D-Wave Quantum Inc. (QBTS)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Form 10-K. The following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those risk factors applicable to D-Wave and its business referenced under the section titled “Risk Factors” elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. In this section, unless otherwise specified, the terms “we”, “our”, “us”, D-Wave" or the "Company" refer to D-Wave Quantum Inc. and its subsidiaries following the Closing while "D-Wave Systems" refers to D-Wave Systems Inc. prior to the Closing. All other capitalized terms have the meanings ascribed thereto elsewhere in this Form 10-K. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

Overview

We are a commercial quantum computing company that provides customers with a full suite of professional services and web-based access to our superconducting quantum computer systems and integrated software environment through our LeapTM quantum cloud service. Historically, we have developed our own annealing superconducting quantum computer and associated software, and our current generation quantum system is the D-Wave AdvantageTM system. We are a leader in the development and delivery of quantum computing systems, software and services, and we are the world’s first commercial supplier of quantum computers—and the only company developing both annealing quantum computers and gate-model quantum computers.

Our business model is focused primarily on generating revenue from providing customers access to our quantum computing systems via the cloud in the form of quantum computing as a service ("QCaaS") products, and from providing professional services wherein we assist our customers in identifying and implementing quantum computing applications. We have three operating facilities, which we lease, in North America. These facilities are located in Burnaby, British Columbia, Richmond, British Columbia, and Palo Alto, California.

During the years ended December 31, 2024 and 2023, we generated revenue totaling $8.8 million and $8.8 million, respectively. We have incurred significant operating losses since inception. For the years ended December 31, 2024 and 2023, our net losses were $143.9 million and $82.7 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of December 31, 2024, we had an accumulated deficit of $626.9 million.

Macroeconomic Environment

Unfavorable conditions in the economy in the United States, Canada and abroad, including conditions resulting from changes in inflationary pressure, gross domestic product growth, financial and credit market fluctuations, banking collapses and related uncertainty, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, Israel or elsewhere, could cause a decrease in business investments on our products and negatively affect the growth of our business and our results of operations. However, to date, these unfavorable conditions have not affected our business.

Key Components of Results of Operations

Revenue

We currently generate our revenue primarily through subscription sales to access our QCaaS cloud platform and professional services related to the development and implementation of quantum computing applications and delivery of quantum computing application training. QCaaS revenue is recognized on a ratable basis over the contract term, which generally ranges from one month to two years. Professional services revenue is recognized over time on a percentage of completion basis using the costs incurred input measure of progress.

Revenue from quantum computing system is recognized at a point in time when control transfers to the customer, typically upon delivery or installation, based on the terms of the sales contract.

57

We expect that QCaaS revenue, as a percentage of total revenue, will increase due to an increasing number of QCaaS agreements being driven by the completion of professional services engagements yielding production applications that require QCaaS services, as well as by customers that choose to access our LeapTM cloud service without utilizing our professional services organization. However, quantum computing system revenue may have an outsized impact on our revenue and shift our product mix during the period when such revenue is recognized, though this revenue is expected to be irregular and intermittent.

Cost of Revenue

Our cost of revenue consists of all direct and indirect expenses related to providing our QCaaS offering and delivering our professional services, such as personnel-related expenses, including stock-based compensation, costs associated with maintaining the cloud platform on which we provide the QCaaS product and depreciation and amortization related to our quantum computing systems and related software.

Cost of revenue for quantum computing systems includes direct manufacturing costs, such as materials and labor for system production, as well as expenses related to installation, warranty, and support. Additionally, it includes shipping and handling costs associated with delivering the systems. These costs are also expensed as incurred.

We expect our total cost of revenue to trend upward in absolute dollars in future periods, corresponding to our anticipated growth in revenue and the higher costs that are necessary to support our customers, maintain the QCaaS cloud offering, operate our quantum computing systems, and deliver our professional services. We expect our cost of revenue as a percentage of total revenue to trend downward over time due to a higher mix of QCaaS revenue that has a lower cost to deliver compared to professional service revenue.

Operating Expenses

Our operating expenses consist of research and development, general and administrative, and sales and marketing expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, fabrication costs, lab supplies, and cloud computing resources and allocated facility 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 components, fabrication and software costs related to quantum computing systems constructed for research purposes that do not have a high probability of providing near-term future economic benefits, and may have no alternate future use. We currently do not capitalize any research and development expenses.

We expect our research and development expenses will trend upward on an absolute dollar basis for the foreseeable future as we continue to invest in research and development efforts to enhance the performance of our annealing quantum computers, to complete the development of our gate model quantum computer, and to broaden the functionality, improve the reliability, availability and scalability of our QCaaS cloud platform. If in the future we receive government grants and research incentives, which have historically offset a portion of research and development costs, these costs could decrease in absolute dollars. Also, non-cash share based compensation expenses may cause downward fluctuations in these costs from time to time.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel and outside professional services expenses including legal, audit and accounting services, insurance, other administrative expenses and allocated facility costs for our administrative functions.

We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act of 2002. However, non-cash stock-based compensation expenses may cause upward and downward fluctuations in these costs from time to time.

58

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, direct advertising, marketing and promotional material costs, sales commission expense, consulting fees and allocated facility costs for our sales and marketing functions. We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, expand our global customer base, and broaden our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future. However, non-cash stock-based compensation expenses may cause upward and downward fluctuations in these costs from time to time.

Results of Operations

The following table sets forth our results of operations for the periods indicated (in thousands):

Revenue

Revenue for the year ended December 31, 2024 remained consistent to the prior year. QCaaS revenue increased by $1.9 million, primarily due to an increase in the average revenue per QCaaS customer. This was offset by a decrease of $1.9 million in professional service revenue, as a result of the timing of closing new professional services engagements.

Cost of Revenue

Cost of revenue decreased by $0.9 million, or 21%, to $3.3 million for the year ended December 31, 2024 as compared to $4.1 million for the year ended December 31, 2023. The decrease in cost of revenue was primarily driven by a decrease in non-cash stock-based compensation of $0.6 million and personnel costs of $0.2 million.

Operating Expenses

Research and Development Expenses

Research and development expenses decreased by $2.6 million, or 7%, to $35.3 million for the year ended December 31, 2024 compared to $37.9 million for the year ended December 31, 2023. The decrease was primarily driven by a decrease in stock-based compensation expenses of $3.2 million, partially offset by an increase in personnel costs of $0.4 million and professional fees of $0.4 million.

59

General and Administrative Expenses

General and administrative expenses decreased by $4.6 million, or 12%, to $32.4 million for the year ended December 31, 2024 as compared to $37.0 million for the year ended December 31, 2023. The decrease was primarily driven by decreases in professional fees of $3.8 million, stock-based compensation expense of $3.2 million and insurance costs of $1.0 million, partially offset by an increase in personnel expenses of $2.3 million and credit loss expenses of $1.3 million.

Sales and Marketing Expenses

Sales and marketing expenses increased by $4.8 million, or 47%, to $15.1 million for the year ended December 31, 2024 as compared to $10.3 million for the year ended December 31, 2023. The increase was primarily driven by increases in personnel costs of $3.3 million, stock-based compensation expense of $0.8 million, travel expenses of $0.4 million and marketing expenses of $0.3 million.

Other Income (Expense), net

Interest Expense

Interest expense increased by $3.9 million, or 10,432%, to $3.9 million for the year ended December 31, 2024 as compared to $37.0 thousand for the year ended December 31, 2023. The increase is primarily due to interest expenses related to the Term Loan and the SIF Loan. The Company fully repaid and extinguished the Term Loan on October 22, 2024, including $30.0 million in principal and $4.3 million in accrued payable in kind ("PIK") interest. Additionally, the increase in interest expense reflects a decrease in the interest expense benefit from the catch-up method adjustment recorded in 2023 on the SIF Loan, which amounted to $2.9 million in the prior year. Refer to Note 7 to the accompanying consolidated financial statements for further details.

Change in fair value of Term Loan

The fair value of Term Loan increased by $0.6 million for the year ended December 31, 2024 as compared to a decrease of $0.6 million for the year ended December 31, 2023. On April 13, 2023, the Company entered into a Term Loan with PSPIB. The Company opted for the fair value option for accounting for the Term Loan (see Note 2 to the accompanying consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, were recorded as gains or losses in the Company’s consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varied primarily based on the market yield rate, market yield volatility, and the probabilities of various settlement scenarios. The Company fully repaid and extinguished the Term Loan on October 22, 2024.

Term Loan debt issuance costs

Term Loan debt issuance costs decreased by $2.1 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023, as there were no advances on the Term Loan during the year ended December 31, 2024.

Gain (loss) on investment in marketable equity securities

Gain (loss) on investment in marketable equity securities increased by $1.5 million for the year ended December 31, 2024 as compared to zero for the year ended December 31, 2023. On January 5, 2024, an investee of the Company was acquired for a combination of cash and stock in an observable orderly transaction. Consequently, the carrying value of the Company's investment was adjusted based on the consideration received, resulting in a net gain of $1.7 million, partially offset by a loss associated with the fair value of the conversion feature of the Zapata Note.

Change in fair value of warrant liabilities

The fair value of warrant liabilities increased by $68.5 million for the year ended December 31, 2024 as compared to a decrease of $0.3 million for the year ended December 31, 2023. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange (see Note 2 and Note 10 to the accompanying condensed consolidated financial statements). As the trading price of the Public Warrants appreciates, generally in correlation with the trading price of the Company’s common stock, the fair value of the warrant liabilities increases.

60

Other income (expense), net

Other income (expense), net increased by $5.6 million or 606%, to a net other income of $4.6 million for the year ended December 31, 2024 as compared to net other expense of $0.9 million for the year ended December 31, 2023. The increase was primarily driven by the impact of net foreign exchange gains driven by appreciation of the U.S. Dollar against the Canadian Dollar of $4.0 million, and an increase in interest income of $1.4 million due primarily to interest earned on higher cash and cash equivalent balances.

Liquidity and Capital Resources

In our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024, we disclosed that there was substantial doubt about our ability to continue as a going concern due to recurring losses, liquidity concerns, debt covenant uncertainties, and reliance on external financing. Since its inception, the Company has incurred net losses and negative cash flows from operations. As of December 31, 2024 and 2023, the Company had an accumulated deficit of $626.9 million and $483.1 million, respectively. For the years ended December 31, 2024 and 2023, the Company incurred a net loss of $143.9 million and $82.7 million, respectively, and the Company had net cash outflows from operating activities of $42.6 million and $60.6 million, respectively. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.

As part of management's evaluation of whether there was substantial doubt about our ability to continue as a going concern as of the date of this filing, management considered the results of fundraising activities completed in the fourth fiscal quarter of 2024 and subsequent to the balance sheet date in addition to the factors discussed above. During the year ended December 31, 2024, the Company received $214.2 million in net proceeds from the issuance of 100,249,331 Common Shares under various equity offerings described more fully in Note 15 to the accompanying consolidated financial statements. As of December 31, 2024 and 2023, the Company had cash and cash equivalents of $178.0 million and $41.3 million, respectively, and working capital (current assets less current liabilities) of $154.9 million and $35.8 million, respectively. Additionally, as of December 31, 2024, total assets exceeded total liabilities by $62.6 million, whereas as of December 31, 2023, total liabilities exceeded total assets by $24.5 million. In January 2025, the Company raised an additional $146.2 million in net cash proceeds from an additional equity offering.

As a result of these considerations, management has assessed the Company's liquidity under Financial Accounting Standards Board’s ASC Topic 205-40, “Basis of Presentation—Going Concern,” and determined that it has sufficient capital resources to meet its obligations for at least the next 12 months and does not anticipate any conditions that would raise substantial doubt about the Company's ability to continue as a going concern.

Lincoln Park Purchase Agreement

In conjunction with the Merger with DPCM, the Company and D-Wave Systems entered into a purchase agreement with Lincoln Park Capital Fund, LLC on June 16, 2022 (the "Purchase Agreement") which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to $150 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding share of common stock of the Company, par value $0.0001, (the "Common Shares") and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the year ended December 31, 2024, the Company has received $44.3 million in proceeds through the issuance of 34,860,416 Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future. As of December 31, 2024, D-Wave had $37.8 million of issuance capacity under the Purchase Agreement.

61

At-the-Market Offerings

On May 24, 2024, the Company entered into an at-the-market sales agreement (the "$100M ATM") with Needham & Company, LLC, B. Riley Securities, Inc., and Roth Capital Partners, LLC (the "$100M ATM Agents"). Under this agreement, the Company could sell shares of its common stock with an aggregate offering price of up to $100.0 million through or to the Agents. During the year ended December 31, 2024, the Company has received $97.2 million in net proceeds through the issuance of 49,812,287 Common Shares under the Sales Agreement. As of December 31, 2024, D-Wave had zero issuance capacity under the ATM Agreement.

