IONQ, INC. This Quarterly Report on Form 10-Q contains statements that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believes," "expects," "intends," "estimates," "projects," "anticipates," "will," "plan," "may," "should," or similar language are intended to identify forward-looking statements. It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year. Readers of this Quarterly Report on Form 10-Q are cautioned not to place undue reliance on any such forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified under "Risk Factors" in Item 1A herein and in our other filings with theSecurities and Exchange Commission (the "SEC"). All forward-looking statements included herein are made only as of the date hereof. Unless otherwise required by law, we do not undertake, and specifically disclaim, any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise after the date of such statement. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, and our audited consolidated financial statements and related notes for the year endedDecember 31, 2021 , filed with theSEC onMarch 28, 2022 . Unless the context otherwise requires, the terms "IonQ ," "LegacyIonQ " "we," "us," "our" and similar terms refer toIonQ Quantum, Inc. prior to the consummation of theBusiness Combination andIonQ, Inc. and its wholly owned subsidiaries after the consummation of the Business Combination. References to "dMY" refer to the predecessor company prior to the consummation of the Business Combination. Overview We are developing quantum computers designed to solve the world's most complex problems, and transform business, society, and the planet for the better. We believe that our proprietary technology, our architecture, and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings. We sell access to quantum computers, and we are in the process of researching and developing technologies for quantum computers with increasing computational capabilities. We currently make access to our quantum computers available via three major cloud platforms,Amazon Web Services' (AWS) Amazon Braket, Microsoft's Azure Quantum, andCloud Marketplace , and to select customers via our own cloud service. We are still in the early stages of generating revenue. We have incurred significant operating losses since our inception. Our net losses were$29.9 million for the nine months endedSeptember 30, 2022 . As ofSeptember 30, 2022 , we had an accumulated deficit of$175.7 million . We expect to continue to incur significant losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve increasingly higher number of stable qubits and higher levels of fidelity than that which presently exists-prerequisites for quantum computing to reach broad quantum advantage.
The Merger Agreement and Public Company Costs
OnMarch 7, 2021 , Legacy IonQ, dMY andIon Trap Acquisition Inc. (the "Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, at the closing, the Merger Sub was merged with and into Legacy IonQ, with Legacy IonQ continuing as the surviving corporation following the merger, being a wholly owned subsidiary of dMY and the separate corporate existence of the Merger Sub ceased. Commensurate with the business combination, dMY changed its name toIonQ, Inc. and Legacy IonQ changed its name toIonQ Quantum, Inc. IonQ became the successor registrant with theSEC , meaning that Legacy IonQ's financial statements for previous periods are disclosed in the registrant's future periodic reports filed with theSEC . 26
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While the legal acquirer in the Merger Agreement is dMY, for financial accounting and reporting purposes under accounting principles generally accepted inthe United States of America ("U.S. GAAP"), Legacy IonQ is the accounting acquirer and the merger is accounted for as a "reverse recapitalization" (i.e., a capital transaction involving the issuance of stock by dMY for the stock of Legacy IonQ). A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the Company represent the continuation of the financial statements of Legacy IonQ in many respects. Under this method of accounting, dMY is treated as the "acquired" company for financial reporting purposes. As a result of the merger, Legacy IonQ is the successor to anSEC registrant and is listed on theNew York Stock Exchange ("NYSE"), which will requireIonQ to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. As a public company, we have incurred and expect to continue to incur, expenses for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Business and Technical Highlights
• In September, the
multi-part,
to compute on our cutting-edge trapped ion systems and certain hardware
components to further research in quantum networking.
• We increased the computational power of our Aria system by approximately
4x, now reaching #AQ 25, up from #AQ 23. Aria was already believed to be
the most powerful quantum computer known, and has now achieved our #AQ
technical milestone for 2022. Aria is available to the public via cloud
access on Microsoft's Azure Quantum Cloud.
• We announced a project with the
the U.S. Department of Energy , to research benchmark circuits for the
discovery of new quantum chemistry applications.
