D-WAVE QUANTUM INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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D-WAVE QUANTUM INC. MANAGEMENT REPORT AND ANALYSIS OF THE FINANCIAL SITUATION AND OPERATING RESULTS

You should read "D-Wave Quantum Inc.'s Management's Discussion and Analysis" of
D-Wave's financial condition and results of operations together with the
condensed financial statements and related notes included elsewhere in this
Report. This discussion contains forward-looking statements that involve risks
and uncertainties, including those described in the section titled "Cautionary
Note Regarding Forward-Looking Statements." Our actual results and the timing of
selected events could differ materially from those discussed below. Factors that
could cause or contribute to such differences include, but are not limited to,
those applicable to D-Wave and its business set forth under the section titled
"Risk factors" in the Proxy Statement/Prospectus. In this section, unless
otherwise specified, the terms "we", "our", "us" and "D-Wave" refer to D-Wave
Quantum Inc. and its consolidated subsidiaries, and all other capitalized terms
have the meanings ascribed thereto elsewhere in this Report. All dollar amounts
are expressed in thousands of United States dollars ("$"), unless otherwise
indicated.

Insight

D-Wave was incorporated on January 24, 2022, as a corporation organized and
existing under the General Corporation Law of the State of the Delaware (the
"DGCL"), with a registered office at 215 Little Falls Drive, Wilmington, New
Castle County, Delaware 19808, and formed for the purpose of effecting the
Business Combination pursuant to the Transaction Agreement. On August 5, 2022,
we consummated our Business Combination with DPCM and D-Wave Systems. D-Wave's
principal offices are located at 3033 Beta Avenue, Burnaby, British Columbia,
V5G 4M9, Canada.

As the Practical Quantum Computing Company, our mission is to unlock the power
of quantum computing today to benefit business and society. We define
"practical" as being focused on delivering quantum offerings and access, built
to provide customer value for commercial use. We define "commercial" as customer
use primarily focused on revenue-generating or cost-saving use cases. Our
commercial-first approach brings quantum products to market that serve the needs
of enterprise customers by solving their most complex and computationally
intensive problems. We deliver this in real-time via our cloud services. Today,
customers can access our annealing quantum computer and quantum hybrid solvers
via our Leap cloud services ("QCaaS"). We are also developing a gate-model
system with cross platform tools to help address a broader range of customer
problem sets over the longer term.

Results of operations and known trends or future events

Through June 30, 2022, we had neither engaged in any significant business
operations nor generated any revenues. All activities through that date relate
to our formation and consummation of the Business Combination. Prior to the
closing of the Business Combination, we did not generate any revenue or incur
any material expenses.

Cash and capital resources

On August 5, 2022, in accordance with the Transaction Agreement, we acquired
100% of the outstanding equity interests of D-Wave Systems and DPCM. In
connection with the close of the Business Combination, we received, among other
things, DPCM's cash on hand and the PIPE Investment, which totaled $37.6
million, net of related transaction costs. See section titled "D-Wave Systems
Inc.'s Management's Discussion and Analysis - Liquidity and Capital Resources"
and Note 12 to D-Wave's condensed consolidated balance sheet included elsewhere
in this Report for more information.


In conjunction with the Business Combination, D-Wave Systems and D-Wave entered
into an agreement with the Investor on June 16, 2022 which provides D-Wave the
sole right, but not the obligation, to direct the Investor to buy specified
dollar amounts up to $150.0 million of D-Wave's par value $0.0001 per share
common stock through the ELOC.
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The ELOC will provide D-Wave Systems and D-Wave with additional liquidity to
fund the business, subject to the conditions set forth in the agreement.

Critical accounting policies

We prepare our consolidated financial statements in accordance with U.S. GAAP.
The preparation of these consolidated financial statements requires that we make
estimates, assumptions and judgments that can significantly impact the amounts
it reports as assets, liabilities, revenue, costs and expenses and the related
disclosures. We base our estimates on historical experience and other
assumptions that we believe are reasonable under the circumstances. Our actual
results could differ significantly from these estimates under different
assumptions and conditions.