On December 9, 2024, the Company entered into a new sales agreement (the "$75M ATM") with Needham & Company, LLC, Roth Capital Partners, LLC, B. Riley Securities, Inc., and Craig-Hallum Capital Group, LLC (the "$75M ATM Agents"). Under this agreement, the Company could sell shares of its common stock with an aggregate offering price of up to $75.0 million through or to the Agents. During the year ended December 31, 2024, the Company has received $72.9 million in net proceeds through the issuance of 15,576,628 Common Shares under the Sales Agreement. As of December 31, 2024, D-Wave had zero issuance capacity under the ATM Agreement.

On January 10, 2025, the Company entered into another at-the-market sales agreement (the "$150M ATM") with Needham & Company, LLC, Stifel, Nicolaus & Company, Incorporated, B. Riley Securities, Inc., Roth Capital Partners, LLC, The Benchmark Company, LLC, and Craig-Hallum Capital Group, LLC (the "$150M ATM Agents"). Under this agreement, the Company could sell shares of its common stock with an aggregate offering price of up to $150.0 million through or to the Agents. As of March 14, 2025, the Company has received $146.2 million in net proceeds through the issuance of 24,604,021 Common Shares under the Sales Agreement. As of March 14, 2025, D-Wave had zero issuance capacity under the ATM Agreement.

Sales under these agreements are classified as "at-the-market" equity offerings under Rule 415(a)(4) of the Securities Act and may be conducted on the NYSE or other trading platforms. The Agents will use commercially reasonable efforts to sell shares based on the Company’s instructions. The compensation to the Agents is up to 3.0% of the gross sales price, along with expense reimbursements. The Company has also agreed to provide indemnification against certain liabilities under the Securities Act.

The Company is not obligated to sell shares under these agreements. Each agreement may be terminated by: (a) the election of the Agents upon the occurrence of certain adverse events, (b) five business days’ advance notice from the Company to the Agents or five days’ advance notice from any of the Agents to the Company or (c) otherwise by mutual agreement of the parties pursuant to the terms of the Sales Agreement.

Repayment of the Term Loan

In addition, we successfully repaid a significant portion of our outstanding debt obligations, including the Term Loan and Security Agreement ("Term Loan") with PSPIB Unitas Investments II Inc. ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder as of December 31, 2024, that was initially entered into on April 13, 2023 (the "Closing Date"). The Term Loan, outlined in Note 7 - Loans payable, net to the consolidated financial statements, provided for $50.0 million in three tranches, subject to certain terms and conditions. The Company drew down two tranches totaling $30.0 million and, on October 22, 2024, the Company had prepaid the entire the Term Loan, including $30.0 million in principal and $4.3 million in accrued PIK interest.

Cash Flows

The following table sets forth our cash flows for the periods indicated (in thousands):

62

Cash Flows Used in Operating Activities

Our cash flows from operating activities are significantly affected by the growth of our business, and are 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, accounts receivable and other current assets and liabilities.

For the year ended December 31, 2024, net cash used in operating activities was $42.6 million, a decrease of $18.0 million from $60.6 million for the year ended December 31, 2023. The change is primarily due to an increase in noncash items added back to net loss of $55.6 million and an increase in cash released from working capital of $23.6 million, offset by an increase in net loss of $61.2 million. The increase in noncash items was primarily due to an increase in change in fair value of warrant liabilities of $68.5 million, partially offset by a decrease in stock-based compensation of $6.3 million, an increase in unrealized foreign exchange gain of $4.3 million, and a gain on marketable securities of $1.5 million. The decrease in working capital was primarily driven by an increased change in deferred revenue of $15.7 million and an increased change in accrued expenses and other current liabilities of $6.9 million.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2024 was $3.1 million, an increase of $2.5 million from $0.6 million for the year ended December 31, 2023. The increase is primarily due to an increase in purchase of property and equipment of $1.5 million and a purchase of a convertible note of $1.0 million.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities during the year ended December 31, 2024 was $182.5 million, an increase of $86.8 million from $95.6 million for the year ended December 31, 2023. The increase is primarily due to an increase in proceeds from the issuance of common stock pursuant to the ATM Agreements of $169.9 million, partially offset by an increase in debt repayments of $30.0 million, a decrease in debt financing proceeds of $29.0 million, a decrease in proceeds from the issuance of common stock pursuant to the Purchase Agreement of $19.4 million, a decrease in proceeds of government assistance of $3.0 million and an increase in the payment of tax withheld for common stock issued under stock-based compensation settlements of $2.7 million.

63

Contractual Obligations and Commitments

The Company has various operating leases of real estate and equipment. See Note 8 - Leases to the accompanying consolidated financial statements for further discussion of the nature and timing of cash obligations due under these leases.

Critical Accounting Estimates

Our consolidated financial statements included in this Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated 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 that affect the reported amounts and related disclosures for the periods presented. 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 significantly. Additionally, changes in assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

The critical accounting estimates, assumptions and judgements we believe to have the most significant impact on our audited annual consolidated financial statements are described below. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to critical accounting estimates and significant accounting policies.

Revenue recognition

We recognize revenue from the sale of our services and products. Our contracts with customers often include multiple performance obligations. Our performance obligations are as follows:

•Subscription sales to access our QCaaS cloud platform;

•Professional services related to the development and implementation of quantum computing applications;

•Quantum computing systems;

•Quantum computing application training;

•Application support and maintenance; and

•Printed circuit boards.

Our contracts with customers may include renewals or other options at fixed prices, which typically do not represent a significant discount. Based on our assessment of standalone selling prices, we determined that there were no significant material rights provided to our customers requiring separate recognition.

When we determine that our contracts with customers contain multiple performance obligations, for these arrangements, we allocate the transaction price based on the relative standalone selling price (“SSP”) method by comparing the SSP of each distinct performance obligation to the total value of the contract. We use the SSP for products and services sold together in a contract to determine whether there is variable consideration (e.g. discount) to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we don't sell the product or service separately, we determine the SSP by considering overall pricing objectives and market conditions, including cost plus a reasonable margin. Significant pricing practices taken into consideration include our discounting practices, the customer demographic, price lists, our go-to-market strategy, historical and current sales and contract prices. In instances where we do not sell or price a product or service separately, we maximize the use of observable inputs by using information that may include market conditions.

Sales of future revenues

On November 20, 2020, the Company entered into an agreement with the Canada Strategic Innovation Fund ("SIF"), wherein SIF committed to providing a conditionally repayable loan to the Company in the amount of up to C$40.0 million ("the SIF Loan"). The SIF Loan is conditionally repayable according to a revenue-based formula. See Note 7 to the accompanying consolidated financial statements for additional information concerning the SIF Loan.

64

The accounting treatment for the SIF Loan considers the "sale of future revenues" guidance outlined in ASC 470-10-25. The debt arising from the SIF Loan was recorded at face value and will be amortized using the effective interest method, leading to the accrual of interest expenses over the estimated term of the SIF Loan. The amortization schedule is based on projected cash flows derived from the Company's long-term revenue forecast. Subsequent changes in forecasted cash flows will be accounted for under the catch-up method, which entails adjusting the accrued interest portion of the principal balance through earnings to reflect the effective interest rate. For the year ended December 31, 2024 and 2023, the Company recognized gains related to catch-up method adjustments to the accrued interest portion of the loans payable, net balance of $0.2 million and $2.9 million, respectively, which are included in interest expense on the consolidated statements of operations and comprehensive loss. The liability is classified as non-current, as the current forecast indicates that repayments will not commence within the 12 months following the balance sheet date.

As the SIF Loan is originated through a government program, a market rate of interest is not imputed in accordance with the scope limitations of ASC 835.

Recently Issued and Adopted Accounting Standards

A discussion of recent accounting pronouncements is included in Note 2 to our audited consolidated financial statements included elsewhere in this Form 10-K.

JOBS Act Accounting Election

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, as an emerging growth company we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, as an emerging growth company, we may take advantage of certain reduced disclosure and other requirements that are otherwise applicable generally to public companies. D-Wave Quantum will take advantage of these exemptions until such time that it is no longer an emerging growth company. D-Wave Quantum will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement; (ii) the last day of the fiscal year in which its total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Form 10-K. The following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those risk factors applicable to D-Wave and its business referenced under the section titled “Risk Factors” elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. In this section, unless otherwise specified, the terms “we”, “our”, “us”, D-Wave" or the "Company" refer to D-Wave Quantum Inc. and its subsidiaries following the Closing while "D-Wave Systems" refers to D-Wave Systems Inc. prior to the Closing. All other capitalized terms have the meanings ascribed thereto elsewhere in this Form 10-K. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

58

Overview

On February 7, 2022, D-Wave Systems entered into the Transaction Agreement with DPCM, D-Wave, Merger Sub, CallCo, and ExchangeCo, pursuant to which, among other things: (a) Merger Sub merged with and into DPCM, with DPCM surviving as a direct, wholly-owned subsidiary of D-Wave, (b) D-Wave indirectly acquired all of the outstanding share capital of D-Wave Systems and D-Wave Systems became an indirect subsidiary of D-Wave, with D-Wave becoming a public company and an SEC registrant as successor to DPCM (the "Merger").

D-Wave was incorporated as a corporation organized and existing under the DGCL on January 24, 2022. The Company was formed for the purpose of effecting a merger between DPCM, D-Wave, and certain other affiliated entities through a series of transactions constituting the Merger pursuant to the Transaction Agreement. The closing of the Merger occurred on August 5, 2022 and is herein referred to as “the Closing.”

On the date of the Closing, DPCM and D-Wave Systems became wholly-owned subsidiaries of, and are operated, by D-Wave. Upon the completion of the Merger, D-Wave succeeded to all of the operations of its predecessor, D-Wave Systems.

Following the Closing, the Common Shares and Warrants of D-Wave commenced trading on the NYSE under the ticker symbols “QBTS” and “QBTS.WT,” respectively.

We are a commercial quantum computing company that provides customers with a full suite of professional services and web-based access to our superconducting quantum computer systems and integrated software environment through our cloud service, LeapTM. Historically, we have developed our own annealing superconducting quantum computer and associated software, and our current generation quantum system is the D-Wave AdvantageTM. We are a leader in the development and delivery of quantum computing systems, software and services, and we are the world’s first commercial supplier of quantum computers—and the only company developing both annealing quantum computers and gate-model quantum computers. During the year ended December 31, 2022, we initiated the development of a gate-model quantum computing system.

Our business model is focused primarily on generating revenue from providing customers access to our quantum computing systems via the cloud in the form of QCaaS products, and from providing professional services wherein we assist our customers in identifying and implementing quantum computing applications. We have three operating facilities, which we lease, in North America. These facilities are located in Burnaby, British Columbia, Richmond, British Columbia, and Palo Alto, California.

During the years ended December 31, 2023 and 2022, we generated revenue totaling $8.8 million and $7.2 million, respectively. We have incurred significant operating losses since inception. For the years ended December 31, 2023 and 2022, our net losses were $82.7 million and $53.7 million, respectively. We expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of December 31, 2023, we had an accumulated deficit of $483.1 million.

The Transaction Agreement and PIPE Financing

As noted above, the Merger pursuant to the Transaction Agreement was consummated on August 5, 2022. While the legal acquirer in the Transaction Agreement is D-Wave Quantum Inc., for financial accounting and reporting purposes under GAAP, D-Wave Systems is the accounting acquirer and the Merger is accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting and the financial statements of D-Wave represent the continuation of our financial statements in many respects. Under this method of accounting, DPCM is treated as the “acquired” company for financial reporting purposes. For accounting purposes, D-Wave Systems will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of D-Wave Systems (i.e., a capital transaction involving the issuance of stock by D-Wave Quantum Inc. for the stock of D-Wave Systems Inc.).

As a result of the Merger, all of the shares of D-Wave Systems common stock issued and outstanding immediately prior to the closing of the Merger (including D-Wave Systems common shares resulting from D-Wave Systems preferred stock conversion) were converted into an aggregate of 99,736,752 Common Shares (including Exchangeable Shares). Additionally, all of the shares of DPCM Class A Common Stock and Class B Common Stock held by DPCM issued and outstanding immediately prior to the Closing were converted into an aggregate of 4,327,512 Common Shares. Upon consummation of the Merger, the most significant change in our reported financial position and results of operations was an increase in cash of $49.0 million in gross proceeds from the Merger and PIPE Financing netted against transaction costs of approximately $14.2 million.

