Rigetti Computing, Inc. — Form 8-K Summary
Report date: November 14, 2022. The filing under Item 4.02 reports that previously issued unaudited interim condensed consolidated financial statements for the quarters ended March 31, 2022 and June 30, 2022 should no longer be relied upon and will be restated.
Business Context and Reporting Period
The issues relate primarily to accounting for sponsor vesting shares and other complex financial instruments following the March 2, 2022 business combination with Supernova Partners Acquisition Company II Ltd. The Company also disclosed a delayed filing of its Form 10-Q for the three and nine months ended September 30, 2022.
Financial Metrics and Material Accounting Items
- Sponsor vesting shares: 2,479,000 promote sponsor shares and 580,273 sponsor redemption-based vesting shares are liability-classified earn-out instruments subject to market-based vesting conditions.
- Valuation revision: The Company determined that the Monte Carlo valuation should place greater weight on the volatility of its publicly traded warrants.
- Expected impact: The revised methodology is expected to decrease earn-out liabilities and the reported change in fair value of the earn-out liability, while increasing net loss and net loss per share for the affected periods.
- Electricity costs: The Company is evaluating approximately $1.6 million of unpaid electrical utility fees relating to usage at its Berkeley location since 2019. Expected effects include higher accrued expenses and other current liabilities, research and development expense, operating expense, operating loss, and net loss.
- Warrant liabilities: The Company expects to correct an immaterial Trinity Capital warrant valuation error in the March 31, 2022 restatement and reverse a prior correction recorded for the June 30, 2022 period. It is also reassessing the fair value of private warrants treated as derivative warrant liabilities.
The filing does not provide clear revised dollar amounts for the earn-out liability, net loss, net loss per share, warrant liabilities, or other affected financial statement line items.
Material Changes Versus Prior Reporting
- The March 31 and June 30, 2022 interim financial statements and related investor communications should no longer be relied upon.
- The Company intends to file amended Forms 10-Q, designated Form 10-Q/A Amendment No. 1, for both affected quarters.
- The September 30, 2022 Form 10-Q was not filed by the prescribed deadline; the Company filed a Form 12b-25 citing ongoing work to determine adjustments and related control impacts.
- Additional adjustments may be identified during the continuing assessment.
Outlook, Controls, Risks, and Unusual Items
Management and the Audit Committee are assessing the effects on internal control over financial reporting and disclosure controls and procedures. The assessment may result in a material weakness related to accounting for complex instruments, in addition to the previously reported material weakness involving review controls over complex warrant instruments. Disclosure controls and procedures had previously been determined ineffective for the first and second quarters of 2022.
Key uncertainties include the final valuation of sponsor vesting shares and private warrants, the accounting for unpaid electricity fees, the possibility of further financial statement adjustments, the timing of the amended filings, and whether additional material weaknesses will be identified. The Company discussed these matters with BDO USA, LLP.
Investor Verification Checklist
- Verify the amended Forms 10-Q for March 31 and June 30, 2022 and compare all restated balance sheet, income statement, cash flow, and per-share figures.
- Confirm the final fair value methodology and recorded liability for the sponsor vesting shares.
- Review the final treatment and amount of the approximately $1.6 million of unpaid electricity fees.
- Check the corrected Trinity Capital warrant valuation and any revisions to private warrant liabilities.
- Assess any newly reported material weaknesses and remediation plans for internal and disclosure controls.
- Confirm the filing date and contents of the delayed September 30, 2022 Form 10-Q.