Our significant accounting policies are described in more detail in Note 3 of
the D-Wave Systems Inc. condensed consolidated balance sheet included elsewhere
in this Report. We believe that the accounting policies discussed in Note 3 are
critical to understanding its historical and future performance as these
policies involved a greater degree of judgment and complexity.

Recent accounting pronouncements

Management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our financial statements.

Emerging Growth Company Status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or 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, an emerging growth company 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
will take advantage of these exemptions until such earlier time that it is no
longer an emerging growth company. D-Wave would 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.
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    D-WAVE SYSTEMS INC.'S 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 condensed financial statements and
related notes included elsewhere in this Report. 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 set forth under the section titled "Risk factors" in the Proxy
Statement/Prospectus. 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" and "D-Wave" refer to
D-Wave Systems Inc. and its consolidated subsidiaries, the term "D-Wave Quantum"
refers to D-Wave Quantum Inc., and all other capitalized terms have the meanings
ascribed thereto elsewhere in this Report. All dollar amounts are expressed in
thousands of United States dollars ("$"), unless otherwise indicated.

Insight

D-Wave is a commercial quantum computing company that provides customers with a
full suite of professional services and web-based access to its superconducting
quantum computer systems and integrated software environment through its cloud
service, LeapTM (or "Leap"). Historically, D-Wave has developed its own
annealing superconducting quantum computer and associated software, and its
current generation quantum system is the D-Wave AdvantageTM. D-Wave is a leader
in the development and delivery of quantum computing systems, software and
services, and is 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, D-Wave initiated the
development of a gate-model quantum computing system. D-Wave was incorporated
under the Business Corporation Act (British Columbia) and is headquartered in
Burnaby, British Columbia, Canada.

D-Wave’s business model is primarily focused on generating revenue by providing customers access to our quantum computing systems via the cloud as QCaaS products, and providing professional services in which we help our customers identify and implement quantum computing applications.

During the three months ended June 30, 2022 and 2021, we recognized revenue from
our cloud and professional services of $1.4 million and $1.1 million,
respectively. During the six months ended June 30, 2022 and 2021, we recognized
revenue from our cloud and professional services of $3.1 million and $2.5
million, respectively. We have incurred significant operating losses since
inception. For the three months ended June 30, 2022 and 2021, our net loss was
$13.2 million and $4.7 million, respectively. For the six months ended June 30,
2022 and 2021, our net loss was $24.8 million and $13.5 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 number of go-to-market initiatives. As of June 30, 2022, we had an
accumulated deficit of $350.1 million.

On August 5, 2022following the Combination, D-Wave became an indirect subsidiary of D-wave quantuma Delaware a company organized and existing under the DGCL, as further described below.

The transaction agreement and the PIPE financing

On February 7, 2022, DPCM and D-Wave entered into a definitive Transaction
Agreement by and among DPCM, D-Wave, D-Wave Quantum, DWSI Holdings Inc., a
Delaware corporation and a direct, wholly-owned subsidiary of D-Wave Quantum
("Merger Sub"), DWSI Canada Holdings ULC, a British Columbia unlimited liability
company and a direct, wholly-owned subsidiary of D-Wave Quantum ("CallCo"),
D-Wave Quantum Technologies Inc., a British Columbia corporation and a direct,
wholly-owned subsidiary of CallCo, 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 Quantum, (b) D-Wave Quantum indirectly
acquired all of the outstanding share capital of D-Wave and D-Wave became an
indirect subsidiary of D-Wave Quantum, with D-Wave Quantum becoming a public
company and a registrant with the SEC. D-Wave and DPCM believe that the Business
Combination and related proceeds will result in enhancing D-Wave's leadership in
commercial quantum computing.

While the legal acquirer in the Transaction Agreement is D-Wave Quantum, for
financial accounting and reporting purposes under GAAP, D-Wave is the accounting
acquirer and the Business Combination will be 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 Quantum represent the
continuation of our financial statements in many respects. Under this method of
accounting, DPCM will be treated as the "acquired" company for financial
reporting purposes. For accounting purposes, D-Wave will be deemed to be the
accounting acquirer in the transaction and, consequently, the transaction will
be treated
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as a recapitalization of D-Wave (i.e. a capital transaction involving the issuance of shares by D-wave quantum for D-Wave stock).

