UNDERWRITING Citigroup Global Markets Inc. and Barclays Capital Inc. are acting as joint book-running managers of the offering and as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement to be dated the date of this prospectus, each underwriter named below will severally agree to purchase, and we and the selling stockholders will severally agree to sell to that underwriter the number of shares set forth opposite the underwriter’s name.
| --- | --- | --- | --- | --- | --- | | Underwriter | Underwriter | Underwriter | Number of Shares | Number of Shares | Number of Shares | | Citigroup Global Markets Inc. | Citigroup Global Markets Inc. | Citigroup Global Markets Inc. | | | | | Barclays Capital Inc. | Barclays Capital Inc. | Barclays Capital Inc. | | | | | UBS Securities LLC | UBS Securities LLC | UBS Securities LLC | | | | | Wells Fargo Securities, LLC | Wells Fargo Securities, LLC | Wells Fargo Securities, LLC | | | | | Mizuho Securities USA LLC | Mizuho Securities USA LLC | Mizuho Securities USA LLC | | | | | TD Securities (USA) LLC | TD Securities (USA) LLC | TD Securities (USA) LLC | | | | | Needham & Company, LLC | Needham & Company, LLC | Needham & Company, LLC | | | | | Craig-Hallum Capital Group LLC | Craig-Hallum Capital Group LLC | Craig-Hallum Capital Group LLC | | | | | Wedbush Securities Inc. | Wedbush Securities Inc. | Wedbush Securities Inc. | | | | | Rosenblatt Securities Inc. | Rosenblatt Securities Inc. | Rosenblatt Securities Inc. | | | | | Academy Securities, Inc. | Academy Securities, Inc. | Academy Securities, Inc. | | | | | Total | Total | Total | | | |
The underwriting agreement will provide that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters will be obligated to purchase all the shares (other than those covered by option to purchase additional shares described below) if they purchase any of the shares. Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $ per share. If all the shares are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The representatives have advised us that the underwriters do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Class A common stock offered by them. If the underwriters sell more shares than the total number set forth in the table above, we will grant the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class A common stock from us at the public offering price less the underwriting discounts and commissions. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. Any shares issued or sold under the option will be issued and sold on the same terms and conditions as the other shares that are the subject of this offering. 176
The following table shows the underwriting discounts and commissions that we and the selling stockholders are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares from us.
Paid by Us
Paid by Us / Paid by Us / Paid by Us / Paid by Us / Paid by Us / Paid by Us / Paid by Us / Paid by Us / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders / Paid by Selling Stockholders
No Exercise / No Exercise / No Exercise / Full Exercise / Full Exercise / Full Exercise / No Exercise / No Exercise / No Exercise / Full Exercise / Full Exercise / Full Exercise
Per share ............................... Per share / Per share / $ / $ / $ / $ / $ / $ / $ / $ / $ / $ / $ / $
Total ................................... Total / Total / $ / $ / $ / $ / $ / $ / $ / $ / $ / $ / $ / $
We estimate that our portion of the total expenses of this offering will be $ , excluding underwriting discounts and commissions. We will agree to reimburse the underwriters for expenses relating to the clearance of this offering with the Financial Industry Regulatory Authority, Inc. in an amount up to $ . We, our executive officers and directors, the selling stockholders, and certain other record holders that together represent approximately % of our Class A common stock, stock options, and other securities convertible into, exercisable, or exchangeable for our Class A common stock, have agreed, for a period ending on the earlier of (i) 9:30 a.m. Eastern Time on the second trading day immediately following our public release of earnings for the year ending December 31, 2024 and (ii) 180 days after the date of this prospectus (the “Lock-up Period”), to not, among other things and subject to certain exceptions, offer, sell, contract to sell, pledge, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise), including the filing or confidential submission (or participation in the filing or confidential submission) of a registration statement with the SEC in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position) any shares of Class A common stock or any securities convertible into or exchangeable for our Class A common stock, or publicly announce an intention to effect any such transaction. Citigroup Global Markets Inc. and Barclays Capital Inc., in their sole discretion, may waive these restrictions at any time. Furthermore, (i) an additional approximately % of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock are subject to the market standoff provisions in our amended and restated investors’ rights agreement, pursuant to which such holders agreed to not lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock held immediately prior to the effectiveness of this registration statement, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such Class A common stock during the Lock-up Period and (ii) an additional approximately % of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock are subject to restrictions contained in market standoff agreements with us that include restrictions on the sale, transfer, or other disposition of shares during the Lock-up Period. The forms and specific restrictive provisions within these market standoff provisions vary among security holders. For example, although some of these market standoff agreements do not specifically restrict hedging transactions and others may be subject to different interpretations between us and security holders as to whether they restrict hedging, our insider trading policy prohibits hedging by all of our current directors, officers, employees, contractors, and consultants. Sales, short sales, or hedging transactions involving our equity securities, whether before or after this offering and whether or not we believe them to be prohibited, could adversely affect the price of our Class A common stock. As a result of the foregoing, and subject to the Early Release (as defined below), substantially all of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock are subject to a lock-up agreement or market standoff provisions during the Lock-up Period. We have agreed to enforce all such market standoff restrictions on behalf of the underwriters and not to amend or waive any such market standoff provisions during the Lock-up Period without the prior consent of Citigroup Global Markets Inc. and Barclays Capital Inc., on behalf of the underwriters, provided that we may 177
