Our business is exposed to risks associated with litigation, investigations and regulatory
proceedings.
We may in the future face legal, administrative and regulatory proceedings, claims, demands and/or investigations
involving stockholder, consumer, competition and/or other issues relating to our business. Litigation and regulatory proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction stopping us from
engaging in certain business practices, or requiring other remedies, such as compulsory licensing of patents. For example, on January 12, 2021, dMY Technology Group, Inc. II, dMY Sponsor II, LLC, dMY and dMY Sponsor III, LLC
(Sponsor) accepted service of a lawsuit where we are named as counterclaim defendants in an underlying action by and between GTY Technology Holdings, Inc. (GTY), dMY Technology Group, Inc. and dMY Sponsor, LLC, dMY Sponsor
II, LLC, dMY Technology Group Inc. II, dMY and Sponsor (collectively, dMY Defendants) and Carter Glatt (Glatt) and Captains Neck Holdings LLC (Captains Neck), an entity of which Mr. Glatt is a member. The
underlying lawsuit, filed by dMY Technology Group, Inc. and dMY Sponsor, LLC, seeks a declaratory judgment that Glatt and Captains Neck are not entitled to membership units of dMY Sponsor LLC, which was formed by Harry L. You, the co-founder and
former President and Chief Financial Officer of GTY when Glatt was still working at GTY. The underlying lawsuit contains claims arising from Glatts termination of employment from GTY, including theft and misappropriation of confidential GTY
information, breach of contract, breach of the duties of loyalty and fiduciary duty and conversion. Glatt has responded to the underlying lawsuit by adding members of the Sponsor and officers of dMY as additional counterclaim defendants
(collectively with the dMY Defendants, Glatt and Captains Neck, the Counterclaim Defendants) and adding Dune Acquisition Holdings LLC, a newly formed special purpose acquisition company, as a counterclaimant and asserting claims for
breach of contract, fraudulent misrepresentation, negligent misrepresentation, tortious interference with business relations, quantum meruit and unjust enrichment. The Counterclaim Defendants have denied the claims against them and have a motion to
dismiss the suit.
We may also be exposed to increased stockholder litigation due to the short seller report issued in May 2022. In
addition, in the past, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of these companies stock. Such litigation, if instituted against us, could cause us to incur
substantial costs and divert managements attention and resources.
Investigations, inquiries or litigation by various regulators may
harm our reputation regardless of the outcome of any such action. Negative perceptions of our business may result in additional regulation, enforcement actions by the government and increased litigation, or harm to our ability to attract or retain
customers or strategic partners, any of which may affect our business. Any damage to our reputation, including from publicity from legal proceedings against us or companies that work within our industry, governmental proceedings, unfavorable media
coverage or class action could adversely affect our business, financial condition and results of operations.
An unfavorable outcome or
settlement in a legal, administrative and regulatory proceeding may result in a material adverse impact on our business, results of operations, financial position and overall trends. In addition, regardless of the outcome, litigation can be costly,
time-consuming, and disruptive to our operations. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future. In
addition, the laws and regulations our business is subject to are complex and change frequently. We may be required to incur significant expense to comply with changes in, or remedy violations of, these laws and regulations. Furthermore, while we
maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by
insurance, insurers may dispute our entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or
insure against such claims.
We may become subject to product liability claims, even those without merit, which could harm our
business prospects, operating results, and financial condition. We may face inherent risk of exposure to claims in the event our quantum computers do not perform as expected or malfunction. A successful product liability claim against us could
require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our quantum computers and business and inhibit or prevent commercialization of other future quantum computers,
which would have material adverse effects on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages
either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially
acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.
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