United States securities and exchange commission logo
April 15, 2022
Emil Michael
President
D-Wave Quantum Inc.
3033 Beta Avenue
Burnaby, British Columbia V5G 4M9
Canada
Re: D-Wave Quantum Inc.
Registration
Statement on Form S-4
Filed March 15,
2022
File No. 333-263573
Dear Mr. Michael:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4
Q: What will happen in the Transaction?, page 3
1. Advise if the number of
shares being converted and exchanged as a product of the
Exchange Ratio will be
rounded to the nearest whole number of shares.
Q: What equity stake will the current equityholders of DPCM and D-Wave
hold in D-Wave
Quantum..., page 6
2. We note your
presentation of the sponsor's ownership interest does not include the Earn-
out shares. Please
revise here or separately disclose the sponsor and its affiliates total
potential ownership
interest in the combined company, assuming exercise and conversion
of all securities,
including the Earn-out shares.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 215, 2022 Page 2
Page
FirstName LastName
Q: What interests does the Sponsor and DPCM's officers and directors have in
the Transaction?,
page 9
3. Please quantify the aggregate dollar amount and describe the nature of
what the sponsor
and its affiliates have at risk that depends on completion of a
business combination.
Include the current value of securities held, loans extended, fees
due, and out-of-pocket
expenses for which the sponsor and its affiliates are awaiting
reimbursement. Provide
similar disclosure for the company s officers and directors, if
material.
PIPE Subscription Agreements, page 24
4. Please highlight any material differences in the terms and price of
securities issued at the
time of the IPO as compared to private placements contemplated at the
time of the
business combination. We note your disclosure that DPCM's CEO has
entered into a
PIPE Subscription Agreement. Disclose if any other of DPCM's sponsors,
directors,
officers or their affiliates intend to participate in a private
placement at Closing.
Transaction Support Agreement, page 25
5. We note that DPCM and D-Wave entered into a Transaction Support
Agreement whereby
D-Wave shareholders agreed to support and vote in favor of the
Transaction. Advise
whether the Transaction Support Agreement involves only executive
officers, directors,
affiliates, founders and their family members, and holders of 5% or
more of the
voting equity securities of D-Wave and that the persons signing the
agreements
collectively own less than 100% of the voting equity of D-Wave. Refer
to Securities Act
Sections Compliance and Disclosure Interpretation 239.13 for further
guidance.
Industry and Market Data, page 42
6. You state that the accuracy and completeness of information included
in your disclosure
from certain third party publications "is not guaranteed." As this
statement may imply an
inappropriate disclaimer of responsibility with respect to the third
party information,
please either delete this statement or specifically state that you are
liable for such
information.
Risk Factors
Our business and growth are dependent on the success of our strategic
relationships with third
parties, page 48
7. We note your disclosure that D-Wave's business is dependent on certain
third-party
suppliers and that you have attached certain pilot line and
semiconductor line operation
agreements to your registration statement. Please disclose the key
terms of these
agreements in your registration statement and file any other
agreements upon which D-
Wave's business is substantially dependent. Refer to Item
601(10)(ii)(B) of Regulation S-
Emil Michael
D-Wave Quantum Inc.
April 15, 2022
Page 3
K.
Our business model includes a relatively new four-phase engagement model...,
page 50
8. We note your disclosure on page 50 about your new four-phase
engagement business
model. Please advise how this relates to D-Wave's three-pronged
go-to-market model and
disclose relevant details about its four-phase engagement model. You
state that if your
technology does not drive continued progression of customers through
the four phases,
then the result could have a material adverse effect on your business,
financial condition
or results of operations.
Unfavorable conditions in our industry or the global economy, including
uncertain geopolitical
conditions..., page 60
9. Disclose the risk of potential cyberattacks by state actors as a
result of Russia s invasion
of the Ukraine and whether you have taken actions to mitigate such
potential cyberattacks.
