D-Wave Quantum Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
QBTS$10.68+18.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-13.
0001907982-24-000061
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001907982-24-000096
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 73 previous paragraphs and 96 current paragraphs.
42 unchanged; 22 reworded; 27 added; 9 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 10 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
Revenue increased by $0.5 million, or 28%, to $2.2 million for the three months ended June 30, 2024 as compared to $1.7 million for the three months ended June 30, 2023. The increase was due primarily to an increase in QCaaS revenue of $0.7 million stemming from an increase in the average revenue per QCaaS customer, partially offset by a decrease of $0.2 million in professional service revenue during the period ending June 30, 2024.
Current report
Sales and marketing expenses increased by $1.9 million, or 77%, to $4.4 million for the three months ended June 30, 2024 as compared to $2.5 million for the three months ended June 30, 2023. The increase was primarily driven by increases in marketing expenses of $0.8 million, personnel costs of $0.7 million and stock-based compensation expense of $0.3 million.
Current report
Term Loan debt issuance costs
Current report
Term Loan debt issuance costs decreased by $1.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, as there were no advances on the Term Loan during the three months ended June 30, 2024.
Current report
Gain (loss) on investment in marketable equity securities
Current report
Loss on investment in marketable equity securities increased by $0.2 million for the three months ended June 30, 2024 as compared to zero for the three months ended June 30, 2023. This loss resulted from the decrease in fair value of the conversion feature of the Zapata convertible notes (see Note 4 to the accompanying condensed consolidated financial statements).
Current report
Comparison of the Six Months Ended June 30, 2024 and 2023
Current report
Revenue
Current report
Cost of revenue decreased by $0.6 million, or 26%, to $1.6 million for the six months ended June 30, 2024 as compared to $2.2 million for the six months ended June 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation of $0.3 million, personnel costs of $0.2 million and quantum computing infrastructure costs of $0.1 million, respectively.
Current report
Research and Development Expenses
Current report
Research and development expenses decreased by $3.6 million, or 18%, to $16.9 million for the six months ended June 30, 2024 compared to $20.5 million for the six months ended June 30, 2023. The decrease was primarily driven by decreases in stock-based compensation expenses of $2.0 million, personnel costs of $0.8 million, fabrication expenses of $0.5 million and facilities expenses of $0.3 million.
Current report
General and Administrative Expenses
Current report
General and administrative expenses decreased by $5.8 million, or 28%, to $15.0 million for the six months ended June 30, 2024 as compared to $20.9 million for the six months ended June 30, 2023. The decrease was primarily driven by decreases in professional fees of $3.8 million, stock-based compensation expense of $1.7 million and insurance costs of $0.6 million.
Current report
Sales and Marketing Expenses
Current report
Sales and marketing expenses increased by $2.1 million, or 39%, to $7.5 million for the six months ended June 30, 2024 as compared to $5.4 million for the six months ended June 30, 2023. The increase was primarily driven by increases in personnel costs of $1.7 million, marketing expenses of $0.3 million and stock-based compensation expense of $0.3 million.
Current report
Other Income (Expense), net
Current report
Interest Expense
Current report
Interest expense increased by $1.5 million, or 192%, to $2.3 million for the six months ended June 30, 2024 as compared to $0.8 million for the six months ended June 30, 2023. The increase is primarily due to accrued interest related to the Term Loan, which was advanced to us in two tranches, each in an aggregate principal amount of $15.0 million, on April 14, 2023 and July 13, 2023, respectively. Refer to Note 6 to the accompanying unaudited condensed consolidated financial statements for further details.
Current report
Term Loan debt issuance costs
Current report
Term Loan debt issuance costs decreased by $1.4 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, as there were no advances on the Term Loan during the six months ended June 30, 2024.
Current report
Gain (loss) on investment in marketable equity securities
Current report
Other income (expense), net
Current report
Other income (expense), net increased by $2.6 million or 266%, to $1.6 million for the six months ended June 30, 2024 as compared to $(1.0) million for the six months ended June 30, 2023. The increase was primarily driven by the net impact of foreign exchange gains of $2.1 million and increase in interest income of $0.4 million.