59

In connection with the Merger, approximately 29.1 million shares of DPCM Class A Common Stock were redeemed, which represented a significant portion of the publicly traded shares of DPCM outstanding immediately prior to the Merger and resulted in only approximately $9.0 million of cash from the DPCM Trust Account becoming available to us. As discussed elsewhere in this Form 10-K, we entered into the Purchase Agreement, pursuant to which Lincoln Park agreed to purchase up to $150.0 million of Common Shares through the Purchase Agreement (subject to certain limitations contained in the Purchase Agreement) from time to time over a 36-month period, to assist us in meeting our capital requirements. However, we may not sell any Common Shares to Lincoln Park unless and until the price of our Common Shares subsequently exceeds the Floor Price of $1.00.

Common Shares that may be resold into the public markets pursuant to the Purchase Agreement could have a significant negative impact on the trading price of our Common Shares.

We have also filed the Resale Registration Statement registering the issuance to and/or resale by certain third parties unrelated to the Purchase Agreement of certain securities issued prior to, or in connection with, the Merger. The Common Shares registered for resale from time to time pursuant to the Resale Registration Statement represent a substantial majority of the number of the Common Shares outstanding as of December 31, 2023. The shareholders selling pursuant to the Resale Registration Statement will determine the timing, pricing and rate at which they sell such Common Shares into the public market and such sales could have a significant negative impact on the trading price of our Common Shares. In addition, PSP, a beneficial owner of approximately 37% of our outstanding Common Shares (including Common Shares underlying Exchangeable Shares) as of December 31, 2023, has registration rights with respect to all of its 55,068,914 shares not registered on the Resale Registration Statement, and, since its lock-up period has concluded, may sell such shares either pursuant to a future registration statement or once Rule 144 under the Securities Act becomes available for such sales. Although the current trading price of the Common Shares is below $10.00 per share, certain of the investors who have resale rights under the Resale Registration Statement have an incentive to sell because they purchased Common Shares and/or Warrants at prices below those offered in DPCM's IPO. Sales by such investors may cause the trading prices of our securities to experience a further decline. As the trading price of our Common Shares has declined, sales of Common Shares to Lincoln Park pursuant to the Purchase Agreement have become a less attractive source of capital. In addition, we may be unable to raise capital at rates that would be possible if the trading price of our Common Shares was higher.

As a result of the Merger, we became subject to the reporting requirements under the Exchange Act and listing standards of the NYSE, which has required us to hire additional personnel and implement procedures and processes to address applicable regulatory requirements and customary practices. We expect D-Wave will incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, legal, and filing fees.

Our future results of consolidated operations and financial position may not be comparable to historical results as a result of the Merger.

Macroeconomic and Business Environment

Unfavorable conditions in the economy in the United States, Canada and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, banking collapses and related uncertainty, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine, Israel or elsewhere, could cause a decrease in business investments on our products and negatively affect the growth of our business and our results of operations.

The recent trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, interest rates and overhead costs may adversely affect our operating results. High interest and inflation rates also present a recent challenge impacting the U.S. and Canadian economies and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or continue to rise) on our operating costs, including our labor, due to supply chain constraints and employee availability and wage increases, which may result in additional stress on our working capital resources.

60

Key Components of Results of Operations

Revenue

We currently generate our revenue primarily through subscription sales to access our QCaaS cloud platform and professional services related to the development and implementation of quantum computing applications. QCaaS revenue is recognized on a ratable basis over the contract term, which generally ranges from one month to two years. Professional services revenue is recognized over time on a percentage of completion basis using the costs incurred input measure of progress.

We expect that QCaaS revenue, as a percentage of total revenue, will increase due to an increasing number of QCaaS agreements being driven by the completion of professional services engagements yielding production applications that require QCaaS services, as well as by customers that choose to access our Leap cloud service without utilizing our professional services organization.

Cost of Revenue

Our cost of revenue consists of all direct and indirect expenses related to providing our QCaaS offering and delivering our professional services, such as personnel-related expenses, including stock-based compensation, costs associated with maintaining the cloud platform on which we provide the QCaaS product and depreciation and amortization related to our quantum computing systems and related software.

We expect our total cost of revenue to increase in absolute dollars in future periods, corresponding to our anticipated growth in revenue and necessary to support our customers and to maintain the QCaaS cloud offering, operate our quantum computing systems, and to deliver our professional services. We expect our cost of revenue as a

percentage of total revenue to decrease over time due to a higher mix of QCaaS revenue that has a lower cost to deliver compared to professional service revenue.

Operating Expenses

Our operating expenses consist of research and development, general and administrative, and sales and marketing expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, fabrication costs, lab supplies, and cloud computing resources and allocated facility 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 components, fabrication and software costs related to quantum computing systems constructed for research purposes that do not have a high probability of providing near-term future economic benefits, and may have no alternate future use. We currently do not capitalize any research and development expenses.

We expect our research and development expenses will increase on an absolute dollar basis for the foreseeable future as we continue to invest in research and development efforts to enhance the performance of our annealing quantum computers, to complete the development of our gate model quantum computer, and to broaden the functionality, improve the reliability, availability and scalability of our QCaaS cloud platform. If in the future we receive government grants and research incentives, which have historically offset a portion of research and development costs, these costs could decrease in absolute dollars.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel and outside professional services expenses including legal, audit and accounting services, insurance, other administrative expenses and allocated facility costs for our administrative functions.

We expect our general and administrative expenses to decrease in absolute dollars in the near term due to significant investments in scaling up our ability to operate as a public company made in prior years. However, in future periods we expect general and administrative expenses to increase in absolute dollars as we continue to invest in more comprehensive compliance and governance functions, increased IT security and compliance, and expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act.

61

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, direct advertising, marketing and promotional material costs, sales commission expense, consulting fees and allocated facility costs for our sales and marketing functions. We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, expand our global customer base, and broaden our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future.

Results of Operations

The following table sets forth our results of operations for the periods indicated (in thousands):

Comparison of the Year Ended December 31, 2023 and 2022

Revenue

Revenue increased by $1.6 million, or 22%, to $8.8 million for the year ended December 31, 2023 as compared to $7.2 million for the year ended December 31, 2022, with the increase due primarily to an increase of $2.3 million in professional services revenue, primarily driven by an increase in projects that enable our customers to identify and implement applications that leverage our QCaaS cloud platform, offset by a decrease in QCaaS revenue of $0.7 million, due to non-renewal for several customer contracts that were partially replaced with new customer contracts.

Cost of Revenue

Cost of revenue increased by $1.2 million, or 41%, to $4.1 million for the year ended December 31, 2023 as compared to $2.9 million for the year ended December 31, 2022. The increase in cost of revenue was primarily driven by investments made to support a higher volume of services. The cost of revenue increases were primarily comprised of increases in stock-based compensation expenses and personnel costs of $0.9 million and $0.5 million, respectively, offset by decreases in quantum computing infrastructure costs of $0.1 million.

62

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $5.8 million, or 18%, to $37.9 million for the year ended December 31, 2023 compared to $32.1 million for the year ended December 31, 2022. The increase in research and development expenses was primarily driven by our continuous efforts to broaden the functionality of our QCaaS cloud platform and improve the reliability, availability and scalability of our cloud platform. In particular, the increases were comprised of stock-based compensation expenses, other personnel costs, and fabrication expenses of $5.1 million, $0.5 million, and $0.9 million respectively, and were partly offset by decreases in facilities costs and consulting expenses of $0.6 million and $0.2 million, respectively.

General and Administrative Expenses

General and administrative expenses increased by $15.5 million, or 72%, to $37.0 million for the year ended December 31, 2023 as compared to $21.5 million for the year ended December 31, 2022. The increase was driven by investments made to scale up our ability to operate as a public company and was primarily comprised of increases in stock-based compensation expense, other personnel costs, professional fees, insurance costs, and facilities expenses of $8.7 million, $0.8 million, $4.0 million, $1.3 million, and $0.4 million, respectively.

Sales and Marketing Expenses

Sales and marketing expenses increased by $0.2 million, or 2%, to $10.3 million for the year ended December 31, 2023 as compared to $10.1 million for the year ended December 31, 2022. The increase was primarily due to increased personnel costs and professional fees of $2.1 million and $0.2 million, respectively, offset by decreased stock-based compensation expenses of $2.0 million.

Other Income (Expense), net

Interest Expense

Interest expense decreased by $2.3 million, or 98%, to $37 thousand for the year ended December 31, 2023 as compared to $2.3 million for the year ended December 31, 2022. The decrease is due to an increase in the benefit from the catch-up method adjustment (see Note 8 to the accompanying consolidated financial statements) on the Company's SIF Loan to $2.9 million from $0.6 million in the comparable period.

63

Change in fair value of Term Loan

Change in Change in fair value of Term Loan increased by $0.6 million for the year ended December 31, 2023 as compared to zero for the year ended December 31, 2022. On April 13, 2023, the Company entered into a Term Loan with PSPIB, providing $50.0 million in aggregate principal amount over three tranches, with the first two tranches, each $15.0 million, disbursed on April 14, 2023, and July 13, 2023, respectively. The Company opted for the fair value option for accounting the Term Loan (See Note 2 to the accompanying consolidated financial statements). Changes in the fair value of the Term Loan, excluding changes due to the Company's own credit risk, are recorded as gains or losses in the Company’s consolidated statements of operations and comprehensive loss in each reporting period. The fair value of the Term Loan varies primarily based on the market yield rate, market yield volatility, probability for an event of default and the probability of the issuance of Common Shares under the Purchase Agreement.

Term Loan debt issuance costs

Change in Term Loan debt issuance costs increased by $2.1 million for the year ended December 31, 2023 as compared to zero for the year ended December 31, 2022. As mentioned previously, the Company elected the fair value option for accounting the Term Loan. Under this option, debt issuance costs are recorded in other expenses in the Company’s consolidated statements of operations and comprehensive loss.

Change in fair value of warrant liabilities

Change in fair value of warrant liabilities decreased by $5.9 million for the year ended December 31, 2023 as compared to $6.2 million for the year ended December 31, 2022. The fair value of the warrant liabilities varies primarily with the trading price of the Public Warrants listed on the New York Stock Exchange.

Lincoln Park Purchase Agreement issuance costs

There were no issuance costs incurred in connection with the Lincoln Park Purchase Agreement during the year ended December 31, 2023.

Other income (expense), net

Other income (expense), net increased by $3.5 million or 136%, to $0.9 million for the year ended December 31, 2023 as compared to $2.5 million for the year ended December 31, 2022. The increase was largely driven by the net impact of foreign exchange gains and losses.

64

Liquidity and Capital Resources

Since its inception, the Company has incurred net losses and negative cash flows from operations. As of December 31, 2023, the Company had an accumulated deficit of $483.1 million. For the years ended December 31, 2023 and 2022, the Company incurred a net loss of $82.7 million and $53.7 million, respectively, and the Company had net cash outflows from operating activities of $60.6 million and $45.2 million, respectively. As of December 31, 2023, the Company had cash of $41.3 million and working capital (current assets less current liabilities) of $35.8 million. Additionally, total liabilities exceeded total assets at December 31, 2023 by $24.5 million. The Company expects to incur additional operating losses and negative cash flows from operating activities as it continues to expand its commercial operations and research and development programs.

On August 5, 2022, the Company completed a Merger with DPCM. The Company received gross proceeds of $49.0 million from the PIPE Investment (as defined below) and the DPCM trust account. Of the gross proceeds, $21.8 million were used to repay the Venture Loan obligations and $14.2 million were used to pay for the Company's transaction costs, including DPCM's transaction costs, associated with the Merger. On April 13, 2023 (the "Closing Date"), the Company entered into a Term Loan and Security Agreement (the "Term Loan"), by and between the Company and PSPIB Unitas Investments II Inc., ("PSPIB" or the "Lender"), a related party to the Company's largest shareholder. As further described in Note 8 - Loans payable, net, the Term Loan provides for an aggregate principal amount of $50.0 million to be made available to the Company in three tranches, subject to certain terms and conditions as defined in the Term Loan, including a financial covenant that measures the Company's revenue against certain minimum percentages of budgeted revenue per quarter. The first two tranches of the Term Loan, each amounting to $15.0 million in principal, were advanced to D-Wave on April 14, 2023 and July 13, 2023, respectively. The Lender agreed to modify certain conditions to the funding of the second tranche of the Term Loan, including delaying the delivery of a board-approved operating budget and plan for the Company’s fiscal years 2023 through 2027 to August 31, 2023 (later extended to December 31, 2023); modifying the condition that, prior to the funding of the second tranche, the Company shall have nominated an additional director that is either an employee of PSPIB or an independent director selected from PSPIB nominees to require such appointment at a later time at PSPIB’s option; and modifying notice deadline requirements for the registration or filings of intellectual property. PSPIB has also agreed to waive certain covenants under the Term Loan that the Company did not meet, including the minimum revenue financial covenant for the second and third fiscal quarters ended June 30, 2023 and September 30, 2023, respectively. The availability of the third tranche of $20.0 million was subject to the satisfaction of certain conditions, including the closing of a $25.0 million non-dilutive financing on terms reasonably acceptable to the Lender, the intellectual property valuation report submitted as a condition precedent to the second tranche remaining satisfactory to the Lender and the board-approved operating budget for 2023 through 2027 to be submitted by December 31, 2023, being satisfactory to the Lender. The Company submitted the board-approved operating budget by December 31, 2023. There can be no assurance that the Company will be able to meet the other conditions necessary to draw on the third tranche or will be able to comply with the covenants of the Term Loan, or that PSPIB will agree to waive covenants under the Term Loan in the future. As of December 31, 2023, the Company was in compliance with the covenants under the Term Loan.