Upon consummation of the Transaction and the PIPE Financing, the most
significant change in our future reported financial position and results of
operations is an increase in cash (as compared to our condensed consolidated
balance sheet as of June 30, 2022) of approximately $49.0 million, which
includes $40.0 million in gross proceeds from the PIPE Financing. Total direct
transaction costs of DPCM and D-Wave paid on August 5, 2022 are approximately
$11.5 million, substantially all of which will be recorded as a reduction to
additional-paid-in-capital as costs related to the reverse recapitalization.
Upon the closing of the Transaction, D-Wave Quantum became the successor to an
SEC registrant and has listed the common shares in the stock of D-Wave Quantum
and the warrants to purchase common shares in the stock of D-Wave Quantum on the
NYSE under the ticker symbol "QBTS" and "QBTS.WS," respectively. Being a public
company will require us to hire additional personnel and implement procedures
and processes to address applicable regulatory requirements and customary
practices. We expect D-Wave Quantum 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.

COVID-19 Update

In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health
Organization. There are many uncertainties regarding the current pandemic, and
we are closely monitoring the impact of the pandemic on all aspects of our
business, including how it will impact our employees, suppliers, vendors and
business partners.

The pandemic has resulted in government authorities implementing numerous
measures to try to contain the virus, such as travel bans and restrictions,
quarantines, stay-at-home or shelter-in-place orders, and business shutdowns.
These measures may adversely impact our employees and operations and the
operations of our suppliers, customers and business partners. In addition,
various aspects of our business cannot be conducted remotely. These measures by
government authorities may continue to remain in place for a significant period
of time and could adversely affect our development plans, sales and marketing
activities, and business operations.

The full impact of the COVID-19 pandemic continues to evolve as of the date of
this Report. As such, the full magnitude of the pandemic's effect on our
financial condition, liquidity and future results of operations is uncertain.
Management continues to actively monitor our financial condition, liquidity,
operations, suppliers, industry and workforce. See "Risk Factors-Risks Related
to D-Wave's Business and Industry-We may in the future be adversely affected by
continuation or worsening of the global COVID-19 pandemic, its various strains
or future pandemics" in the Proxy Statement/Prospectus.

From June 30, 2022 and December 31, 2021D-Wave’s financial condition, business, results of operations and financial condition have not been materially affected due to the effects of the COVID-19 outbreak.

Key elements of operating results

Revenue

We currently generate our revenue through subscription sales to access our
Quantum Computing as a Service ("QCaaS") cloud platform; professional services
that includes problem evaluation, proof of concept, and pilot applications;
training on our quantum computing systems and other revenue derived from 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 our cloud based recurring QCaaS revenue to increase over time as a
function of the increasing number of applications driven by professional
services engagements with our customers, as well as by customers that choose to
access our Leap cloud service without utilizing our professional services
organization.

We expect that there will be a marginal decrease in our cloud based recurring
QCaaS revenue as a percentage of total revenue in 2022 when compared to 2021 due
to the scaling up of our professional services revenue. In subsequent periods,
we expect that the QCaaS revenue as a percentage of total revenue will increase
from year to year.

Cost of Revenue

Our cost of revenue primarily includes all direct and indirect expenses associated with providing our QCaaS offering and delivering our professional services, including personnel expenses and costs associated with cloud maintenance.

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platform on which the QCaaS resides. Product cost also includes 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 field service team.

Functionnary costs

Our operating expenses include research and development expenses, general and administrative expenses, and selling 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 future economic benefits, and have no alternate future use. We
currently do not capitalize any research and development expenditures.

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 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 primarily include personnel-related expenses, including salaries, benefits and stock-based compensation for personnel and expenses for external professional services, including legal, audit and accounting, insurance, other administrative expenses and installation costs allocated for our administrative functions.

We expect our operating 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 expense
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 U.S.
Securities and Exchange Commission. As a result, our historical results of
operations may not be indicative of our results of operations in future periods.

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.

