loss per Share for the six months ended June 30,2022 included in the Affected Financials; and

•

a decrease in the Change in Fair value of Derivatives Liability recorded in the unaudited condensed consolidated statements of cash flows as supplemental disclosure of

non-cash

financing activities for the period ended June 30, 2022 included in the Affected Financials (the Private Warrant adjustments are marked with an “(d)” in the table below).

Additional Operating Expenses

In addition, in connection with the preparation of the financial statements for the three months ended September 30, 2022, the Company completed its analysis with respect to the treatment of additional operating expenses relating to electrical utility fees for a portion of the electrical usage at its Berkeley location since 2019 that were not paid and recognized in prior periods. The Company has cumulatively recorded an accrual of $1.6 million as of June 30, 2022, which includes an accrual of $1.5 million recorded for the three months ended March 31, 2022, reflecting an

out-of-period

adjustment of $1.3 million in relation to expenses incurred in 2019 through 2021, and an additional $0.1 million accrual for the three months ended June 30, 2022. The expenses have been recorded as research and development expenses in the financial statements for the respective periods. The impact of the additional operating expenses recorded increased accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheet and research and development expenses, operating expenses, operating loss and net loss recorded in the unaudited condensed consolidated statement of operations in the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2022 included in the Affected Financials (the additional operating expense adjustments are marked with a “(b)” in the table below).

Trinity Warrant Valuation

As part of the restatement of the financial statements for the quarters ended March 31, 2022 and June 30, 2022, the Company also recorded the correction of an immaterial error related to the valuation of the liability associated with the warrants issued to Trinity Capital Inc. in the restated financial statements for the quarter ended March 31, 2022, and reversed the

out-of-period

adjustment it had previously recorded for such immaterial error in the financial statements for the quarter ended June 30, 2022 in the restated unaudited condensed consolidated financial statements for the three and six months ended June 30, 2022. The Company reduced Derivative Warrant Liabilities by $1.3 million in the condensed consolidated balance sheet as of March 31, 2022 and increased the Change in Fair Value of Derivative Warrant Liabilities by $1.3 million in the restated unaudited condensed consolidated statement of operations for the period ended March 31, 2022 for the revaluation of the liability associated with the warrants issued to Trinity Capital. The increase to the Change in Fair Value of Derivative Warrant Liabilities increased total other income (expense) and decreased net loss recorded in the unaudited condensed consolidated statement of operations for the period ended March 31, 2022. The reversal of the out of period adjustment from the financial statements for the quarter ended June 30, 2022 decreased total other income (expense) and increased net loss recorded in the restated unaudited condensed consolidated statement of operations for the period ended June 30, 2022 (the Trinity Warrant adjustments are marked with a “(c)” in the table below).

The Company recorded the following adjustments to correct the prior period errors in the financial statements as of and for the period ended June 30, 2022 such that the consolidated balance sheet and the

year-to-date

consolidated statement of operations appropriately reflect the accounting impacts of the related transactions (in thousands):

Restated Condensed Consolidated Balance Sheet (unaudited)


	As of June 30, 2022
	As reported			As adjusted - (a)			As adjusted - (b)			As adjusted - (c)		As adjusted - (d)			As adjusted - Total			As restated
Accrued expenses and other current liabilities	$	4,428		$	—		$	1,590		$	—	$	—		$	1,590		$	6,018
Total current liabilities		11,279			—			1,590			—		—			1,590			12,869
Derivative warrant liabilities		8,944			—			—			—		3,204			3,204			12,148
Earn-out liabilities		8,925			(1,069	)		—			—					(1,069	)		7,856
Total liabilities		54,765			(1,069	)		1,590			—		3,204			3,725			58,490
Additional paid-in capital		401,290			6,170			—			—		(445	)		5,725			407,015
Accumulated deficit		(227,575	)		(5,101	)		(1,590	)		—		(2,759	)		(9,450	)		(237,025	)
Total stockholders’ equity (deficit)		173,825			1,069			(1,590	)		—		(3,204	)		(3,725	)		170,100

Restated Condensed Consolidated Statements of Operations (unaudited)


