REGISTERED NUMBER: |
FINANCIAL STATEMENTS |
FOR THE YEAR ENDED 31 DECEMBER 2022 |
FOR |
D-WAVE UK LTD |
REGISTERED NUMBER: |
FINANCIAL STATEMENTS |
FOR THE YEAR ENDED 31 DECEMBER 2022 |
FOR |
D-WAVE UK LTD |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
CONTENTS OF THE FINANCIAL STATEMENTS |
for the Year Ended 31 December 2022 |
Page |
Company Information | 1 |
Balance Sheet | 2 |
Notes to the Financial Statements | 3 |
D-WAVE UK LTD |
COMPANY INFORMATION |
for the Year Ended 31 December 2022 |
DIRECTORS: |
REGISTERED OFFICE: |
REGISTERED NUMBER: |
AUDITORS: |
Statutory Auditors |
Herschel House |
58 Herschel Street |
Slough |
Berkshire |
SL1 1PG |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
BALANCE SHEET |
31 December 2022 |
31.12.22 | 31.12.21 |
Notes | £ | £ | £ | £ |
FIXED ASSETS |
Investments | 4 |
CURRENT ASSETS |
Debtors | 5 |
CREDITORS |
Amounts falling due within one year | 6 |
NET CURRENT ASSETS/(LIABILITIES) | ( |
) |
TOTAL ASSETS LESS CURRENT LIABILITIES |
( |
) |
CREDITORS |
Amounts falling due after more than one year |
7 |
NET ASSETS/(LIABILITIES) | ( |
) |
CAPITAL AND RESERVES |
Called up share capital | 8 |
Other reserves | 9 |
Retained earnings | 9 | ( |
) | ( |
) |
SHAREHOLDERS' FUNDS | ( |
) |
In accordance with Section 444 of the Companies Act 2006, the Income Statement has not been delivered. |
The financial statements were approved by the Board of Directors and authorised for issue on |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS |
for the Year Ended 31 December 2022 |
1. | STATUTORY INFORMATION |
D-Wave UK Ltd is a |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES |
Basis of preparing the financial statements |
The company has obtained a letter of support from its ultimate parent company, D-Wave Quantum Inc. The directors of D-Wave Quantum Inc have provided a commitment to provide any financial support which may be necessary in order that the company can meet its liabilities, as they fall due, for a period in excess of 12 months from the date of the audit report. As a result of this commitment the directors have continued to adopt the going concern basis in preparing these financial statements. |
However, the parent company financial statements includes the following note which is also relevant here (note, amounts are in USD): |
"The Company has prepared its consolidated financial statements assuming that it will continue as a going concern. Since its inception, the Company has incurred net losses and negative cash flows from operations. As of December 31, 2022, the Company had an accumulated deficit of $376.8 million. For the years ended December 31, 2022, 2021 and 2020, the Company incurred a net loss of $51.5 million, $31.5 million and $10.0 million, respectively, and the Company had net cash outflows from operating activities of $45.2 million, $34.8 million and $29.3 million, respectively. As of December 31, 2022, the Company had $7.1 million of cash and working capital (current assets less current liabilities) deficit of $1.9 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. $21.8 million of the gross proceeds was used to repay the Venture Loan obligations and, $14.2 million was used to pay for the Company's transaction costs, including DPCM's transaction costs, associated with the Merger. |
On April 13, 2023, 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") with an aggregate principal amount of $50.0 million to be made available to the Company, as defined in the Term Loan and Security Agreement, in three tranches (Refer to Note 18 - Subsequent events). The first tranche, in an aggregate principal amount of $15.0 million was advanced to the Company on April 14, 2023, with the second and third tranches, of $15.0 million and $20.0 million, respectively, to be made available to the Company 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 the Company as of July 12, 2023, is subject to the Company 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 the Company as of October 10, 2023, is subject to the Company 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 $15.0 million tranche provides the Company with a two month cash runway. There can be no assurance that the Company will be able to meet the conditions necessary to draw on the second and third tranches. |
At the discretion of the Company, the Term Loan bears interest on a monthly basis at either (i) 10% payable in cash, or (ii) 10% payable in kind ('PIK'), with the latter added to the principal value of the Term Loan. |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
Upon the repayment or prepayment of the Term Loan, there is a prepayment premium due 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 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% of the amount then prepaid to the Lender. |
The Term Loan is secured by a first-priority security interest in substantially all of the Company's assets and contains certain operational and financial covenants. |
In conjunction with the Merger, the Company and D-Wave Systems entered into a Purchase Agreement with Lincoln Park on June 16, 2022 which provides D-Wave the sole right, but not the obligation, to direct Lincoln Park to buy specified dollar amounts up to $150 million of Common Shares through June 15, 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 which the Company may not sell to Lincoln Park any Common Shares. As of December 31, 2022, the Company has received $4.2 million in proceeds through the issuance of 1,878,806 Common Shares to Lincoln Park under the Purchase Agreement. Subsequent to December 31, 2022, D-Wave continued to make sales pursuant to the Lincoln Park Purchase Agreement when the market price of the Company's shares was above the floor price of $1.00 (see Note 18). On February 13, 2023, the Company filed an S-1 registration statement with the SEC to register an additional 35.0 million shares of Common Shares under the Purchase Agreement with Lincoln Park. Since February 13, 2023, the Company's share price has been below the floor price of $1.00 and the Company may not sell shares to Lincoln Park. There is no assurance when the Company might be able to make sales to Lincoln Park in the future. |
To the extent that sufficient capital is not obtained through the cash received in connection with 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. |
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." |
Preparation of consolidated financial statements |
The financial statements contain information about D-Wave UK Ltd as an individual company and do not contain consolidated financial information as the parent of a group. The company is exempt under Section 399(2A) of the Companies Act 2006 from the requirements to prepare consolidated financial statements. |