release shares from such restrictions to the extent such shares would be entitled to release under the form of lock-up agreement with the underwriters signed by our directors and executive officers, the selling stockholders, and certain other record holders of our securities as described herein. Notwithstanding the foregoing, if the closing price of our Class A common stock on the Nasdaq Global Market has exceeded 125% of the initial public offering price per share set forth on the cover page of this prospectus for at least two trading days out of the first five full consecutive trading days after the date of our public announcement of earnings for the quarter ending September 30, 2024 (such date, the “Price Condition Satisfaction Date”), holders of our securities may freely transfer or dispose of (i) for our officers and directors and entities affiliated with Alpha Wave, Altimeter, Benchmark, Coatue, Eclipse Ventures, and Foundation Capital, up to 10%, and (ii) for all other holders, up to 20%, of the sum of (A) the outstanding shares of Class A common stock that are held by such holder as of November 15, 2024 and (B) the securities convertible into or exchangeable or exercisable for Class A common stock that were held by such holder and fully vested as of November 15, 2024. We refer to the release described in this paragraph as the “Early Release.” If the terms of the Early Release are satisfied, sales or transfers may be made beginning at 9:30 a.m. Eastern Time on the first trading day after the Price Condition Satisfaction Date. The number of shares that may be transferred or sold in connection with the Early Release (if the price condition is satisfied) is approximately million shares. Of these shares, up to million shares may be transferred or sold by our officers and directors. Transfers and sales during the Early Release are subject to applicable securities laws, applicable contractual restrictions and limitations, and, if applicable to the security holder, compliance with our insider trading policy. If the price condition referred to above is not satisfied by the fifth consecutive trading day after the date of our announcement of earnings for the quarter ending September 30, 2024, then no securities will be released pursuant to the Early Release, and such securities will remain subject to the restrictions described above (subject to the exceptions described below) for the remainder of the Lock-up Period. The restrictions imposed by the lock-up agreements and market standoff provisions during the Lock-up Period are subject to certain exceptions, including with respect to: (i)any sales of our Class A common stock to the underwriters pursuant to the underwriting agreement to be entered into in connection with this offering; (ii)transfers (A) as a bona fide gift or gifts (including contributions to a charitable organization or educational institution) or (B) for bona fide estate or tax planning purposes (including contributions to a family foundation); (iii)transfers by will, other testamentary document, or intestacy; (iv)transfers to any trust for the direct or indirect benefit of the lock-up party or the immediate family of the lock-up party, or if the lock-up party is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust; (v)transfers to a partnership, limited liability company, or other entity of which the lock-up party and/or the immediate family of the lock-up party are the legal and beneficial owner of all of the outstanding equity securities or similar interests; (vi)transfers to a nominee, custodian, or trustee of a person or entity to whom a disposition or transfer would be permissible under clauses (ii) through (v) above; (vii)transactions relating to shares of Class A common stock acquired by the lock-up party in open market transactions after the closing date of this offering; (viii)if the lock-up party is a corporation, partnership, limited liability company, trust, or other business entity, (A) transfers to another corporation, partnership, limited liability company, trust, or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act) of the lock-up party, or to any investment fund or other entity controlling, controlled by, managing, or 178
managed by or under common control with the lock-up party or affiliates of the lock-up party (including, for the avoidance of doubt, where the lock-up party is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (B) transfers as part of a distribution to members, partners, shareholders, or other equity-holders of the lock-up party; (ix)transfers by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree, separation agreement or other court order; (x)transfers to us pursuant from a service provider of the Company upon death, disability or termination of services, in each case, of such service provider; (xi)transfers to us in connection with the vesting, exercise, or settlement of options, warrants, RSUs, or other rights to purchase shares of our Class A common stock (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, exercise, or settlement of such options, warrants, RSUs, or rights, provided that any shares of Class A common stock received upon such vesting, exercise, or settlement shall remain subject to the restrictions set forth above, and provided further that any such options, warrants, RSUs, or rights are held by the lock-up party pursuant to (A) an agreement or (B) equity awards granted under an equity incentive plan, stock purchase plan, or other equity award plan described in this prospectus; (xii)transfers in connection with the sale or other transfer of the lock-up party’s shares of Class A common stock to satisfy any tax obligations or payments due as a result of (A) the exercise of stock options, if such options expire or the post-termination exercise period applicable to such options expire during