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What changed in IonQ, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of IonQ, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+394 added−378 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-30)

Top changes in IonQ, Inc.'s 2023 10-K

394 paragraphs added · 378 removed · 313 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

71 edited+8 added−4 removed128 unchanged
Biggest changeWe expect our standard offerings will include additional bundled value-add services in exchange for an annual commitment, such as usage-based access to our cloud platform, reserved system time, consultations with solution scientists, and other application and integration support. 12 Quantum Computing Systems and Hardware We are engaged with certain prospects who are interested in purchasing partial or entire quantum computing systems, either over the cloud or for local access.
Biggest changeSuch access is currently limited to a select group of end-users. We expect our standard offerings will include additional bundled value-add services in exchange for an annual commitment, such as reserved system time, consultations with solution scientists, and other application and integration support.
Quantum computing uses information in a fundamentally different way than classical computing. Quantum computers are 1 based on quantum bits (qubits), a fundamental unit that can exist in both states 0 and 1 simultaneously (superposition). As a result, we believe that quantum computers can address a set of problems classical computing may never solve.
Quantum computing uses information in a fundamentally different way than classical computing. Quantum computers are based on quantum bits (qubits), a fundamental unit that can exist in both states 0 and 1 simultaneously (superposition). As a result, we believe that quantum computers can address a set of problems classical computing may never solve.
The advantages to this approach are that photons are cheap to generate, they can remain coherent depending on the property of the photons used as the qubit, and they integrate well with recently-developed silicon photonics technology; however, the disadvantages of photonic qubit approaches include the lack of high-quality storage devices for the qubits (photons move at the speed of light) and weak gate interactions (photons do not interact with one another easily).
The advantages to this approach are that photons are cheap to generate, they can remain coherent depending on the property of the photons used as the qubit, and they integrate well with recently-developed silicon photonics technology; however, the disadvantages of photonic qubit approaches include the lack of high-quality storage 13 devices for the qubits (photons move at the speed of light) and weak gate interactions (photons do not interact with one another easily).
The two atomic states have enough frequency separation that the qubit is easy to measure through fluorescence detection when an appropriate laser beam is applied. To build quantum computers, many atomic ions are held in a single trap, and the repulsion from their charges naturally forces them into a stable linear crystal (or chain) of qubits.
The two atomic states have enough frequency separation that the qubit is easy to measure through fluorescence detection when an appropriate laser beam is applied. 8 To build quantum computers, many atomic ions are held in a single trap, and the repulsion from their charges naturally forces them into a stable linear crystal (or chain) of qubits.
Our business model is premised on the belief that businesses with access to quantum computers will likely have a competitive advantage in the future. We envision providing quantum computing services, complemented by access to quantum experts and algorithm development capabilities, to solve some of the most challenging issues facing corporations, governments and other large-scale entities today.
Our business model is premised on the belief that businesses with access to quantum computers will likely have a competitive advantage in the future. 10 We envision providing quantum computing services, complemented by access to quantum experts and algorithm development capabilities, to solve some of the most challenging issues facing corporations, governments and other large-scale entities today.
This typically allows quantum logic gates between all possible pairs of qubits in the processor core without extraneous operations, which will enable us to operate some quantum gates that are not possible on other quantum architectures. We have also demonstrated the ability to 14 shuttle multiple processor cores on the same chip, increasing the potential qubit capacity of a system.
This typically allows quantum logic gates between all possible pairs of qubits in the processor core without extraneous operations, which will enable us to operate some quantum gates that are not possible on other quantum architectures. We have also demonstrated the ability to shuttle multiple processor cores on the same chip, increasing the potential qubit capacity of a system.
Various aspects of a photon, such as presence/absence, polarization, frequency (color) or its temporal location can be used to represent a qubit. Solid state : In solid-state-based quantum computers, the qubits are engineered into the system. • Spins in semiconductors : This approach uses the spins of individual electrons or atomic nuclei in a semiconductor matrix.
Various aspects of a photon, such as presence/absence, polarization, frequency (color) or its temporal location can be used to represent a qubit. 6 Solid state : In solid-state-based quantum computers, the qubits are engineered into the system. • Spins in semiconductors : This approach uses the spins of individual electrons or atomic nuclei in a semiconductor matrix.
This contrasts with other approaches, for which we estimate the overhead to be in the range of 1,000:1 to 100,000:1. We believe our architectural decisions will make our systems uniquely capable of achieving scale. We have published a roadmap for scaling to larger quantum computing systems, with concrete technological innovations designed to significantly improve the performance of the systems.
This contrasts with other approaches, for which we estimate the overhead to be in the range of 1,000:1 to 100,000:1. 9 We believe our architectural decisions will make our systems uniquely capable of achieving scale. We have published a roadmap for scaling to larger quantum computing systems, with concrete technological innovations designed to significantly improve the performance of the systems.
If future generations of more powerful quantum computers are successfully developed, we believe that we could improve the speed and accuracy of virtual high-throughput screening and improve the molecular docking predictions used in structure-based drug discovery, dramatically reducing the development cost of new drugs and reducing the time to market.
If future generations of more powerful quantum computers are successfully developed, we believe that we could improve the speed and accuracy of virtual high-throughput screening 4 and improve the molecular docking predictions used in structure-based drug discovery, dramatically reducing the development cost of new drugs and reducing the time to market.
Quantum Algorithms for Optimization Optimization problems have enormous economic significance in many industries, and they often cannot be solved with classical computers due to their daunting complexity. Quantum algorithms are naturally suited for 3 problems in which an exponential number of possibilities must be considered before an optimized output can be identified.
Quantum Algorithms for Optimization Optimization problems have enormous economic significance in many industries, and they often cannot be solved with classical computers due to their daunting complexity. Quantum algorithms are naturally suited for problems in which an exponential number of possibilities must be considered before an optimized output can be identified.
Our modular architecture benefits from this flexible connectivity, significantly reducing the complexity of implementing a given quantum circuit. • Ion traps require no novel manufacturing capabilities : Ion trap chips consist of electrodes and their electrical connections, which are built using existing technologies. The trap chips themselves are not quantum materials.
Our modular architecture benefits from this flexible connectivity, significantly reducing the complexity of implementing a given quantum circuit. 7 • Ion traps require no novel manufacturing capabilities : Ion trap chips consist of electrodes and their electrical connections, which are built using existing technologies. The trap chips themselves are not quantum materials.
A 2019 publicly available report by a leading third-party consulting firm describes these phases—and the associated technical barriers—as paraphrased below: • Noisy and intermediate-scale quantum (NISQ) computers : The earliest stage of development will see component demonstrations and intermediate-scale system development with limited commercial application.
A 2019 5 publicly available report by a leading third-party consulting firm describes these phases—and the associated technical barriers—as paraphrased below: • Noisy and intermediate-scale quantum (NISQ) computers : The earliest stage of development will see component demonstrations and intermediate-scale system development with limited commercial application.
Moreover, we believe that as systems with other qubit technologies scale up, their restricted 7 connectivity and high error-correction overhead will significantly slow down their overall computation time, which we believe will make the trapped ion approach more competitive in terms of operational speed.
Moreover, we believe that as systems with other qubit technologies scale up, their restricted connectivity and high error-correction overhead will significantly slow down their overall computation time, which we believe will make the trapped ion approach more competitive in terms of operational speed.
The nuclear spin of the dopant atoms, or the nearby atoms to defects, are often used to store qubits. 5 • Superconducting circuits : This approach uses circuits fabricated using superconducting material that features quantum phenomena at cryogenic temperatures. Two states of the circuit, either charge states or states of circulating current, are used as the qubit.
The nuclear spin of the dopant atoms, or the nearby atoms to defects, are often used to store qubits. • Superconducting circuits : This approach uses circuits fabricated using superconducting material that features quantum phenomena at cryogenic temperatures. Two states of the circuit, either charge states or states of circulating current, are used as the qubit.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov . The information found on our website is not incorporated by reference into this Annual Report or any other report we file with or furnish to the SEC.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov . The information found on our website is not incorporated by reference into this Annual Report or any other report we file with or furnish to the SEC. 15
We believe that we will find solutions to these challenges and that our proprietary technology and architecture and the technology exclusively available to us through exclusive license agreements will offer advantages both in terms of research and development as well as the ultimate product we wish to offer customers.
We believe that we will find solutions to these challenges and that our proprietary technology and 3 architecture and the technology exclusively available to us through exclusive license agreements will offer advantages both in terms of research and development as well as the ultimate product we wish to offer customers.
Customers and Prospects QCaaS We sell access to our quantum computing solutions via AWS’s Amazon Braket, Microsoft’s Azure Quantum, and Google’s Cloud Marketplace, and directly to select customers via our own cloud service. Making systems available through the cloud in both cases enables wide distribution.
QCaaS We sell access to our quantum computing solutions via AWS’s Amazon Braket, Microsoft’s Azure Quantum, and Google’s Cloud Marketplace, and directly to select customers via our own cloud service. Making systems available through the cloud in both cases enables wide distribution.
At 4 this stage, classical computers are expected to no longer compete with quantum computers in many fields. The technical barrier will be the adoption of a modular quantum computer architecture that allows the scalable manufacturing of large quantum computer systems.
At this stage, classical computers are expected to no longer compete with quantum computers in many fields. The technical barrier will be the adoption of a modular quantum computer architecture that allows the scalable manufacturing of large quantum computer systems.
However, meeting future milestones included in our 9 roadmap is not guaranteed and is dependent on various technological advancements, which could take longer than expected to realize or turn out to be impossible to achieve.
However, meeting future milestones included in our roadmap is not guaranteed and is dependent on various technological advancements, which could take longer than expected to realize or turn out to be impossible to achieve.
We have added patents and other intellectual property to the License Agreement through the Duke Option Agreement. Pursuant to the terms of the Duke Option Agreement, we issued Duke University shares of common stock, including shares of common stock issued pursuant to the amendment of the Duke Option Agreement. The Duke Option Agreement terminates in July 2026.
We have added patents and other intellectual property to the License Agreement through the Duke Option Agreement. Pursuant to the terms of the Duke Option Agreement, we issued Duke shares of common stock, including shares of common stock issued pursuant to the amendment of the Duke Option Agreement. The Duke Option Agreement terminates in July 2026.
Our systems have benefitted from years of architectural focus on scalability that addresses both #AQ and per-AQ cost and, as such, we believe that if we are able to successfully solve remaining scalability challenges, these systems may become increasingly powerful and accessible in tandem. At the heart of our approach is the modular architecture that may enable such growth.
Our systems have benefited from years of architectural focus on scalability that addresses both #AQ and per-AQ cost and, as such, we believe that if we are able to successfully solve remaining scalability challenges, these systems may become increasingly powerful and accessible in tandem. At the heart of our approach is the modular architecture that may enable such growth.
The University of Maryland and Duke University may terminate the License Agreement if we enter into an insolvency-related event or in the event of our material breach of the agreement or other specified obligations therein, in each case, that remains uncured for 90 days after the date that it is provided with written notice of such breach by either university.
UMD and Duke may terminate the License Agreement if we enter into an insolvency-related event or in the event of our material breach of the agreement or other specified obligations therein, in each case, that remains uncured for 90 days after the date that it is provided with written notice of such breach by either university.
Option Agreement with Duke University In July 2016, we entered into an option agreement with Duke University, which was subsequently amended in December 2020 and March 2021 (as amended, the “Duke Option Agreement”), under which it obtained the 13 right to add Duke University’s interests in certain patents or other intellectual property to the License Agreement, including if they were developed by Jungsang Kim, Christopher Monroe or Kenneth Brown, a professor at Duke University, or by individuals under their respective supervision and such patents or intellectual property relates to the field of quantum information processing devices.
Option Agreement with Duke University In July 2016, we entered into an option agreement with Duke, which was subsequently amended in December 2020 and March 2021 (as amended, the “Duke Option Agreement”), under which it obtained the right to add Duke's interests in certain patents or other intellectual property to the License Agreement, including if they were developed by Jungsang Kim, Christopher Monroe or Kenneth Brown, a professor at Duke, or by individuals under their respective supervision and such patents or intellectual property relates to the field of quantum information processing devices.
(formerly known as IonQ, Inc., and referred to as “Legacy IonQ” herein), was incorporated in the state of Delaware in September 2015. 15 On March 7, 2021, Legacy IonQ entered into an Agreement and Plan of Merger (the “Merger Agreement”), with dMY and Ion Trap Acquisition Inc., a direct, wholly owned subsidiary of dMY (the “Merger Sub”).
(formerly known as IonQ, Inc., and referred to as “Legacy IonQ” herein), was incorporated in the state of Delaware in September 2015. 14 On March 7, 2021, Legacy IonQ entered into an Agreement and Plan of Merger (the “Merger Agreement”), with dMY and Ion Trap Acquisition Inc., a direct, wholly owned subsidiary of dMY (the “Merger Sub”).