In conjunction with the Merger, the Company and D-Wave Systems entered into a purchase agreement with Lincoln Park on June 16, 2022 (the "Purchase Agreement") which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to $150.0 million of D-Wave's common stock, par value $0.0001 per share through November 1, 2025. The Purchase Agreement may provide the Company and D-Wave with additional liquidity to fund the business, subject to the conditions set forth in the agreement, including volume limitations tied to periodic market prices, ownership limitations restricting Lincoln Park from owning more than 9.9% of the then total outstanding Common Shares and a floor price of $1.00 at or below which the Company may not sell to Lincoln Park any Common Shares. When the Company sells shares to Lincoln Park, Lincoln Park may resell all, some, or none of those Common Shares at any time or from time to time in its discretion. During the year ended December 31, 2023, the Company has received $63.7 million in proceeds through the issuance of 42.1 million Common Shares to Lincoln Park under the Purchase Agreement. In order for the Company to issue Common Shares under the Purchase Agreement, the Company's share price must be above the floor price of $1.00. There is no assurance that the floor price will not fall below $1.00 preventing the Company from being able to make sales to Lincoln Park in the future.

65

To the extent that sufficient capital is not obtained through the cash received in connection with the proceeds of the Term Loan or the issuance of Common Shares under the Purchase Agreement with Lincoln Park, management will be required to obtain additional capital through the issuance of debt and/or equity, or other arrangements. However, there can be no assurance that D-Wave will be able to raise additional capital when needed or under acceptable terms. The issuance of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to the currently outstanding common stock. Any future debt may contain covenants and limit D-Wave’s ability to pay dividends or make other distributions to stockholders. If D-Wave is unable to obtain additional financing, operations will be scaled back or discontinued.

As of December 31, 2023, the Company was not in compliance with certain continued listing standards of the New York Stock Exchange ("NYSE"). On March 1, 2024, the NYSE provided D-Wave with a notification letter of recompliance based on a calculation of the Company’s average closing share price for the 30 trading days ended February 29, 2024, which reflected an average closing share price above the NYSE’s $1.00 minimum requirement. D-Wave will continue to be traded on the NYSE, subject to its continued compliance with all applicable listing standards.

If the Company is unable to maintain compliance with the continued listing standards of the NYSE and is not able to cure any violations within the time periods allotted by the NYSE, if any, it will result in the delisting of the Company’s common stock from the NYSE, which could negatively impact the trading price, trading volume and liquidity of, and have other material adverse effects on, the Company’s common stock and its ability to raise capital.

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification (“ASC”) Topic 205-40, “Basis of Presentation—Going Concern”, management has determined that the Company's liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern, which is considered to be for a period of one year from the issuance of these financial statements. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Such adjustments could be material.

Cash Flows

The following table sets forth our cash flows for the periods indicated (in thousands):

Cash Flows Used in Operating Activities

Our cash flows from operating activities are significantly affected by the growth of our business, and are 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, accounts receivable and other current assets and liabilities.

For the year ended December 31, 2023, net cash used in operating activities was $60.6 million, an increase of $15.4 million from cash used in operating activities of $45.2 million for the year ended December 31, 2022. The change is primarily due to an increase in net loss of $29.0 million and an increase in net cash used to settle accounts payable of $6.2 million, offset by increases on noncash charges related to stock-based compensation of $12.8 million and decreases in noncash income related to the change in fair value of warrant liabilities of $5.9 million.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2023 was $0.6 million, representing additions of $0.6 million in property and equipment.

Net cash used in investing activities during the year ended December 31, 2022 was $0.5 million representing additions of $0.4 million in property and equipment and $0.1 million in software primarily related to the development of our quantum computing systems.

Cash Flows Provided by Financing Activities

66

Net cash provided by financing activities during the year ended December 31, 2023 was $95.6 million, an increase of $52.4 million from cash provided by financing activities of $43.3 million for the year ended December 31, 2022. The increase a result of increased net proceeds from equity financing activities of $22.1 million and increased net proceeds from debt financing activities of $30.3 million.

Contractual Obligations and Commitments

The Company has various operating leases of real estate and equipment. See Note 9 - Leases to the accompanying consolidated financial statements for further discussion of the nature and timing of cash obligations due under these leases.

Critical Accounting Estimates

Our consolidated financial statements included in this Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated 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 that affect the reported amounts and related disclosures for the periods presented. 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 significantly. Additionally, changes in assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

The critical accounting estimates, assumptions and judgements we believe to have the most significant impact on our audited annual consolidated financial statements are described below. See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to the audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to critical accounting estimates and significant accounting policies.

Revenue recognition

We recognize revenue from the sale of our services and products. Our contracts with customers often include multiple performance obligations. Our performance obligations are as follows:

•Subscription sales to access our QCaaS cloud platform;

•Professional services related to the development and implementation of quantum computing applications;

•Quantum computing application training;

•Application support and maintenance; and

•Printed circuit boards.

Our contracts with customers may include renewals or other options at fixed prices, which typically do not represent a significant discount. Based on our assessment of standalone selling prices, we determined that there were no significant material rights provided to our customers requiring separate recognition.

When we determine that our contracts with customers contain multiple performance obligations, for these arrangements, we allocate the transaction price based on the relative standalone selling price (“SSP”) method by comparing the SSP of each distinct performance obligation to the total value of the contract. We use the SSP for products and services sold together in a contract to determine whether there is variable consideration (e.g. discount) to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we don't sell the product or service separately, we determine the SSP by considering its overall pricing objectives and market conditions, including cost plus a reasonable margin. Significant pricing practices taken into consideration include our discounting practices, the customer demographic, price lists, our go-to-market strategy, historical and current sales and contract prices. In instances where we do not sell or price a product or service separately, we maximize the use of observable inputs by using information that may include market conditions.

Sales of future revenues

On November 20, 2020, the Company entered into an agreement with the Canada Strategic Innovation Fund ("SIF"), wherein SIF committed to providing a conditionally repayable loan to the Company in the amount of up to C$40.0 million ("the SIF Loan"). The SIF Loan is conditionally repayable according to a revenue-based formula. See Note 8 to the accompanying consolidated financial statements for additional information concerning the SIF Loan.

67

The accounting treatment for the SIF Loan considers the "sale of future revenues" guidance outlined in ASC 470-10-25. The debt arising from the SIF Loan was recorded at face value and will be amortized using the effective interest method, leading to the accrual of interest expenses over the estimated term of the SIF Loan. The amortization schedule is based on projected cash flows derived from the Company's long-term revenue forecast. Subsequent changes in forecasted cash flows will be accounted for under the catch-up method, which entails adjusting the accrued interest portion of the principal balance through earnings to reflect the effective interest rate. For the year ended December 31, 2023 and 2022, the Company recognized gains related to catch-up method adjustments to the accrued interest portion of the loans payable, net balance of $2.9 million and $0.6 million, respectively. The liability is classified as non-current, as the current forecast indicates that repayments will not commence within the 12 months following the balance sheet date.

As the SIF Loan is originated through a government program, a market rate of interest is not imputed in accordance with the scope limitations of ASC 835.

Term Loan fair value option election

The Company determined that it is eligible for the fair value option election in connection with the Term Loan. The Term Loan meets the definition of a “recognized financial liability” which is an acceptable financial instrument eligible for the fair value option under ASC 825. At the date of issuance, the fair value of the Term Loan was derived from the instrument’s implied discount rate at inception. The fair value option election was made to enhance the relevance and transparency of information presented related the features embedded in the Term Loan.

Changes in the fair value of the Term Loan, other than changes associated with the Company's own credit risk, are recorded as gains or losses in the Company’s consolidated statements of operations and comprehensive loss in each reporting period. Changes in fair value attributable to the Company's own credit risk are recorded in other comprehensive income or loss in the Company's consolidated statements of operations and comprehensive loss in each reporting period; there have been no such changes for the year ended December 31, 2023. Under the fair value option, debt issuance costs are recorded in other expense in the Company’s consolidated statements of operations and comprehensive loss.

The Term Loan is subject to certain repayment and prepayment provisions which the Company has considered in their valuation analysis. The valuation analysis performed as of the issuance date on April 13, 2023 and December 31, 2023 did not consider any amendments to the Term Loan that occurred subsequent to December 31, 2023 (See Note 8). To estimate the fair value of the Term Loan under the optional prepayment scenario, we have utilized the binomial lattice model. Additionally, we have employed a Monte Carlo simulation model to forecast both the probability for an event of default in the valuation analysis which would result in a mandatory prepayment of the outstanding principal and accrued and unpaid interest and the probability of the issuance of Common Shares under the Purchase Agreement to determine the estimated proceeds to be paid to the Lender along with a mandatory prepayment premium of 10%.

Recently Issued and Adopted Accounting Standards

A discussion of recent accounting pronouncements is included in Note 2 to our audited consolidated financial statements included elsewhere in this Form 10-K.

JOBS Act Accounting Election

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, as an emerging growth company we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, as an emerging growth company, we may take advantage of certain reduced disclosure and other requirements that are otherwise applicable generally to public companies. D-Wave Quantum will take advantage of these exemptions until such time that it is no longer an emerging growth company. D-Wave Quantum will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement; (ii) the last day of the fiscal year in which its total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes included elsewhere in this Form 10-K. The following discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those risk factors applicable to D-Wave and its business referenced under the section titled “Risk Factors” elsewhere in this Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. In this section, unless otherwise specified, the terms “we”, “our”, “us”, D-Wave" or the "Company" refer to D-Wave Quantum Inc. and its subsidiaries following the Closing while "D-Wave Systems" refers to D-Wave Systems Inc. prior to the Closing. All other capitalized terms have the meanings ascribed thereto elsewhere in this Form 10-K. All dollar amounts are expressed in thousands of United States dollars (“$”), unless otherwise indicated.

Overview

On February 7, 2022, D-Wave Systems entered into the Transaction Agreement with DPCM, D-Wave, Merger Sub, CallCo, and ExchangeCo, pursuant to which, among other things: (a) Merger Sub merged with and into DPCM, with DPCM surviving as a direct, wholly-owned subsidiary of D-Wave, (b) D-Wave indirectly acquired all of the outstanding share capital of D-Wave Systems and D-Wave Systems became an indirect subsidiary of D-Wave, with D-Wave becoming a public company and an SEC registrant as successor to DPCM (the "Merger").

D-Wave was incorporated as a corporation organized and existing under the DGCL on January 24, 2022. The Company was formed for the purpose of effecting a merger between DPCM, D-Wave, and certain other affiliated entities through a series of transactions constituting the Merger pursuant to the Transaction Agreement. The closing of the Merger occurred on August 5, 2022 and is herein referred to as “the Closing.”

On the date of the Closing, DPCM and D-Wave Systems became wholly-owned subsidiaries of, and are operated, by D-Wave. Upon the completion of the Merger, D-Wave succeeded to all of the operations of its predecessor, D-Wave Systems.

Following the Closing, the Common Shares and Warrants of D-Wave commenced trading on the NYSE under the ticker symbols “QBTS” and “QBTS.WT,” respectively.

We are a commercial quantum computing company that provides customers with a full suite of professional services and web-based access to our superconducting quantum computer systems and integrated software environment through our cloud service, LeapTM. Historically, we have developed our own annealing superconducting quantum computer and associated software, and our current generation quantum system is the D-Wave AdvantageTM. We are a leader in the development and delivery of quantum computing systems, software and services, and we are the world’s first commercial supplier of quantum computers—and the only company developing both annealing quantum computers and gate-model quantum computers. During the year ended December 31, 2021, we initiated the development of a gate-model quantum computing system.

Our business model is focused primarily on generating revenue from providing customers access to our quantum computing systems via the cloud in the form of QCaaS products, and from providing professional services wherein we assist our customers in identifying and implementing quantum computing applications. We have three operating facilities, which we lease, in North America. These facilities are located in Burnaby, British Columbia, Richmond, British Columbia, and Palo Alto, California.

