Our business is exposed to risks associated with litigation, investigations and regulatory
proceedings.
We may 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.
In May 2022, a securities class action complaint captioned Leacock v. IonQ, Inc. et al., Case No. 8:22-cv-01306, was filed by a
stockholder of the Company in the United States District Court for the District of Maryland (the Leacock Litigation) against the Company and certain of the Companys current officers. In June 2022, a securities class action
complaint captioned Fisher v. IonQ, Inc., Case No. 8:22-cv-01306-DLB (the Fisher Litigation) was filed by a stockholder against the Company and certain of the Companys current officers. Both the Leacock Litigation and
Fisher Litigation allege violations of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act and seeking unspecified damages.
These proceedings and any additional investigations, inquiries or litigation by various regulators may harm our reputation regardless of the
outcome of any such action. The outcome of any litigation, regardless of its merits, is inherently uncertain. Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert
management attention and resources, and lead to attempts on the part of other parties to pursue similar claims. 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 the Leacock or Fisher Litigation or any other 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.
62