the Lock-Up Period or (B) the settlement of RSUs (other than in connection with the RSU Net Settlement) pursuant to awards granted under an equity incentive plan, stock purchase plan, or other equity award plan described in this prospectus, provided that, in each case, any remaining shares of Class A common stock received upon such exercise or settlement shall remain subject to the restrictions set forth above; (xiii)transfers the conversion of our outstanding preferred stock or warrants to acquire our preferred stock into shares of our Class A common stock or warrants to acquire shares of our Class A common stock prior to or in connection with the completion of this offering, provided that any such shares of Class A common stock or warrants received upon such conversion shall be subject to the restrictions set forth above; (xiv)transfers pursuant to a bona fide third-party tender offer, merger, consolidation, or other similar transaction that is approved by our board of directors and made to all holders of our capital stock involving a change of control of the company; provided that in the event that such tender offer, merger, consolidation, or other similar transaction is not completed, the lock-up party’s securities shall remain subject to the restrictions set forth above; (xv)the exercise of options, settlement of RSUs or other equity awards, or exercise of warrants granted pursuant to an equity incentive plan, stock purchase plan, or other equity award plan or agreements described in this prospectus; provided that any shares of Class A common stock received upon such vesting, exercise, or settlement shall be subject to the restrictions set forth above; or (xvi)the establishment of trading plans under Rule 10b5-1 under the Exchange Act, provided that such plans do not provide for the transfer or disposition of Class A common stock or any securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock during the Lock-up Period (except as permitted under the Early Release) and to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the lock-up party or us regarding the establishment of such plans during the Lock-up Period, such announcement or filing shall include a statement to the effect that no transfer of shares of Class A 179
common stock may be made under such plans during the Lock-up Period (except as permitted under the Early Release); provided that (A) in the case of any transfer, distribution or other disposition pursuant to clauses (a)(ii), (iii), (iv), (v), (vi), (viii) and (ix), such transfer shall not involve a disposition for value and such securities shall remain subject to the restrictions set forth above; (B) in the case of any transfer, distribution, or other disposition pursuant to clauses (a)(vii) and (viii), no filing by any party under the Exchange Act or other public announcement shall be required or will be made voluntarily in connection with such transfer, disposition, or distribution (other than a filing on a Form 5 or pursuant to Section 13 of the Exchange Act); and (C) in the case of any transfer or distribution pursuant to clauses (a)(ii), (iii), (iv), (v), (vi), (ix), (x), (xi), and (xii), that no public filing, report, or announcement will be voluntarily made, and if any filing under Section 16(a) of the Exchange Act, or other public filing, report, or announcement reporting a reduction in beneficial ownership of shares of Class A common stock in connection with the transfer or distribution is legally required during the Lock-up Period, such filing, report, or announcement must clearly indicate in the footnotes thereto the nature and conditions of the transfer. As described above, pursuant to certain exceptions to the lock-up agreements and market standoff agreements, certain shares of our Class A common stock will be eligible for sale in the open market during the Lock-up Period in sell-to-cover transactions in order to satisfy tax withholding obligations in connection with the settlement of RSUs. We expect RSUs to vest and settle during the Lock-up Period. Assuming a % tax withholding rate, we would expect approximately shares of Class A common stock to be eligible for sale in the open market in connection with the satisfaction of such tax withholding obligations. The number of shares actually sold in sell-to-cover transactions will depend on the tax withholding rate applicable to the relevant stockholder. It is also possible that we may decide to net settle all or a portion of such RSUs instead. The restrictions on issuances by us during the Lock-up Period are subject to certain exceptions, including with respect to: (i)the sale of our Class A common stock to the underwriters pursuant to the underwriting agreement; (ii)the issuance of shares of Class A common stock upon the exercise of an option or warrant or the conversion of a security outstanding as of the date of this prospectus or the settlement of RSUs; (iii)grants of stock options, stock awards, restricted stock, RSUs, or other equity awards and the issuance of shares of Class A common stock or securities convertible into or exercisable for Class A common stock (whether upon the exercise of stock options or otherwise) to employees, officers, directors, advisors or consultants of the Company pursuant to the terms of an equity incentive plan or employee benefit plan in effect as of the closing of this offering and described herein, provided that all recipients of any such grants, stock awards, restricted stock, RSUs, or other equity awards shall execute and deliver to the underwriters a lock-up agreement covering the remainder of the Lock-up Period to the extent the securities held by such person are not otherwise bound by a market standoff agreement that is at least as restrictive as the terms described herein; (iv)facilitating the establishment of a trading plan on behalf of a stockholder, officer, or director pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Class A common stock, provided that (A) such plan does not provide for the transfer of Class A common stock during the Lock-up Period (except as otherwise permitted under the lock-up agreement) and (B) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of shares of Class A common stock may be made under such plan during the Lock-up Period (except as otherwise permitted under the lock-up agreement); (v)the sale or issuance of or entry into an agreement to sell or issue Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock in connection with one or more mergers, acquisitions of securities, businesses, property or other assets, products or 180