Current report
On May 24, 2024, the Company entered into an at-the-market sales agreement (the “ATM Agreement”) with Needham & Company, LLC, B. Riley Securities, Inc. and Roth Capital Partners, LLC (collectively, the “Agents”), pursuant to which the Company may sell from time to time, at its option, shares of the Company’s common stock, par value $0.0001 per share, through or to the Agents, as sales agent or principal. In accordance with the terms of the ATM Agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $100.0 million from time to time through or to the Agents, as sales agent or principal. During the six months ended June 30, 2024, the Company has received $9.1 million in proceeds through the issuance of 8,279,098 Common Shares under the Sales Agreement. As of June 30, 2024, D-Wave had $90.7 million of issuance capacity under the ATM Agreement.
Current report
The sale, if any, of shares of the Company’s common stock under the ATM Agreement will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the New York Stock Exchange or any other trading market for the Company’s common stock. Subject to the terms and conditions of the Sales Agreement, the Agents will use commercially reasonable efforts to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions.
Current report
The compensation payable to the Agents as sales agent shall be up to 3.0% of the gross sales price of the shares sold through or to the Agents pursuant to the ATM Agreement. In addition, the Company will reimburse the Agents for certain expenses incurred in connection with the ATM Agreement, and the Company has agreed in the ATM Agreement to provide indemnification and contribution to the Agents against certain liabilities, including liabilities under the Securities Act.
Current report
The Company is not obligated to make any sales of shares of common stock under the ATM Agreement. The offering of common stock pursuant to the ATM Agreement will terminate upon (a) the election of the Agents upon the occurrence of certain adverse events, (b) five business days’ advance notice from the Company to the Agents or five days’ advance notice from any of the Agents to the Company or (c) otherwise by mutual agreement of the parties pursuant to the terms of the ATM Agreement.
Removed paragraphs (9)
Previous report
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. High interest and inflation rates also present a recent challenge impacting the U.S. and Canadian economies and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. 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 and employee availability and wage increases, which may result in additional stress on our working capital resources.
Previous report
Cost of Revenue
Previous report
Operating Expenses
Previous report
Cost of Revenue
Previous report
Operating Expenses
Previous report
Sales and marketing expenses remained steady for the three months ended March 31, 2024, in comparison to the same period in 2023.
Previous report
Gain on investment in marketable equity securities
Previous report
As of December 31, 2023, the Company was not in compliance with certain continued listing standards of the New York Stock Exchange ("NYSE"). On March 1, 2024, the NYSE provided D-Wave with a notification letter of recompliance based on a calculation of the Company’s average closing share price for the 30 trading days ended February 29, 2024, which reflected an average closing share price above the NYSE’s $1.00 minimum requirement. D-Wave will continue to be traded on the NYSE, subject to its continued compliance with all applicable listing standards.
Previous report
If the Company is unable to maintain compliance with the continued listing standards of the NYSE and is not able to cure any violations within the time periods allotted by the NYSE, if any, it will result in the delisting of the Company’s common stock from the NYSE, which could negatively impact the trading price, trading volume and liquidity of, and have other material adverse effects on, the Company’s common stock and its ability to raise capital.
Reworded paragraphs (22)
Previous wording
During the three months ended March 31, 2024 and 2023, we generated revenue totaling $2.5 million and $1.6 million, respectively. We have incurred significant operating losses since inception. For the three months ended March 31, 2024 and 2023, our net losses were $17.3 million and $24.4 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of March 31, 2024, we had an accumulated deficit of $500.4 million.