• We announced a new partnership with Dell Technologies to offer joint
customers a world-class hybrid computing solution, allowing for the
seamless transitioning of workloads between the world's leading quantum
and classical computing hardware systems.
• We announced a next generation custom chip called the multilayered glass
trap (MGT), which utilizes multiple layers to route wires across the chip
to enable higher qubit count per chip.
• We will be participating at the Super Compute 2022 (SC22), a multi-day
event in
will demonstrate our new Dell Quantum Computing Solution.
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Impact of COVID-19 and Other Trends on Our Business
InMarch 2020 , the COVID-19 outbreak was declared a pandemic by theWorld Health Organization . There are many uncertainties regarding the ongoing pandemic, and we are closely monitoring its impact on all aspects of our business, including how it impacts our employees, suppliers, vendors, and business partners. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-in-place orders, and business shutdowns. These measures may adversely impact our employees and operations and the operations of suppliers and business partners. In addition, various aspects of our business cannot be conducted remotely. These measures by government authorities may continue to remain in place for a significant period of time and could adversely affect our development plans, sales and marketing activities, and business operations. The evolution of the virus is unpredictable at this point and any resurgence may slow down our ability to develop our quantum computing program. The ongoing COVID-19 pandemic could limit the ability of suppliers and business partners to perform, including third-party suppliers' ability to provide components and materials. We may also experience an increase in the cost of raw materials. The full impact of the COVID-19 pandemic continues to evolve. As such, the full magnitude of the pandemic's effect on our financial condition, liquidity and future results of operations is uncertain. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry, and workforce. Additionally, the recent trends towards rising inflation may also materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a recent challenge impacting theU.S. economy 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 continue to rise) on our operating costs, including our labor, due to supply chain constraints, consequences associated with COVID-19 and the ongoing conflict betweenRussia andUkraine , and employee availability and wage increases, which may result in additional stress on our working capital resources.
Key Components of Results of Operations
Revenue
We have generated limited revenues since our inception. We derive revenue from
providing access to quantum-computing-as-a-service ("QCaaS") and consulting
services related to co-developing algorithms on our quantum computing systems.
In arrangements with the cloud service providers, the cloud service provider is
considered the customer and we do not have any contractual relationships with
the cloud service providers' end users.
We have determined that our QCaaS contracts represent a combined, stand-ready
performance obligation to provide access to our quantum computing systems
together with related maintenance and support. The transaction price for our
contracts generally includes a variable fee based on usage of our quantum
computing systems and may include a fixed fee for a minimum volume of usage to
be made available over a defined period of access. Fixed fee arrangements may
also include a variable component whereby customers pay an amount for usage over
contractual minimums contained in the contracts. For contracts with a fixed
transaction price, the fixed fee is recognized as QCaaS subscription-based
revenues on a straight- line basis over the access period. The Company has
determined that contracts which contain consulting services related to
co-developing quantum computing algorithms and the ability to use our quantum
computing systems to run such algorithms represent a combined performance
obligation that is satisfied over-time with revenue recognized based on the
efforts incurred to date relative to the total expected effort. For contracts
without fixed fees, variable usage fees are billed and recognized during the
period of such usage.
We are currently focused on marketing our QCaaS and have entered into, and are continuing to enter into, new contracts with customers.
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Table of Contents Operating Costs and Expenses Cost of revenue Cost of revenue primarily consists of expenses related to delivering our services, including personnel-related expenses, allocated facility and other costs for customer facing functions, and costs associated with maintaining our in-service quantum computing systems to ensure proper calibration as well as costs incurred for maintaining the cloud on which the QCaaS resides beginning in the period that QCaaS revenue generating activities began. Personnel-related expenses include salaries, benefits, and stock-based compensation. Cost of revenue excludes depreciation and amortization related to our quantum computing systems and related software.
Research and development
Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our research and development functions. Unlike a standard computer, design and development efforts continue throughout the useful life of our quantum computing systems to ensure proper calibration and optimal functionality. Research and development expenses also include purchased hardware and software costs related to quantum computing systems constructed for research purposes that are not probable of providing future economic benefit and have no alternate future use as well as costs associated with third-party research and development arrangements. Sales and marketing Sales and marketing expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, costs for direct advertising, marketing and promotional expenditures and allocated facility and other costs for our sales and marketing functions. We expect to continue to make the necessary sales and marketing investments to enable us to increase our market penetration and expand our customer base.