Other income (expenses), net

Our other income (expense), net is primarily comprised of government assistance,
gain on settlement of warranty, gain on debt extinguishment, interest income,
net and other miscellaneous income and expense unrelated to our core operations.
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Operating results

The following table sets forth our results of operations for the periods
indicated:
                                                Three Months Ended June 30,                 Six Months Ended June 30,
                                                  2022                  2021                 2022                  2021
Revenue                                    $         1,371          $   1,137          $        3,083          $   2,546
Cost of revenue                                        586                448                   1,169                746
Total gross profit                                     785                689                   1,914              1,800
Operating expenses:
Research and development                             7,072              6,291                  13,599             12,775
General and administrative                           3,959              2,508                   7,606              5,030
Sales and marketing                                  1,739              1,226                   3,339              2,296
Total operating expenses                            12,770             10,025                  24,544             20,101
Loss from operations                               (11,985)            (9,336)                (22,630)           (18,301)
Other income (expense):
Interest expense                                    (1,746)              (207)                 (2,538)              (385)
Government assistance                                    -              4,586                       -              4,586
Other income (expense), net                            533                289                     353                604
Total other income (expense), net                   (1,213)             4,668                  (2,185)             4,805
Net loss                                   $       (13,198)         $  

(4,668) ($24,815) ($13,496)
Foreign currency translation adjustment, net of tax

                                              32                (38)                    (38)                11
Net comprehensive loss                     $       (13,166)         $  

(4,706) ($24,853) ($13,485)

Comparison of the three months ended June 30, 2022 and 2021

Revenue

Revenue increased $234,000, or 21%, to $1.4 million for the three months ended
June 30, 2022 as compared to $1.1 million for the three months ended June 30,
2021. The increase in revenue was driven by an increase in QCaaS revenue of
$215,000.

Revenue cost

Cost of revenue increased $138,000, or 31%, to $586,000 for the three months
ended June 30, 2022 as compared to $448,000 for the three months ended June 30,
2021. The increase in cost of revenue was driven primarily by:

• An increase in personnel costs of $131,000 associated with the growth of our QCaaS revenues during the three months ended June 30, 2022;

• A reduction in the costs related to the software of $93,000 due to design and implementation changes;

• An augmentation of $52,000 related to the maintenance and repair of customer systems; and

• An augmentation of $46,000 linked to the increase in the amortization of customer systems and travel.

Operating Expenses

Research and development costs

                                  Three Months Ended June 30,                  Change
                                       2022                   2021        Amount        %
Research and development   $        7,072                   $ 6,291      $  781        12  %


Research and development expenses increased by $781,000, or 12% to $7.1 million
for the three months ended June 30, 2022 compared to $6.3 million for the three
months ended June 30, 2021. The increase in research and development was
primarily driven by:

• An increase in personnel costs of $337,000 due to an increase in staff and which included an increase in $60,000 stock-based compensation;

•An increase of $280,000 associated with the increase in fabrication activities
necessary for various research and development as we continue to develop new
products and enhance existing products, services and technologies; and
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•An increase of $172,000 associated to the increase in computing resources, R&D
supplies and the associated freight and custom fees to support the continued
development for various research and development activities.

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

General and administrative expenses

                                     Three Months Ended June 30,                   Change
                                          2022                   2021        Amount         %
General and administrative    $        3,959                   $ 2,508      $ 1,451        58  %

General and administrative expenses increased $1.5 millioni.e. 58%, at $4.0 million for the three months ended June 30, 2022 compared to $2.5 million for the three months ended June 30, 2021. The increase is mainly due to:

• An augmentation of $1.0 million personnel expenses due to an increase in the workforce and which included an increase in $567,000 in stock-based compensation;

• An augmentation of $288,000 in the professional services of legal and accounting consultants; and

• An augmentation of $112,000 in other expenses.

We expect our general and administrative expenses to increase in absolute
dollars 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, investor relations activities, and other administrative and
professional services.

Sales and Marketing Expenses

                               Three Months Ended June 30,                  Change
                                    2022                   2021        Amount        %
Sales and marketing     $        1,739                   $ 1,226      $  513        42  %

Sales and marketing expenses increased $513,000i.e. 42%, at $1.7 million for the three months ended June 30, 2022 compared to $1.2 million for the three months ended June 30, 2021. The increase is mainly due to:

• An augmentation of $301,000 personnel costs due to an increase in the workforce and which included an increase in $20,000 in stock-based compensation;

• An augmentation of $187,000 in expenses for public relations, conferences and promotion; and

• An augmentation of $25,000 in other expenses.