Our trade secrets primarily cover the design, configuration, operation and testing of its trapped-ion quantum computers.
Our trade secrets primarily cover the design, configuration, operation and testing of our trapped-ion quantum computers.
We supplement our QCaaS offering with professional services focused on assisting our customers in applying quantum computing to their businesses. We also expect to sell full quantum computing systems to customers, either over the cloud or for local access. We are still in the early stages of commercial growth. Since our inception, we have incurred significant operating losses.
We supplement our offerings with professional services focused on assisting our customers in applying quantum computing to their businesses. We also expect to sell full quantum computing systems to customers, either over the cloud or for local access. We are still in the early stages of commercial growth. Since our inception, we have incurred significant operating losses.
We also entered into an exclusive option agreement (“Option Agreement”) with each of the Universities in 2016 whereby we have the right to exclusively license additional intellectual property developed by the Universities by exercising an annual option and issuing a certain number of common shares to each of Duke University and University of Maryland.
We also entered into an exclusive option agreement (“Option Agreement”) with each of the Universities in 2016 whereby we have the right to exclusively license additional intellectual property developed by the Universities by exercising an annual option and issuing a certain number of common shares to each of Duke and UMD.
Today, we sell access to several quantum computers of various qubit capacities and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities.
We also sell access to several quantum computers of various qubit capacities and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities.
We have accumulated a broad patent portfolio, both owned and exclusively licensed, across the range of technological fronts that make up our systems and will continue to protect our innovative inventions in the United States and other countries. Our patent portfolio is deepest in the area of devices, methods and algorithms for controlling and manipulating trapped ions for quantum computing.
We have accumulated a broad patent portfolio, both owned and exclusively licensed, across a range of technological fronts that relate to our systems and will continue to protect our inventions in the United States and other countries. Our patent portfolio is deepest in the area of devices, methods and algorithms for controlling and manipulating trapped ions for quantum computing.
Our current and future cloud partnerships with AWS’s Amazon Braket, Microsoft’s Azure Quantum, Google’s Cloud Marketplace and other cloud providers are or will be designed to make access to quantum computing hardware available to a broader community of quantum programmers. • Dedicated hardware .
Our current and future cloud partnerships with AWS’s Amazon Braket, Microsoft’s Azure Quantum, Google’s Cloud Marketplace and other cloud providers are designed and will continue to be designed to make access to quantum computing hardware available to a broader community of quantum programmers.
We are also responsible for the prosecution and maintenance of the licensed patents, at our expense and using commercially reasonable efforts. We have the sole right to enforce the licensed patents, at our expense. We may terminate the License Agreement at any time for any reason with at least 90 days’ written notice to the University of Maryland.
We are also responsible for the prosecution and maintenance of the licensed patents, at our expense and using commercially reasonable efforts. We have the sole right to enforce the licensed patents, at our expense. 12 We may terminate the License Agreement at any time for any reason with at least 90 days’ written notice to UMD.
Agreements with the University of Maryland and Duke University Exclusive License Agreement In July 2016, we entered into a license agreement with the University of Maryland and Duke University, which was subsequently amended in September 2017, October 2017, October 2018, February 2021, April 2021 and September 2021 (as amended, the “License Agreement”), under which we obtained a worldwide, royalty-free, sublicensable license under certain patents, know-how and other intellectual property to develop, manufacture and commercialize products for use in certain licensed fields, the scope of which would include the application of the licensed intellectual property in ion trap quantum computing.
Agreements with the University of Maryland and Duke University Exclusive License Agreement In July 2016, we entered into a license agreement with the University of Maryland ("UMD") and Duke University (“Duke”), which was subsequently amended in September 2017, October 2017, October 2018, February 2021, April 2021, September 2021, and January 2023 (as amended, the “License Agreement”), under which we obtained a worldwide, royalty-free, sublicensable license under certain patents, know-how and other intellectual property to develop, manufacture and commercialize products for use in certain licensed fields, the scope of which includes the application of the licensed intellectual property in ion trap quantum computing.
We intend to manufacture, own and operate quantum computers, with compute units being offered to potential customers on a QCaaS basis. We expect our target markets to experience two stages of quantum algorithm deployment: the development stage and the application stage.
We intend to manufacture, own and operate quantum computers, with compute units being offered to potential customers through system hardware sales and on a QCaaS basis. We expect our target markets to experience two stages of quantum algorithm deployment: the development stage and the application stage.
Our issued patents expire between 2029 and 2041. Human Capital Management Our employees are critical to our success. As of December 31, 2022, we had a 202 person-strong team of quantum hardware and software developers, engineers, and general and administrative staff.
Our issued patents expire between 2029 and 2041. Human Capital Management Our employees are critical to our success. As of December 31, 2023, we had a 324 person-strong team of quantum hardware and software developers, engineers, and general and administrative staff.
For example, last year, we announced that through our partnership with the U.S. Department of Energy’s Pacific Northwest National Laboratory (“PNNL”), we were able to shrink the barium source material down to a microscopic scale.
For example, in 2022, we announced that through our partnership with the U.S. Department of Energy’s Pacific Northwest National Laboratory (“PNNL”), we were able to shrink the barium source material down to a microscopic scale.
Approximately 49% of our full-time employees are based in the greater Washington, D.C. metropolitan area and approximately 12% of our full-time employees are based in the greater Seattle, WA metropolitan area. We also engage a small number of consultants and contractors to supplement our permanent workforce.
Approximately 38% of our full-time employees are based in the greater Washington, D.C. metropolitan area and approximately 26% of our full-time employees are based in the greater Seattle, WA metropolitan area. We also engage a small number of consultants and contractors to supplement our permanent workforce.
Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and further commercialization of our quantum computing systems. Our net losses were $48.5 million and $106.2 million for the years ended December 31, 2022 and 2021, respectively, and we expect to continue to incur significant losses for the foreseeable future.
Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and further commercialization of our quantum computing systems. Our net losses were $157.8 million and $48.5 million for the years ended December 31, 2023 and 2022, respectively, and we expect to continue to incur significant losses for the foreseeable future.
As of December 31, 2022, we had an accumulated deficit of $194.3 million. We expect to continue to incur losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve an increasingly higher number of stable qubits and higher levels of fidelity than presently exists—prerequisites for quantum computing to reach broad quantum advantage.
As of December 31, 2023, we had an accumulated deficit of $352.1 million. We expect to continue to incur losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve an increasingly higher number of stable qubits and higher levels of fidelity than presently exists—prerequisites for quantum computing to reach broad quantum advantage.
We anticipate manufacturing and selling complete quantum systems for dedicated use by a single customer, to be hosted on premises by the customer or remotely by us.
We also anticipate manufacturing and selling complete quantum systems for dedicated use by a single customer, to be hosted on premises by the customer or remotely by us. • Cloud access to quantum computing .
This technology, known as a photonic interconnect, uses light particles to communicate between qubits while keeping information stored stably on either end of the interconnect. The basic protocol for this photonic interconnect between ion traps in two different vacuum chambers was first realized by our co-founder Christopher Monroe’s research team in 2007.
This technology, known as a photonic interconnect, uses light particles to communicate between qubits while keeping information stored stably on either end of the interconnect. The basic protocol for this photonic interconnect between ion traps in two different vacuum chambers was first realized in 2007.
Determining how many physical qubits are needed to form a more reliable logical qubit (the resource “overhead”) depends on both the error rate of the physical qubits and the specific error-correcting codes used. In 2020, our co-founder Dr. Monroe’s research team at the University of Maryland demonstrated the first error-corrected qubit using 13 trapped ion qubits.
Determining how many physical qubits are needed to form a more reliable logical qubit (the resource “overhead”) depends on both the error rate of the physical qubits and the specific error-correcting codes used. In 2020, a team of researchers at the University of Maryland, including some current IonQ employees, demonstrated the first fault-tolerant error-corrected qubit using 13 trapped ion qubits.
We believe that our proprietary technology, our architecture and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings.
We believe that our proprietary technology, our architecture and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings. Today, we sell specialized quantum computing hardware together with related maintenance and support.
We expect our preferred offerings to give the customer’s application engineers direct access to our cutting-edge quantum systems, as well as technical support to pursue their solution development. 11 • Cloud access to quantum computing .
We expect our preferred offerings to give the customer’s application engineers direct access to our cutting-edge quantum systems, as well as technical support to pursue their solution development. • Dedicated hardware . We sell certain specialized quantum computing hardware to select customers.
Lease with the University of Maryland In March 2020, we entered into an amended and restated office lease with the University of Maryland for the lease of our corporate headquarters and our research and development and manufacturing facility. This lease expires on December 31, 2030.
Lease with the University of Maryland In March 2020, we entered into an amended and restated office lease with UMD for the lease of our corporate headquarters and our research and development and manufacturing facility. This lease expires on December 31, 2030. We may terminate this lease with not less than 120 days written notice beginning in year six.
We pursue patent protection only when it is consistent with our overall strategy for safeguarding intellectual property. In addition, we seek to protect our intellectual property rights through non-disclosure and invention assignment agreements with our employees and consultants and through non-disclosure agreements with business partners and other third parties.
In addition, we seek to protect our intellectual property rights through non-disclosure and invention assignment agreements with our employees and consultants and through non-disclosure agreements with business partners and other third parties.
In consideration for the rights granted to us under the License Agreement, we issued the University of Maryland and Duke University shares of our common stock. Pursuant to the University of Maryland policy, Christopher Monroe, our Chief Scientist, may receive renumeration from the University of Maryland relating to any stock we have issued to the University of Maryland.
In consideration for the rights granted to us under the License Agreement, we issued UMD and Duke shares of our common stock. Pursuant to Duke’s policy, Jungsang Kim, our Chief Technology Officer and Director, may receive remuneration from Duke relating to any stock we have issued to Duke.
To date, we have developed and assembled eight generations of quantum computer prototypes and systems, have constructed quantum operating systems and software tools, and have worked with leading cloud vendors, quantum programming languages and quantum software development kits (“SDKs”). • Offering QCaaS . We intend to provide QCaaS, complemented by access to quantum experts and algorithm development capabilities.
To date, we have developed and assembled nine generations of quantum computer prototypes and systems, have constructed quantum operating systems and software tools, and have worked with leading cloud vendors, quantum programming languages and quantum software development kits (“SDKs”). • Selling Direct Access to Quantum Computers .
When appropriate, we may develop full-stack quantum solutions that can be provided directly to customers, regardless of their in-house quantum expertise. • Accelerated high-impact applications development . We intend to provide opportunities for accelerated applications development to customers seeking compressed development timelines to solve some of their biggest problems and drive efficiencies.
When appropriate, we may develop full-stack quantum solutions that can be provided directly to customers, regardless of their in-house quantum expertise. • Accelerated high-impact applications development .
We intend to continue to drive innovation in quantum computing and seek intellectual property protection where appropriate to enhance our proprietary technology position. • Further Developing Our Quantum Computing Partner Ecosystem .
We intend to continue to drive innovation in quantum computing and seek intellectual property protection where appropriate to enhance our proprietary technology position. • Further Developing Our Quantum Computing Partner Ecosystem . We believe our relationships with leading technology enterprises and university research institutes will accelerate innovation, distribution and monetization of our quantum capabilities.
According to a 2020 report from P&S Intelligence, the total addressable market of quantum computing is expected to be approximately $65 billion by 2030. Below are a few of the use cases in which we believe quantum computers, if they are successfully developed, will become an important tool for businesses to remain competitive in the market over the coming years.
Below are a few of the use cases in which we believe quantum computers, if they are successfully developed, will become an important tool for businesses to remain competitive in the market over the coming years.
We believe our relationships with leading technology enterprises and university research institutes will accelerate innovation, distribution and monetization of our quantum capabilities. 2 Market Opportunity: A Future Driven by Quantum Computing The potential uses for quantum applications are widespread and address a number of problems that would be impossible to solve using classical computing technology.
Market Opportunity: A Future Driven by Quantum Computing The potential uses for quantum applications are widespread and address a number of problems that would be impossible to solve using classical computing technology.
If successful, we expect that we may be able to achieve compact, lightweight and reliable quantum computers, which can be deployed at the edge, similarly to how personal computers have enabled new applications for both government and commercial use. 10 Our Business Model Quantum Computing and the Software-as-a-Service Model As quantum hardware matures, we expect the quantum computing industry to increasingly focus on practical applications for real-world problems, known as quantum algorithms.
If successful, we expect that we may be able to achieve compact, lightweight and reliable quantum computers, which can be deployed at the edge, similarly to how personal computers have enabled new applications for both government and commercial use.