General and administrative
General and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our corporate, executive, finance, and other administrative functions. General and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, information technology, travel expenses and certain non-income taxes, insurance, and other administrative expenses.
We expect our general and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of theSEC , NYSE, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue over time.
Depreciation and amortization
Depreciation and amortization expense results from depreciation and amortization of our property and equipment and intangible assets that is recognized over their estimated lives.
Nonoperating Costs and Expenses
Change in fair value of warrant liabilities
The change in fair value of warrant liabilities consists of mark-to-market fair value adjustments recorded associated with the public warrants assumed as part of the business combination.
Interest income, net
Interest income, net consists of income earned on our money market funds and other available-for-sale investments.
Offering costs associated with warrants
Offering costs associated with warrants consist of transaction costs that have been allocated to the public and private warrants and were expensed upon consummation of the Business Combination onSeptember 30, 2021 , based on the relative fair value of the equity issued and the liability-classified warrants.
Other income (expense), net
Other income (expense), net consists of realized losses on our available-for-sale investments and certain other expenses.
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Results of Operations
The following table sets forth our statements of operations data for each of the
periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands)
Revenue $ 2,763 $ 233 $ 7,324 $ 451
Costs and expenses:
Cost of revenue (excluding depreciation
and amortization)(1) 733 234 2,043 742
Research and development(1) 13,292 6,180 30,282 15,311
Sales and marketing(1) 1,969 1,286 5,971 2,384
General and administrative(1) 10,149 2,461 26,901 8,321
Depreciation and amortization 1,531 596 4,248 1,543
Total operating costs and expenses 27,674 10,757 69,445 28,301
Loss from operations (24,911 ) (10,524 ) (62,121 ) (27,850 ) Change in fair value of warrant liabilities (1,151 ) - 28,358 - Interest income, net 2,059 - 3,926 - Offering costs associated with warrants - (4,259 ) - (4,259 ) Other income (expense), net 20 2 (27 ) 7
Loss before benefit for income taxes (23,983 ) (14,781 )
(29,864 ) (32,102 ) Benefit for income taxes - - - - Net loss$ (23,983 ) $ (14,781 ) $ (29,864 ) $ (32,102 )
(1) Cost of revenue, research and development, sales and marketing, and general
and administrative expenses for the periods include stock-based compensation
expense as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(in thousands)
Cost of revenue $ 239 $ 15 $ 590 $ 46
Research and development 4,932 1,181 8,998 2,351
Sales and marketing 344 22 920 47
General and administrative 4,490 837 12,053 3,485
Comparison of the Three Months Ended
Revenue
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Revenue $ 2,763 $ 233 $ 2,530 1086 %
Revenue increased by $2.5 million , or 1,086%, to $2.8 million for the three
months ended September 30, 2022 , from $0.2 million for the three months ended
September 30, 2021 . The increase was primarily driven by new revenue contracts
under which we provided services during the three months ended September 30,
2022 , as well as an increase in revenue from services provided under our
contract with UMD.