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 (expenses), net

Interest Expense

                            Three Months Ended June 30                   Change
                                 2022                   2021        Amount         %
Interest expense     $        (1,746)                 $ (207)     $ (1,539)      743  %


Interest expense increased $1.5 million or 743%, to $1.7 million for the three
months ended June 30, 2022 as compared to $207,000 for the three months ended
June 30, 2021. The increase was primarily due to a higher debt balance in the
current period compared to the prior period due to a $15.0 million Venture Loan
that became effective on March 3, 2022 and was increased by an additional $5.0
million on June 21, 2022, final payment fee for the Venture Loan of $583,000 as
well as an increase in our government loan.
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Other income (expense), net

                                      Three Months Ended June 30                   Change
                                            2022                   2021       Amount        %
Other income (expense), net   $          533                      $ 289      $  244        84  %


Other income (expense), increased $244,000 or 84%, to $533,000 for the three
months ended June 30, 2022 as compared to $289,000 for the three months ended
June 30, 2021. The decrease was largely driven by the net impact of foreign
exchange gains and losses that totaled $562,000.

Government assistance

                               Three Months Ended June 30                   Change
                                   2022                  2021         Amount          %
Government assistance   $       -                      $ 4,586      $ (4,586)       (100) %


Government assistance decreased by $4.6 million for the three months ended June
30, 2022 when compared to the three months ended June 30, 2021. The decrease was
driven by the timing of the deemed interest benefit resulting from the SIF loan,
which was recognized in years 2020 and 2021. See Note 3 included in the notes to
our unaudited condensed consolidated financial statements for the three and six
month periods ended June 30, 2022 included elsewhere in this Report for details
regarding the government assistance programs.

Comparison of the six months ended June 30, 2022 and 2021

Revenue

Revenues have increased $537,000i.e. 21%, at $3.1 million for the six months ended
June 30, 2022 compared to $2.5 million for the six months ended June 30, 2021. The revenue increase was primarily due to an increase in QCaaS revenue of $477,000.

Revenue cost

Cost of revenue increased $423,000, or 57%, to $1,169,000 for the six months
ended June 30, 2022 as compared to $746,000 for the six months ended June 30,
2021. The increase in cost of revenue was primarily driven by:

• An increase in personnel costs of $290,000 associated with the growth of our QCaaS revenues during the six months ended June 30, 2022;

• An augmentation of $118,000 related to software costs;

• An augmentation of $67,000 related to increased amortization of client systems; and

• An augmentation of $66,000 related to the maintenance and repair of customer systems.

Operating Expenses

Research and development costs

                                  Six Months ended - June 30th                 Change
                                       2022                    2021        Amount       %
Research and development   $        13,599                  $ 12,775      $  824       6  %


Research and development expenses increased by $824,000, or 6% to $13.6 million
for the six months ended June 30, 2022 compared to $12.8 million for the six
months ended June 30, 2021. The increase in research and development expenses
was primarily driven by:

•An increase in personnel-related costs of $802,000 included an increase of
$123,000 in stock based-compensation, and higher salaries due to an increase in
headcount;

• An augmentation of $155,000 in manufacturing costs; and

• The above increases are partially offset by a decrease in $133,000 in supplies and analysis costs.

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

General and administrative expenses

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                                     Six Months Ended June 30,                  Change
                                         2022                 2021        Amount         %
General and administrative    $       7,606                 $ 5,030      $ 2,576        51  %


•General and administrative expenses increased $2.6 million, or 51%, to $7.6
million for the six months ended June 30, 2022 as compared to $5.0 million for
the six months ended June 30, 2021. The increase was primarily driven by:

•An increase of $1.7 million in personnel-related expenses which included an
increase of $1.1 million in stock-based compensation, and higher salaries due to
an increase in headcount;

• An augmentation of $512,000 in the professional services of legal and accounting consultants;

• An augmentation of $200,000 linked to the increase in software licenses; and

• An augmentation of $188,000 in other expenses.