During the years ended December 31, 2022, 2021, and 2020, we generated revenue totaling $7.2 million, $6.3 million, and $5.2 million respectively. We have incurred significant operating losses since inception. For the years ended December 31, 2022, 2021, and 2020 our net loss was $51.5 million, $31.5 million, and $10.0 million, respectively. We

54

expect to continue to incur significant losses for the foreseeable future as we continue to invest in a number of research and development programs as well as a variety of go-to-market initiatives. As of December 31, 2022, we had an accumulated deficit of $376.8 million.

The Transaction Agreement and PIPE Financing

As noted above, the Merger pursuant to the Transaction Agreement was consummated on August 5, 2022. While the legal acquirer in the Transaction Agreement is D-Wave Quantum Inc., for financial accounting and reporting purposes under GAAP, D-Wave Systems is the accounting acquirer and the Merger is accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting and the financial statements of D-Wave represent the continuation of our financial statements in many respects. Under this method of accounting, DPCM is treated as the “acquired” company for financial reporting purposes. For accounting purposes, D-Wave Systems will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of D-Wave Systems (i.e., a capital transaction involving the issuance of stock by D-Wave Quantum Inc. for the stock of D-Wave Systems Inc.).

As a result of the Merger, all of the shares of D-Wave Systems common stock issued and outstanding immediately prior to the closing of the Merger (including D-Wave Systems common shares resulting from D-Wave Systems preferred stock conversion) were converted into an aggregate of 99,736,752 Common Shares (including Exchangeable Shares). Additionally, all of the shares of DPCM Class A Common Stock and Class B Common Stock held by DPCM issued and outstanding immediately prior to the Closing were converted into an aggregate of 4,327,512 Common Shares. Upon consummation of the Merger, the most significant change in our reported financial position and results of operations was an increase in cash of $49.0 million in gross proceeds from the Merger and PIPE Financing netted against transaction costs of approximately $14.2 million.

In connection with the Merger, approximately 29.1 million shares of DPCM Class A Common Stock were redeemed, which represented a significant portion of the publicly traded shares of DPCM outstanding immediately prior to the Merger and resulted in only approximately $9.0 million of cash from the DPCM Trust Account becoming available to us. As discussed elsewhere in this Form 10-K, we entered into the Purchase Agreement, pursuant to which Lincoln Park agreed to purchase up to $150.0 million of Common Shares through the Purchase Agreement (subject to certain limitations contained in the Purchase Agreement) from time to time over a 36-month period, to assist us in meeting our capital requirements. However, we may not sell any Common Shares to Lincoln Park unless and until the price of our Common Shares subsequently exceeds the Floor Price of $1.00. Since February 14, 2023, our stock price has closed each day below the $1.00 Floor Price. The resale of our Common Shares by Lincoln Park related to the Purchase Agreement was registered under the Securities Act pursuant to the First LP Registration Statement. On February 13, 2023 we filed the Second LP Registration Statement to register the sale of additional shares related to the Purchase Agreement. Such registration statement is not yet effective.

Common Shares that may be resold into the public markets pursuant to the Purchase Agreement could have a significant negative impact on the trading price of our Common Shares.

We have also filed the Resale Registration Statement registering the issuance to and/or resale by certain third parties unrelated to the Purchase Agreement of certain securities issued prior to, or in connection with, the Merger. The Common Shares registered for resale from time to time pursuant to the Resale Registration Statement represent a substantial majority of the number of the Common Shares outstanding as of December 31, 2022. The shareholders selling pursuant to the Resale Registration Statement will determine the timing, pricing and rate at which they sell such Common Shares into the public market and such sales could have a significant negative impact on the trading price of our Common Shares. In addition, PSP, a beneficial owner of approximately 52% of our outstanding Common Shares (including Common Shares underlying Exchangeable Shares) as of December 31, 2022, has registration rights with respect to all of its 55,068,914 shares not registered on the Resale Registration Statement, and, since its lock-up period has concluded, may sell such shares either pursuant to a future registration statement or once Rule 144 under the Securities Act becomes available for such sales. Although the current trading price of the Common Shares is below $10.00 per share, certain of the investors who have resale rights under the Resale Registration Statement have an incentive to sell because they purchased Common Shares and/or Warrants at prices below those offered in DPCM's IPO. Sales by such investors may cause the trading prices of our securities to experience a further decline. As the trading price of our Common Shares has declined, sales of Common Shares to Lincoln Park pursuant to the Purchase Agreement have become a less attractive source of capital. In addition, we may be unable to raise capital at rates that would be possible if the trading price of our Common Shares was higher.

As a result of the Merger, we became subject to the reporting requirements under the Exchange Act and listing standards of the NYSE, which has required us to hire additional personnel and implement procedures and processes to address applicable regulatory requirements and customary practices. We expect D-Wave will incur additional annual

55

expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit, legal, and filing fees.

Our future results of consolidated operations and financial position may not be comparable to historical results as a result of the Merger.

Macroeconomic and Business Environment

Russia-Ukraine Conflict

In February 2022, the Russian Federation launched an invasion of the country of Ukraine resulting in conflict in the region and a variety of sanctions against the Russian Federation enacted by several governmental bodies, including the governments of the U.S., United Kingdom and Canada and the European Union. The conflict has had, and continues to have, direct and indirect adverse effects on financial markets and global supply chain disruptions. We do not have any direct operations in either Russia or Ukraine and there were no material impacts to our consolidated financial statements as of and for the year ended December 31, 2022 as a result of the situation. We will continue to monitor the situation as it evolves for potential impacts to our operating and financial results such as increased inflation, supply chain, or cybersecurity risks in subsequent periods. Refer to Item 1A, “Risk Factors” disclosed herein for our assessment of risk factors surrounding inflationary, supply chain and cybersecurity risks.

COVID-19 Update

While the crisis brought on by COVID-19 pandemic has shown signs of abatement (e.g., new case rates remain below prior highs, the mortality rate remains low, and the Centers for Disease Control relaxed its guidance), the full magnitude of the pandemic’s effect on our financial condition, liquidity and future results of operations remains uncertain. Management continues to actively monitor our financial condition, liquidity, operations, suppliers, industry and workforce. Economic uncertainty as a result of changing or worsening COVID-19 conditions may cause our current or potential future customers to modify, delay or cancel plans to purchase our products and services.There were no material impacts to our consolidated financial statements as of and for the year ended December 31, 2022 as a result of the COVID-19 outbreak. Refer to Item 1A, "Risk Factors" disclosed herein for our assessment of risk factors surrounding the pandemic.

Macroeconomic Environment

Unfavorable conditions in the economy in the United States, Canada and abroad, including conditions resulting from changes in gross domestic product growth, labor shortages, supply chain disruptions, inflationary pressures, rising interest rates, financial and credit market fluctuations, banking collapses and related uncertainty, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe or elsewhere, including military actions affecting Russia, Ukraine or elsewhere, could cause a decrease in business investments on our products and negatively affect the growth of our business and our results of operations.

Key Components of Results of Operations

Revenue

We currently generate our revenue through subscription sales to access our QCaaS cloud platform; professional services that include problem evaluation, proof of concept, and pilot application phases; training on our quantum computing systems; and the sale of printed circuit boards. QCaaS revenue is recognized on a ratable basis over the contract term, which generally ranges from one month to two years. Professional services revenue is recognized based on the terms of the contract, or based upon the ratio that incurred costs bear to total estimated contract costs. Other revenue is not material and is recognized upon completion. Our contracts with our customers do not, at any time, provide the customer with the right to take possession of the software that runs our cloud platform.

We expect that there will be a decrease in our cloud based recurring QCaaS revenue as a percentage of total revenue in 2023 when compared to 2022 due to increased demand for professional services engagements. In subsequent periods, we expect that the general trend will be for QCaaS revenue, as a percentage of total revenue, to increase due to an increasing number of QCaaS agreements being driven by the completion of professional services engagements yielding production applications that require QCaaS services, as well as by customers that choose to access our Leap cloud service without utilizing our professional services organization.

Cost of Revenue

Our cost of revenue consists of all direct and indirect expenses related to providing our QCaaS offering and delivering our professional services, personnel-related expenses, including stock-based compensation, and costs associated

56

with maintaining the cloud platform on which we provide the QCaaS product. Cost of revenue includes personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, and depreciation and amortization related to our quantum computing systems and related software.

We expect our total cost of revenue to increase in absolute dollars in future periods, corresponding to our anticipated growth in revenue and employee headcount to support our customers and to maintain the QCaaS cloud offering, manufacturing operations, and the field service organization.

Operating Expenses

Our operating expenses consist of research and development, general and administrative, and sales and marketing expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, fabrication costs, lab supplies, and cloud computing resources and allocated facility 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 components, fabrication and software costs related to quantum computing systems constructed for research purposes that do not have a high probability of providing near-term future economic benefits, and may have no alternate future use. We currently do not capitalize any research and development expenses.

We expect our research and development expenses will increase on an absolute dollar basis for the foreseeable future as we continue to invest in research and development efforts to enhance the performance of our annealing quantum computers, to complete the development of our gate model quantum computer, broaden the functionality of our QCaaS cloud platform, and improve the reliability, availability and scalability of our cloud platform. In addition, research and development costs could increase in absolute dollars if we do not receive government grants and research incentives, which have historically offset a portion of these costs.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel and outside professional services expenses including legal, audit and accounting services, insurance, other administrative expenses and allocated facility costs for our administrative functions.

We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as a result of operating as a public company. In particular, we expect our legal, accounting, tax, personnel-related expenses and directors’ and officers’ insurance costs reported within general and administrative expenses to increase as we establish more comprehensive compliance and governance functions, increased IT security and compliance, expanded internal controls over financial reporting in accordance with the Sarbanes-Oxley Act, and prepare and distribute periodic reports as required by the rules and regulations of the SEC.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses, including salaries, benefits and stock-based compensation for personnel, direct advertising, marketing and promotional material costs, sales commission expense, consulting fees and allocated facility costs for our sales and marketing functions. We intend to continue to make significant investments in our sales and marketing organization to drive additional revenue, expand our global customer base, and broaden our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future.

Government Assistance

US GAAP for profit-oriented entities does not define government assistance; nor is there specific guidance applicable to government assistance. We receive various forms of government assistance including (i) government grants (ii) investment credits, and (iii) government loans, for research and development initiatives from Canadian government agencies.

We recognize grants and investment tax credits relating to qualifying scientific research and development expenditures as a reduction of the related eligible expenses (research and development expenses) in our consolidated statement of operations and comprehensive loss. Grants and investment tax credits are recognized in the period during which the related qualifying expenses are incurred, provided that the conditions under which the grants and investment tax credits have been met. We recognize grants and investment tax credits in an amount equal to the estimated qualifying

57

expenses incurred in each period multiplied by the applicable reimbursement percentage. Grants and investment tax credits that are recognized upon incurring qualifying expenses in advance of receipt of grant funding or proceeds from research and development incentives are recorded in the consolidated balance sheets as research incentives receivable. In circumstances where the grants received relate to prior period eligible expenses, we recognize these grants as other income in our consolidated statement of operations and comprehensive loss in the current period. Upon entering into the transaction agreement on February 7, 2022, the Company is no longer a Canadian Controlled Private Corporation. As a result, beginning February 7, 2022, Scientific Research and Development investment tax credits can be applied to reduce income taxes payable to the Canadian government. Subsequent to February 7, 2022, expenses qualifying for Scientific Research and Development investment credits that are not realized will be reflected as investment tax credit carryforwards.

We have received government loans under funding agreements that bear interest at rates that are below market rates of interest or interest-free. We account for the imputed benefit arising from the difference between a market rate of interest and the rate of interest charged as additional grant funding, and record interest expense for the loans at a market rate of interest. On the date that loan proceeds are earned, we recognize the portion of the loan proceeds allocated to grant funding as a discount to the carrying value of the loan which is subsequently recognized as additional government assistance upon draw down of the qualified loan amounts. The valuation of the liability of the loans relies on a combination of valuation approaches that are dependent on significant estimates and assumptions related to forecasts of future revenues and the discount rate. Should we not reach a benchmark year within 14 years post completion of the project, the SIF Loan will be forgiven. Once a benchmark year is reached, payment will commence two years after reaching the benchmark year and will be repaid within 15 years. The carrying value (net present value) of the SIF Loan at each reporting period is highly sensitive to the estimated timing of loan payments. The Company determined that a 5% decrease in projected gross revenue over the term of the SIF loan would not materially decrease its carrying value while a 20% decrease would decrease the carrying value by approximately $0.5 million.

Other income (expense), net

Our other income (expense), net is primarily comprised of change in fair value of warrant liabilities assumed by D-Wave as part of the Merger (see Note 3 included in the notes to our consolidated financial statements for the year ended December 31, 2022 included elsewhere in this Form 10-K), gain on investment in marketable securities, government assistance, interest expense, non-cash interest income on SIF and other miscellaneous income and expense unrelated to our core operations.