Related party exemption |
The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group. |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
Turnover |
Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. |
Turnover in relation to service and maintenance revenue is recognised when the service is provided. |
Turnover arising from intercompany agreements are recognised in the period to which they relate. |
Investments in subsidiaries |
Investments in subsidiaries are measured at cost less accumulated impairment. An impairment review is considered by the directors on an annual basis. Any impairment recognised will be recognised in the statement of profit or loss. |
Financial instruments |
Basic Financial Instruments as covered by Section 11 of FRS 102 are measured at amortised cost. The company does not have any Other Financial Instruments as covered by Section 12 of FRS 102. |
Taxation |
Taxation for the year comprises current and deferred tax. Tax is recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. |
Current or deferred taxation assets and liabilities are not discounted. |
Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. |
Deferred tax |
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. |
Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference. |
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. |
Foreign currencies |
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result. |
Pension costs and other post-retirement benefits |
The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate. |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
2. | ACCOUNTING POLICIES - continued |
Share-based payments |
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. |
The cost of equity-settled transactions is measured at fair value on grant date. |
Fair value of options is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. |
Fair value of restricted stock units is taken as the share price at grant date. |
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. |
The share based payment expense is recognised on a reasonable allocation of the group expense. |
3. | EMPLOYEES AND DIRECTORS |
The average number of employees during the year was |
4. | FIXED ASSET INVESTMENTS |
Shares in |
group |
undertakings |
£ |
COST |
At 1 January 2022 |
and 31 December 2022 |
NET BOOK VALUE |
At 31 December 2022 |
At 31 December 2021 |
5. | DEBTORS |
31.12.22 | 31.12.21 |
£ | £ |
Amounts falling due within one year: |
Trade debtors |
Amounts owed by group undertakings |
Other debtors |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
5. | DEBTORS - continued |
31.12.22 | 31.12.21 |
£ | £ |
Amounts falling due after more than one year: |
Other debtors & prepayments |
Aggregate amounts |
6. | CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
31.12.22 | 31.12.21 |
£ | £ |
Trade creditors |
Amounts owed to group undertakings |
Taxation and social security |
Other creditors & accruals |
7. | CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR |
31.12.22 | 31.12.21 |
£ | £ |
Other creditors |
8. | CALLED UP SHARE CAPITAL |
Allotted, issued and fully paid: |
Number: | Class: | Nominal | 31.12.22 | 31.12.21 |
value: | £ | £ |
Ordinary | £1 | 100 | 100 |
9. | RESERVES |
Retained | Other |
earnings | reserves | Totals |
£ | £ | £ |
At 1 January 2022 | ( |
) | (390 | ) |
Profit for the year |
Capital contribution reserve | - | 22,894 | 22,894 |
At 31 December 2022 | ( |
) | 24,274 |
10. | DISCLOSURE UNDER SECTION 444(5B) OF THE COMPANIES ACT 2006 |
The Report of the Auditors was unqualified. |
for and on behalf of |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
10. | DISCLOSURE UNDER SECTION 444(5B) OF THE COMPANIES ACT 2006 - continued |
As stated above, the report of the auditors was unqualified. It did however contain the following modification:- |
"Material uncertainty relating to going concern |
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. |
We draw attention to Note 2 in the financial statements, which indicates that the company has received a letter of support from the parent company and that the ability of the parent company to obtain additional debt or equity financing to fund its future operations is uncertain. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter. |
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report." |
We would also like to draw your attention to the following statement contained within our audit report as included within the full financial statements:- |
"Use of our report |
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed." |
11. | ULTIMATE PARENT COMPANY |
The ultimate parent company is D-Wave Quantum Inc, a company incorporated at 3033 Beta Avenue, Burnaby, British Columbia, V5G 4M9 Canada. Consolidated accounts are prepared and are available at this address, or on their website. |
D-WAVE UK LTD (REGISTERED NUMBER: 11871115) |
NOTES TO THE FINANCIAL STATEMENTS - continued |
for the Year Ended 31 December 2022 |
12. | SHARE-BASED PAYMENT TRANSACTIONS |
The Company has issued equity settled share options to its employees. The share options are denominated D-Wave Systems Inc, however they will be settled by D-Wave Quantum Inc, in a ratio defined by the de-SPAC exchange ratio. These options all vest over a period of 4 years and expire after 10 years from the vesting commencement date. |
The following table summarises the equity settled share options with employees in the period: |
Item | Number | Weighted average exercise price ($ | ) |
Outstanding at the beginning of the period | 45,000 | 0.82 |
Forfeited/cancelled during the period | (4,966 | ) | 0.82 |
Outstanding at the end of the period | 40,034 | 0.82 |
Exercisable at the end of the period | 16,680 | 0.82 |
The following table summarises the restricted stock units with employees in the period: |
Item | Number | Weighted average exercise price ($ | ) |
Outstanding at the beginning of the period | - | - |
Granted during the period | 21,038 | 7.12 |
Outstanding at the end of the period | 21,038 | 7.12 |
The share based payment expense is recognised on a reasonable allocation of the group expense. The charge recognised in the year was £22,894 (2021: £5,380) and relates to both restricted stock units and share options. |
Further details over how the fair value of the goods or services received are measured are given in note 2 to the financial statements. |
The Company will be liable to employer's national insurance contributions should the options be exercised in future. The timing and value of this is currently not known. |