Current wording
During the three months ended June 30, 2024 and 2023, we generated revenue totaling $2.2 million and $1.7 million, respectively. During the six months ended June 30, 2024 and 2023, we generated revenue totaling $4.6 million and $3.3 million, respectively. We have incurred significant operating losses since inception. For the three months ended June 30, 2024 and 2023, our net losses were $17.8 million and $26.2 million, respectively. For the six months ended June 30, 2024 and 2023, our net losses were $35.1 million and $50.6 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of June 30, 2024, we had an accumulated deficit of $518.2 million.
Previous wording
Unfavorable conditions in the economy in the United States, Canada and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, banking collapses and related uncertainty, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, Israel or elsewhere, could cause a decrease in business investments on our products and negatively affect the growth of our business and our results of operations.
Current wording
Unfavorable conditions in the economy in the United States, Canada and abroad, including conditions resulting from changes in inflationary pressure, gross domestic product growth, financial and credit market fluctuations, banking collapses and related uncertainty, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, Israel or elsewhere, could cause a decrease in business investments on our products and negatively affect the growth of our business and our results of operations.
Previous wording
We currently generate our revenue primarily through subscription sales to access our QCaaS cloud platform and professional services related to the development and implementation of quantum computing applications. QCaaS revenue is recognized on a ratable basis over the contract term, which generally ranges from one month to two years. Professional services revenue is recognized over time on a percentage of completion basis using the costs incurred input measure of progress.
Current wording
We currently generate our revenue primarily through subscription sales to access our QCaaS cloud platform and professional services related to the development and implementation of quantum computing applications and delivery of quantum computing application training. QCaaS revenue is recognized on a ratable basis over the contract term, which generally ranges from one month to two years. Professional services revenue is recognized over time on a percentage of completion basis using the costs incurred input measure of progress.
Previous wording
We expect our research and development expenses will trend upward on an absolute dollar basis for the foreseeable future as we continue to invest in research and development efforts to enhance the performance of our annealing quantum computers, to complete the development of our gate model quantum computer, and to broaden the functionality, improve the reliability, availability and scalability of our QCaaS cloud platform. If in the future we receive government grants and research incentives, which have historically offset a portion of research and development costs, these costs could decrease in absolute dollars. Also, in the short term, decreases in share based compensation expenses may offset the expected long-term upward trend.
Current wording
We expect our research and development expenses will trend upward on an absolute dollar basis for the foreseeable future as we continue to invest in research and development efforts to enhance the performance of our annealing quantum computers, to complete the development of our gate model quantum computer, and to broaden the functionality, improve the reliability, availability and scalability of our QCaaS cloud platform. If in the future we receive government grants and research incentives, which have historically offset a portion of research and development costs, these costs could decrease in absolute dollars. Also, non-cash share based compensation expenses may cause downward fluctuations in these costs from time to time.
Previous wording
We expect our general and administrative expenses to decrease in absolute dollars in the near term due to significant investments in scaling up our ability to operate as a public company made in prior years. However, in longer term future periods we expect general and administrative expenses to increase in absolute dollars as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act.
Current wording
We expect our general and administrative expenses to decrease in absolute dollars in the near term due to significant investments in scaling up our ability to operate as a public company made in prior years. However, in the longer term we expect general and administrative expenses to increase in absolute dollars as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act. However, non-cash stock-based compensation expenses may cause downward fluctuations in these costs from time to time.
Previous wording
Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, direct advertising, marketing and promotional material costs, sales commission expense, consulting fees and allocated facility costs for our sales and marketing functions. We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, expand our global customer base, and broaden our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future. However, non-cash expenses like stock-based compensation could decrease these costs in the short term.
Current wording
Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, direct advertising, marketing and promotional material costs, sales commission expense, consulting fees and allocated facility costs for our sales and marketing functions. We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, expand our global customer base, and broaden our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future. However, non-cash stock-based compensation expenses may cause downward fluctuations in these costs from time to time.
Previous wording
Cost of revenue decreased by $0.4 million, or 31%, to $0.8 million for the three months ended March 31, 2024 as compared to $1.2 million for the three months ended March 31, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation, personnel costs and quantum computing infrastructure costs of $0.2 million, $0.1 million and $0.1 million, respectively.