We expect our general and administrative expenses to increase in absolute
dollars 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, investor relations activities, and other administrative and
professional services.

Sales and Marketing Expenses

                               Six Months Ended June 30,                  Change
                                   2022                 2021        Amount         %
Sales and marketing     $       3,339                 $ 2,296      $ 1,043        45  %

Sales and marketing expenses increased $1.0 million or 45%, at $3.3 million for the six months ended June 30, 2022 compared to $2.3 million for the six months ended June 30, 2021. The increase is mainly due to:

•An increase of $721,000 in personnel-related costs which included an increase
of $51,000 in stock-based compensation, and higher salaries due to an increase
in headcount; and

• An augmentation of $298,000 in public relations, conferences and promotional expenses.

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 (expenses), net

Interest Expense

                            Six Months Ended June 30                  Change
                                2022                 2021        Amount         %
Interest expense     $       (2,538)               $ (385)     $ (2,153)      559  %


Interest expense increased $2.2 million or 559%, to $2.5 million for the six
months ended June 30, 2022 as compared to $385,000 for the six months ended June
30, 2021. The increase was primarily due to our higher debt balance in the
current period compared to the prior period due to a $15.0 million Venture Loan
that was closed on March 3, 2022 and was increased by $5.0 million on June 30,
2022, final payment fee on the Venture Loan of $583,000 as well as an increase
in our government loan.

Other income (expense), net


                                      Six Months Ended June 30                  Change
                                          2022                  2021       Amount        %
Other income (expense), net   $         353                    $ 604      $ (251)      (42) %


Other income (expense), net decreased $251,000 or 42%, to $353,000 for the six
months ended June 30, 2022 as compared to $604,000 for the six months ended June
30, 2021. The decrease was largely driven by the net impact of foreign exchange
gains and losses.

Government assistance
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                              Six Months Ended June 30                   Change
                                  2022                2021         Amount          %
Government assistance   $      -                    $ 4,586      $ (4,586)       (100) %


Government assistance decreased $4.6 million to nil for the six months ended
June 30, 2022 as compared to $4.6 million for the six months ended June 30,
2021. The decrease was driven by the timing of the deemed interest benefit
resulting from the SIF loan, which was recognized in years ended December 31,
2020 and 2021. See Note 3 included in the notes to our unaudited condensed
consolidated financial statements for the six month period ended June 30, 2022
included elsewhere in this Report for details regarding the government
assistance programs.

Liquidity and Capital Resources
We have incurred net losses since inception and experienced negative cash flows
from operations. To date, our primary sources of capital have been through
private placements of convertible preferred shares, revenue from the sale of our
products and services, government assistance and the venture loan. During the
six months ended June 30, 2022 and 2021, we incurred net losses of $24.8 million
and $13.5 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, including through the consummation
of the Transaction. If D-Wave is unable to obtain additional financing,
operations may be scaled back or discontinued. These conditions give rise to
material uncertainties that may cast substantial doubt on the ability of D-Wave
to continue as a going concern.

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 and/or debt financings or other capital sources, including
strategic partnerships. However, we may be unable to raise additional funds or
enter into such other arrangements, when needed, 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
shareholders. 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.

We continue to assess the effect of the COVID-19 pandemic and the Russia/Ukraine
crisis on our operations. The extent to which the COVID-19 pandemic will impact
our business and operations will depend on future developments that are highly
uncertain and cannot be predicted with confidence, such as the continuing spread
of the infection, new and emerging variants of the virus, the duration of the
pandemic, and the effectiveness of actions taken in the U.S. and other countries
to contain and treat the disease. The extent to which the Russia/Ukraine crisis
will impact our business and operations will also depend on future developments
that are highly uncertain and cannot be predicted with confidence, including
restrictive actions that may be taken by the U.S. and/or other countries, such
as sanctions or export controls, and the duration of the conflict.

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's Business and Industry" in the Proxy
Statement/Prospectus. Our management believes that the funds available under the
ELOC would be sufficient to fund our operations for at least 18 months, subject
to the terms and conditions of the agreement.

Subprime loan and guarantee agreement

On March 3, 2022, we entered into the Venture Loan Agreement, by and between the
Borrowers, as defined in the agreement, and PSPIB, as the lender. Under the
Venture Loan Agreement, 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.