As of March 1, 2023, we own or license, on an exclusive basis, 57 issued U.S. patents and 136 pending or allowed U.S. patent applications, 7 issued foreign patents and 99 pending or allowed foreign patent applications, 8 registered U.S. trademarks and 11 pending U.S. trademark applications, and 17 registered international trademarks and 7 pending international trademark applications.
As of February 1, 2024, we own or license, on an exclusive basis, 82 issued U.S. patents and 185 pending or allowed U.S. patent applications, 21 issued foreign patents and 137 pending or allowed foreign patent applications, 8 registered U.S. trademarks and 14 pending U.S. trademark applications, and 22 registered international trademarks and 2 pending international trademark applications.
It is widely believed that quantum computers will be able to arrive at a better approximate optimization solution than classical computers can, and with reduced computational cost and time.
It is widely believed that quantum computers will be able to arrive at a better approximate optimization solution than classical computers can, and with reduced computational cost and time. One method of quantum optimization is a hybrid method called the Quantum Approximate Optimization Algorithm, in which layers of quantum computations are executed within circuit parameters optimized using classical high-performance computers.
Intellectual Property We protect our intellectual property rights via a combination of patent, trademark and trade secret laws in the United States and other jurisdictions, as well as with contractual protections, to establish, maintain and enforce rights in its proprietary technologies. Unpatented research, development, know-how and engineering skills make an important contribution to our business.
Intellectual Property We rely on a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies.
We also sell certain specialized quantum computing hardware to select customers. Government Agencies Our customers, potential customers and partners include government agencies such as the United States Air Force Research Lab. Government agencies and large organizations often undertake a significant evaluation process.
Government Agencies Our customers, potential customers and partners include government agencies such as the United States Air Force Research Lab. Government agencies and large organizations often undertake a significant evaluation process. Our contracts with government agencies are typically structured in phases, with each phase subject to satisfaction of certain conditions.
Our quantum architecture is modular, meaning that if development of this architecture is successful, the number of qubits in a QPU, or the number of QPUs in a system, could be scaled.
We believe this can open up the possibility of scaling quantum computers indefinitely, similar to how high-performance computers and data centers have been scaled. Our quantum architecture is modular, meaning that if development of this architecture is successful, the number of qubits in a QPU, or the number of QPUs in a system, could be scaled.
This allows us to minimize the system size as technology progresses, while scaling the compute power and simultaneously reducing costs. • All-to-all connectivity : In superconducting and other solid-state architectures, individual qubits are connected via physical wires, hence a particular qubit can only communicate with a further-removed qubit by going through the qubits that lie in-between.
Although modest cryogenics ( • All-to-all connectivity : In superconducting and other solid-state architectures, individual qubits are connected via physical wires, hence a particular qubit can only communicate with a further-removed qubit by going through the qubits that lie in-between. In the trapped ion approach, however, qubits are connected by electrostatic repulsion rather than through physical wires.
In the trapped ion approach, however, qubits are connected by electrostatic repulsion rather than through physical wires. As a result, qubits in our existing systems can directly interact with any other qubit in the system.
As a result, qubits in our existing systems can directly interact with any other qubit in the system.
We believe that by offering direct access to quantum computing, we can assist select customers in deepening their application of quantum solutions. • Continuing to Enhance Our Proprietary Position . We have exclusively licensed our core technology from the University of Maryland and Duke University (together, the “Universities”), and our complex technology is protected by an extensive patent portfolio.
We have exclusively licensed our core technology from the University of Maryland and Duke University (together, the “Universities”), and our complex technology is protected by an extensive patent portfolio.
For example, D-Wave computing produces quantum annealers, a separate form of computing technology that hopes to tackle a class of problems with some overlap to those solved by quantum computing. To our knowledge, none of these alternative approaches has produced a commercial-grade quantum computer.
For example, D-Wave computing produces quantum annealers, a separate form of computing technology that hopes to tackle a class of problems with some overlap to those solved by quantum computing. Another example is QuEra, which hopes to use neutral rubidium atom arrays to build quantum computers.
Additional markets taking advantage of quantum material science research and optimization speed-ups may come online next if broad-scale quantum advantage becomes accessible. If our quantum computers achieve full-scale fault tolerance, a diverse array of industries, ranging from quantum chemistry to deeper optimization, may be able to be transitioned to the application phase.
If our quantum computers achieve full-scale fault tolerance, a diverse array of industries, ranging from quantum chemistry to deeper optimization, may be able to be transitioned to the application phase. Customers and Prospects Quantum Computing Systems and Hardware We sell certain specialized quantum computing hardware to select customers.
IonQ has announced co-development agreements with Hyundai Motor Company to pursue solutions for battery chemistry and with GE Research to apply quantum computing to risk management. • Preferred compute agreements with clients .
IonQ has announced co-development agreements with Hyundai Motor Company to pursue solutions for battery chemistry and with ZapataAI and the US Defense Advanced Research Projects Agency (DARPA), to help establish the next generation of benchmarking for quantum computers. • Preferred compute agreements with clients .
This is because the qubits themselves are not in thermal contact with the environment, as they are electromagnetically confined in free space inside a vacuum chamber. Although modest cryogenics ( 6 the qubits themselves is extremely efficient because the atomic ions have very little mass and this requires just a single low-power laser beam (microwatts).
This is because the qubits themselves are not in thermal contact with the environment, as they are electromagnetically confined in free space inside a vacuum chamber.
Direct Access Customers By directly integrating with us, customers can reserve dedicated execution windows, receive concierge-level application development support, gain early access to next-generation hardware, or host their own quantum computer. Such access is currently limited to a select group of end-users.
We are also engaged with certain prospects who are interested in purchasing partial or entire quantum computing systems, either over the cloud or for local access. Direct Access Customers By directly integrating with us, customers can reserve dedicated execution windows, receive concierge-level application development support, gain early access to next-generation hardware, or host their own quantum computer.
We expect the technical complexity of the solutions required for quantum algorithms to address each application area will impact the timing of that market’s inflection point and transition from the development phase to the application phase. During the NISQ computing era, we expect quantum machine learning to be the first solution to transition into broadly available applications.
We intend to provide opportunities for accelerated applications development to customers seeking compressed development timelines to solve some of their biggest problems and drive efficiencies. 11 We expect the technical complexity of the solutions required for quantum algorithms to address how each application area will impact the timing of that market’s inflection point and transition from the development phase to the application phase.
We believe this protocol can be combined with all-optical switching technology to enable multi-QPU quantum computers at large scale. We have deep expertise 8 in photonics; while at Bell Labs, co-founder Jungsang Kim led a team to build the world’s largest optical switch.
We believe this protocol can be combined with all-optical switching technology to enable multi-QPU quantum computers at large scale. We at IonQ have assembled a team with deep expertise in photonics and are designing Photonic Interconnects that will enable our systems to compute with entangled qubits spanning multiple QPUs.
We may terminate this lease with not less than 120 days written notice beginning in year six. Any early termination will result in a termination fee ranging from $2.5 million in year six to $500,000 in year ten, with each year subject to a reduction of $0.5 million.
Any early termination will result in a termination fee ranging from $2.5 million in year six to $0.5 million in year ten, with each year subject to a reduction of $0.5 million. Annual base rent starts at $0.7 million and increases approximately 3.0% each subsequent year.
We believe that by offering QCaaS, we can accelerate the adoption of our quantum computing solutions, while efficiently promoting quantum computing across our partner ecosystems. • Selling Direct Access to Quantum Computers . We intend to sell direct access to the quantum computers we manufacture, with units offered on a whole system or usage basis.
We sell specialized quantum computing hardware to select customers, complemented by access to quantum experts and algorithm development capabilities. We intend to sell direct access to the quantum computers we manufacture, with units offered on a whole system or usage basis.
We plan to manufacture, own and operate quantum computers, with compute units offered on a usage basis. Our quantum computing solution is currently delivered via AWS’s Amazon Braket, Microsoft’s Azure Quantum and Google’s Cloud Marketplace.
Our quantum computing solution is currently delivered via AWS’s Amazon Braket, Microsoft’s Azure Quantum and Google’s Cloud Marketplace. We believe that by offering QCaaS, we can accelerate the adoption of our quantum computing solutions, while efficiently promoting quantum computing across our partner ecosystems. • Continuing to Enhance Our Proprietary Position .
Annual base rent starts at $684,472 and increases approximately 3.0% each subsequent year. Competition There are many other approaches to quantum computing that use qubit technology besides the trapped ion approach we are taking. In some cases, conflicting marketing messages from these competitors can lead to confusion among our potential customer base.
In some cases, conflicting marketing messages from these competitors can lead to confusion among our potential customer base.
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One method of quantum optimization is a hybrid method called the Quantum Approximate Optimization Algorithm, in which layers of quantum computations are executed within circuit parameters optimized using classical high- performance computers.
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We believe that by offering direct access to quantum computing, supplemented by our professional services, we can assist select customers in deepening their application of quantum solutions. • Offering QCaaS . We provide QCaaS, complemented by access to quantum experts and algorithm development capabilities. We manufacture, own and operate quantum computers.
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Photonic interconnects are designed to allow our systems to compute with entangled qubits spanning multiple QPUs, which we believe can open up the possibility of scaling quantum computers indefinitely, similar to how high-performance computers and data centers have been scaled.
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Our Business Model Quantum Computing and the Compute Access Model As quantum hardware matures, we expect the quantum computing industry to increasingly focus on practical applications for real-world problems, known as quantum algorithms.
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Our contracts with government agencies are typically structured in phases, with each phase subject to satisfaction of certain conditions.
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During the NISQ computing era, we expect quantum machine learning to be the first solution to transition into broadly available applications. Additional markets taking advantage of quantum material science research and optimization speed-ups may come online next if broad-scale quantum advantage becomes accessible.
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Pursuant to Duke University’s policy, Christopher Monroe and Jungsang Kim, our Chief Technology Officer and Director, may receive renumeration from Duke University relating to any stock we have issued to Duke University.
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Contracts with the University of Maryland In September 2021, we entered into a contract with UMD to provide certain quantum computing services and facility access (the “UMD Quantum Agreement”) related to the National Quantum Lab at UMD in exchange for payments totaling $14.0 million over three years.
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Over the term of the contract, we estimate that we will make payments to UMD of approximately $1.4 million, including a contribution of $1.0 million to establish the IonQ Endowed Professorship in the College of Computer, Mathematical and Natural Sciences at UMD.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results. • 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. • 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. • Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs that 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 have and may continue to face 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 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 is critical to our success. • 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. • Our systems depend on the use of a particular isotope of an atomic element that provides qubits for our ion trap technology.
Biggest changeIf these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results. • 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. • 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 have experienced in the past, and could also suffer disruptions, outages, defects and other performance and quality problems with our quantum computing systems, our private cloud, our research and development activities, our testbeds, our facilities, or with the public cloud, internet, and other infrastructure on which they rely. • Even if we are successful in developing quantum computing systems and executing our strategy, competitors in the industry may achieve technological breakthroughs that render our quantum computing systems obsolete or inferior to other products. • We may be negatively impacted by any early obsolescence of our quantum computing technology. • We may be unable to reduce the cost per qubit sufficiently, 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. 16 • If our computers fail to achieve a broad quantum advantage, our business, financial condition and future prospects may be harmed. • We have and may continue to face 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 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 key employees who have specialized knowledge, and our ability to attract and retain senior management and other key employees is critical to our success. • 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. • Much of our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations, acquisitions, or other means, our revenue may decrease substantially. • Our systems depend on the use of a particular isotope of an atomic element that provides qubits for our ion trap technology.
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain entering into contracts with us and/or purchasing our computers in the future, reduce the size or timing of payment with respect to our services to or purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from entering into contracts with us and/or purchasing our computers in the future, reduce the size or timing of payment with respect to our services to or purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition, and growth prospects.
IonQ, Inc., Case No. 8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder against the Company and certain of the Company’s current officers (the “IonQ Defendants”).
IonQ, Inc., Case No. 8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder against the Company and certain of the Company’s current officers (“IonQ Defendants”).
These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest, or other transaction that stockholders may consider favorable, include the following: • 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 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.
These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest, or other transaction that stockholders may consider favorable, include the following: • 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 an 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 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.
These risks include, among others, the following: • 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. • We may not manage our growth effectively. • Our management has limited experience in operating a public company. • Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate. 16 • 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 operating and financial results forecast relies in large part upon assumptions and analyses we developed.
These risks include, among others, the following: • 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. • We may not manage our growth effectively. • Our management has limited experience in operating a public company. • 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 operating and financial results forecast relies in large part upon assumptions and analyses we developed.
Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, regardless of the merit of the claim or our defenses, may require us to do one or more of the following: • 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; 47 • 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.
Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, regardless of the merit of the claim or our defenses, may require us to do one or more of the following: • 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.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar events); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
The issuance of additional shares or other equity securities of equal or senior rank would have the following effects: • 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.
The issuance of additional shares or other equity securities of equal or senior rank would have the following effects: • 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; 46 • the relative voting strength of each previously outstanding share of common stock may be diminished; and • the market price of our common stock may decline.
New legislation and regulations may require us to make material changes to our operations, resulting in significant increases to the cost of production. 40 Our manufacturing process will have hazards such as but not limited to hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents.
New legislation and regulations may require us to make material changes to our operations, resulting in significant increases to the cost of production. Our manufacturing process will have hazards such as, but not limited to, hazardous materials, machines with moving parts, and high voltage and/or high current electrical systems typical of large manufacturing equipment and related safety incidents.
As we build our brand and become more well known, there is increased risk that competitors or other companies may seek to hire our personnel. The loss of the services provided by these individuals will adversely impact the achievement of our business strategy. These individuals could leave our employment at any time, as they are “at will” employees.
As we build our brand and become more well known, there is increased risk that competitors or other companies may seek to hire our personnel. The loss of the services provided by these individuals could adversely impact the achievement of our business strategy. These individuals could leave our employment at any time, as they are “at will” employees.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our Sensitive Data (including proprietary information and intellectual property) or our information technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our Sensitive Data (including proprietary information and intellectual property) or our information technology systems, or those of the 30 third parties upon whom we rely.
Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations. 42 In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.
Some European regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly violating the EU GDPR’s cross-border data transfer limitations. In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future.
Without timely innovation and development, our quantum computing solutions could be rendered obsolete or less competitive by changing customer preferences or because of the introduction of a competitor’s newer technologies. We believe that many 25 competing technologies will require a technological breakthrough in one or more problems related to science, fundamental physics or manufacturing.
Without timely innovation and development, our quantum computing solutions could be rendered obsolete or less competitive by changing customer preferences or because of the introduction of a competitor’s newer technologies. We believe that many competing technologies will require a technological breakthrough in one or more problems related to science, fundamental physics or manufacturing.
The funding of our programs is subject to the 31 overall U.S. government budget and appropriation decisions and processes, which are driven by numerous factors, including geo-political events and macroeconomic conditions. The overall level of U.S. defense spending increased in recent years for numerous reasons. Significant reduction in defense spending could have long-term consequences for our size and structure.
The funding of our programs is subject to the overall U.S. government budget and appropriation decisions and processes, which are driven by numerous factors, including geo-political events and macroeconomic conditions. The overall level of U.S. defense spending increased in recent years for numerous reasons. Significant reduction in defense spending could have long-term consequences for our size and structure.
The development of our scalable business model will likely require the incurrence of a substantially higher level of costs than incurred to date, while our revenues will not substantially increase until more powerful, scalable computers are produced, that requires a number of technological advancements which may not occur on the currently anticipated 18 timetable or at all.
The development of our scalable business model will likely require the incurrence of a substantially higher level of costs than incurred to date, while our revenues will not substantially increase until more powerful, scalable computers are produced, which requires a number of technological advancements that may not occur on the currently anticipated timetable or at all.
Reliance on any single supplier increases the risks associated with being unable to obtain the necessary atomic samples because the supplier may have laboratory constraints, can be subject to unanticipated shutdowns and/or may be affected by natural disasters and other catastrophic events. Some of these factors may be completely out of our and our suppliers’ control.
Reliance on any single supplier 26 increases the risks associated with being unable to obtain the necessary atomic samples because the supplier may have laboratory constraints, can be subject to unanticipated shutdowns and/or may be affected by natural disasters and other catastrophic events. Some of these factors may be completely out of our and our suppliers’ control.
If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
If these policies, materials or statements are found to be deficient, lacking in 38 transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
We have entered into, and may enter into, strategic partnerships to develop and commercialize our current and future research and development programs with other companies to accomplish one or more of the following: • obtain expertise in relevant markets; • obtain sales and marketing services or support; • obtain equipment and facilities; • develop relationships with potential future customers; and 30 • generate revenue.
We have entered into, and may enter into, strategic partnerships to develop and commercialize our current and future research and development programs with other companies to accomplish one or more of the following: • 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.
Any strategic transaction might not strengthen our competitive position, may increase some of our risks, and may be viewed negatively by our customers, partners or investors. Even if we successfully complete a strategic transaction, we may not be able to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business.
Any strategic transaction might not strengthen our competitive position, may increase some of our risks, and may be viewed negatively by our customers, partners or investors. Even if we successfully complete a strategic transaction, we may not be able to effectively 32 integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business.
If we 37 invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business, financial condition, revenues, results of operations or cash flows will suffer. We may be unable to keep current with changes in government requirements as they change from time to time.
If we invest substantial time and resources to expand our international operations and are unable to do so successfully, in a timely manner, our business, financial condition, revenues, results of operations or cash flows will suffer. We may be unable to keep current with changes in government requirements as they change from time to time.
We may not be able to prevent unauthorized use of our intellectual property. We rely upon a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret 45 laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies.
We may not be able to prevent unauthorized use of our intellectual property. We rely upon a combination of the intellectual property protections afforded by patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies.
However, achieving quantum advantage would not necessarily lead to commercial viability of the technology that accomplished such advantage, nor would it mean that such system could outperform classical computers in tasks other than the one used to determine a quantum advantage. 26 Quantum computing technology, including broad quantum advantage, may take decades to be realized, if ever.
However, achieving quantum advantage would not necessarily lead to commercial viability of the technology that accomplished such advantage, nor would it mean that such system could outperform classical computers in tasks other than the one used to determine a quantum advantage. Quantum computing technology, including broad quantum advantage, may take decades to be realized, if ever.
If such a challenge or disagreement were to occur, and our position 38 was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
In addition, noncompliance with anti-corruption or anti-bribery laws could subject us to whistleblower complaints, investigations, sanctions, 43 settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties, injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences.
In addition, noncompliance with anti-corruption or anti-bribery laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties, injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences.
Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a 20 significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to our management and growth.
Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to our management and growth.
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 rules and regulations thereunder.
The enforceability of similar choice of forum provisions in other companies’ certificates of 48 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 rules and regulations thereunder.
If we are unable to achieve and/or sustain profitability, or if we are unable to achieve the growth that we expect from these investments, it could have a material effect on our business, financial condition or results of operations. Our business model is unproven and may never allow us to cover our costs.
If we are unable to achieve and/or sustain profitability, or if we are unable to achieve the growth that we expect from these investments, it could have a material adverse effect on our business, financial condition or results of operations. Our business model is unproven and may never allow us to cover our costs.
Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. U.S. export control and economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products, technologies, and services to U.S. government embargoed or sanctioned countries, governments, persons and entities.
Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. U.S. export control and economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products, technologies, and services to U.S. government embargoed or sanctioned countries, governments, persons and entities.
We are heavily reliant upon licenses to certain patent rights and other intellectual property from third parties that are important or necessary to the development of our products. In particular, our quantum computing technology is dependent on our license agreement with University of Maryland and Duke University.
We are heavily reliant upon licenses to certain patent rights and other intellectual property from third parties that are important or necessary to the development of our products. In particular, our quantum computing technology is dependent on our license agreement with University of Maryland and Duke University, or the Universities.
We intend to make investments to support our current business and may require additional funds to respond to business challenges, including the need to develop or enhance our technology, improve our operating infrastructure or acquire complementary businesses and technologies. Additional financing may not be available on favorable terms, if at all.
We intend to make investments to support our current business and may require additional funds to respond to business challenges, including the need to develop or enhance our technology, improve our operating infrastructure or 44 acquire complementary businesses and technologies. Additional financing may not be available on favorable terms, if at all.
Furthermore, uncertain economic conditions may make it more difficult for us to raise funds through borrowings or private or public sales of debt or equity securities. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
Furthermore, uncertain economic conditions may make it more difficult for us to raise funds through borrowings or private or public sales of debt or equity securities. We cannot predict the timing, location, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
Significant intellectual property developed by our co-founders, Jungsang Kim, our Chief Technology Officer, and Christopher Monroe, our Chief Scientist, has been and is required to be assigned to the Universities as a result of Dr. Kim and Dr. Monroe’s employment by the Universities, and certain such intellectual property is licensed pursuant to the license agreement with the Universities.
Significant intellectual property developed by our co-founders, Jungsang Kim, our Chief Technology Officer, and Christopher Monroe, has been and is required to be assigned to the Universities as a result of Dr. Kim and Dr. Monroe’s employment by the Universities, and certain such intellectual property is licensed pursuant to the license agreement with the Universities.
The Warrant Agreement provides that the terms of the public warrants may be amended without the 53 consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
The Warrant Agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
Compliance with public company requirements will continue to increase costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities we have not done previously. For example, we adopted new internal controls and disclosure controls and procedures.
Compliance with public company requirements will continue to increase costs and make 45 certain activities more time-consuming. A number of those requirements require us to carry out activities we have not done previously. For example, we adopted new internal controls and disclosure controls and procedures.
As part of the consolidated amended complaint, certain members of the Company’s board of directors (the “Board”) as well as other dMY related defendants (“Additional Defendants”) have been added as defendants to the case. On February 7, 2023, the IonQ Defendants and the Additional Defendants each filed a motion to dismiss the consolidated amended complaint.
As part of the consolidated amended complaint, certain members of the Company’s board of directors as well as other dMY-related defendants (“Additional Defendants”) have been added as defendants to the case. On February 7, 2023, the IonQ Defendants and the Additional Defendants each filed a motion to dismiss the consolidated amended complaint.
The outcome of any litigation, regardless of its merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, could be 39 time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.
The outcome of any litigation, regardless of its merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention and resources, and lead to attempts on the part of other parties to pursue similar claims.
Our second amended and restated certificate of incorporation (“Certificate of Incorporation”) and amended and restated bylaws (“Bylaws”) contain several provisions that may make it more difficult or expensive for a 54 third party to acquire control of us without the approval of the Board.
Our second amended and restated certificate of incorporation (“Certificate of Incorporation”) and amended and restated bylaws (“Bylaws”) contain several provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of the Board.
In May 2022, the Biden administration announced directives to support U.S. leadership in quantum computing, and in September 2022, the National Security Administration (NSA) shared guidance on the importance of cybersecurity readiness against would-be adversaries developing quantum systems.
In May 2022, the Biden administration announced directives to support U.S. leadership in quantum computing, and in September 2022, the National Security Administration (NSA) shared guidance on the importance of cybersecurity readiness against would-be adversaries developing quantum systems. In September 2023, the U.S.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our Sensitive Data and information technology systems, and those of the third parties upon which we rely.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our Sensitive Data and information 29 technology systems, and those of the third parties upon which we rely.
Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against such company. Such litigation could result in substantial costs and a diversion of management’s attention and resources.
Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against such company. Such litigation could result in substantial costs and a diversion of 43 management’s attention and resources.
The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive 55 jurisdiction.
The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.
Evolving and scaling our business and operations places increased demands on our management as well as our financial and operational resources to: • 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; 19 • scale support operations in a cost-effective manner; • implement appropriate operational and financial systems; and • maintain effective financial disclosure controls and procedures.
Evolving and scaling our business and operations places increased demands on our management as well as our financial and operational resources to: • effectively manage organizational change; • design scalable processes; • accelerate and/or refocus research and development activities; 18 • 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.
There can be no assurance that our projections on which such targets are based will prove accurate or 21 that the pace of growth or coverage of our customer infrastructure network will meet customer expectations.
There can be no assurance that our projections on which such targets are based will prove accurate or that the pace of growth or coverage of our customer infrastructure network will meet customer expectations.
In addition, conducting international operations subjects us to new risks, 36 some of which we have not generally faced in the United States or other countries where we currently operate.
In addition, conducting international operations subjects us to new risks, some of which we have not generally faced in the United States or other countries where we currently operate.
Such a 50 delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so.
Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so.
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 collaborative partnerships, our future growth and development could be negatively impacted. 17 • Our business depends on our customers’ abilities to implement useful quantum algorithms and sufficient quantum resources for their business. • Our future growth and success depend in part on our ability to sell effectively to government entities and large enterprises. • Contracts with government and state agencies are subject to a number of challenges and risks. • Our future growth and success depend on our ability to sell effectively to large customers. • Contracts with government and state agencies are subject to a number of challenges and risks. • If our information technology systems, data, or physical facilities where our quantum computers are stored, or those of third parties upon which we rely, are or were compromised, we could experience adverse business consequences resulting from such compromise. • 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. • Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations. • Licensing of intellectual property is of critical importance to 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.