Current wording
Cost of revenue decreased by $0.2 million, or 21%, to $0.8 million for the three months ended June 30, 2024 as compared to $1.0 million for the three months ended June 30, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation and personnel costs of $0.1 million and $0.1 million, respectively.
Previous wording
Research and development expenses decreased by $2.4 million, or 22%, to $8.5 million for the three months ended March 31, 2024 compared to $10.9 million for the three months ended March 31, 2023. In particular, the decrease was primarily driven by decreases in stock-based compensation expenses of $1.6 million, fabrication expenses of $0.3 million, other personnel costs of $0.2 million and facilities expenses of $0.2 million.
Current wording
Research and development expenses decreased by $1.2 million, or 12%, to $8.4 million for the three months ended June 30, 2024 compared to $9.5 million for the three months ended June 30, 2023. In particular, the decrease was primarily driven by decreases in personnel costs of $0.6 million, stock-based compensation expenses of $0.4 million and fabrication and related expenses of $0.3 million.
Previous wording
General and administrative expenses decreased by $3.7 million, or 33%, to $7.6 million for the three months ended March 31, 2024 as compared to $11.3 million for the three months ended March 31, 2023. The decrease was primarily driven by decreases in professional fees of $2.1 million, stock-based compensation expense of $1.3 million and insurance costs of $0.3 million, partially offset by an increase in personnel costs of $0.4 million.
Current wording
General and administrative expenses decreased by $2.1 million, or 22%, to $7.5 million for the three months ended June 30, 2024 as compared to $9.6 million for the three months ended June 30, 2023. The decrease was primarily driven by decreases in professional fees of $1.7 million, stock-based compensation expense of $0.4 million and insurance costs of $0.3 million, partially offset by increases in bad debt expenses of $0.2 million.
Previous wording
Interest expense increased by $0.9 million, or 438%, to $1.1 million for the three months ended March 31, 2024 as compared to $0.2 million for the three months ended March 31, 2023. The increase is primarily due to accrued interest related to the Term Loan, which commenced in the second quarter of 2023. Refer to Note 6 to the accompanying unaudited condensed consolidated financial statements for further details.
Current wording
Interest expense increased by $0.6 million, or 102%, to $1.2 million for the three months ended June 30, 2024 as compared to $0.6 million for the three months ended June 30, 2023. The increase is primarily due to accrued interest related to the Term Loan, which was advanced to us in two tranches, each in an aggregate principal amount of $15.0 million, on April 14, 2023 and July 13, 2023, respectively. Refer to Note 6 to the accompanying unaudited condensed consolidated financial statements for further details.
Previous wording
Change in fair value of Term Loan increased by $1.2 million for the three months ended March 31, 2024 as compared to zero for the three months ended March 31, 2023. As previously mentioned, on April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of shares of D-Wave’s common stock, par value $0.0001, (the "Common Share") under a purchase agreement with Lincoln Park on June 16, 2022 (the "Purchase Agreement").
Current wording
Fair value of Term Loan increased by $0.28 million for the three months ended June 30, 2024 as compared to an increase of $0.35 million for the three months ended June 30, 2023. On April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of shares of D-Wave’s common stock, par value $0.0001, (the "Common Share") under a purchase agreement with Lincoln Park on June 16, 2022 (the "Purchase Agreement").
Previous wording
Fair value of warrant liabilities increased by $2.7 million for the three months ended March 31, 2024 as compared to a decrease of $0.6 million for the three months ended March 31, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 to the accompanying condensed consolidated financial statements).
Current wording
Fair value of warrant liabilities decreased by $2.2 million for the three months ended June 30, 2024 as compared to an increase of $2.2 million for the three months ended June 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).
Previous wording
Other income (expense), net increased by $1.3 million or 901%, to $1.1 million for the three months ended March 31, 2024 as compared to $(0.1) million for the three months ended March 31, 2023. The increase was primarily driven by the net impact of foreign exchange gains and losses of $1.1 million and increase in interest income of $0.2 million.
