UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from_______to_______
Commission File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of October 30, 2024, there were
IONQ, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
1 |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
1 |
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2 |
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3 |
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4 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
Item 3. |
35 |
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Item 4. |
35 |
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36 |
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Item 1. |
36 |
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Item 1A. |
37 |
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Item 2. |
67 |
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Item 3. |
67 |
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Item 4. |
67 |
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Item 5. |
67 |
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Item 6. |
68 |
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GLOSSARY OF SELECTED TERMINOLOGY
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the following terms have the respective meaning as defined below:
Algorithmic Qubit: A metric describing the number of “useful” qubits in a system, considering noise, connectivity limitations, and other sources of error.
Barium: A silvery rare-earth metal, atomic number 56, that can be used as a qubit for quantum computing. IonQ has recently started exploring barium as an alternative qubit species because its slightly more complex structure offers higher fundamental gate and readout fidelities when controlled correctly, and because it primarily interacts with light in the visible spectrum, allowing additional opportunities for standard fiber optic technologies in parts of the system.
Classical Computer: A computer that stores and calculates information using classical mechanics: information is stored as a 0 or a 1, in a transistor.
Coherence Time: A measurement of the “lifetime” of a qubit, coherence time measures how long a qubit can maintain coherent phase, which allows it to successfully retain quantum information and behave in the ways necessary for it to be part of a useful computation.
Entanglement: A property of quantum mechanics where two particles, even when physically separated, behave in ways conditionally dependent on each other.
Error-Corrected Qubit: Groups of physical qubits that are logically combined using techniques called error correction encoding with the goal of having them act together as one much higher-quality qubit for computational purposes.
Fault Tolerance: A system’s ability to accommodate errors in its operation without losing the information it is processing and/or storing.
Gate Fidelity/Error Rate: A measure of how much noise (or error) is introduced in each operation during a quantum algorithm.
Ion Trap: An apparatus that holds ions in place, ready for computation, in a trapped-ion quantum computer.
Measurement: The process at the end of a quantum computation where the exponentially large computational space available during computation collapses down to a binary string in order to produce readable results.
Multi-Core QPU: A single quantum processor that has multiple quantum compute zones that can compute in parallel and be entangled via moving and recombining ion chains.
Noise: For quantum computers to compute correctly, they must be isolated from the environment around them. Any interaction with the environment, or imperfection in the control systems that perform gates, introduces noise. As noise accumulates, the overall likelihood that an algorithm will produce a successful answer goes down. With too much noise, a quantum computer is no longer useful at all.
Photonic Interconnect: A connection between two qubits using photons, typically via a fiber optic cable. A photonic interconnect is used to remotely connect two qubits.
Physical Qubit: The hardware implementation of a qubit in a quantum computer.
Quantum Algorithm: A series of quantum logic gates that together solve a specific problem.
Quantum Bit (Qubit): The quantum equivalent of bits in classical computing, able to exist in a superposition of states and be entangled with other qubits.
Quantum Circuit: A collection of quantum logic gates to be run in a specific order on a given set of qubits.
Quantum Logic Gate(s): Gates used to manipulate the state of qubits, including putting them in superposition states and creating entanglement.
Quantum Processing Unit (QPU): A complete system made up of physical qubits and the apparatus for controlling them.
Superconducting Qubit: A qubit implementation that uses specialized silicon-fabricated chips at ultracold temperatures.
Synthetic (Fabricated) Qubit: A qubit that uses an engineered or “manufactured” quantum system, rather than a naturally occurring one. Examples of synthetic (fabricated) qubits include superconducting transmon qubits and semiconductor quantum dot qubits.
Trapped Ion Qubit: A qubit implementation using charged atomic particles (ions) suspended in vacuum and manipulated with lasers.
WHERE YOU CAN FIND MORE INFORMATION
Investors and others should note that we announce material financial information to our investors using our investor relations website at investors.ionq.com, press releases, filings with the U.S. Securities and Exchange Commission (“SEC”) and public conference calls and webcasts. In compliance with our disclosure obligations under Regulation FD, we also use IonQ’s blog and the following social media channels as a means of disclosing information about the Company, our products and services, our planned financials and other announcements and attendance at upcoming investor and industry conferences, and other matters:
Information posted through these social media channels may be deemed material. Accordingly, in addition to reviewing our press releases, SEC filings, public conference calls and webcasts, investors should monitor IonQ’s blog and our other social media channels. The information we post through these channels is not part of this Quarterly Report on Form 10-Q. The channel list on how to connect with us may be updated from time to time and is available on our investor relations website.
