While the legal acquirer in the Merger Agreement is dMY, for financial accounting and reporting purposes under accounting principles generally accepted in the United States of America (“U.S. GAAP”), Legacy IonQ is the accounting acquirer and the merger is accounted for as a “reverse recapitalization” (i.e., a capital transaction involving the issuance of stock by dMY for the stock of Legacy IonQ). A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the Company represent the continuation of the financial statements of Legacy IonQ in many respects. Under this method of accounting, dMY is treated as the “acquired” company for financial reporting purposes.
Upon the closing of the merger and the concurrent private placement of 34,500,000 shares of common stock (the “PIPE”), the most significant change in our financial position and results of operations was an increase in cash (as compared to our balance sheet as of June 30, 2021) of approximately $560 million, which included $345 million in gross proceeds from the PIPE.
As a result of the merger, Legacy IonQ is the successor to an SEC registrant and is listed on the NYSE, which will require IonQ to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Third Quarter Business Highlights
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Industry benchmarking by the Quantum Economic Development Consortium, a third-party industry group, demonstrated the superior power of IonQ hardware compared to key competitors.
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First team globally to show fault-tolerant error correction in practice in a peer-reviewed paper published in
Nature
, alongside researchers from Duke University, the University of Maryland and the Georgia Institute of Technology.
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Debuted the industry’s first Reconfigurable Multicore Quantum Architecture, creating a path to scale quantum computers with potentially hundreds of qubits on one chip.
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A partnership with The University of Maryland to create the National Quantum Lab at Maryland (Q-Lab), the nation’s first user facility that enables hands-on access to a commercial-grade quantum computer.
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Announced partnerships and collaborations with leading organizations such as Accenture, Goldman Sachs, Fidelity Center for Applied Research and GE Research.
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Continued our hiring of world-class talent with key positions filled by Tom Jones as Chief People Officer (Blue Origin, Microsoft, Honeywell), Ariel Braunstein as Senior Vice President of Product Management (Google, Lytro, Cisco), and Dean Kassmann as Vice President of Research and Development (Blue Origin, Amazon).
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Impact of
COVID-19
on Our Business
In March 2020, the
COVID-19
outbreak was declared a pandemic by the World Health Organization. There are many uncertainties regarding the ongoing pandemic, and we are closely monitoring its impact on all aspects of our business, including how it impacts our employees, suppliers, vendors, and business partners. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines,
or
orders, and business shutdowns. These measures may adversely impact our employees and operations and the operations of suppliers and business partners. In addition, various aspects of our business cannot be conducted remotely. These measures by government authorities may continue to remain in place for a significant period of time and could adversely affect our development plans, sales and marketing activities, and business operations.
The evolution of the virus is unpredictable at this point and any resurgence may slow down our ability to develop our quantum computing program. The ongoing
COVID-19
pandemic could limit the ability of suppliers and business partners to perform, including third-party suppliers’ ability to provide components and materials. We may also experience an increase in the cost of raw materials. The full impact of the
COVID-19
pandemic continues to evolve. As such, the full magnitude of the pandemic’s effect on our financial condition, liquidity and future results of operations is uncertain. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry, and workforce.
Key Components of Results of Operations
We have generated limited revenues since our inception. We derive revenue from providing access to QCaaS and professional services related
to co-developing algorithms
on our quantum computing systems. In arrangements with the cloud service providers, the cloud service provider is considered the customer and we do not have any contractual relationships with the cloud service providers’ end users. We have determined that our QCaaS contracts represent a combined, stand-ready performance obligation to provide access to our quantum computing systems and revenue is recognized based on our customers’ usage. For contracts with a fixed transaction price to provide stand-ready QCaaS access, the fixed fee is recognized as QCaaS subscription-based revenues on a straight-line basis over the access period.
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