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 collaborative 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. • Our future growth and success depend in part on our ability to sell effectively to government entities and large enterprises. • Contracts with government and state agencies are subject to a number of challenges and risks. • Our future growth and success depend on our ability to sell effectively to large customers. • If our information technology systems, data, or physical facilities, or those of third parties upon which we rely, are or were compromised, we could experience adverse business consequences resulting from such compromise. • 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 adversely impact our business, including our ability to obtain products from our suppliers. • Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations. • Licensing of intellectual property is of critical importance to 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.
Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition. 35 In addition, in challenging economic times, our current or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products and services.
Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition. 31 In addition, in challenging economic times, our current or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products and services.
Weakness and volatility in capital markets and the economy, in general or as a result of bank failures or macroeconomic conditions such as rising inflation and interest rates, could limit our access to capital markets and increase our costs of borrowing. There can be no assurance that financing will be available to us on favorable terms, or at all.
Weakness and volatility in capital markets and the economy, in general or as a result of bank failures or macroeconomic conditions such as high inflation and interest rates, could limit our access to capital markets and increase our costs of borrowing. There can be no assurance that financing will be available to us on favorable terms, or at all.
Unfavorable changes in any of these or other factors, most of which are beyond our control, could materially and adversely affect our business, financial condition and results of operations. 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.
Unfavorable changes in any of these or other factors, many of which are beyond our control, could materially and adversely affect our business, financial condition and results of operations. 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.
Risks Related to Our International Expansion and Future Operations Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations. We currently maintain offices and/or have personnel in the United States and Canada, and recently expanded operations to Germany, Israel, and Canada.
Risks Related to Our International Expansion and Future Operations Because our success depends, in part, on our ability to expand sales internationally, our business will be susceptible to risks associated with international operations. We currently maintain offices and/or have personnel in the United States, Canada, and Israel, and recently expanded into Germany and Switzerland.
Contracts with government and state agencies are subject to a number of challenges and risks. The bidding process for government contracts can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate revenue.
Contracts with domestic and international government and state agencies are subject to a number of challenges and risks. The bidding process for government contracts can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that these efforts will generate revenue.
Before you make a decision to buy our securities, in addition to the risks and uncertainties described above under “Special Note Regarding Forward-Looking Statements,” you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report.
Before you make a decision to buy our securities, in addition to the risks and uncertainties described above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report.
Our current competitors include: • large, well-established tech companies that generally compete in all of our markets, including 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 24 • new or emerging entrants seeking to develop competing technologies.
Our current competitors include (among others): • large, well-established tech companies that generally compete in all of our markets, including 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.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of our stock.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our U.S. federal net operating loss carryforwards and other tax attributes may become subject to an annual limitation in the event of certain cumulative changes in the ownership of our stock.
However, such problems may never be solvable by quantum computing technology. If our clients and partners do not perceive the benefits of our solution, or if our solution does not drive member engagement, then our market may not develop at all, or it may develop slower than we expect.
However, such problems may never be solvable by quantum computing technology. If our clients and partners do not perceive the benefits of our solution, or if our solution does not drive customer engagement, then our market may not develop at all, or it may develop slower than we expect.
Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecasts depends on a number of factors, many of which are outside our control, including, but not limited to: • 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.
Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in our forecasts depends on a number of factors, many of which are outside our control, including, but not limited to: • 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; 20 • our ability to manage our growth; • our ability to expand our sales into international markets; • 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.
There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products, bundle competing products, provide us with unfavorable pricing, leverage their public cloud customer relationships to exclude us from opportunities, and treat us and our customers differently with respect to terms and conditions or regulatory requirements than they would treat their similarly situated customers.
There is risk that one or more of these public cloud providers could use their respective control of their public clouds to embed innovations or privileged interoperating capabilities in competing products, bundle competing products, provide us 23 with unfavorable pricing, leverage their public cloud customer relationships to exclude us from opportunities, and treat us and our end users differently with respect to terms and conditions or regulatory requirements than they would treat their similarly situated customers.
We expect to continue to expand our international operations by developing a sales and operations presence in other international markets, which may include opening offices in new jurisdictions. Any additional international expansion efforts that we are undertaking and may undertake may not be successful.
We expect to continue to expand our international operations by developing our sales and operations presence in these and other international markets, which may include opening offices in new jurisdictions. Any additional international expansion efforts that we are undertaking and may undertake may not be successful.
In addition, reduction in government priorities and requirements could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. Contracts with government and state agencies are subject to a number of challenges and risks.
In addition, reduction in government priorities and requirements could impact the funding, or the timing of funding, of our programs, which could negatively impact our results of operations and financial condition. Contracts with domestic and international government and state agencies are subject to a number of challenges and risks.
In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that it needs to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results. 46 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.
In addition, patents issued to us may be infringed upon or designed around by others and others may obtain patents that we need to license or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results. 41 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.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in customer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in government fiscal or procurement policies, or decreases in government funding available for procurement of goods and services generally, or for our federal government contracts specifically; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. federal government and foreign government agencies, as applicable; • changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards us as a company or our technology; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies; 32 • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in legal obligations or political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to: • changes in government fiscal or procurement policies, or decreases in government funding available for procurement of goods and services generally, or for our federal government contracts specifically; • changes in government programs or applicable requirements; • restrictions in the grant of personnel security clearances to our employees; • ability to maintain facility clearances required to perform on classified contracts for U.S. government and foreign government agencies, as applicable; • changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding; • changes in the government’s attitude towards us as a company or our technology; • appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; • the adoption of new laws or regulations or changes to existing laws or regulations; • budgetary constraints, including automatic reductions as a result of “sequestration,” operating under continuing resolutions, disruptions from government shutdowns, or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies; • influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; • changes in legal obligations or political or social attitudes with respect to security or data privacy issues; • potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns; and • increased or unexpected costs or unanticipated delays caused by other factors outside of our control.
Unfavorable conditions in our industry or the global economy, could limit our ability to grow our business and negatively affect our results of operations. Our results of operations may vary based on the impact of changes in our industry or the global economy on the company or our customers and potential customers.
Unfavorable conditions in our industry or the global economy, could limit our ability to grow our business and negatively affect our results of operations. Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers.
Our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including: • 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 any future bank failures, public health crises or geopolitical events such as the Russia-Ukraine war; and • the impact of any of the foregoing on our management, employees, partners, customers, and operating results.
Our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including: • 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 any future bank failures, public health crises or geopolitical events such as tensions in and around Ukraine, Israel and other areas of the world; and • the impact of any of the foregoing on our management, employees, partners, customers, and operating results.
Our future growth and success depends in part on our ability to sell effectively to government entities and large enterprises. Our customers and potential customers include government agencies and large enterprises. Therefore, our future success will depend on our ability to effectively sell our products to such customers.
Our future growth and success depends in part on our ability to sell effectively to government entities and large enterprises. Our customers and potential customers include domestic and international government agencies and large enterprises. Therefore, our future success will depend on our ability to effectively sell our products to such customers.
Our financial statements could fail to reflect adequate reserves to cover such a contingency.
Our consolidated financial statements could fail to reflect adequate reserves to cover such a contingency.
We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will consist of forward-looking statements, subject to the risks and uncertainties described in this filing and in our other public filings and public statements.
We have historically and may continue to, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will consist of forward-looking statements, subject to the risks and uncertainties described in this filing and in our other public filings and public statements.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “Processing”) personal data and other sensitive information, including intellectual property, proprietary and confidential business data, trade secrets, sensitive third-party data, business plans, transactions, and financial information of our own, our partners, our customers, or other third parties (collectively, “Sensitive Data”).
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “Processing”) personal data and other sensitive information, including intellectual property, proprietary and confidential business data, trade secrets, sensitive third-party data, business plans, transactions, and financial information of our own, our partners, our vendors and their own supply chains, our customers, or other third parties (collectively, “Sensitive Data”).
If we cannot attract, train and retain qualified personnel, including our co-founders, in this competitive environment, we may experience delays in the development of our quantum computing technologies and be otherwise unable to develop and grow our business as projected, or even at all.
If we cannot attract, train and retain qualified personnel, in this competitive environment, we may experience delays in the development of our quantum computing technologies and be otherwise unable to develop and grow our business as projected, or even at all.
There can be no assurance that we will be able to detect and fix any defects in our quantum computers prior to the sale to potential consumers.
There can be no assurance that we will be able to detect and fix any defects in our quantum computers prior to the sale to potential customers.
The United States administration has announced tariffs on certain products imported into the United States with China as the country of origin, and China has imposed tariffs in response to the actions of the United States.
The United States administration imposes tariffs on certain products imported into the United States with China as the country of origin, and China has imposed tariffs in response to the actions of the United States.
We also must comply with laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts. For example, in 2021, the U.S.
We also must comply with both local and international laws and regulations relating to the formation, administration, and performance of contracts, which provide public sector customers rights, many of which are not typically found in commercial contracts. For example, in 2021, the U.S.
Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future. Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due several factors, some of which are beyond our control, resulting in a decline in our stock price.
There can be no assurance that we will continue to issue public guidance in the future. Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to several factors, some of which are beyond our control, resulting in a decline in our stock price.
We and the third parties upon which we rely may process Sensitive Data, and, as a result, we and the third parties upon which we rely face a variety of evolving threats to our information technology systems, data, or physical facilities where our quantum computers are stored, including but not limited to ransomware attacks, which could cause security incidents.
We and the third parties upon which we rely may process Sensitive Data, and, as a result, we and the third parties upon which we rely face a variety of evolving threats to our information technology systems, data, and physical facilities (such as those where our quantum computers are stored), including but not limited to ransomware attacks or advanced persistent threats, which could cause security incidents.
We have focused our efforts on creating quantum computing hardware, the operating system for such hardware and a suite of low-level software programs that optimize execution of quantum algorithms on our hardware. Further up the software stack, we rely on third parties to create higher level quantum programming languages, SDKs, and application libraries.
We have focused our efforts on creating quantum computing hardware, the system control platform for such hardware and a suite of low-level software programs that optimize execution of quantum algorithms on our hardware. Further up the software stack, we rely on third parties to create and advance higher level quantum programming languages, SDKs, and application libraries.
In addition, changes in our products or technologies or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and technologies in international markets or, in some cases, prevent the export or import of our products and technologies to certain countries, governments or persons altogether.
Changes in our products or technologies or changes in applicable export or import laws and regulations also may create delays in the introduction and sale of our products and technologies in international markets or, in some cases, prevent the export or import of our products and technologies to certain countries, 39 governments or persons altogether.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
Any disruptions, outages, defects and other performance and quality problems with our quantum computing system or with the public cloud and internet infrastructure on which it relies, could result in reduced use of our systems, increased expenses, including service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.
Any disruptions, outages, defects and other performance and quality problems with our quantum computing systems or with the public cloud, internet, and other infrastructure on which they rely, could result in reduced use of our systems, increased expenses, including service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.
In addition, alternatives to quantum computing may present themselves and if they did, could substantially reduce the market for quantum computing services. Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with quantum computing solutions.
In addition, alternatives to quantum computing may present themselves, which could substantially reduce the market for quantum computing services. Any expansion in our market depends on a number of factors, including the cost, performance, and perceived value associated with quantum computing solutions.
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 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 our rights to use key technologies to develop and operate our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also signed a lease for approximately 65,000 square feet of space in Bothell, Washington under an agreement that commenced in 2023 and expires in 2030. Most of the facility will be used for manufacturing in addition to general office space.
Biggest changeWe also lease approximately 101,000 square feet of space in Bothell, Washington under an agreement that expires in 2030. Most of the facility is used for manufacturing, research and development and general office space. We also signed a lease for approximately 27,000 square feet of space in Arlesheim, Switzerland under an agreement that commenced in 2024 and expires in 2029.
Item 2. Properties. Our principal facility is our corporate headquarters, located in College Park, Maryland, where we lease approximately 32,000 square feet of space from the University of Maryland under an agreement that expires in 2030. Most of the facility is used for research and development and corporate functions.
Item 2. Properties. Our principal facility is our corporate headquarters, located in College Park, Maryland, where we lease approximately 32,000 square feet of space from the University of Maryland under an agreement that expires in 2030. Most of the facility is used for research and development, servicing customers, and corporate functions.
We believe that our facilities are sufficient to meet our current needs and we will be able to obtain additional space as needed under commercially reasonable terms.
Most of the facility will be used to service customers, in addition to general office space. We believe that our facilities are sufficient to meet our current needs and we will be able to obtain additional space as needed under commercially reasonable terms. 50

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn addition, at no point prior to March 17, 2023 had we issued or reserved for issuance shares in excess of the predecessor certificate of incorporation of the Company. Please refer to Note 10, Commitments and Contingencies, to the consolidated financial statements included in this Annual Report for further details on current legal proceedings. Item 4. Mine Safety Disclosures.