	For the Three Months Ended June 30, 2022
	As reported			As adjusted - (a)			As adjusted - (b)			As adjusted - (c)			As adjusted - (d)		As adjusted - Total			As restated
Research and development	$	12,634		$	—		$	113		$	—		$	—	$	113		$	12,747
Total operating expenses		26,906			—			113			—			—		113			27,019
Loss from operations		(25,645	)		—			(113	)		—			—		(113	)		(25,758	)
Change in fair value of derivate warrant liabilities		8,687			—			—			(1,331	)		624		(707	)		7,980
Change in fair value of earn-out liability		8,024			(1,458	)		—			—			—		(1,458	)		6,566
Total other income (expense), net		15,671			(1,458	)		—			(1,331	)		624		(2,165	)		13,506
Net loss	$	(9,974	)	$	(1,458	)	$	(113	)	$	(1,331	)	$	624	$	(2,278	)	$	(12,252	)
Net loss per share attributed to common stockholders - basic and diluted	$	(0.09	)												$	(0.02	)	$	(0.11	)


	For the Six Months Ended
	June 30, 2022
	As reported			As adjusted - (a)			As adjusted - (b)			As adjusted - (c)		As adjusted - (d)			As adjusted - Total			As restated
Research and development	$	25,083		$	—		$	1,590		$	—	$	—		$	1,590		$	26,673
Total operating expenses		52,391			—			1,590			—		—			1,590			53,981
Loss from operations		(49,440	)		—			(1,590	)		—		—			(1,590	)		(51,030	)
Change in fair value of derivate warrant liabilities		14,509			—			—			—		(2,759	)		(2,759	)		11,750
Change in fair value of earn-out liability		17,658			(5,101	)		—					—			(5,101	)		12,557
Total other income (expense), net		28,996			(5,101	)		—			—		(2,759	)		(7,860	)		21,136
Net loss	$	(20,444	)	$	(5,101	)	$	(1,590	)	$	—	$	(2,759	)	$	(9,450	)	$	(29,894	)
Net loss per share attributed to common stockholders - basic and diluted	$	(0.24	)												$	(0.12	)	$	(0.36	)

Restated Condensed Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholder’s (Deficit) Equity (unaudited) as of June 30, 2022


	For the Six Months Ended June 30, 2022
	As reported			As adjusted - (a)			As adjusted - (b)			As adjusted - (c)		As adjusted - (d)			As adjusted - Total			As Restated
Additional Paid-In Capital	$	401,290		$	6,170		$	—		$	—	$	(445	)	$	5,725		$	407,015
Accumulated deficit		(227,575	)		(5,101	)		(1,590	)		—		(2,759	)		(9,450	)		(237,025	)
Total Stockholders’ (Deficit) Equity		173,825			1,069			(1,590	)		—		(3,204	)		(3,725	)		170,100

Restated Condensed Consolidated Statement of Cash Flows (unaudited)


	For the Six Months Ended June 30, 2022
	As reported			As adjusted - (a)			As adjusted - (b)			As adjusted - (c)		As adjusted - (d)			As adjusted - Total			As restated
Net loss	$	(20,444	)	$	(5,101	)	$	(1,590	)	$	—	$	(2,759	)	$	(9,450	)	$	(29,894	)
Accrued expenses and other current liabilities		967			—			1,590			—		—			1,590			2,557
Change in fair value of derivative warrant liabilities		(14,509	)		—			—			—		2,759			2,759			(11,750	)
Change in fair value of earnout liability		(17,658	)		5,101			—			—		—			5,101			(12,557	)
Net cash used in operating activities		(35,085	)		—			—			—		—			—			(35,085	)

The cumulative impact of the error correction

on the Company’s

accumulated deficit

was

$9.5

million, and the impact on stockholders’ equity (deficit) was

$3.7

million as of and for the period ended June 30, 2022. The impact on net loss was

$2.3

million for the three months ended June 30, 2022.

The cumulative impact of the error correction on the Company’s net loss for the six months ended June 30, 2022 was $9.5 million. There was no impact to net cash used in operating activities for the six months ended June 30, 2022.