D-Wave Quantum Inc. Form 8-K Summary
Business Context and Reporting Period
D-Wave Quantum Inc. filed a Form 8-K reporting that its previously issued consolidated financial statements for the three and nine months ended September 30, 2022 should no longer be relied upon. The Audit Committee approved an amended Form 10-Q with restated financial statements, which the company intended to file on April 17, 2023. The report is dated April 13, 2023 and was signed on April 17, 2023.
Financial Metrics and Liquidity
The filing does not provide revised revenue, profit or loss, cash flow, margins, debt, liquidity, or other financial statement amounts. It states that previously reported amounts may be affected by the identified accounting errors.
Material Changes Versus the Prior Comparable Period
- The September 30, 2022 financial statements and related interim financial information are no longer reliable and will be restated.
- The company determined that its Lincoln Park purchase agreement should have been accounted for as a derivative financial instrument at fair value, with changes in fair value recorded in operations.
- Commitment Shares issued to Lincoln Park should have been treated as issuance costs and expensed rather than recorded in prepaid expenses and other current assets.
- The company was not eligible for Scientific Research and Experimental Development investment tax credits after February 7, 2022, when the merger transaction agreement was signed; eligibility was initially assumed to continue through the August 5, 2022 merger closing.
- Deferred revenue was incorrectly recognized for services not yet rendered and for which no cash had been received.
- Stock-based compensation errors involved forfeiture estimates, valuation inputs for August 18, 2022 option awards, the use of a $5.72 share price instead of the $10.07 NYSE closing price, volatility assumptions, and expense classification across operating expense categories, including cost of revenue.
- The Strategic Innovation Fund loan repayment model used a repayment period of one year after achievement of the revenue benchmark instead of the two-year period required under the loan terms.
- Prepaid expenses and accounts payable were both overstated for unpaid invoices included in prepaid expenses at the balance sheet date.
Guidance, Outlook, Risks, and Unusual Items
The filing provides no operating guidance or revised outlook. The principal unusual item is the planned restatement of the September 30, 2022 interim financial statements. The accounting errors could affect reported assets, liabilities, revenue, expenses, net loss, stockholders’ equity, and related disclosures, but the filing does not quantify the impact.
Important Facts for Investors to Verify
- Review the amended Form 10-Q and restated financial statements filed for the three and nine months ended September 30, 2022.
- Verify the quantified effects of each correction on revenue, net loss, cash flow, assets, liabilities, equity, and per-share data.
- Assess the final fair-value accounting for the Lincoln Park purchase agreement and the related treatment of commitment shares.
- Review any changes to the company’s internal controls, disclosure controls, and auditor conclusions resulting from the restatement.
- Confirm the accounting and repayment assumptions for the Strategic Innovation Fund loan and the company’s remaining liquidity after the corrections.