Cost of revenue
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Cost of revenue (excluding
depreciation and amortization) $ 733 $ 234 $ 499 213 %
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Cost of revenue increased by$0.5 million , or 213%, to$0.7 million for the three months endedSeptember 30, 2022 , from$0.2 million for the three months endedSeptember 30, 2021 . The increase was driven by the increase in costs to service new contracts for the three months endedSeptember 30, 2022 . Research and development Three Months Ended September 30, $ % 2022 2021 Change Change (in thousands) Research and development $ 13,292 $ 6,180$ 7,112 115 % Research and development expenses increased by$7.1 million , or 115%, to$13.3 million for the three months endedSeptember 30, 2022 , from$6.2 million for the three months endedSeptember 30, 2021 . The increase was primarily driven by a$6.0 million increase in payroll-related expenses, including stock-based compensation of$3.8 million , as a result of increased headcount, and a$1.1 million increase in professional service costs to support research and development initiatives. Sales and marketing Three Months Ended September 30, $ % 2022 2021 Change Change (in thousands) Sales and marketing $ 1,969 $ 1,286$ 683 53 % Sales and marketing expenses increased by$0.7 million , or 53%, to$2.0 million for the three months endedSeptember 30, 2022 , from$1.3 million for the three months endedSeptember 30, 2021 . The increase was primarily due to an increase of$0.7 million of payroll-related expenses, including an increase in stock-based compensation of$0.3 million , as a result of increased headcount. General and administrative Three Months Ended September 30, $ % 2022 2021 Change Change (in thousands) General and administrative $ 10,149 $ 2,461$ 7,688 312 % General and administrative expenses increased by$7.7 million , or 312%, to$10.1 million for the three months endedSeptember 30, 2022 , from$2.5 million for the three months endedSeptember 30, 2021 . The increase was primarily driven by an increase of$5.1 million in payroll-related expenses, including an increase in stock-based compensation of$3.7 million , as a result of increased headcount, and an increase of$1.2 million in director and officer insurance costs. The remaining increase is primarily due to additional costs incurred to operate as a public company and other general and administrative activities as a result of hiring additional personnel. Depreciation and amortization Three Months Ended September 30, $ % 2022 2021 Change Change (in thousands) Depreciation and amortization $ 1,531 $ 596$ 935 157 % Depreciation and amortization expenses increased by$0.9 million , or 157%, to$1.5 million for the three months endedSeptember 30, 2022 , from$0.6 million for the three months endedSeptember 30, 2021 . The increase was primarily driven by an increase of$0.2 million due to amortization of capitalized internally developed software and an increase of$0.5 million in depreciation expense associated with capitalized quantum computing system costs. 31
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Change in fair value of warrant liabilities
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Change in fair value of warrant
liabilities $ (1,151 ) $ - $ (1,151 ) NM
NM-Not Meaningful
The change in fair value of warrant liabilities increased $1.2 million to
$1.2 million for the three months ended September 30, 2022 , from zero for the
three months ended September 30, 2021 , as a result of mark-to-market income
adjustments recorded for the public warrants assumed as part of the Business
Combination.
Interest income, net
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Interest income, net $ 2,059 $ - $ 2,059 NM
NM-Not Meaningful
Interest income, net increased by $2.1 million to $2.1 million for the three
months ended September 30, 2022 , from zero for the three months ended
September 30, 2021 . The increase was primarily driven by interest income earned
on our cash equivalents and available-for-sale investments.
Offering costs associated with warrants
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Offering costs associated with warrants $ - $ (4,259 ) $ 4,259 100 %
Offering costs associated with warrants decreased by $4.3 million , or 100%, to
zero for the three months ended September 30, 2022 , from $4.3 million for the
three months ended September 30, 2021 . In connection with the Business
Combination, $4.3 million of transaction costs were allocated and expensed
related to the liability-classified public and private warrants.
Comparison of the Nine Months Ended
Revenue
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Revenue $ 7,324 $ 451 $ 6,873 1524 %
Revenue increased by $6.9 million , or 1,524%, to $7.3 million for the nine
months ended September 30, 2022 , from $0.5 million for the nine months ended
September 30, 2021 . The increase was primarily driven by new revenue contracts
under which we provided services during the nine months ended September 30,
2022 , as well as an increase in revenue from services provided under our
contract with UMD.
Cost of revenue
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Cost of revenue (excluding
depreciation and amortization) $ 2,043 $ 742 $ 1,301 175 %
Cost of revenue increased by $1.3 million , or 175%, to $2.0 million for the nine
months ended September 30, 2022 , from $0.7 million for the nine months ended
September 30, 2021 . The increase was driven by the increase in costs to service
new contracts for the nine months ended September 30, 2022 .