technologies, joint ventures, commercial relationships, or other strategic corporate transactions or alliances; provided that the aggregate amount of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock that we may sell or issue or agree to sell or issue pursuant to this clause (v) shall not exceed % of the total number of shares of our Class A common stock issued and outstanding immediately following the completion of this offering, and provided, further, that each recipient of such securities enter into a lock-up agreement with the underwriters covering the remainder of the Lock-up Period to the extent the securities held by such person are not otherwise bound by a market standoff agreement; (vi)the sale or issuance of shares of Class N common stock or any other securities pursuant to the Preferred Stock Purchase Agreement, including pursuant to the G42 Primary Purchase, the G42 Option, or the Alternative Economic Position, provided, that the recipient of such securities enter into a lock-up agreement with the underwriters covering the remainder of the Lock-up Period; or (vii)the filing of one or more registration statements on Form S-8 for the registration of shares of Class A common stock issued pursuant to our equity incentive and employee benefit plans disclosed in this prospectus. Prior to this offering, there has been no public market for our shares. Consequently, the initial public offering price for the shares will be determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price will be our results of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our shares will develop and continue after this offering. We have applied to list our Class A common stock on the Nasdaq Global Market under the symbol “CBRS.” In connection with the offering, the underwriters may purchase and sell shares in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the underwriters’ option to purchase additional shares, and stabilizing purchases. •Short sales involve secondary market sales by the underwriters of a greater number of shares than they are required to purchase in the offering. ◦“Covered” short sales are sales of shares in an amount up to the number of shares represented by the underwriters’ option to purchase additional shares. ◦“Naked” short sales are sales of shares in an amount in excess of the number of shares represented by the underwriters’ option to purchase additional shares. •Covering transactions involve purchases of shares either pursuant to the underwriters’ option to purchase additional shares or in the open market in order to cover short positions. ◦To close a naked short position, the underwriters must purchase shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. ◦To close a covered short position, the underwriters must purchase shares in the open market or must exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters will consider, among other things, the price of shares 181
available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. •Stabilizing transactions involve bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum. Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the shares. They may also cause the price of the shares to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time. Other Relationships The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing, and brokerage activities. Certain of the underwriters and their respective affiliates have in the past performed commercial banking, investment banking, and advisory services for us from time to time for which they have received customary fees and reimbursement of expenses. The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. We, the selling stockholders, and the underwriters will agree to indemnify each other against certain liabilities, including liabilities under the Securities Act, or to contribute to payments we, the selling stockholders, or the underwriters may be required to make because of any of those liabilities. Selling Restrictions Notice to Prospective Investors in the European Economic Area In relation to each Member State of the European Economic Area (each a “Relevant State”), no shares of our Class A common stock have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares of our Class A common stock which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares of our Class A common stock may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation: (a)to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation; (b)to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or (c)in any other circumstances falling within Article 1(4) of the Prospectus Regulation, 182
provided that no such offer of shares of our Class A common stock shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation. and each person who initially acquires any shares of our Class A common stock or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and the Company that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares of our Class A common stock being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares of our Class A common stock acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares of our Class A common stock to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters have been obtained to each such proposed offer or resale. For the purposes of this provision, the expression an “offer to the public” in relation to shares of our Class A common stock in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of our Class A common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129. Notice to Prospective Investors in the United Kingdom No shares of our Class A common stock have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares of our Class A common stock which (i) has been approved by the Financial Conduct Authority and (ii) is to be treated as if it had been approved by the Financial Conduct Authority in accordance with the transitional provisions in Article 74 (transitional provisions) of the Prospectus Amendment etc. (EU Exit) Regulations 2019/1234, except that the shares of our Class A common stock may be offered to the public in the United Kingdom at any time: (a)to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation; (b)to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of underwriters for any such offer; or (c)in any other circumstances falling within Section 86 of the FSMA. provided that no such offer of the shares of our Class A common stock shall require us or any representative to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares of our Class A common stock in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of our Class A common stock and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares of our Class A common stock in the United Kingdom within the meaning of the Financial Services and Markets Act 2000. 183