58

Results of Operations

The following table sets forth our results of operations for the periods indicated (in thousands):

Comparison of the Year Ended December 31, 2022 and 2021

Revenue

Revenue increased by $0.9 million, or 14%, to $7.2 million for the year ended December 31, 2022 as compared to $6.3 million for the year ended December 31, 2021, with the increase due primarily to an increase in QCaaS revenue of $1.2 million partially offset by a $0.3 million decrease in professional services revenue.

Cost of Revenue

Cost of revenue increased by $1.2 million, or 67%, to $2.9 million for the year ended December 31, 2022 as compared to $1.8 million for the year ended December 31, 2021. The increase in cost of revenue was primarily driven by:

•An increase in personnel-related costs of $0.5 million associated with the growth of our QCaaS revenue;

•An increase of $0.3 million related to stock-based compensation expense;

•An increase of $0.1 million related to the maintenance and repair of our quantum systems; and

•An increase of $0.1 million related to the increase of depreciation of our quantum systems.

Operating Expenses

Research and Development Expenses

59

Research and development expenses increased by $6.7 million, or 26%, to $32.1 million for the year ended December 31, 2022 compared to $25.4 million for the year ended December 31, 2021. The increase in research and development expenses was primarily driven by:

•An increase of $2.8 million in stock-based compensation expense primarily relating to new stock option and restricted stock unit awards;

•An increase in personnel-related costs of $1.5 million relating to higher salaries and an increase in headcount;

•An increase in research and development expenditures of $1.5 million resulting from a reduction in Scientific Research and Experimental Development expenditure credits during the year due to the Company’s loss of Canadian Controlled Private Corporation ("CCPC") status after becoming a public company;

•An increase of $0.6 million in wafer fabrication costs due to increased activity demands; and

•An increase of $0.3 million associated with the increase in third party professional services for various research and development initiatives as we continue to develop new products and enhance existing products, services and technologies.

We expect our research and development expenses to increase in absolute dollars for the foreseeable future as we continue to develop new products and enhance existing products, services, and technologies.

General and Administrative Expenses

General and administrative expenses increased by $9.6 million, or 81%, to $21.5 million for the year ended December 31, 2022 as compared to $11.9 million for the year ended December 31, 2021. The increase was primarily driven by:

•An increase of $4.5 million in third party professional services from legal and accounting consultants, including $0.2 million in transfer agent fees;

•An increase of $1.5 million in stock-based compensation due to the issuance of stock option and restricted stock unit awards;

•An increase of $2.1 million in personnel-related expenses due to an increase in headcount and higher salaries;

•An increase of $1.2 million related to the increase in Directors and Officers insurance costs;

•An increase of $0.3 million related to an increase from software licensing fees; and

•An increase of $0.1 million related to other operating costs.

We expect our general and administrative expenses to increase in absolute dollars for the foreseeable future as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the NYSE, additional insurance costs, higher audit fees, investor relations activities, and other administrative and professional services.

Sales and Marketing Expenses

Sales and marketing expenses increased by $3.9 million, or 63%, to $10.1 million for the year ended December 31, 2022 as compared to $6.2 million for the year ended December 31, 2021. The increase was primarily due to:

•An increase of $2.8 million in stock-based compensation due to the issuance of stock option and restricted stock unit awards;

60

•An increase of $0.9 million in personnel-related costs resulting from an increase in headcount and higher salaries;

•An increase of $0.4 million in public relations, advertising, and marketing costs;

•An increase of $0.3 million in other expenses; with

•The above increases partially offset by a decrease of $0.5 million in promotion and conference costs.

We expect our sales and marketing expenses to increase in absolute dollars as we hire additional sales and marketing personnel, expand our sales professional support, and market our QCaaS cloud service offerings to further penetrate the United States and international markets.

Other Income (Expense), net

Interest Expense

Interest expense increased by $2.9 million, or 168%, to $4.6 million for the year ended December 31, 2022 as compared to $1.7 million for the year ended December 31, 2021. The increase was due to a higher average debt balance throughout 2022 driven primarily by a $15.0 million Venture Loan (as defined below) that became effective on March 3, 2022, was increased by an additional $5.0 million loan tranche on June 30, 2022, and was paid off on August 5, 2022. The increase was also driven by an increase in the average principal balance of our Strategic Innovation Fund ("SIF") government loan.

Government assistance

Government assistance decreased by $7.2 million to nil for the year ended December 31, 2022 as compared to $7.2 million for the year ended December 31, 2021. The decrease was due to the Company not receiving any government assistance from SIF for the year ended December 31, 2022. See Note 2 included in the notes to our audited consolidated financial statements as of and for the year ended December 31, 2022 included elsewhere in this Form 10-K for details regarding the government assistance programs.

Non-cash interest income on SIF

Non-cash interest income on SIF increased by $5.7 million for the year ended December 31, 2022 as compared to nil for the year ended December 31, 2021. The amount was related to a decrease in the average principal balance of our SIF loan as of December 31, 2022. See Note 2 included in the notes to our audited consolidated financial statements as of and for the year ended December 31, 2022 included elsewhere in this Form 10-K for details regarding the government assistance programs.

Gain on investment in marketable securities

During the year ended December 31, 2022, we did not record any gain or loss on investment in marketable securities. During the year ended December 31, 2021, we recorded a $1.2 million gain on investment in marketable securities based on the valuation of one of the Company's investments.

Change in fair value of warrant liabilities

61

Change in fair value of warrant liabilities increased by $6.2 million for the year ended December 31, 2022 as compared to nil for the year ended December 31, 2021. In August 2022, we assumed the warrant liabilities from DPCM as part of the Merger. See Note 2 and Note 11 of our audited consolidated financial statements as of and for the year ended December 31, 2022 included elsewhere in this Form 10-K for details regarding our warrants.

Lincoln Park Purchase Agreement issuance costs

Lincoln Park Purchase Agreement issuance costs increased by $0.6 million for the year ended December 31, 2022 as compared to nil for the year ended December 31, 2021.

Other income (expense), net

Other income (expense), net increased by $0.5 million or 68%, to $1.3 million for the year ended December 31, 2022 as compared to $0.8 million for the year ended December 31, 2021. The increase was largely driven by the net impact of foreign exchange gains and losses and SIF Loan interest expense.

Comparison of the Years Ended December 31, 2021 and 2020

Revenue

Revenue increased by $1.1 million, or 22%, to $6.3 million for the year ended December 31, 2021 as compared to $5.2 million for the year ended December 31, 2020. The increase in revenue was primarily driven by:

• An increase of $1.4 million in professional services revenue related to the completion of certain customer deliverables of our remote systems;

• An increase of $0.1 million in our QCaaS revenue; with

• The above increases partially offset by a decrease of $0.4 million in other revenue mainly due to the completion of a customer contract during the year ended December 31, 2020.

Cost of Revenue

Cost of revenue increased by $0.8 million, or 91%, to $1.8 million for the year ended December 31, 2021 as compared to $0.9 million for the year ended December 31, 2020. The increase in cost of revenue was primarily driven by:

• An increase of personnel-related costs of $0.9 million associated with providing services as a result of the growth of our professional services and our QCaaS offerings during the year ended December 31, 2021;

• Offset by a reduction of $0.1 million in other costs during the year ended December 31, 2021.

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $5.0 million, or 24%, to $25.4 million for the year ended December 31, 2021 as compared to $20.4 million for the year ended December 31, 2020. The increase was primarily due to the completion of the Sustainable Development Technology Canada and BC Innovative Clean Energy (“SDTC”) project in 2020 that offset $7.4 million of our research and development expenses in 2020. The increase was also due to an increase

62

of $2.4 million of personnel-related expenses, partially offset by a decrease of $1.2 million in stock-based compensation due to the recapitalization of D-Wave in 2020, a decrease of $3.4 million in fabrication costs due to lower fabrication activities, and a decrease of $0.5 million in depreciation costs.

General and Administrative Expenses

General and administrative expenses increased by $0.3 million, or 3%, to $11.9 million for the year ended December 31, 2021 as compared to $11.6 million for the year ended December 31, 2020. The increase was primarily due to a $0.3 million increase in personnel-related expenses and an increase in IT services of $0.3 million, partially offset by a decrease of $0.3 million in professional services from legal and accounting consultants and a decrease of $25 thousand in other expenses. Overall, our general and administrative expenses are aligned with prior year expenses.

Sales and Marketing Expenses

Sales and marketing expenses increased by $2.5 million, or 66%, to $6.2 million for the year ended December 31, 2021 as compared to $3.7 million for the year ended December 31, 2020. The increase was primarily due to an increase of $1.9 million in personnel-related costs, an increase of $0.2 million in consulting fees to promote our cloud service offerings and an increase of $0.4 million in conference expenses, trade shows and other marketing related events. The increase in personnel-related costs includes an increase of $0.1 million in stock-based compensation as a result of additional head count to the sales and marketing team.

Other Income (Expense), net

Interest Expense

Interest expense decreased by $3.5 million, or 67%, to $1.7 million for the year ended December 31, 2021 as compared to $5.3 million for the year ended December 31, 2020. The decrease was largely driven by the retirement of our interest-bearing convertible notes in April 2020.

Government Assistance

Government assistance decreased by $4.9 million, or 40%, to $7.2 million for the year ended December 31, 2021 as compared to $12.0 million for the year ended December 31, 2020. The decrease was mainly driven by the deemed interest benefit associated with the SIF Loan secured during the year ended December 31, 2020.

Gain on Debt Extinguishment

During the year ended December 31, 2020, we recorded $3.9 million in gain on debt extinguishment largely driven by the extinguishment of our 2019 convertible notes due to a modification of the conversion feature, which resulted in a gain on our convertible debt, and the forgiveness of our loan with the Technology Partnership of Canada. We did not record any gain on debt extinguishment during the year ended December 31, 2021 as all of our convertible notes were transferred to DWSI Holdings Inc., a Canadian corporation and predecessor of D-Wave (“Old DWSI”) in exchange of its common shares and they remained in existence under Old DWSI until the amalgamation on January 1, 2021 at which time they were automatically cancelled.

63

Gain on Settlement of Warrant Liability

During the year ended December 31, 2020, we recorded $7.8 million in gain on settlement of warrant liability largely driven by the transfer to Old DWSI of all then-outstanding warrants in exchange for its common shares and they remained in existence under Old DWSI until the amalgamation on January 1, 2021, at which time they were automatically cancelled. We did not record any gain on settlement of warrant liabilities during the year ended December 31, 2021 as no warrant conversion took place in 2021.

Gain on Investment in Marketable Securities

During the year ended December 31, 2021, we recorded $1.2 million in gain on investment in marketable securities based on the valuation of one of the Company's investments. We did not record any gain on investment in marketable securities during the year ended December 31, 2020.

Other income, net

Other income, net decreased $2.2 million, or 73%, to $0.8 million for the year ended December 31, 2021 as compared to $3.0 million for the year ended December 31, 2020. The decrease was largely driven by a reduction of prior period government assistance received from SDTC for our research and development initiatives of $2.4 million, partially offset by the net impact of foreign exchange gains and losses of $0.2 million.

Liquidity and Capital Resources

We have incurred net losses and experienced negative cash flows from operations since inception. To date, our primary sources of capital have been through private placements of convertible preferred shares, private placements of common stock, revenue from the sale of our products and services, government assistance and the Venture Loan. During the years ended December 31, 2022, 2021, and 2020 we incurred net losses of $51.5 million, $31.5 million, and $10.0 million, respectively. We expect to incur additional losses and higher operating expenses for the foreseeable future as we continue to invest in research and development and go-to-market programs. We have determined that additional financing will be required to fund our operations for the next 12 months and our ability to continue as a going concern is dependent upon obtaining additional capital and financing. Due to the large number of DPCM stockholders that exercised their redemption rights in connection with the Merger, only approximately $9.0 million of cash from the $300.0 million DPCM Trust Account became available to us as of the closing of the Merger, which significantly reduced the potential enhancement to our liquidity and capital resources that was sought to be achieved through the Merger. If we are unable to obtain additional financing, operations will be scaled back or discontinued. These conditions give rise to material uncertainties that cast substantial doubt on our ability to continue as a going concern.