We have identified a material weakness in our internal control over financial
reporting. If we fail
to remedy this weakness..., page 69
10. We note that you have identified a material weakness in your internal
control over
financial reporting and have implemented remedial measures. Please
disclose how long
you estimate it will take to complete your remediation plans and any
associated material
costs that you have incurred or expect to incur.
Risks Related to DPCM, D-Wave Quantum and the Transaction, page 71
11. Please highlight the risk that the sponsor will benefit from the
completion of a business
combination and may be incentivized to complete an acquisition of a
less favorable target
company or on terms less favorable to shareholders rather than
liquidate.
Each of DPCM and D-Wave have incurred and will incur substantial costs in
connection with the
Transaction and related transactions..., page 80
12. Provide an estimate of the aggregate transaction expenses that DPCM
and D-Wave expect
to incur in connection with the Transaction.
D-Wave Quantum may redeem your unexpired Public Warrants prior to their
exercise at a time
that is disadvantageous to you..., page 89
13. Clarify whether recent common stock trading prices exceed the threshold
that would allow
FirstName LastNameEmil Michael
the company to redeem public warrants. Clearly explain the steps, if
any, the company
Comapany
will NameD-Wave Quantum
take to notify all Inc. including beneficial owners,
regarding when the
shareholders,
warrants
April 15, become
2022 Page 3 eligible for redemption.
FirstName LastName
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 415, 2022 Page 4
Page
FirstName LastName
Potential Purchases of Public Shares and/or Warrants, page 105
14. We note your disclosure that you may grant put options or other
agreements to protect
investors or holders against potential loss in the value of their
shares. Revise your risk
factors to discuss the risks that these agreements may pose to other
holders if you are
required to buy back the shares of your common stock or provide other
downside
protection. For example, discuss how such forced purchases would
impact the cash you
have available for other purposes and the execution of your business
strategy. Please
clarify whether you intend to circulate a new or amended proxy
statement/prospectus if
such agreements are entered into prior to the Special Meeting in
addition to the Current
Report on Form 8-K your disclosure indicates you would file. Further,
advise if you
anticipate entering into such transactions after the Special Meeting
and before Closing of
the Transaction and, if so, your view on why this information would
not need to be shared
with DPCM's public stockholders prior to their vote on the
Transaction.
Unaudited Pro Forma Combined Balance Sheet, page 147
15. Please include a subtotal column to reflect D-Wave on a pro forma
basis to give effect to
the Material Event, before giving effect to the merger with DPCM
Capital, Inc.
Information about D-Wave, page 175
16. To the extent material, provide a breakdown of the revenue D-Wave
generates from each
of its product types or services, including from QCaaS and
professional services. Balance
this presentation with disclosure of its net losses for the periods
presented in the financial
statements.
Our Quantum Computers, Developer Tools and Quantum Hybrid Solvers Delivered via
QCaaS,
page 177
17. We note your disclosure here that you are planning to provide a
multilayer fabrication
stack to deliver gate-based quantum computing. To help investors
understand your
product plans, clarify your use of the term multilayer fabrication
stack. Additionally,
disclose how you intend to deliver this product, whether as physical
hardware to
customers or if the gate-based quantum computing will be provided
through your cloud
service or other means.
Customers and Applications, page 178
18. We note your disclosure that D-Wave had three significant customers in
2021. Please
disclose the materials terms of your agreements with these customers,
including but not
limited to, the term and termination provisions of the agreement and
the identity of the
customers.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 515, 2022 Page 5
Page
FirstName LastName
Our Business Model, page 182
19. Please revise to more fully explain your free trial service for Leap,
including restrictions
and time frames associated with the free trial. Please also provide
investors with metrics,
where possible, to give more context about the scope of your direct
sales, partner and
developer strategies. For example, consider quantifying historical
revenues from direct
sales compared to re-sellers.
Expansion into gate-model, page 187
20. Please revise to include key details from your "Clarity" product
roadmap that you
reference on page 189 to the extent this roadmap includes material
information about the
timing and development of your gate-model hardware. We also note your
disclosure on
page 47 that D-Wave's growth is dependent on scaling up manufacturing
of its products
and constructing quantum computing technology. Provide an overview of
your business
plan to build this capacity.