Biggest changePlease refer to Note 10, Commitments and Contingencies, to the consolidated financial statements included in this Annual Report for further details on current legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 51 PART II
As part of the consolidated amended complaint, certain members of the Company’s Board as well as other dMY related defendants (the “Additional Defendants”) have been added as defendants to the case. On February 7, 2023, the IonQ Defendants and the Additional Defendants each filed a motion to dismiss the consolidated amended complaint.
As part of the consolidated amended complaint, certain members of the Company’s board of directors as well as other dMY-related defendants (“Additional Defendants”) have been added as defendants to the case. On February 7, 2023, the IonQ Defendants and the Additional Defendants each filed a motion to dismiss the consolidated amended complaint.
IonQ, Inc. , Case No. 8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder of the Company and certain of the Company’s current officers (“IonQ Defendants”).
IonQ, Inc., Case No. 8:22-cv-01306-DLB (the “Fisher Litigation”) was filed by a stockholder against the Company and certain of the Company’s current officers (“IonQ Defendants”).
The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. In May 2022, a securities class action complaint captioned Leacock v.
The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. On January 12, 2021, dMY Technology Group, Inc.
Removed
Both the IonQ Defendants and the Additional Defendant believe that the allegations in the various complaints are without merit and intend to defend the matters vigorously.
Added
II, dMY Sponsor II, LLC, dMY, and dMY Sponsor III, LLC (“Sponsor”) accepted service of a lawsuit where they were named as counterclaim defendants in an underlying action by and between GTY Technology Holdings, Inc. (“GTY”), dMY Technology Holdings Inc., dMY Sponsor, LLC, dMY Sponsor II, LLC, dMY Technology Group Inc.
Removed
On March 2, 2023, we filed a petition in the Delaware Court of Chancery pursuant to Section 205 of the Delaware General Corporation Law, which permits the Court of Chancery, in its discretion, to validate potentially 56 defective corporate acts.
Added
II, dMY and Sponsor (collectively “dMY Defendants”) and Carter Glatt (“Glatt”) and Captains Neck Holdings LLC (“Captains Neck”), an entity of which Mr. Glatt is a member.
Removed
The petition sought an order of the Chancery Court validating and declaring effective (i) our Second Amended and Restated Certificate of Incorporation dated September 30, 2021 (the “A&R COI”), including its filing and effectiveness, as of the date and time that it was originally filed with the Delaware Secretary of State and (ii) all shares of our capital stock issued in reliance on the validity and effectiveness of the A&R COI as of the date and time of the original issuance of such shares.
Added
The underlying lawsuit, filed by dMY Technology Group, Inc. and dMY Sponsor, LLC, seeks a declaratory judgment that Glatt and Captains Neck are not entitled to membership units of dMY Sponsor LLC, which was formed by Harry L. You, the co-founder and former President and Chief Financial Officer of GTY when Glatt was still working at GTY.
Removed
Although we believe the A&R COI and all shares issued under it were valid and effective at all relevant times, a recent decision of the Court of Chancery created uncertainty regarding the approval of the A&R COI by our stockholders in February 2021. On March 17, 2023, the Court of Chancery entered the requested order.
Added
The underlying lawsuit contains claims arising from Glatt’s termination of employment from GTY, including theft and misappropriation of confidential GTY information, breach of contract, breach of the duties of loyalty and fiduciary duty and conversion.
Added
Glatt responded to the underlying lawsuit by adding members of the Sponsor and officers of dMY as additional counterclaim defendants (collectively with the dMY Defendants Glatt and Captains Neck, the “Counterclaim Defendants”) and adding Dune Acquisition Holdings LLC, a newly formed special purpose acquisition company, as a counterclaimant and asserting claims for breach of contract, fraudulent misrepresentation, negligent misrepresentation, tortious interference with business relations, quantum meruit and unjust enrichment. dMY and the Company have never employed Glatt nor maintained any business agreements with him.
Added
The Counterclaim Defendants denied the claims against them and filed a motion to dismiss the suit. During 2023, the court dismissed the claims against dMY Technology Group, Inc. III (“dMY III”), the former legal registrant of IonQ, Inc and the case is now considered closed. In May 2022, a securities class action complaint captioned Leacock v.
Added
On March 23, 2023, lead plaintiffs filed their omnibus opposition to the motions to dismiss. On April 26, 2023, the IonQ Defendants and the Additional Defendants each filed a reply in support of the motions to dismiss.
Added
On September 28, 2023, the District Court of Maryland issued an order dismissing plaintiffs' claims against the IonQ Defendants and the Additional Defendants with prejudice and directed the clerk to close the case. On October 26, 2023, the plaintiffs filed a motion for post-judgment relief, seeking to amend their consolidated amended complaint.
Added
The IonQ Defendants and Additional Defendants filed oppositions to plaintiffs’ motion on December 1, 2023, and plaintiffs filed their reply on January 8, 2024. Both the IonQ Defendants and Additional Defendants intend to defend the matters vigorously.
Added
Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot reasonably estimate the possible loss or range of loss, if any, that may result from the associated suit.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed3 unchanged
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock and public warrants are traded on the NYSE under the symbols “IONQ” and “IONQ WS,” respectively. Holders As of March 23, 2023, there were approximately 103 stockholders of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock and public warrants are traded on the NYSE under the symbols “IONQ” and “IONQ WS,” respectively. Holders As of February 21, 2024, there were approximately 285 stockholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved]. 52

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+15 added−37 removed24 unchanged
Biggest changeOther income (expense), net Other income (expense), net consists of realized losses on our available-for-sale investments and certain other expenses. 62 Results of Operations The following table sets forth our statements of operations for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Revenue $ 11,131 $ 2,099 Costs and expenses: Cost of revenue (excluding depreciation and amortization) (1) 2,944 1,040 Research and development (1) 43,978 20,228 Sales and marketing (1) 8,385 3,233 General and administrative (1) 35,966 13,737 Depreciation and amortization 5,604 2,548 Total operating costs and expenses 96,877 40,786 Loss from operations (85,746 ) (38,687 ) Change in fair value of warrant liabilities 30,136 (63,332 ) Interest income, net 7,093 64 Offering costs associated with warrants — (4,259 ) Other income (expense), net 6 28 Loss before benefit for income taxes (48,511 ) (106,186 ) Benefit for income taxes — — Net loss $ (48,511 ) $ (106,186 ) (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: Year Ended December 31, 2022 2021 (in thousands) Cost of revenue $ 902 $ 62 Research and development 13,472 2,841 Sales and marketing 1,298 67 General and administrative 15,784 4,778 Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Revenue $ 11,131 $ 2,099 $ 9,032 430 % Revenue increased by $9.0 million, or 430%, to $11.1 million for the year ended December 31, 2022, from $2.1 million for the year ended December 31, 2021.
Biggest changeResults of Operations The following table sets forth our consolidated statements of operations for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Revenue $ 22,042 $ 11,131 Costs and expenses: Cost of revenue (excluding depreciation and amortization) (1) 8,108 2,944 Research and development (1) 92,321 43,978 Sales and marketing (1) 18,270 8,385 General and administrative (1) 50,722 35,966 Depreciation and amortization 10,375 5,604 Total operating costs and expenses 179,796 96,877 Loss from operations (157,754 ) (85,746 ) Gain (loss) on change in fair value of warrant liabilities (19,206 ) 30,136 Interest income, net 19,322 7,093 Other income (expense), net (85 ) 6 Loss before income tax expense (157,723 ) (48,511 ) Income tax benefit (expense) (48 ) — Net loss $ (157,771 ) $ (48,511 ) (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: Year Ended December 31, 2023 2022 (in thousands) Cost of revenue $ 2,819 $ 902 Research and development 40,103 13,472 Sales and marketing 6,762 1,298 General and administrative 20,059 15,784 Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Revenue $ 22,042 $ 11,131 $ 10,911 98 % Revenue increased by $10.9 million, or 98%, to $22.0 million for the year ended December 31, 2023, from $11.1 million for the year ended December 31, 2022.
General and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, information technology, travel expenses and certain non-income taxes, insurance, and other administrative expenses.
General and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, information technology, travel expenses, certain non-income taxes, insurance, and other administrative expenses.
Net cash used in operating activities during year ended December 31, 2022, was $44.7 million, resulting primarily from a net loss of $48.5 million, adjusted for non-cash activity, primarily related to the gain recorded as a result of mark-to-market activity for our public warrants offset by stock-based compensation and other working capital activities.
Net cash used in operating activities during the year ended December 31, 2022, was $44.7 million, resulting primarily from a net loss of $48.5 million, adjusted for non-cash activity, primarily related to the gain recorded as a result of mark-to-market activity for our public warrants offset by stock-based compensation and other working capital activities.
We expect to continue to make the necessary sales and marketing investments to enable us to increase our market penetration and expand our customer base. 61 General and administrative General and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our corporate, executive, finance, and other administrative functions.
We expect to continue to make the necessary sales and marketing investments to enable us to increase our market penetration and expand our customer base. General and administrative General and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our corporate, executive, finance, and other administrative functions.
Impact of the Macroeconomic Climate on Our Business The recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, interest rates and overhead costs may adversely affect our operating results.
Impact of the Macroeconomic Climate on Our Business The recent trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, interest rates and overhead costs may adversely affect our operating results.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods.
Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
Debt financing and equity financing, if available, may involve agreements that 58 include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
Sales and marketing Sales and marketing expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, costs for direct advertising, marketing and promotional expenditures and allocated facility and other costs for our sales and marketing functions.
Sales and marketing Sales and marketing expenses consist of personnel-related expenses, including salaries, commissions, benefits and stock-based compensation, costs for direct advertising, marketing and promotional expenditures and allocated facility and other costs for our sales and marketing functions.
However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Rising interest and inflation rates present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.
However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. High interest and inflation rates present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.
As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue over time. Depreciation and amortization Depreciation and amortization expense results from depreciation and amortization of our property and equipment, including our quantum computing systems, and intangible assets that is recognized over their estimated lives.
As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue over time. Depreciation and amortization Depreciation and amortization expense results from depreciation and amortization of our property and equipment, including our quantum computing systems, and intangible assets that are recognized over their estimated lives.
The increase was primarily due to an increase of $3.7 million of payroll-related expenses, including an increase in stock-based compensation of $1.2 million, as a result of increased headcount, and increased costs to promote our services and other marketing initiatives of approximately $1.5 million.
The increase was primarily due to an increase of $8.7 million of payroll-related expenses, including an increase in stock-based compensation of $5.5 million, as a result of increased headcount, and increased costs to promote our services and other marketing initiatives of approximately $1.2 million.
Rising interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.
High interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future.
Judgment is used to determine when hardware and labor costs incurred for our quantum computing systems should be capitalized as a result of our assessment of whether the system will provide a probable future economic benefit and whether or not the costs represent activities necessary to build the systems, maintain the systems or to perform certain research and development functions.
Costs to maintain quantum computing systems are expensed as incurred. 60 Judgment is used to determine when hardware and labor costs incurred for our quantum computing systems should be capitalized as a result of our assessment of whether the system will provide a probable future economic benefit and whether or not the costs represent activities necessary to build the systems, maintain the systems or to perform certain research and development functions.
We expect to continue to incur significant losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve an increasingly higher number of stable qubits and higher levels of fidelity than presently exists—prerequisites for quantum computing to reach broad quantum advantage. 59 The Merger Agreement and Public Company Costs On March 7, 2021, Legacy IonQ, dMY and Ion Trap Acquisition Inc.
We expect to continue to incur significant losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve an increasingly higher number of stable qubits and higher levels of fidelity than presently exists—prerequisites for quantum computing to reach broad quantum advantage. The Merger Agreement On March 7, 2021, Legacy IonQ, dMY and Ion Trap Acquisition Inc.
Today, we sell access to several quantum computers of various qubit capacities and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities.
We also sell access to several quantum computers of various qubit capacities and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities.
Excluded from our available liquidity is $2.0 million of restricted cash, which is recorded in other noncurrent assets in our consolidated balance sheets. We believe that our cash, cash equivalents and investments as of December 31, 2022, will be sufficient to meet our working capital and capital expenditure needs for the next 12 months.
Excluded from our available liquidity is $2.4 million of restricted cash, which is primarily recorded in other noncurrent assets in our consolidated balance sheets. We believe that our cash, cash equivalents and investments as of December 31, 2023, will be sufficient to meet our working capital and capital expenditure needs for the next 12 months.
Revenue recognition We derive revenue from our QCaaS arrangements, consulting services related to co-developing algorithms on our quantum computing systems, and from contracts associated with the design, development, and construction of specialized quantum computing systems together with related services.