In addition, in connection with the Merger, the board of directors of DPCM considered, among other things, internal financial forecasts prepared by, or at the direction of, our management (the “Transaction Forecasts”). None of these projections or forecasts were prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, U.S. GAAP, IFRS or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. Neither DPCM’s independent registered public accounting firm nor our independent registered public accounting firm, PricewaterhouseCoopers LLP, have audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the unaudited prospective financial information, and accordingly, they do not express an opinion or any other form of assurance with respect thereto. Any projections and forecasts were inherently based on various estimates and assumptions that were subject to the judgment of those preparing them. Projections and forecasts were also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which were difficult or impossible to predict and many of which were beyond our control. With respect to revenue, we do not anticipate meeting the Transaction Forecasts due primarily to (i) the timing of closing the Merger in August 2022, which was later than the assumed closing in June 2022, and (ii) the significant

64

redemptions of DPCM stockholders, which has adversely affected our liquidity position and ability to pursue certain growth opportunities, and which will require us to seek alternative sources of financing as described below.

Our primary uses of cash are to fund our operations as we continue to grow our business. We will require a significant amount of cash for expenditures as we invest in ongoing research and development and business operations. Until such time as we can generate significant revenue from sales of our QCaaS offering and our professional services, we expect to finance our cash needs through public and/or private equity (including sales pursuant to the Purchase Agreement) and/or debt financings or other capital sources, including strategic partnerships. However, we may be unable to raise sufficient funds or enter into such other arrangements, when needed, on favorable terms, or at all. In particular, uncertain and unfavorable conditions in the United States and global macroeconomic environment, including inflationary pressures, rising interest rates, banking collapses, and financial and credit market fluctuations, could reduce our ability to access capital 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 common 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 are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our quantum computing development and go-to-market efforts.

As of December 31, 2022, we had 17,916,609 Warrants outstanding, each Warrant being exercisable for 1.4541326 Common Shares of the Company at an exercise price of $11.50. Whether warrant holders will exercise their Warrants, and therefore the amount of cash proceeds we would receive upon exercise, is dependent upon the trading price of the Common Shares. Therefore, if and when the trading price of the Common Shares is less than approximately $7.91, the effective exercise price of the Warrants per one Common Share, we expect that warrant holders will not exercise their Warrants. Our Common Shares have closed below $7.91 since October 11, 2022. Therefore, we do not expect warrant holders to exercise their Warrants in the short-term and as such, we do not expect to rely on the cash exercise of Warrants to fund our operations. Instead, we intend to rely on other sources of cash discussed below to continue to fund our operations. If we are unable to raise additional funds through equity or debt financings when needed, we will be required to delay, limit, or substantially reduce our quantum computing development and go-to-market 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—Risks Related to D-Wave Quantum’s Business and Industry” in this Form 10-K.

Venture Loan and Security Agreement

On March 3, 2022, we entered into the Venture Loan and Security Agreement, by and between the Borrowers, as defined in the agreement, and PSPIB, as the lender (the "Venture Loan"). Under the Venture Loan, term loans in an aggregate principal amount of $25.0 million were made available to the Borrowers in three tranches, subject to certain terms and conditions.

The first tranche in an aggregate principal amount of $15.0 million was advanced on March 3, 2022. The second tranche in an aggregate principal amount of $5.0 million was advanced to D-Wave on June 30, 2022. D-Wave did not draw the third $5.0 million tranche.

The term loans under the Venture Loan bore interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 7.25%, and (ii) 10.5%. Interest on the outstanding advances was accrued monthly and repaid on August 5, 2022.

The Venture Loan incorporated a final payment fee equal to 5.0% of the principal balance of the loans payable upon repayment.

The Venture Loan was secured by a first-priority security interest in substantially all of the Borrower’s assets and contained certain operational covenants. The Borrowers remained in compliance with all covenants under the Venture Loan for the term of the Venture Loan.

On August 5, 2022, the Company repaid the amount of principal outstanding under the Venture Loan as well as accrued interest and the final fee that in the aggregate totaled $21.8 million.

Term Loan and Security Agreement

On April 13, 2023, we entered into the Term Loan and Security Agreement, by and between us and PSIPB Unitas Investment II Inc., ("PSPIB" or the "Lender"), as the lender (the "Term Loan"). Under the Term Loan, loans in aggregate principal amount of $50.0 million are to be made available to us in three tranches, subject certain terms and conditions.

65

The first tranche, in an aggregate principal amount of $15.0 million was advanced on April 14, 2023 with second and third tranches, of $15.0 million and $20.0 million respectively, to be made available to us subject to certain conditions. Prior to PSPIB's advance of the first tranche, the Company satisfied several closing conditions including the provision of a cash flow forecast and the board of directors' retention of an advisor. The second tranche, that shall be available to us as of July 12, 2023, is subject to us providing the Lender with an IP valuation report, a board-approved operating budget for 2023 through 2027, and SIF’s consent to the grant of security interests in the Project IP associated with the SIF Loan. The third tranche, that shall be available to us as of October 10, 2023, is subject to us closing a $25.0 million non-dilutive financing on terms reasonably acceptable to the Lender, providing the Lender with an IP valuation report, and a board-approved operating budget for 2023 through 2027. Each tranche is subject to a 2.0% drawdown fee and the Term Loan matures on March 31, 2027. The initial tranche of $15.0 million provides us with a two month cash runway.

At our discretion, the Term Loan bears interest on a monthly basis at either (i) 10.0% payable in cash, or (ii) 11.0% payable in kind (PIK), with the latter added to the principal value of the Term Loan.

The Term Loan requires that any proceeds from the issuance of Common Stock under the LPC Purchase Agreement be applied towards the repayment of advances under the Term Loan in addition to a premium payment equal to 10.0% of the amount then prepaid to the Lender.

Upon the repayment or prepayment of the Term Loan, there is a prepayment premium due to the Lender that is equal to 3.0% of the amount repaid / prepaid prior to the first anniversary of the closing of the Term Loan, 2.0% of the amount repaid / prepaid after the first anniversary and before the second anniversary of the closing of the Term Loan, 1.0% of the amount repaid / prepaid after the second anniversary and before the third anniversary of the closing of the Term Loan and no prepayment premium due thereafter.

The Term Loan is secured by a first-priority security interest in substantially all of our assets and contains certain operational and financial covenants and terminates in March 2027.

Lincoln Park Purchase Agreement

As of December 31, 2022, the Company received $4.2 million in proceeds through the issuance of 1,878,806 Common Shares to Lincoln Park under the Purchase Agreement, excluding the commitment shares. Between January 1, 2023 and February 10, 2023, the Company received $15.7 million in proceeds through the issuance of 13,239,654 Common Shares to Lincoln Park under the Purchase Agreement.

To the extent that sufficient capital is not obtained through the cash received in connection with the Term Loan and the issuance of Common Shares under the LPC Purchase Agreement, management will be required to obtain additional capital through the issuance of additional debt and/or equity, or other arrangements. However, there can be no assurance that D-Wave will be able to raise additional capital when needed or under acceptable terms. The issuance of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to the currently outstanding Common Shares. Any future debt may contain covenants and limit D-Wave’s ability to pay dividends or make other distributions to stockholders. If D-Wave is unable to obtain additional financing, operations will be scaled back or discontinued.

Cash Flows

The following table sets forth our cash flows for the periods indicated (in thousands):

Cash Flows Used in Operating Activities

Our cash flows from operating activities are significantly affected by the growth of our business, and are 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, accounts receivable and other current assets and liabilities.

66

Net cash used in operating activities during the year ended December 31, 2022 was $45.2 million, resulting primarily from a net loss of $51.5 million, adjusted for non-cash charges of $9.2 million in stock-based compensation, $5.7 million in non-cash interest income on SIF, $2.5 million in interest on government loans, $6.2 million in change in fair value of Public and Private Warrants, $2.3 million in depreciation and amortization, including amortization of operating right of use assets, $1.8 million in interest expense on the Venture Loan, $1.3 million in unrealized foreign exchange gain, $0.6 million in Lincoln Park Purchase Agreement issuance costs, $0.1 million of other non-cash charges, $3.0 million in working capital adjustments, $0.2 million in amortization on the Venture Loan, and $0.1 million in realized gain on issuance of shares under the Lincoln Park Purchase Agreement.

Net cash used in operating activities during the year ended December 31, 2021 was $34.8 million, resulting primarily from a net loss of $31.5 million, adjusted for $7.1 million in government grants, non-cash charges of $2.6 million in depreciation and amortization including amortization of operating right of use assets, $1.7 million in stock-based compensation, $1.7 million in interest on government loans, $1.2 million in gain on D-Wave Systems' marketable securities, $1.2 million in working capital adjustments, $0.1 million in unrealized foreign exchange gain and $0.3 million of other non-cash charges.

Net cash used in operating activities during the year ended December 31, 2020 was $29.3 million, resulting primarily from a net loss of $10.0 million, adjusted for $12 million in government grants, $7.8 million in gain on settlement of our warrant liability, $7.1 million in working capital adjustments, $3.9 million in gain on extinguishment of debt from our convertible notes, $5.1 million in interest expense on convertible notes, $3.0 million in stock-based compensation, non-cash charges of $2.7 million in depreciation and amortization including amortization of operating right of use assets and $0.7 million of other non-cash charges.

Cash Flows Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2022 was $0.5 million, representing additions of $0.4 million in property and equipment and $0.1 million in software primarily related to the development and upgrade of our quantum computing systems.

Net cash used in investing activities during the year ended December 31, 2021 was $2.0 million representing additions of $1.8 million in property and equipment and $0.2 million in software primarily related to the development of our quantum computing systems.

Net cash used in investing activities during the year ended December 31, 2020 was $0.8 million representing additions of $0.7 million in property and equipment primarily related to the development of our quantum computing systems and additions of $0.1 million in intangible assets.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities during the year ended December 31, 2022 was $43.3 million, primarily reflecting proceeds from the PIPE Financing for $40.0 million; net proceeds received from the SIF Loan for $2.8 million; proceeds from the Merger, net of DPCM Class A shareholders redemption and DPCM transactions costs for $4.1 million; proceeds from Lincoln Park Purchase Agreement of $4.3 million; proceeds received from issuance of D-Wave Systems common shares upon exercise of stock options for $1.1 million; and proceeds received from the issuance of Common Shares upon exercise of the Public Warrants for $0.9 million. These proceeds were offset by the repayment of the Venture Loan which was entered into on March 3, 2022 and repaid on August 5, 2022 for $21.8 million (the repayment included the proceeds from the Venture Loan for $20.0 million and $1.8 million related accrued interest and a final payment fee); and the payment of the D-Wave Systems transaction costs for $6.5 million.

Net cash provided by financing activities during the year ended December 31, 2021 was $24.9 million, primarily reflecting net proceeds received from government programs (SIF) for $25.1 million.

Net cash provided by financing activities during the year ended December 31, 2020 was $43.1 million, primarily reflecting net proceeds from the issuance of D-Wave Systems' non-redeemable convertible preferred stock.

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations and other commitments as of December 31, 2022 and the effects that such obligations are expected to have on our liquidity and cash flow for future periods (in thousands):

67

(1)Includes operating lease liabilities for certain of our offices and facilities.

(2)Promissory notes – related party are described in Note 13, Promissory note – related party of the Notes to Consolidated Financial Statements included herein.

(3)Excludes the Venture Loan entered into on March 3, 2022 by and between the Borrowers, and PSPIB, as the loan has since been repaid.

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.

Critical Accounting Estimates

Our consolidated financial statements included in this Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated 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 that affect the reported amounts and related disclosures for the periods presented. 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 significantly. Additionally, changes in assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

The critical accounting estimates, assumptions and judgements we believe to have the most significant impact on our audited annual consolidated financial statements are described below. See Note 2 to the audited consolidated financial statements included elsewhere in this Form 10-K for additional information related to critical accounting estimates and significant accounting policies.

Government assistance

US GAAP for profit-oriented entities does not define government assistance; nor is there specific guidance applicable to government assistance.

We receive various forms of government assistance including (i) government grants (ii) investment credits, and (iii) government loans, for research and development initiatives from Canadian government agencies.

We recognize grants and investment tax credits relating to qualifying scientific research and development expenditures as a reduction of the related eligible expenses (research and development expenses) in our consolidated statement of operations and comprehensive loss. Grants and investment tax credits are recognized in the period during which the related qualifying expenses are incurred, provided that the conditions under which the grants and investment tax credits have been met. We recognize grants and investment tax credits in an amount equal to the estimated qualifying expenses incurred in each period multiplied by the applicable reimbursement percentage. Grants and investment tax credits that are recognized upon incurring qualifying expenses in advance of receipt of grant funding or proceeds from research and development incentives are recorded in the consolidated balance sheets as research incentives receivable. In circumstances where the grants received relate to prior period eligible expenses, we recognize these grants as other income in our consolidated statement of operations and comprehensive loss in the current period.