The term loans under the Venture Loan Agreement bear 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 is
payable monthly, on the first business day of each calendar month through the
Maturity Date.
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Final payment fee is 5.0% of the aggregate amount of the term loans made under
the Venture Loan Agreement on the earliest of (i) the Maturity Date; (ii) the
date that we prepay all of the outstanding aggregate principal amount in full,
or (iii) the date the loan payments are accelerated due to an event of default
(as defined in the Venture Loan Agreement). In connection with any prepayment of
less than all of the outstanding principal balance of the loans, we agreed to
pay PSPIB an amount equal to five percent of the principal balance of the loans
being prepaid.

The Venture Loan Agreement is secured by a first-priority security interest in
substantially all of the Borrower's assets and contains certain operational
covenants. The Borrowers remained in compliance with all covenants under the
Venture Loan Agreement for the term of the Venture Loan Agreement. The full text
of the Venture Loan Agreement is filed as an exhibit to this Report, and such
description is qualified in its entirety by the full text of such exhibit.

On August 5, 2022the Company repaid the Venture Loan, including accrued interest totaling $20.8 million. In addition to $20.8 millionthe company paid a $1.0 million final payment fee to PSPIB.

Cash flow

The following table presents our cash flows for the period indicated:

                                                                      Six 

Months ended June 30th,

                                                                      2022                  2021
Net cash (used in) provided by:
Operating activities                                            $      (21,499)         $  (20,268)
Investing activities                                                      (218)             (1,265)
Financing activities                                                    22,765              13,127
Effect of exchange rate changes on cash and cash equivalent                (65)                262
Net (decrease) increase in cash and cash equivalent             $          

983 ($8,144)

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.

Net cash used in operating activities during the six months ended June 30, 2022
was $21.5 million, resulting primarily from a net loss of $24.8 million,
adjusted for non-cash charges of $1.2 million in depreciation and amortization,
including amortization of operating right of use assets, $1.6 million in
stock-based compensation, $2.4 million of other non-cash charges, and $1.9
million in working capital adjustments.

Net cash used in operating activities during the six months ended June 30, 2021
was $20.3 million, resulting primarily from a net loss of $13.5 million,
adjusted for non-cash charges of $1.2 million in depreciation and amortization
including amortization of operating right of use assets, $0.3 million in
stock-based compensation, $0.6 million of other non-cash charges and $9.0
million in working capital adjustments.

Cash flows used in investing activities

Net cash used in investing activities during the six months ended June 30, 2022
has been $0.2 millionrepresenting additions of $0.2 million in property, plant and equipment primarily related to the development and upgrade of our quantum computing systems.

Net cash used in investing activities during the six months ended June 30, 2021
was $1.3 million representing additions of $1.1 in property and equipment and
$0.2 million in software primarily related to the development of our quantum
computing systems.

Cash flows generated by financing activities

Net cash provided by financing activities during the six months ended June 30,
2022 was $22.8 million, primarily reflecting proceeds received from the Venture
Loan entered into signed on March 3, 2022 for $19.9 million, net proceeds
received from government programs (SIF) for $2.7 million and proceeds received
from issuance of common stock upon exercise of stock options for $0.1 million.

Net cash flows generated by financing activities during the six months ended June 30, 2021 has been $13.1 millionprimarily reflecting net revenue received from government programs (SIF).

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Contractual obligations and commitments

The following table summarizes our non-cancellable contractual obligations and
other commitments as of December 31, 2021 and the effects that such obligations
are expected to have on our liquidity and cash flow for future periods (in
thousands):

                                                                         

Payments due per period (2)

                                                          Less than 1                                                    More than 5
                                         Total                year              1 - 3 year           4 - 5 year             years
Lease commitment (1)                  $  16,356          $     1,687          $     2,563          $     2,458          $     9,648
Total                                 $  16,356          $     1,687          $     2,563          $     2,458          $     9,648

(1)Includes obligations related to operating leases for some of our offices and facilities.

(2)Excluding the risk loan agreement entered into on March 3, 2022 by and between the Borrowers, and PSPIB, as lender.

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.

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