Revenue recognition We derive revenue from contracts associated with the design, development, and construction of specialized quantum computing hardware together with related services, from contracts providing access to QCaaS, and from consulting services related to co-developing algorithms on the quantum computing systems.
Key Components of Results of Operations Revenue We have generated limited revenues since our inception. We derive revenue from providing access to quantum-computing-as-a-service (“QCaaS”), consulting services related to co-developing algorithms on our quantum computing systems, and from contracts associated with the design, development, and construction of specialized quantum computing systems together with related services.
Key Components of Results of Operations Revenue We have generated limited revenues since our inception. We derive revenue from contracts associated with the design, development, construction and sale of specialized quantum computing hardware together with related services, from contracts providing access to QCaaS, and from consulting services related to co-developing algorithms on our quantum computing systems.
Cash flows from investing activities Net cash used in investing activities during the year ended December 31, 2022, was $309.1 million, primarily resulting from purchases of available-for-sale securities of $605.7 million, additions of $9.3 million to property and equipment primarily related to the development of our quantum computing systems, offset by cash received from sales and maturities of available-for-sale investments of $310.0 million.
Net cash used in investing activities during the year ended December 31, 2022, was $309.1 million, primarily resulting from purchases of available-for-sale securities of $605.7 million and additions of $9.3 million to property and equipment primarily related to the development of our quantum computing systems, offset by cash received from maturities of available-for-sale investments of $310.0 million. 59 Cash flows from financing activities Net cash provided by financing activities during the year ended December 31, 2023, was $1.8 million, primarily resulting from proceeds from stock options exercised.
Unless the context otherwise requires, the terms “IonQ,” “Legacy IonQ” “we,” “us,” “our” and similar terms refer to IonQ Quantum, Inc. prior to the consummation of the Business Combination and IonQ, Inc. and its wholly owned subsidiary, IonQ Quantum, Inc., after the consummation of the Business Combination.
Unless the context otherwise requires, the terms “IonQ,” “Legacy IonQ” “we,” “us,” “our” and similar terms refer to IonQ Quantum, Inc. prior to the consummation of the Business Combination and IonQ, Inc. and its wholly owned subsidiaries after the consummation of the Business Combination. References to “dMY” refer to the predecessor company prior to the consummation of the Business Combination.
Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and further commercialization of our quantum computing systems. Our net losses were $48.5 million and $106.2 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $194.3 million.
Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and further commercialization of our quantum computing systems. Our net losses were $157.8 million and $48.5 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $352.1 million.
Commensurate with the Business Combination, dMY changed its name to IonQ, Inc. and Legacy IonQ changed its name to IonQ Quantum, Inc. IonQ became the successor registrant with the SEC, meaning that Legacy IonQ’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.
Contemporaneously with the Business Combination, dMY changed its name to IonQ, Inc. and Legacy IonQ changed its name to IonQ Quantum, Inc. IonQ became 53 the successor registrant with the SEC, meaning that Legacy IonQ’s financial statements for previous periods have been disclosed in the registrant’s periodic reports filed with the SEC.
The increase was primarily driven by an increase of $0.7 million due to amortization of capitalized internally developed software and an increase of $1.3 million in depreciation expense associated with capitalized quantum computing system costs, as well as an increase of $1.0 million in depreciation expenses associated with other property and equipment.
The increase was primarily driven by an increase of $2.3 million and $0.9 million in depreciation expense associated with capitalized quantum computing system costs and other property and equipment, respectively, and an increase of $1.4 million due to amortization of capitalized internally developed software.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor, due to supply chain constraints, consequences associated with COVID-19 and the Russia-Ukraine war, and employee availability and wage increases, which may result in additional stress on our working capital resources.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or continue to rise) on our operating costs, including our labor, due to supply chain constraints, consequences associated with bank failures, geopolitical tensions in and around Ukraine, Israel and other areas of the world, and employee availability and wage increases, which may result in additional stress on our working capital resources.
We currently make access to our quantum computers available via three major cloud platforms, AWS’s Amazon Braket, Microsoft’s Azure Quantum and Google’s Cloud Marketplace, and also to select customers via our own cloud service. This cloud-based approach enables the broad availability of QCaaS.
We currently make access to our quantum computers available via three major cloud platforms, Amazon Web Services’ (“AWS”) Amazon Braket, Microsoft’s Azure Quantum and Google’s Cloud Marketplace, and also to select customers via our own cloud service. This cloud-based approach enables the broad availability of quantum-computing-as-a-service (“QCaaS”).
Cash flows The following table summarizes our cash flows for the period indicated: Year Ended December 31, 2022 2021 (in thousands) Net cash used in operating activities $ (44,698 ) $ (26,537 ) Net cash used in investing activities (309,056 ) (213,785 ) Net cash provided by financing activities 1,096 603,227 Cash flows from operating activities Our cash flows from operating activities are significantly affected by the growth of our business, primarily related to research and development, sales and marketing, and general and administrative activities.
Cash flows The following table summarizes our cash flows for the period indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ (78,811 ) $ (44,698 ) Net cash provided by (used in) investing activities 68,766 (309,056 ) Net cash provided by (used in) financing activities 1,761 1,096 Cash flows from operating activities Our cash flows from operating activities are significantly affected by the growth of our business, primarily related to research and development, sales and marketing, and general and administrative activities.
We have incurred significant losses since our inception and as of December 31, 2022, we had an accumulated deficit of $194.3 million. During the year ended December 31, 2022, we incurred net losses of $48.5 million. We expect to incur significant losses and higher operating expenses for the foreseeable future.
We have incurred significant losses since our inception and as of December 31, 2023, we had an accumulated deficit of $352.1 million. During the year ended December 31, 2023, we incurred net losses of $157.8 million. We expect to incur significant losses and higher operating expenses for the foreseeable future.
We believe that our proprietary technology, our architecture, and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings.
We believe that our proprietary technology, our architecture, and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings. Today, we sell specialized quantum computing hardware together with related maintenance and support.
References to “dMY” refer to the predecessor company prior to the consummation of the Business Combination. Overview We are developing quantum computers designed to solve some of the world’s most complex problems, and transform business, society and the planet for the better.
Overview We are developing quantum computers designed to solve some of the world’s most complex problems, and transform business, society and the planet for the better.
As a result, hardware and labor costs associated with the building of such quantum computing systems were capitalized in the period the costs were incurred. Costs to maintain quantum computing systems are expensed as incurred.
Hardware and labor costs associated with the building of such quantum computing systems are capitalized in the period the costs are incurred.
Net cash used in operating activities during the year ended December 31, 2021, was $26.5 million, resulting primarily from a net loss of $106.2 million, adjusted for non-cash activity, primarily related to the loss recorded as a result of mark-to-market activity for our public and private warrants, stock-based compensation and offering costs associated with warrants, as well as other working capital activities.
Net cash used in operating activities during the year ended December 31, 2023, was $78.8 million, resulting primarily from a net loss of $157.8 million, adjusted for non-cash activity, primarily related to stock-based compensation, the loss recorded as a result of mark-to-market activity for our public warrants, depreciation and amortization, and other working capital activities.
Operating Costs and Expenses Cost of revenue Cost of revenue primarily consists of expenses related to delivering our services, including personnel-related expenses, allocated facility and other costs for customer facing functions, and costs associated with maintaining our in-service quantum computing systems to ensure proper calibration as well as costs incurred for maintaining the cloud on which the QCaaS resides.
We have also engaged with certain prospects who are interested in purchasing entire quantum computers, either over the cloud or for local access. 54 Operating Costs and Expenses Cost of revenue Cost of revenue primarily consists of expenses related to delivering our services, including personnel-related expenses, allocated facility and other costs for customer facing functions, and costs associated with maintaining our in-service quantum computing systems to ensure proper calibration as well as costs incurred for maintaining the cloud on which the QCaaS resides.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors.” Other than operating expenses and our continued investment in our quantum computers, cash requirements for fiscal year 2023 are expected to consist primarily of capital expenditures for corporate facilities. 66 Our material cash requirements as of December 31, 2022, include operating lease commitments, including the lease of our headquarters in College Park, Maryland and manufacturing and office space in Bothell, Washington.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors.” Other than operating expenses and our continued investment in our quantum computers, cash requirements for fiscal year 2024 are expected to consist primarily of capital expenditures for facilities.
Sales and marketing Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Sales and marketing $ 8,385 $ 3,233 $ 5,152 159 % Sales and marketing expense increased by $5.2 million, or 159%, to $8.4 million for the year ended December 31, 2022, from $3.2 million for the year ended December 31, 2021.
Sales and marketing Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Sales and marketing $ 18,270 $ 8,385 $ 9,885 118 % Sales and marketing expense increased by $9.9 million, or 118%, to $18.3 million for the year ended December 31, 2023, from $8.4 million for the year ended December 31, 2022.
Our primary uses of cash and investments are to fund our operations as we continue to grow our business. We require a significant amount of cash for expenditures as we invest in ongoing research and development and commercialization of our products.
We require a significant amount of cash for expenditures as we invest in ongoing research and development and commercialization of our products.
Personnel-related expenses include salaries, benefits, and stock-based compensation. Cost of revenue excludes depreciation and amortization related to our quantum computing systems and related software. Research and development Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our research and development functions.
Cost of revenue also includes hardware costs for construction of specialized quantum computing hardware. Personnel-related expenses include salaries, benefits, and stock-based compensation. Cost of revenue excludes depreciation and amortization related to our quantum computing systems and related software.
General and administrative Year Ended December 31, $ Change % Change 2022 2021 (in thousands) General and administrative $ 35,966 $ 13,737 $ 22,229 162 % General and administrative expenses increased by $22.2 million, or 162%, to $36.0 million for the year ended December 31, 2022, from $13.7 million for the year ended December 31, 2021.
General and administrative Year Ended December 31, $ % 2023 2022 Change Change (in thousands) General and administrative $ 50,722 $ 35,966 $ 14,756 41 % General and administrative expenses increased by $14.8 million, or 41%, to $50.7 million for the year ended December 31, 2023, from $36.0 million for the year ended December 31, 2022.
Nonoperating Costs and Expenses Change in fair value of warrant liabilities The change in fair value of warrant liabilities consists of mark-to-market fair value adjustments recorded associated with the public and private placement warrants assumed as part of the Business Combination. Interest income, net Interest income, net consists of income earned on our money market funds and other available-for-sale investments.
Nonoperating Costs and Expenses Gain (loss) on change in fair value of warrant liabilities The gain (loss) on change in fair value of warrant liabilities consists of mark-to-market fair value adjustments recorded associated with the public warrants assumed as part of the Business Combination.
The increase was primarily driven by an $18.1 million increase in payroll-related expenses, including stock-based compensation of $10.6 million, as a result of increased headcount, a $2.6 million increase in materials, supplies and equipment costs, and a $2.3 million increase in professional service costs to support research and development initiatives.
The increase was primarily driven by a $44.0 million increase in payroll-related expenses, including an increase in stock-based compensation of $27.1 million, as a result of increased headcount, and a $1.8 million increase in materials, supplies and equipment costs.
Net cash used in investing activities during the year ended December 31, 2021, was $213.8 million, primarily resulting from purchases of available-for-sale securities of $203.8 million, additions of $7.8 million to property and equipment primarily related to the development of our quantum computing systems, $1.6 million of capitalized internal software development costs, and $0.6 million of intangible asset acquisition costs.
Cash flows from investing activities Net cash provided by investing activities during the year ended December 31, 2023, was $68.8 million, primarily resulting from maturities of available-for-sale securities of $386.8 million, offset by purchases of available-for-sale investments of $298.4 million, additions of $13.7 million to property and equipment primarily related to the development of our quantum computing systems, and additions of $4.6 million related to capitalized software development costs.
Research and development Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Research and development $ 43,978 $ 20,228 $ 23,750 117 % Research and development expense increased by $23.8 million, or 117%, to $44.0 million for the year ended December 31, 2022, from $20.2 million for the year ended December 31, 2021.
Research and development Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Research and development $ 92,321 $ 43,978 $ 48,343 110 % Research and development expense increased by $48.3 million, or 110%, to $92.3 million for the year ended December 31, 2023, from $44.0 million for the year ended December 31, 2022.
Change in fair value of warrant liabilities Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Change in fair value of warrant liabilities $ 30,136 $ (63,332 ) $ 93,468 148 % The change in fair value of warrant liabilities increased by $93.5 million, or 148%, to a gain of $30.1 million for the year ended December 31, 2022, from a loss of $63.3 million for the year ended December 31, 2021.
Gain (loss) on change in fair value of warrant liabilities Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Gain (loss) on change in fair value of warrant liabilities $ (19,206 ) $ 30,136 $ (49,342 ) (164 )% The gain (loss) on change in fair value of warrant liabilities decreased by $49.3 million, or 164%, to a loss of $19.2 million for the year ended December 31, 2023, from a gain of $30.1 million for the year ended December 31, 2022.