PART 1-FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
IonQ, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except share and per share data)
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September 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Other noncurrent assets |
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Total Assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Current portion of operating lease liabilities |
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Unearned revenue |
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Current portion of stock option early exercise liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Unearned revenue, net of current portion |
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Stock option early exercise liabilities, net of current portion |
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Warrant liabilities |
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Other noncurrent liabilities |
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Total liabilities |
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$ |
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$ |
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(see Note 7) |
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Stockholders’ Equity: |
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Common stock $ |
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$ |
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$ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
) |
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Total stockholders’ equity |
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$ |
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$ |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
IonQ, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Costs and expenses: |
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Cost of revenue (excluding depreciation and amortization) |
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Research and development |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Total operating costs and expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Gain (loss) on change in fair value of warrant liabilities |
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( |
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( |
) |
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( |
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Interest income, net |
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Other income (expense), net |
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( |
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Loss before income tax expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Income tax benefit (expense) |
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( |
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( |
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( |
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( |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders— |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted average shares used in computing net loss per share |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
IonQ, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
(in thousands)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income (loss), net of reclassification adjustments: |
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Change in unrealized gain (loss) on available-for-sale securities, net |
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Currency translation adjustments |
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( |
) |
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( |
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Total other comprehensive income (loss) |
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Total comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
IonQ, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
(in thousands, except share data)
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Stockholders’ Equity |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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||||||
Balance, June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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( |
) |
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( |
) |
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Other comprehensive income (loss) |
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— |
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Stock options exercised |
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Vesting of restricted common stock |
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Issuance of common stock from the |
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Stock-based compensation |
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— |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Stockholders’ Equity |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
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Net loss |
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— |
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( |
) |
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( |
) |
|||
Other comprehensive income (loss) |
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— |
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Stock options exercised |
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Vesting of restricted common stock |
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Issuance of common stock from the |
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Stock-based compensation |
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— |
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Warrants exercised |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IonQ, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
(in thousands, except share data)
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Stockholders’ Equity |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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||||
Net loss |
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— |
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( |
) |
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( |
) |
|||
Other comprehensive income (loss) |
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— |
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Stock options exercised |
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Vesting of restricted common stock |
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Issuance of common stock from the |
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Stock-based compensation |
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— |
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|||||
Balance, September 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Stockholders’ Equity |
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Accumulated |
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||||||
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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||||||
Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Net loss |
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— |
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( |
) |
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( |
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Other comprehensive income (loss) |
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— |
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Stock options exercised |
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Vesting of restricted common stock |
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Issuance of common stock from the |
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Stock-based compensation |
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— |
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Warrants exercised |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IonQ, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
|
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Nine Months Ended |
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2024 |
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2023 |
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||
Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Non-cash research and development arrangements |
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Stock-based compensation |
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(Gain) loss on change in fair value of warrant liabilities |
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( |
) |
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|
Amortization of premiums and accretion of discounts on available-for-sale securities |
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( |
) |
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( |
) |
Other, net |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other current assets |
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( |
) |
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( |
) |
Accounts payable |
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( |
) |
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Accrued expenses |
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Unearned revenue |
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( |
) |
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( |
) |
Other assets and liabilities |
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( |
) |
|
Net cash provided by (used in) operating activities |
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$ |
( |
) |
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$ |
( |
) |
Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
) |
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( |
) |
Capitalized software development costs |
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( |
) |
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( |
) |
Intangible asset acquisition costs |
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( |
) |
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( |
) |
Purchases of available-for-sale securities |
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( |
) |
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( |
) |
Maturities of available-for-sale securities |
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||
Net cash provided by (used in) investing activities |
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$ |
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$ |
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Cash flows from financing activities: |
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Proceeds from stock options exercised |
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Other financing, net |
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Net cash provided by (used in) financing activities |
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$ |
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$ |
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||
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash |
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Net change in cash, cash equivalents and restricted cash |
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( |
) |
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( |
) |
Cash, cash equivalents and restricted cash at the beginning of the period |
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||
Cash, cash equivalents and restricted cash at the end of the period |
|
$ |
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|
$ |
|
||
Supplemental disclosures of non-cash investing and financing transactions |
|
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||
Property and equipment purchases in accounts payable and accrued expenses |
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$ |
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$ |
|
||
Intangible asset purchases in accounts payable and accrued expenses |
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Operating lease right-of-use assets subject to lease liability |
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Noncash reclassification of warrant liabilities to equity upon exercise |
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Bonus settled in restricted stock units |
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Net share settled stock option exercises |
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
IonQ, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. DESCRIPTION OF BUSINESS
IonQ, Inc. (“IonQ” or the “Company”), formerly known as dMY Technology Group, Inc. III (“dMY”), was incorporated in the state of Delaware in September 2020 and formed as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. IonQ Quantum, Inc. (formerly known as IonQ, Inc., and referred to as “Legacy IonQ” herein), was incorporated in the state of Delaware in September 2015 and is headquartered in College Park, Maryland.