Key Strategic Relationships, page 188
21. We note your disclosure of several key relationships and the entry by
D-Wave into
investment and resale agreements with NEC and a contract with
Lockheed. Please revise
your disclosure to describe the key terms of any material agreements,
including the term
and termination provisions, and for any other contracts upon which
D-Wave's business is
substantially dependent. File a copy of any such agreement as an
exhibit to your
registration statement. Refer to Item 601(b)(10) of Regulation S-K.
D-Wave Management's Discussion and Analysis of Financial Condition and Results
of
Operations, page 192
22. Please tell us whether management uses any key metrics to monitor or
evaluate the key
factors that affect D-Wave's performance or manage its business. If
so, please tell us your
consideration of disclosing these measures for each of the periods
presented. Refer to
SEC Release No. 33-10751.
Management of D-Wave Quantum, page 217
23. Please revise to include specific dates of service for the past and
present occupations held
for each of your executive officers and directors during the past five
years. Refer to Item
401(e) of Regulation S-K.
Beneficial Ownership of Securities, page 248
24. Please disclose the natural person(s) with dispositive and voting
power over shares held
by the Public Sector Pension Investment Board.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 615, 2022 Page 6
Page
FirstName LastName
Background of the Transaction, page 263
25. When you refer to representatives of D-Wave, DPCM, the sponsor, or the
DPCM board,
identify any executive officers or board members that were present or
are referenced, or
confirm that you mean all members of the board or executive officers,
as applicable. In
addition, please expand the description of the transaction timeline to
include any relevant
disclosure to address:
whether the sponsor and management and affiliates have a track
record with
SPACs and, if so, balanced disclosure about this record and the
outcomes of the prior
transactions;
whether the sponsor has other SPACs in the process of searching
for a target
company and whether the sponsor considered more than one active
SPAC to be the
potential acquirer and how the final decision was reached;
the negotiation of any arrangements for any shareholder to waive
its
redemption rights;
the underlying reason why the Earn-out shares and shares subject
to forfeiture by the
sponsor were negotiated;
any discussions relating to the assumptions underlying the
financial projections
provided by D-Wave; and
any discussions involving continuing employment or involvement for
any persons
affiliated with DPCM before the merger, any formal or informal
commitment to
retain any of the financial advisors after the merger, and any
pre-existing
relationships between DPCM (or individuals affiliated with DPCM)
and additional
investors.
Certain Projected Financial Information, page 270
26. Tell us why you believe D-Wave has sufficient engagement with
customers and a
reasonable basis to project revenue through 2026 given your disclosure
of risks associated
with its status as an early-stage company and the developing market
for quantum
computers. Quantify any other material assumptions described as used
in preparing the
projections, such as the number of quantum-accelerated applications
developed by
customers, product offerings, and length of the sales cycle, among
others. Clarify if the
projections account for D-Wave's development of a gate-model quantum
computing
system.
Financial Projections, page 273
27. Please revise your table to provide additional financial operating
data to balance the
information provided. For example, please disclose the amount of
Research and
Development expense and related headcount for each period presented.
Please clarify the
extent to which your projections assume continued government
assistance and the basis
for those assumptions.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 715, 2022 Page 7
Page
FirstName LastName
28. You disclose on page 271 that your assumptions presume that revenue
from QCaaS will
increase from 45% of total revenue in 2022 to 95% of total revenue in
2026. Please
explain the basis for your revenue growth assumptions both in total
and by
product/service. Please also revise your table on page 273 to provide
disaggregated
revenue disclosure by product type, similar to your presentation on
page F-23.
29. We note your disclosure that D-Wave's implied enterprise value was
based, in part, on an
analysis of comparable companies. Please revise your disclosure on
page 275 to explain
the criteria used to select the comparable companies used. We note
your reference to
competitors Rigetti Computing and IonQ on page 189. Please tell us how
you considered
other similarly sized publicly traded quantum computing companies.