Judgment is also applied when determining the relative standalone selling price of each performance obligation, including determining when to apply the residual method, as this is used to allocate the transaction price to each performance obligation within the contract.
For arrangements with multiple performance obligations, judgment is applied to determine the relative standalone selling price of each performance obligation as this is used to allocate the transaction price to each performance obligation within the contract.
Depreciation and amortization Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Depreciation and amortization $ 5,604 $ 2,548 $ 3,056 120 % Depreciation and amortization expenses increased by $3.1 million, or 120%, to $5.6 million for the year ended December 31, 2022, from $2.5 million for the year ended December 31, 2021.
Depreciation and amortization Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Depreciation and amortization $ 10,375 $ 5,604 $ 4,771 85 % 57 Depreciation and amortization expenses increased by $4.8 million, or 85%, to $10.4 million for the year ended December 31, 2023, from $5.6 million for the year ended December 31, 2022.
Judgment is also used to determine when the systems are placed into service and the estimated useful life of the associated systems. Changes in these estimates can have a significant impact on the assessment of capitalized costs, which could result in material changes to reported property and equipment, net.
Changes in these estimates can have a significant impact on the assessment of capitalized costs and depreciation expense, which could result in material changes to reported property and equipment, net.
Unlike a standard computer, design and development efforts continue throughout the useful life of our quantum computing systems to ensure proper calibration and optimal functionality.
Research and development Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our research and development functions. Unlike a standard computer, design and development efforts continue throughout the useful life of our quantum computing systems to ensure proper calibration and optimal functionality.
The increase was primarily driven by new revenue contracts under which we provided services during the year ended December 31, 2022, an increase in revenue from our cloud service providers and an increase in revenue from services provided under our contract with UMD, as well as other existing contracts. 63 Cost of revenue Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Cost of revenue (excluding depreciation and amortization) $ 2,944 $ 1,040 $ 1,904 183 % Cost of revenue increased by $1.9 million, or 183%, to $2.9 million for the year ended December 31, 2022, from $1.0 million for the year ended December 31, 2021.
The increase was primarily driven by progress on our arrangements to build specialized quantum computing hardware, as well as new revenue contracts under which we provided services during the year ended December 31, 2023. 56 Cost of revenue Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Cost of revenue (excluding depreciation and amortization) $ 8,108 $ 2,944 $ 5,164 175 % Cost of revenue increased by $5.2 million, or 175%, to $8.1 million for the year ended December 31, 2023, from $2.9 million for the year ended December 31, 2022.
The increase was driven primarily by the increase in costs to service contracts for the year ended December 31, 2022, including an increase in labor costs to service consulting arrangements.
The increase was driven primarily by the increase in labor costs to service contracts, as well as the increase in materials costs for arrangements to build specialized quantum computing hardware, for the year ended December 31, 2023.
Critical Accounting Estimates This discussion and analysis of financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Net cash provided by financing activities during the year ended December 31, 2022, was $1.1 million, primarily resulting from proceeds from stock options exercised. Critical Accounting Estimates This discussion and analysis of financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Interest income, net Year Ended December 31, $ Change % Change 2022 2021 (in thousands) Interest income, net $ 7,093 $ 64 $ 7,029 NM NM-Not meaningful Interest income, net increased by $7.0 million to $7.1 million for the year ended December 31, 2022, from $0.1 million for the year ended December 31, 2021.
Interest income, net Year Ended December 31, $ % 2023 2022 Change Change (in thousands) Interest income, net $ 19,322 $ 7,093 $ 12,229 172 % Interest income, net increased by $12.2 million, or 172%, to $19.3 million for the year ended December 31, 2023, from $7.1 million for the year ended December 31, 2022.
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 together with related maintenance and support.
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. Certain of our contracts contain multiple performance obligations, most commonly in contracts for the sale of specialized quantum computing hardware together with related maintenance and support.
We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, which may require us to seek additional equity or debt financing. Upon the closing of the Business Combination, we received approximately $636.0 million of gross proceeds.
We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, which may require us to seek additional equity or debt financing. Our primary uses of cash and investments are to fund our operations as we continue to grow our business.
Certain of our contracts contain multiple performance obligations, most commonly in contracts for specialized quantum computing systems together with related maintenance and support. Such contracts may also include access to our QCaaS. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied.
Such contracts may also include access to our QCaaS. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. When there are multiple performance obligations in a contract, we allocate the transaction price to each performance obligation based on its standalone selling price when available.
Revenue is recognized on performance obligations satisfied over time based on the efforts incurred to date relative to the total expected effort. We are currently focused on marketing our QCaaS and consulting services and have entered into, and are continuing to enter into, new contracts with customers.
For performance obligations related to providing QCaaS access, fixed fees are recognized on a straight-line basis over the access period. We are currently focused on marketing our QCaaS and consulting services and have entered into, and are continuing to enter into, new contracts with customers.
When there are multiple performance obligations in a contract, we allocate the transaction price to each performance obligation based on its standalone selling price when available. We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers.
We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. Certain products and services have limited or no history of being sold on a standalone basis, requiring us to estimate the standalone selling price.
We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. When the standalone selling price is not known, due to it being either highly variable or uncertain, we allocate the transaction price using the residual approach.
We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. Certain products and services have limited or no history of being sold on a standalone basis, requiring us to estimate the standalone selling price.
The transaction price generally includes a variable fee based on usage of our quantum computing systems and may include a fixed fee for a minimum volume of usage to be made available over a defined period of access.
We have determined that our QCaaS contracts represent a combined, stand-ready performance obligation to provide access to our quantum computing systems together with related maintenance and support. The transaction price generally consists of a fixed fee for a minimum volume of usage to be made available over a defined period of access.
We have determined that contracts that contain consulting 60 services related to co-developing quantum computing algorithms and the ability to use our quantum computing systems to run such algorithms represent a combined performance obligation that is satisfied over-time with revenue recognized based on the efforts incurred to date relative to the total expected effort.
Fixed fee arrangements may also include a variable component whereby customers pay an amount for usage over contractual minimums contained in the contracts. We have determined that contracts that contain consulting services related to co-developing quantum computing algorithms and the ability to use our quantum computing systems to run such algorithms represent a combined performance obligation that is satisfied over-time.
The increase was primarily driven by an increase of $14.9 million in payroll-related expenses, including an increase in stock-based compensation of $11.0 million, due to increased headcount, and an increase of $3.4 million in director and 64 officer liability insurance costs.
The increase was primarily driven by an increase of $10.3 million in payroll-related expenses, including an increase in stock-based compensation of $6.5 million, due to increased headcount, offset by a decrease of $2.2 million in one-time stock-based compensation costs incurred in the year ended December 31, 2022.
The amount of revenue recognized in a period may vary with respect to the allocation of arrangement consideration to performance obligations with different revenue recognition patterns and changes to existing contract terms. 68 Quantum computing systems Quantum computing systems are included within property and equipment, net on the consolidated balance sheet.
The amount of revenue recognized in a period may vary with respect to the allocation of arrangement consideration to performance obligations with different revenue recognition patterns and changes to existing contract terms. For certain contracts, revenue is recognized over time based on the efforts incurred to date relative to the total expected effort, primarily based on a cost-to-cost input measure.
The increase was primarily driven by interest income earned on our cash equivalents and available-for-sale investments from the investment of the proceeds from the Business Combination.
The increase was primarily driven by interest income earned on our cash equivalents and available-for-sale investments due to higher interest rates. Liquidity and Capital Resources As of December 31, 2023, we had cash, cash equivalents and available-for-sale securities of $455.9 million.
When the standalone selling price is not known, due to it being either highly variable or uncertain, we allocate the transaction price using the residual approach. For contracts with a fixed transaction price, the fixed fee is recognized on a straight-line basis over the access period or associated measure of progress for our consulting services contracts.
In limited situations, for certain contracts executed in prior years, when the standalone selling price was not known, due to it being either highly variable or uncertain, we allocated the transaction price using the residual approach.
Emerging Growth Company Status and Smaller Reporting Company Status Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
Therefore, we are required to comply with new or revised accounting standards as of the effective dates applicable to public companies that are not emerging growth companies. We were also a smaller reporting company as defined in the Exchange Act until June 30, 2023.
As of December 31, 2022, we have total operating lease obligations of $16.1 million, with $0.7 million payable within 12 months.
Our material cash requirements as of December 31, 2023, include operating lease commitments, including the lease of our headquarters in College Park, Maryland and our manufacturing, research and development and general office space in Bothell, Washington. As of December 31, 2023, we have total operating lease obligations of $19.8 million, with $1.9 million payable within 12 months.
Removed
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.
Added
To date, we have estimated the standalone selling price based on other contracts for similar products and services adjusted for differing terms than the contract being evaluated, as well as internal pricing guidelines and market factors. In addition, we take into consideration the estimated costs to be incurred to satisfy the performance obligation plus an appropriate profit margin.
Removed
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).
Added
For performance obligations related to specialized quantum computing hardware and consulting services, revenue is recognized over time based on the efforts incurred to date relative to the total expected effort, primarily based on a cost-to-cost input measure. We apply judgment to determine a reasonable method to measure progress and to estimate total expected effort.
Removed
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.
Added
Factors considered in these estimates include our historical performance, the availability, productivity and cost of labor, the nature and complexity of work to be performed, the effect of change orders, availability and cost of materials, and the effect of any delays in performance.
Removed
As a result of the Business Combination, Legacy IonQ is the successor to an SEC registrant and is listed on the NYSE, which will require IonQ to continue to hire additional personnel as it continues to implement procedures and processes to address public company regulatory requirements and customary practices.
Added
Interest income, net Interest income, net consists of income earned on our money market funds and other available-for-sale investments. 55 Other income (expense), net Other income (expense), net consists of gains and losses that arise from fluctuations in foreign currency exchange rates, realized losses on our available-for-sale investments, and certain other nonoperating expenses.
Removed
As a public company, we have incurred and expect to continue to incur, expenses 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.
Added
Income tax benefit (expense) Income tax expense consists of income taxes related to foreign jurisdictions in which we conduct business.
Removed
Fixed fee arrangements may also include a variable component whereby customers pay an amount for usage over contractual minimums contained in the contracts.
Added
The remaining increase is primarily due to an increase of $4.9 million in professional services fees as we scale our business as a public company.
Removed
For contracts without fixed fees, variable usage fees are billed and recognized during the period of such usage.
Added
The decrease was due to mark-to-market adjustments based on changes in the trading price for our public warrants.
Removed
We have also engaged with certain prospects who are interested in purchasing entire quantum computers, either over the cloud or for local access.
Added
To date, we have estimated the standalone selling price based on other contracts for similar products and services adjusted for differing terms than the contract being evaluated, as well as internal pricing guidelines and market factors. In addition, we take into consideration the estimated costs to be incurred to satisfy the performance obligation plus an appropriate profit margin.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We had cash, cash equivalents and available-for-sale securities of $537.8 million as of December 31, 2022. We hold our cash and cash equivalents for working capital purposes. Our cash and cash equivalents are held in cash deposits and money market funds.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We had cash, cash equivalents and available-for-sale securities of $455.9 million as of December 31, 2023. We hold our cash and cash equivalents for working capital purposes. Our cash and cash equivalents are held in cash deposits, money market funds, and U.S government and agency securities.
Our investments are held in commercial paper, corporate notes and bonds, municipal bonds, and U.S. government and agency securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increased risk. To achieve this object, we invest in highly liquid securities depending on our strategic cash needs.
Our investments are held in commercial paper, corporate notes and bonds, municipal bonds, and U.S. government and agency securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increased risk. To achieve this objective, we invest in highly liquid securities depending on our strategic cash needs.
While the company has not experienced any losses in such accounts, the recent failure of Silicon Valley Bank (“SVB”), at which we held cash and cash equivalents in 70 multiple accounts, exposed us to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation of the resolution of SVB in a manner that fully protected all depositors.
While the company has not experienced any losses in such accounts, the failure of Silicon Valley Bank (“SVB”), at which we held cash and cash equivalents in multiple accounts, exposed us to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation of the resolution of SVB in a manner that fully protected all depositors.
Further, in the event of a change of such magnitude, we would consider taking actions to further mitigate our exposure to the change. Concentration of Credit Risk We deposit our cash, restricted cash, cash equivalents and investments with financial institutions, and, at times, such balances may exceed federally insured limits.
Further, in the event of a significant decline in interest rates, we would consider taking actions to further mitigate our exposure to the change. Concentration of Credit Risk We deposit our cash, restricted cash, cash equivalents and investments with financial institutions, and, at times, such balances may exceed federally insured limits.

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