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons. Notice to Prospective Investors in Hong Kong The shares of our Class A common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong) (the “CO”) or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares of our Class A common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of our Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder. Notice to Prospective Investors in Japan The shares of our Class A common stock have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares of our Class A common stock nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time. Notice to Prospective Investors in Singapore Each joint book-running manager has acknowledged that this offering has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each joint book-running manager has represented and agreed that it has not offered or sold any shares of our Class A common stock or caused the shares of our Class A common stock to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares of our Class A common stock or cause the shares to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of our Class A common stock, whether directly or indirectly, to any person in Singapore other than: (a)to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA; (b)to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or (c)otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. 184
Where the shares of our Class A common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a)a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b)a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares of our Class A common stock pursuant to an offer made under Section 275 of the SFA except: (i)to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA; (ii)where no consideration is or will be given for the transfer; (iii)where the transfer is by operation of law; (iv)as specified in Section 276(7) of the SFA; or as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. Notice to Prospective Investors in Canada The shares of our Class A common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of our Class A common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. Notice to Prospective Investors in Switzerland This Prospectus does not constitute an offer to the public or a solicitation to purchase or invest in any shares of our Class A common stock. No shares of our Class A common stock have been offered or will be offered to the 185
public in Switzerland, except that offers of shares of our Class A common stock may be made to the public in Switzerland at any time under the following exemptions under the Swiss Financial Services Act (“FinSA”): (a)to any person which is a professional client as defined under the FinSA; (b)to fewer than 500 persons (other than professional clients as defined under the FinSA), subject to obtaining the prior consent of joint book-running managers for any such offer; or (c)in any other circumstances falling within Article 36 FinSA in connection with Article 44 of the Swiss Financial Services Ordinance, provided that no such offer of shares of our Class A common stock shall require the Company or any investment bank to publish a prospectus pursuant to Article 35 FinSA. The shares of our Class A common stock have not been and will not be listed or admitted to trading on a trading venue in Switzerland. Neither this document nor any other offering or marketing material relating to the shares of our Class A common stock constitutes a prospectus as such term is understood pursuant to the FinSA and neither this document nor any other offering or marketing material relating to the shares of our Class A common stock may be publicly distributed or otherwise made publicly available in Switzerland. Notice to Prospective Investors in Australia This prospectus: •does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the “Corporations Act”); •has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and •may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act (“Exempt Investors”). The shares of our Class A common stock may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the shares of our Class A common stock may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any shares of our Class A common stock may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the shares of our Class A common stock, you represent and warrant to us that you are an Exempt Investor. As any offer of shares of our Class A common stock under this document will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares of our Class A common stock you undertake to us that you will not, for a period of 12 months from the date of issue of the shares of our Class A common stock, offer, transfer, assign or otherwise alienate those shares of our Class A common stock to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC. 186
Notice to Prospective Investors in the Dubai International Financial Centre This prospectus relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (the “DFSA”). This prospectus and the accompanying prospectus is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for this prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor. In relation to its use in the Dubai International Financial Centre (the “DIFC”), this prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC. 187
LEGAL MATTERS The validity of the shares of Class A common stock offered hereby will be passed upon for us by Latham & Watkins LLP. Davis Polk & Wardwell LLP, Menlo Park, California, is acting as counsel for the underwriters in connection with certain legal matters related to this offering. Whalen LLP, Newport Beach, California, has acted as counsel for the selling stockholders in connection with certain legal matters related to this offering.