Current wording
Other income (expense), net increased by $1.3 million or 156%, to $0.5 million for the three months ended June 30, 2024 as compared to $(0.8) million for the three months ended June 30, 2023. The increase was primarily driven by the net impact of foreign exchange gains of $1.1 million and increase in interest income of $0.2 million.
Previous wording
Revenue increased by $0.9 million, or 56%, to $2.5 million for the three months ended March 31, 2024 as compared to $1.6 million for the three months ended March 31, 2023, with the increase due primarily to an increase in QCaaS revenue of $0.5 million, due to an increase in the number of QCaaS customers and average revenue per QCaaS customer, as well as an increase of $0.3 million in professional services revenue, primarily driven by an increase in projects that enable our customers to identify and implement applications that leverage our QCaaS cloud platform.
Current wording
Revenue increased by $1.4 million, or 41%, to $4.6 million for the six months ended June 30, 2024 as compared to $3.3 million for the six months ended June 30, 2023, with the increase due primarily to an increase in QCaaS revenue of $1.3 million, primarily due to an increase in the average revenue per QCaaS customer, as well as an increase of $0.1 million in professional service revenue, primarily driven by an increase in training revenue.
Previous wording
Gain on investment in marketable equity securities increased by $1.7 million for the three months ended March 31, 2024 as compared to zero for the three months ended March 31, 2023. On January 5, 2024, an investee of the Company was acquired for a combination of cash and stock in an orderly transaction. Consequently, the carrying value of the Company's investment was adjusted based on the consideration received, resulting in a net gain of $1.7 million.
Current wording
Gain (loss) on investment in marketable equity securities increased by $1.5 million for the six months ended June 30, 2024 as compared to zero for the six months ended June 30, 2023. On January 5, 2024, an investee of the Company was acquired for a combination of cash and stock in an observable orderly transaction. Consequently, the carrying value of the Company's investment was adjusted based on the consideration received, resulting in a net gain of $1.7 million, partially offset by a loss associated with the fair value of the conversion feature of the Zapata convertible notes (see Note 4 to the accompanying condensed consolidated financial statements).
Previous wording
Since its inception, the Company has incurred net losses and negative cash flows from operations. As of March 31, 2024, the Company had an accumulated deficit of $500.4 million. For the three months ended March 31, 2024 and 2023, the Company incurred a net loss of $17.3 million and $24.4 million, respectively, and the Company had net cash outflows from operating activities of $12.1 million and $13.6 million, respectively. As of March 31, 2024, the Company had cash of $27.3 millionand working capital (current assets less current liabilities) of $22.8 million. Additionally, total liabilities exceeded total assets at March 31, 2024 by $37.0 million. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.
Current wording
Since its inception, the Company has incurred net losses and negative cash flows from operations. As of June 30, 2024, the Company had an accumulated deficit of $518.2 million. For the three months ended June 30, 2024 and 2023, the Company incurred a net loss of $17.8 million and $26.2 million, respectively. For the six months ended June 30, 2024 and 2023, the Company incurred a net loss of $35.1 million and $50.6 million, respectively. For the six months ended June 30, 2024 and 2023, the Company had net cash outflows from operating activities of $26.6 million and $29.0 million, respectively. As of June 30, 2024, the Company had cash of $40.9 million and working capital (current assets less current liabilities) of $4.0 million. Additionally, total liabilities exceeded total assets at June 30, 2024 by $21.5 million. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.
Previous wording
On April 13, 2023 (the "Closing Date"), the Company finalized a Term Loan and Security Agreement ("Term Loan") with PSPIB Unitas Investments II Inc. ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder. The Term Loan, outlined in Note 6 - Loans payable, net, provides$50.0 million in three tranches, with financial performance requirements. The first two tranches of$15.0 million each were disbursed on April 14, 2023, and July 13, 2023, respectively. The third tranche of $20.0 million is contingent on meeting specific criteria, including a non-dilutive financing closure. There can be no assurance that the Company will be able to meet the conditions necessary to draw on the third tranche. As of March 31, 2024, the Company was in compliance with the covenants under the Term Loan.