We have received government loans under funding agreements that bear interest at rates that are below market rates of interest or interest-free. We account for the imputed benefit arising from the difference between a market rate of interest and the rate of interest charged as additional grant funding, and record interest expense for the loans at a market rate of interest. On the date that loan proceeds are earned, we recognize the portion of the loan proceeds allocated to grant funding as a discount to the carrying value of the loan which is subsequently recognized as additional government assistance upon draw down of the qualified loan amounts. The valuation of the liability of the loans relies on a combination of valuation approaches that are dependent on several significant estimates and assumptions related to forecast of future revenues and the discount rate. Should the projected revenue not be achieved, the SIF Loan may be forgiven. The original

68

fair value of the loan and the subsequent amortized cost value are highly sensitive to the timing of loan payments and the discount rate. As of December 31, 2022, we determined that the discount rate to use in calculating the discounted cash flow for the SIF Loan was 26%. The annual repayment of the SIF Loan is calculated based upon a formula using the Company’s fiscal year revenue multiplied by a repayment rate totaling 150% of total SIF Loan funds received to date. The contractual repayment period is 15 years and commences in the second year in which the Company reports annual revenue of $70.0 million (the “Benchmark Year”). In each of those years, an annual repayment amount is due. The Benchmark Year is expected to occur between 2025 to 2027. The Company determined that a 20% decrease in projected revenue over the term of the SIF Loan would decrease the carrying value by approximately $0.5 million.

Revenue recognition

We recognize revenue in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) and accounts for certain contract costs in accordance with FASB’s Accounting Standards Codification (“ASC”) 340-40, Other Assets and Deferred Costs-Contracts with Customers.

The core principle of ASC 606 is that an entity shall recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To support this core principle, D-Wave applies the following five step approach:

•identify the contract with the customers

•identify the performance obligations;

•determine the transaction price;

•allocate the transaction price to the performance obligations; and

•recognize revenue when (or as) the entity satisfies a performance obligation.

We generate revenue through subscription sales to access our QCaaS cloud platform and from professional services related to assisting our customers with developing quantum proofs-of-concepts, pilot hybrid quantum applications and to put those applications into production. In addition, we also earn revenue providing training regarding quantum computing systems and building related applications. In arrangements with re-sellers of our cloud services, the re-seller is considered the customer and we do not have any contractual relationships with the re-sellers’ end users. For these arrangements, revenue is recognized at the amount charged to the re-seller and does not reflect any mark-up to the end user. In addition, we apply judgment in evaluating any consideration payable to the customer and whether it is in exchange for distinct goods or services or should be reflected as a reduction of revenue.

When we determine that our contracts with customers contain multiple performance obligations, we allocate the transaction price based on the relative standalone selling price (“SSP”) method by comparing the SSP of each distinct performance obligation to the total value of the contract. We use a range of amounts to estimate SSP for products and services sold together in a contract to determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. Standalone selling price is typically established as a range. In situations in which the stated contract price for a performance obligation is outside of the applicable standalone selling price range and has a different pattern of transfer to the customer than the other performance obligations in the contract, we will reallocate the total transaction price to each performance obligation based on the relative standalone selling price of each. At times, we may sell bundled services that include professional services, QCaaS and training. For these bundled arrangements, our selling prices associated with QCaaS and training are observable, predictable and consistent. Accordingly, we use the residual method under which the total transaction price and observable SSP of the QCaaS and training performance obligations are used to arrive at the estimated SSP of the professional services performance obligation.

The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer. Revenue is recorded based on the transaction price.

Our contracts with customers may include renewals or other options at fixed prices. Determining whether such options are considered distinct performance obligations that provide the customer with a material right and therefore should be accounted for separately requires significant judgment. Judgment is required to determine the standalone selling price for each renewal option to determine whether the renewal pricing is reflective of the standalone selling price or is reflective of a discount that would provide the customer with a material right. Based on our assessment of standalone selling prices, we determined that there were no significant material rights provided to our customers requiring separate recognition.

69

The timing of revenue recognition may not align with the right to invoice the customer. We record accounts receivable when we have the unconditional right to issue an invoice and receive payment, regardless of whether revenue has been recognized. Deferred revenue is primarily composed of fees related to QCaaS, which are generally billed in advance and recognized as revenue over the related subscription term. Unbilled receivables relate to revenue recognized for milestones completed under professional services contracts for which the related milestone billing has not yet occurred.

In instances where the timing of revenue recognition differs from the timing of the right to invoice, we have determined that a significant financing component generally does not exist. The primary purpose of our invoicing terms is to provide customers with a simplified and predictable way of purchasing the services and not to receive financing from or provide financing to the customer. Additionally, we have elected the practical expedient terms that permit an entity not to recognize a significant financing component if the time between the transfer of a good or service and payment is one year or less.

Payment terms on invoiced amounts are typically net 30 days. We do not offer rights of return for our services in the normal course of business and contracts generally do not include service-type warranties that provide any incremental service to the customer beyond providing assurance that the services conform to applicable specifications or customer-specific or subjective acceptance provisions. We also exclude from revenue government-assessed and imposed taxes on revenue-generating activities that are invoiced to customers.

Revenue from QCaaS is recognized evenly over the contractual period, on a straight-line basis over the subscription term, beginning on the date that the service is made available to the customer. Professional services are recognized as they are earned based on the terms of the contract or based on the cost-to-cost method. Under the cost-to-cost method, revenue is recognized based upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenue recorded as the costs are incurred. Each month we review estimated contract costs through a process of aggregating actual costs incurred and estimating additional costs to completion based upon the current available information and status of the contract. The effect of any change in the estimated gross margin rate for a contract is reflected in revenues in the period in which the change is known. Provisions for the full amount of anticipated losses on contracts are made in the period in which they become determinable.

Quantum computing systems

Quantum computing systems are included within property and equipment, net on the consolidated balance sheet, and consist of hardware and labor costs associated with the building of our quantum computing systems. These costs are capitalized in the period the costs were incurred and expensed as incurred. Costs to maintain quantum computing systems are expensed as incurred.

Judgement is used to determine when hardware and labor costs incurred for our quantum computing systems should be capitalized as a result of our assessment of whether the system will provide a probable future economic benefit and whether or not the costs represent activities necessary to build the systems, maintain the systems or to perform certain research and development functions. Judgement is also used to determine when the systems are placed into service and the estimated useful life of the associated systems.

Changes in these estimates can have a significant impact on the assessment of capitalized costs which could result in material changes to reported property and equipment, net. The amount of depreciation expense associated with the quantum computing systems may also vary based on the estimated useful life.

Capitalized internally developed software

Capitalized internally developed software, which is included in intangible assets, net, on the consolidated balance sheet, consists of costs to purchase and develop internal-use software, which we use to provide services to our customers.

Judgement is used to determine when costs to develop internal-use software for a specific project should be capitalized and whether or not the costs represent activities necessary to enhance the functionality of the software or maintain the performance of the software, and whether it is considered probable that the software will be used to perform the function intended. Judgement is also used to determine when the software is available for use as well as the estimated useful life of the software.

The assumptions used to capitalize internally developed software costs consider when the preliminary project stage is completed, whether the software will perform the function intended, and whether the development activities enhance the functionality of the software or maintain the performance of the software. Changes in these estimates can have a significant impact on the assessment of capitalized costs which could result in material changes to reported intangible assets, net. The amortization of capitalized internally developed software may also be impacted by the estimated useful life associated with these intangible assets.

70

Impairment of long-lived assets

Long-lived assets, such as our quantum computing systems and capitalized internally developed software are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

As of December 31, 2022, we did not have an impairment of any long-lived assets. In determining whether a potential impairment exists, judgement is used in determining the level at which the assessment is made. We have determined that the company consists of one entity-wide asset group for purposes of assessing whether a triggering event has occurred that would indicate the long-lived asset group’s carrying value is not recoverable. Impairment calculations, if necessary, contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. Key assumptions used in estimating future cash flows and asset fair values include projected revenue growth and operating expenses, as well as forecasting asset useful lives and selecting an appropriate discount rate with respect to any terminal value cash flows.

Triggering events occur when there are indicators that the carrying value of a long-lived asset may not be recoverable. These indicators may include internal and external economic factors, including significant decrease in market price of our capital stock, adverse market conditions, and an adverse change in the manner of which the asset is used. The assumptions used to assess impairment consider historical trends, macroeconomic conditions, and projections consistent with our operating strategy including the pace of technological change or specific technological challenges in building our quantum computing systems. Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses.

Warrant liabilities

Our Public Warrants and Private Warrants are liability-classified financial instruments that were initially recorded at fair value on the issuance date and that are re-valued upon exercise or at each reporting date.

For periods subsequent to the detachment of the Public Warrants from the Units, the closing price of the Public Warrants was used as the fair value of the Public Warrants and Private Warrants as of each relevant date. The subsequent measurements of the Public Warrants after the detachment of the Public Warrants from the Units are classified as Level 1 fair value measurements due to the use of an observable market quote in an active market. The subsequent measurements of the Private Warrants after the detachment of the Public Warrants from the Units are classified as Level 2 fair value measurements due to the use of an observable market quote for the Public Warrants, which are considered to be a similar asset in an active market.

Stock-based compensation

The Company accounts for its stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all stock-based payments to employees and directors, including grants qualified incentive stock options (“ISO”), nonqualified stock options (“NSO”), restricted stock awards (“RSA”), restricted stock units (“RSU”), or stock appreciation rights (“SAR”), to be recognized as expense based on the estimated fair value of the awards as of the grant date. The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its ISOs and NSOs, and the Company uses the quoted market closing price of its Common Stock as reported on the NYSE for the fair value of RSUs. Stock-based compensation expense is recognized over the requisite service period using the straight-line method and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company's stock-based compensation is reduced for the estimated forfeitures at the grant date and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Stock-based compensation expenses to non-employees as consideration for services received are measured on the date of performance at the fair value of the consideration received or the fair value of the equity instruments issued, using the Black-Scholes option-pricing model for ISOs and NSOs and the NYSE quoted market price, whichever can be more reliably measured. Compensation expense for options granted to non-employees is remeasured each period as the underlying options vest.

The Black-Scholes option-pricing model requires the use of subjective assumptions, which determine the fair value of share-based awards, including the fair value of the Company’s Common Shares, the option’s expected term, the price volatility of the underlying Common Shares, risk-free interest rates, and the expected dividend yield of the Common Shares. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment.

Leases

71

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and current operating lease liabilities and operating lease liabilities, net of current portion on our consolidated balance sheets. We recognize lease expense for our operating leases on a straight-line basis over the term of the lease.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from a lease. ROU assets and operating lease liabilities are recognized at the commencement date based on the present value of the future minimum lease payments over the lease term. Operating lease ROU assets also include the impact of any lease incentives. Amendments to a lease are assessed to determine if it represents a lease modification or a separate contract. Lease modifications are reassessed as of the effective date of the modification using an incremental borrowing rate based on the information available at the commencement date. For modified leases we also reassess the lease classification as of the effective date of the modification.

The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located.

Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option in the measurement of its ROU assets and liabilities. We consider contractual-based factors such as the nature and terms of the renewal or termination, asset-based factors such as physical location of the asset and entity-based factors such as the importance of the leased asset to our operations to determine the lease term. We generally use the base, non-cancelable, lease term when determining the ROU assets and lease liabilities. The right-of-use asset is tested for impairment in accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the estimated future tax consequences of events that have been included in the consolidated financial statements or in our tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax bases of assets and liabilities using the enacted tax rates and laws in effect for the years in which the differences are expected to reverse. Deferred income taxes are classified as current or non-current, based on the classification of the related assets and liabilities giving rise to the temporary differences. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we consider factors such as past operating results and expected future taxable income within each jurisdiction in which we operate.

To the extent that new information becomes available, which causes us to change our judgment regarding the adequacy of tax liabilities or valuation allowances, such changes will impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.

We follow the authoritative guidance under ASC 740, which clarifies the accounting for uncertainty in tax positions recognized in the financial statements. ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of our common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding for the period, including potential dilutive shares assuming the dilutive effect of outstanding stock options and of convertible preferred stock.

For periods in which we have reported net losses, diluted net loss per Common Share is the same as basic net loss per share, since dilutive Common Shares are not assumed to have been issued if their effect is anti-dilutive.

Recently Issued and Adopted Accounting Standards

A discussion of recent accounting pronouncements is included in Note 2 to our audited consolidated financial statements included elsewhere in this Form 10-K.

JOBS Act Accounting Election

72

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, as an emerging growth company we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, as an emerging growth company, we may take advantage of certain reduced disclosure and other requirements that are otherwise applicable generally to public companies. D-Wave Quantum will take advantage of these exemptions until such time that it is no longer an emerging growth company. D-Wave Quantum will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement; (ii) the last day of the fiscal year in which its total annual gross revenue is equal to or more than $1.07 billion; (iii) the date on which it has issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the SEC.