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Research and development
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Research and development $ 30,282 $ 15,311 $ 14,971 98 %
Research and development expense increased by $15.0 million , or 98%, to
$30.3 million for the nine months ended September 30, 2022 from $15.3 million
for the nine months ended September 30, 2021 . The increase was primarily driven
by a $10.8 million increase in payroll-related expenses, including an increase
in stock-based compensation of $6.6 million , as a result of increased headcount,
a $2.4 million increase in materials, supplies and equipment costs, and a
$1.4 million increase in professional service costs to support research and
development initiatives.
Sales and marketing
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Sales and marketing $ 5,971 $ 2,384 $ 3,587 150 %
Sales and marketing expense increased by $3.6 million , or 150%, to $6.0 million
for the nine months ended September 30, 2022 , from $2.4 million for the nine
months ended September 30, 2021 . The increase was primarily due to an increase
of $2.8 million of payroll-related expenses, including an increase in
stock-based compensation of $0.9 million , as a result of increased headcount,
and increased costs to promote our services and other marketing initiatives of
approximately $0.8 million .
General and administrative
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
General and administrative $ 26,901 $ 8,321 $ 18,580 223 %
General and administrative expenses increased by $18.6 million , or 223%, to
$26.9 million for the nine months ended September 30, 2022 , from $8.3 million
for the nine months ended September 30, 2021 . The increase was primarily driven
by an increase of $11.1 million in payroll-related expenses, including an
increase in stock-based compensation of $8.6 million , as a result of increased
headcount, and an increase of $3.7 million in director and officer insurance
costs. The remaining increase is primarily due to additional costs incurred to
operate as a public company and other general and administrative activities as a
result of hiring additional personnel.
Depreciation and amortization
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Depreciation and amortization $ 4,248 $ 1,543 $ 2,705 175 %
Depreciation and amortization expenses increased by $2.7 million , or 175%, to
$4.2 million for the nine months ended September 30, 2022 , from $1.5 million for
the nine months ended September 30, 2021 . The increase was primarily driven by
an increase of $0.5 million due to amortization of capitalized internally
developed software and an increase of $1.4 million in depreciation expense
associated with capitalized quantum computing system costs.
Change in fair value of warrant liabilities
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Change in fair value of warrant
liabilities $ 28,358 $ - $ 28,358 NM
NM-Not Meaningful
The change in fair value of warrant liabilities increased $28.4 million to
$28.4 million for the nine months ended September 30, 2022 , from zero for the
nine months ended September 30, 2021 , as a result of mark-to-market income
adjustments recorded for the public warrants assumed as part of the Business
Combination.
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Interest income, net
Nine Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Interest income, net $ 3,926 $ - $ 3,926 NM
NM-Not Meaningful
Interest income, net increased by
Offering costs associated with warrants
Three Months Ended September 30, $ %
2022 2021 Change Change
(in thousands)
Offering costs associated with warrants $ - $ (4,259 ) $ 4,259 100 %
Offering costs associated with warrants decreased by $4.3 million , or 100%, to
zero for the nine months ended September 30, 2022 , from $4.3 million for the
nine months ended September 30, 2021 . In connection with the Business
Combination, $4.3 million of transaction costs were allocated and expensed
related to the liability-classified public and private warrants.
Liquidity and Capital Resources
As ofSeptember 30, 2022 , we had cash, cash equivalents and available-for-sale securities of$555.8 million . We believe that our cash, cash equivalents and investments as ofSeptember 30, 2022 , will be sufficient to meet our working capital and capital expenditure needs for the next 12 months. We believe we will meet longer term expected future cash requirements and obligations through a combination of cash flows from operating activities and available funds from our cash, cash equivalents and investment balances. However, this determination is based upon internal projections and is subject to changes in market and business conditions. We have incurred losses since our inception, and as ofSeptember 30, 2022 , we had an accumulated deficit of$175.7 million . During the nine months endedSeptember 30, 2022 , we incurred net losses of$29.9 million . We expect to incur additional losses and higher operating expenses for the foreseeable future.