Current wording
On April 13, 2023 (the "Closing Date"), the Company finalized a Term Loan and Security Agreement ("Term Loan") with PSPIB Unitas Investments II Inc. ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder. The Term Loan, outlined in Note 6 - Loans payable, net, provides$50.0 million in three tranches, with financial performance requirements. The first two tranches of$15.0 million each were disbursed on April 14, 2023, and July 13, 2023, respectively. The third tranche of $20.0 million is contingent on meeting specific criteria, including a non-dilutive financing closure. There can be no assurance that the Company will be able to meet the conditions necessary to draw on the third tranche. As of August 7, 2024, the Company had prepaid $15.8 million for the Term Loan (see Note 12). According to the terms of the sixth amendment, this prepayment qualifies for the prepayment premium exemption for up to $20.0 million in gross proceeds received (see Note 6). On August 7, 2024, the Company entered into the Limited Waiver Agreement with PSPIB, relating to the Term Loan. Refer to Note 12 - Subsequent events for further details. Pursuant to the terms of the Limited Waiver Agreement, the Company was granted a waiver of compliance for the 2024 second quarter permitted variance covenant. The requirement for a waiver resulted in reclassification of the loan balance to current liabilities on the condensed consolidated balance sheets.
Previous wording
In conjunction with the Merger, the Company and D-Wave Systems entered into the Purchase Agreement with Lincoln Park Capital Fund, LLC ("Lincoln Park") on June 16, 2022, which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to$150.0 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding Common Shares and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the three months ended March 31, 2024, the Company did not issue any Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future.
Current wording
In conjunction with the Merger, the Company and D-Wave Systems entered into the Purchase Agreement with Lincoln Park Capital Fund, LLC ("Lincoln Park") on June 16, 2022, which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to$150.0 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding Common Shares and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the six months ended June 30, 2024, the Company has received$20.3 million in proceeds through the issuance of 14,948,550 Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future. As of June 30, 2024, D-Wave had $61.8 million of issuance capacity under the Purchase Agreement.
Previous wording
To the extent that sufficient capital is not obtained through the cash received in connection with the proceeds of the Term Loan or the issuance of Common Shares under the Purchase Agreement with Lincoln Park, management will be required to obtain additional capital through the issuance of debt and/or equity, or other arrangements. However, there can be no assurance that D-Wave will be able to raise additional capital when needed or under acceptable terms. The issuance of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to the currently outstanding common stock. Any future debt may contain covenants and limit D-Wave’s ability to pay dividends or make other distributions to stockholders. If D-Wave is unable to obtain additional financing, operations will be scaled back or discontinued.
Current wording
To the extent that sufficient capital is not obtained through the cash received in connection with the proceeds of the Term Loan or the issuance of Common Shares under the Purchase Agreement with Lincoln Park and the ATM Agreement, management will be required to obtain additional capital through the issuance of debt and/or equity, or other arrangements. However, there can be no assurance that D-Wave will be able to raise additional capital when needed or under acceptable terms. The issuance of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to the currently outstanding common stock. Any future debt may contain covenants and limit D-Wave’s ability to pay dividends or make other distributions to stockholders. If D-Wave is unable to obtain sufficient financing, operations will be scaled back or discontinued.
Previous wording
For the three months ended March 31, 2024, net cash used in operating activities was $12.1 million, a decrease of $1.5 million from $13.6 million for the three months ended March 31, 2023. The change is primarily due to a decrease in net loss of $7.1 million, offset by a decrease in noncash items of $3.1 million and a decrease in cash released from working capital of $2.5 million. The decrease in noncash items was primarily due to a decrease in stock-based compensation of $3.2 million, an increase in fair value of Term Loan of $1.2 million and a gain on marketable securities of $1.7 million, offset by a net increase in fair value of warrant liabilities of $3.3 million.