On March 7, 2021, Legacy IonQ entered into an Agreement and Plan of Merger (the “Merger Agreement”) with dMY and Ion Trap Acquisition Inc. (“Merger Sub”), a direct, wholly owned subsidiary of dMY. Pursuant to the Merger Agreement, on September 30, 2021 (“the Closing Date”), the Merger Sub was merged with and into Legacy IonQ with Legacy IonQ continuing as the surviving corporation following the merger, becoming a wholly owned subsidiary of dMY and the separate corporate existence of the Merger Sub ceased (the “Business Combination”). Contemporaneously with the Business Combination, dMY changed its name to IonQ, Inc. and Legacy IonQ changed its name to IonQ Quantum, Inc.
IonQ is engaged in quantum computing and develops general-purpose quantum computing systems designed to solve some of the world’s most complex problems, and transform business, society, and the planet for the better. To operate the quantum computing systems, the Company has developed custom hardware, custom firmware, and an operating system to orchestrate the quantum computers.
Segment Reporting
The Company operates as
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2023, and the notes thereto are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) that was filed with the Securities and Exchange Commission (“SEC”) on February 28, 2024. Since the date of that filing, there have been no material changes to the Company’s significant accounting policies except as noted below.
Basis of Preparation
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) as determined by the Financial Accounting Standards Board (“FASB”). Such condensed consolidated financial statements include the accounts of IonQ and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Unaudited Interim Financial Information
The interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by the Company and are unaudited, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for a quarterly report and are adequate to make the information presented not misleading. The interim condensed consolidated financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. These interim condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023, included in the Annual Report. The condensed consolidated statements of operations and the condensed consolidated statements of comprehensive loss for the three or nine months ended September 30, 2024, are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2024, or thereafter. All references to September 30, 2024 and 2023, in the notes to the condensed consolidated financial statements are unaudited.
7
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the SEC require management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes.
Significant estimates and assumptions are inherent in the analysis and measurement of items including, but not limited to: standalone selling price for revenue arrangements with multiple performance obligations, total expected costs for revenue arrangements recognized over time, capitalization of quantum computing system costs, useful lives for quantum computing systems, and stock-based compensation for awards with performance and market conditions. Management bases its estimates and assumptions on historical experience, expectations, forecasts, and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ and be affected by changes in those estimates.
Foreign Currency
The reporting currency of the Company is the U.S. dollar. Financial statements of subsidiaries whose functional currency is not the U.S. dollar are translated at exchange rates in effect at the balance sheet date for assets and liabilities and at average exchange rates for revenues and expenses for the respective periods. Translation adjustments are recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets.
The Company is exposed to foreign currency risk to the extent that it enters into transactions denominated in currencies other than its subsidiaries’ respective functional currencies. Transactions denominated in currencies other than subsidiaries’ functional currencies are recorded based on exchange rates at the time such transactions arise. Changes in exchange rates with respect to amounts recorded in the Company’s condensed consolidated balance sheets related to these items will result in unrealized foreign currency transaction gains and losses based upon period-end exchange rates. The Company also records realized foreign currency transaction gains and losses upon settlement of the transactions. Foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency are included in other income (expense), net in the condensed consolidated statements of operations.
Fair Value Measurements
The Company evaluates the fair value of certain assets and liabilities using the fair value hierarchy. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability.
Assets and liabilities that are measured at fair value on a non-recurring basis include property and equipment, intangible assets, and goodwill. The Company recognizes these items at fair value when they are considered to be impaired or upon initial recognition when acquired through a business combination or an asset acquisition. The fair value of these assets and liabilities are determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.
8
Due to their short-term nature, the carrying amounts reported in the Company’s condensed consolidated financial statements approximate the fair value for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash in banks, checking deposits, money market funds, and U.S. government and agency securities. The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Restricted cash for collateralizing letters of credit and corporate credit cards is included in other noncurrent assets in the condensed consolidated balance sheets. The Company issues letters of credit in the ordinary course of business, including for lease arrangements. As of September 30, 2024 and December 31, 2023, letters of credit totaling $
The following table provides a reconciliation of cash, cash equivalents and restricted cash included in the condensed consolidated balance sheets to the amounts included in the condensed consolidated statements of cash flows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash in the condensed |
|
$ |
|
|
$ |
|
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are non-interest bearing and represent amounts billed and currently due from customers at the gross invoiced amount as well as unbilled amounts related to unconditional rights for consideration to be received for services performed but not yet invoiced. A receivable is recorded when the Company has an unconditional right to receive payment.
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Billed accounts receivable |
|
$ |
|
|
$ |
|
||
Unbilled accounts receivable < |