Certain Benefits of DPCM's Directors and Officers and Others in the
Transaction, page 277
30. We note your disclosure on page 78 that certain of your directors and
officers would not
be able to serve as an officer or director if DPCM s charter did not
waive the doctrine of
corporate opportunity. Please address this potential conflict of
interest and whether it
impacted your search for an acquisition target and revise the
conflicts of interest
discussion so that it highlights all material interests in the
transaction held by the sponsor
and the company s officers and directors. This could include
fiduciary or contractual
obligations to other entities as well as any interest in, or
affiliation with, the target
company. In addition, please clarify how the board considered those
conflicts in
negotiating and recommending the business combination.
D-Wave Systems, Inc. Consolidated Financial Statements
2. Basis of presentation and summary of significant accounting policies
Revenue recognition, page F-16
31. Please revise to explain in detail what is meant by the statement that
professional services
are recognized "as they are earned based on the terms of the
contract". Please also revise
to explain when you use this method to recognize revenue as compared
to an input method
based upon costs incurred.
32. We note your discussion of your offerings on page 178 and your
discussion of key
strategic relationships on page 188. Please revise your revenue
recognition policy
footnote to more clearly explain how the offerings you describe on
page 178 correspond
to your discussion of performance obligations on pages F-16 through
F-18.
33. You disclose on page F-18 that revenue from QCaaS is recognized on a
straightline basis
over the contractual period. However, on page 194, you indicate that
QCaaS revenue may
also be recognized on a usage basis. If your contracts with customers
include variable fee
arrangements based upon usage or other variable payment terms, please
revise to disclose
how you recognize variable consideration. Please refer to ASC
606-10-50-20.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 815, 2022 Page 8
Page
FirstName LastName
Contract assets and contract liabilities, page F-18
34. Your disclosure on page F-18 distinguishes between contract
liabilities associated with
deferred product revenue and deferred service revenue and indicates
that deferred service
revenue typically results from maintenance and other service
contracts. Your revenue
disclosures on page F-17 make no reference to maintenance contracts
and indicates that
deferred revenue is primarily composed of fees related to QCaaS.
Please revise to more
clearly explain what deferred revenue represents. To the extent that
you have
maintenance or other service contracts with customers, please revise
to more clearly
explain the terms of those contracts, the related performance
obligations, and how you
recognize revenue associated with those contracts.
9. Leases, page F-28
35. Please revise to clarify what is meant by footnote (1) next to the
weighted average
discount rate in the table of weighted-average remaining lease terms
and discount rates for
operating leases on page F-29.
12. Stock-based compensation, page F-33
36. Please provide us with a breakdown of all equity awards granted from
July 1, 2021 and
leading up to your filing, including the fair value of the underlying
common stock used to
value such awards. To the extent there were any significant
fluctuations in the fair values
from period-to-period, please describe for us the factors that
contributed to those
fluctuations, including any intervening events within the Company or
changes in your
valuation assumptions or methodology. Compare the most recent
valuations for options
granted to the fair value of shares of common stock as determined by
the exchange ratio in
the merger agreement.
15. Earnings per share, page F-38
37. We note your disclosure on page F-38 that potentially dilutive
securities were not included
in the diluted per share calculations because they would be
anti-dilutive. As such, it's
unclear why your table showing the computation of basic and diluted
net loss per share
includes a line item for the effect of stock options. Please explain
why this line item is
included or revise to remove it from the table.
Emil Michael
FirstName LastNameEmil Michael
D-Wave Quantum Inc.
Comapany
April NameD-Wave Quantum Inc.
15, 2022
April 915, 2022 Page 9
Page
FirstName LastName
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Lisa Etheredge, Senior Staff Accountant, at (202)
551-3424 or Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Patrick Faller, Staff
Attorney, at (202) 551-4438 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Adam M. Givertz