Future Funding Requirements
We expect our principal sources of liquidity will continue to be our cash, cash equivalents and investments and any additional capital we may obtain through additional equity or debt financings. Our future capital requirements will depend on many factors, including investments in growth and technology. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies which may require us to seek additional equity or debt financing. Upon the closing of the Business Combination, we received approximately$636.0 million of gross proceeds. The proceeds are invested in money market funds, commercial paper, corporate and municipal notes and bonds, and otherU.S. government and agency securities as disclosed in Note 3 in our condensed consolidated financial statements. We expect to use these investments to fund our strategic operations. Our primary uses of cash and investments are to fund our operations as we continue to grow our business. We require a significant amount of cash for expenditures as we invest in ongoing research and development and commercialization of our products. Until such time as we can generate significant revenue from commercializing our quantum computing technology, if ever, we expect to finance our liquidity needs through our cash, cash equivalents and investments, as well as equity or debt financings or other capital sources, including potential collaborations and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our quantum computing technology on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our quantum computing development efforts. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled "Risk Factors." Other than operating expenses, including our continued investment in our quantum computers, cash requirements for the year endingDecember 31, 2022 , are expected to consist primarily of capital expenditures for corporate facilities. Our material cash requirements as ofSeptember 30, 2022 include operating lease commitments, including the lease of our headquarters inCollege Park, Maryland . As ofSeptember 30, 2022 , we have total operating lease obligations of$6.5 million , with$0.7 million payable within 12 months. 34
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Cash flows
The following table summarizes our cash flows for the period indicated:
Nine Months Ended September 30,
2022 2021
(in thousands)
Net cash used in operating activities
(6,914 )
Net cash provided by financing activities $ 2,165
Cash flows from operating activities
Our cash flows from operating activities are significantly affected by the growth of our business primarily related to research and development, sales and marketing, and general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities during the nine months endedSeptember 30, 2022 , was$29.8 million , primarily resulting from a net loss of$29.9 million , adjusted for non-cash activity, primarily related to the gain recorded as a result of mark-to-market activity for our public warrants offset by stock-based compensation and other working capital activities. The increase in net cash used in operations from the prior year period was primarily related to increased research and development activities, increased compensation costs as a result of hiring personnel and increased costs incurred as a public company. Net cash used in operating activities during the nine months endedSeptember 30, 2021 , was$21.9 million , primarily resulting from a net loss of$32.1 million , adjusted for non-cash activity, primarily related to stock-based compensation, offering costs associated with warrants, costs associated with research and development arrangements and other working capital activities.
Cash flows from investing activities
Net cash used in investing activities during the nine months endedSeptember 30, 2022 , was$314.2 million , primarily resulting from purchases of available-for-sale investments of$488.9 million , additions of$8.4 million to property and equipment related to the development of our quantum computing systems, offset by cash received from sales and maturities of available-for-sale investments of$185.2 million . Net cash used in investing activities during the nine months endedSeptember 30, 2021 , was$6.9 million , primarily resulting from additions of$5.3 million to property and equipment related to the development of our quantum computing systems,$1.2 million of capitalized internal software development costs, and$0.4 million of intangible assets acquisition costs.
Cash flows from financing activities
Net cash provided by financing activities during the nine months endedSeptember 30, 2022 , was$2.2 million , primarily resulting from proceeds from stock options exercised and tax withholding receipts related to restricted stock units.
Net cash provided by financing activities during the nine months ended
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Critical Accounting Estimates
This discussion and analysis of financial condition and results of operations is based upon the Company's condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
There have been no material changes to our critical accounting estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.
Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. Within our Annual Report, we have disclosed our critical accounting estimates that we believe to have the greatest potential impact on our consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.
Recently Issued and Adopted Accounting Standards
See Note 2, Summary of Significant Accounting Policies, in the notes to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Emerging Growth Company and Smaller Reporting Company Status
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used. We will remain an emerging growth company under the JOBS Act until the earliest of (i)December 31, 2025 , (ii) the last date of our fiscal year in which we have total annual gross revenue of at least$1.235 billion , (iii) the date on which we are deemed to be a "large accelerated filer" under the rules of theSEC with at least$700.0 million of outstanding securities held by non-affiliates or (iv) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the previous three years. We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by nonaffiliates is less than$250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than$100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than$700.0 million measured on the last business day of our second fiscal quarter. 36
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