Current wording
For the six months ended June 30, 2024, net cash used in operating activities was $26.6 million, a decrease of $2.5 million from $29.0 million for the six months ended June 30, 2023. The change is primarily due to a decrease in net loss of $15.5 million, offset by a decrease in noncash items of $9.1 million and a decrease in cash released from working capital of $4.0 million. The decrease in noncash items was primarily due to a decrease in stock-based compensation of $3.7 million, an increase in unrealized foreign exchange gain of $2.2 million, a gain on marketable securities of $1.5 million, a decrease in fair value of Term Loan of $1.3 million and a decrease in debt issuance costs of $0.6 million, partially offset by an increase in non-cash interest expense of $1.5 million. The decrease in working capital was primarily driven by a decrease in change in prepaid expenses and other current assets of $2.0 million, a decrease in change in deferred revenue of $1.3 million and an increase in change in trade accounts payable of $0.8 million.
Previous wording
Net cash used in investing activities during the three months ended March 31, 2024 was $1.2 million, an increase of $1.1 million in cash used in investing activities from $0.1 million for the three months ended March 31, 2023. The increase is primarily due to purchase of convertible note of $1.0 million and an increase in purchase of property and equipment of $0.2 million. On February 8, 2024, the Company purchased a convertible Senior Secured Note with a principal amount of $1.0 million from Zapata. Refer to Note 2 and Note 4 to the unaudited condensed consolidated financial statements for further details.
Current wording
Net cash used in investing activities during the six months ended June 30, 2024 was $1.8 million, an increase of $1.7 million in cash used in investing activities from $0.1 million for the six months ended June 30, 2023. The increase is primarily due to purchase of convertible note of $1.0 million and an increase in purchase of property and equipment of $0.8 million. On February 8, 2024, the Company purchased a convertible Senior Secured Note with a principal amount of $1.0 million from Zapata. Refer to Note 2 and Note 4 to the unaudited condensed consolidated financial statements for further details.
Previous wording
Net cash used in financing activities during the three months ended March 31, 2024 was $0.7 million, a decrease of $16.3 million from cash provided by financing activities of $15.6 million for the three months ended March 31, 2023. The decrease is primarily due to absence of Common Shares issuance to Lincoln Park under the Purchase Agreement during the three months ended March 31, 2024 and the payment of tax withheld for common stock issued under stock-based compensation plans of $0.7 million.
Current wording
Net cash provided by financing activities during the six months ended June 30, 2024 was $27.9 million, a decrease of $1.8 million from cash provided by financing activities of $29.7 million for the six months ended June 30, 2023. The decrease is primarily due to a decrease in debt financing proceeds of $14.4 million, a decrease in proceeds from the issuance of common stock upon exercise of stock options of $1.2 million, and the payment of tax withheld for common stock issued under stock-based compensation plans of $1.4 million. The decrease was partially offset by an increase in proceeds from the issuance of common stock pursuant to the Lincoln Park Purchase Agreement of $4.6 million, proceeds from the issuance of common stock pursuant to the ATM agreement of $9.1 million and a decrease in debt repayments of $1.5 million.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
The following table sets forth our results of operations for the periods indicated (in thousands):
Current report — wording carried from elsewhere
Change in fair value of Term Loan
Current report — wording carried from elsewhere
Fair value of Term Loan decreased by $0.9 million for the six months ended June 30, 2024 as compared to an increase of $0.3 million for the six months ended June 30, 2023. As previously mentioned, on April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting of the Term Loan (see Note 2 to the accompanying condensed consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s condensed consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of shares of D-Wave’s Common Shares under the Purchase Agreement.
Current report — wording carried from elsewhere
Change in fair value of warrant liabilities
Current report — wording carried from elsewhere
Fair value of warrant liabilities increased by $0.5 million to $2.1 million for the six months ended June 30, 2024 as compared to an increase of $1.5 million for the six months ended June 30, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 7 to the accompanying condensed consolidated financial statements).