EXPERTS The consolidated financial statements of Cerebras Systems Inc. as of December 31, 2023 and 2022 and for each of the years then ended included in this prospectus and in the registration statement have been so included in reliance on the report of BDO USA, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act, with respect to the shares of Class A common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and our Class A common stock, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference. You may read our SEC filings, including this registration statement, over the Internet at the SEC’s website at www.sec.gov. Upon the completion of this offering, we will be subject to the information reporting requirements of the Exchange Act and we will file reports, proxy statements, and other information with the SEC. These reports, proxy statements, and other information will be available for review at the SEC’s website referred to above. We also maintain a website at www.cerebras.ai, at which, following the completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus or the registration statement of which it forms a part, and the inclusion of our website address in this prospectus is an inactive textual reference only. 188
Cerebras Systems Inc. Index to the Consolidated Financial Statements Consolidated Financial Statements (audited) for the Years Ended December 31, 2023 and December 31, 2022
Page / Page / Page
Report of Independent Registered Public Accounting Firm ... Report of Independent Registered Public Accounting Firm / Report of Independent Registered Public Accounting Firm / F- 2 / F- 2 / F- 2
Consolidated Balance Sheets ............. Consolidated Balance Sheets / Consolidated Balance Sheets / F- 3 / F- 3 / F- 3
Consolidated Statements of Operations ... Consolidated Statements of Operations / Consolidated Statements of Operations / F- 4 / F- 4 / F- 4
Consolidated Statements of Comprehensive Loss ... Consolidated Statements of Comprehensive Loss / Consolidated Statements of Comprehensive Loss / F- 5 / F- 5 / F- 5
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit ... Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit / Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit / F- 6 / F- 6 / F- 6
Consolidated Statements of Cash Flows ... Consolidated Statements of Cash Flows / Consolidated Statements of Cash Flows / F- 7 / F- 7 / F- 7
Notes to Consolidated Financial Statements ... Notes to Consolidated Financial Statements / Notes to Consolidated Financial Statements / F- 9 / F- 9 / F- 9
Consolidated Financial Statements (unaudited)
Page / Page / Page
Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 ... Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 / Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 / F - 37 / F - 37 / F - 37
Condensed Consolidated Statements of Operation for the six months ended June 30, 2024 and 2023 ... Condensed Consolidated Statements of Operation for the six months ended June 30, 2024 and 2023 / Condensed Consolidated Statements of Operation for the six months ended June 30, 2024 and 2023 / F - 38 / F - 38 / F - 38
Condensed Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2024 and 2023 ... Condensed Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2024 and 2023 / Condensed Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2024 and 2023 / F - 39 / F - 39 / F - 39
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder’s Deficit for the six months ended June 30, 2024 and 2023 ... Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder’s Deficit for the six months ended June 30, 2024 and 2023 / Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder’s Deficit for the six months ended June 30, 2024 and 2023 / F - 40 / F - 40 / F - 40
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 ... Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 / Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 / F - 41 / F - 41 / F - 41
N otes to Condensed Consolidated Financial Statements ... N otes to Condensed Consolidated Financial Statements / N otes to Condensed Consolidated Financial Statements / F - 42 / F - 42 / F - 42
F-1
Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Cerebras Systems Inc. Sunnyvale, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Cerebras Systems Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2020. San Jose, California June 17, 2024 F-2
CEREBRAS SYSTEMS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share and share amounts)
December 31,
December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
ASSETS .................................. ASSETS / ASSETS
Current assets: ......................... Current assets: / Current assets:
Cash and cash equivalents ............... Cash and cash equivalents / Cash and cash equivalents / $ / 34,761 / $ / 26,077
Restricted cash ......................... Restricted cash / Restricted cash / 19 / 19 / 119 / 119
Investments ............................. Investments / Investments / 117,627 / 117,627 / 199,257 / 199,257
Accounts receivable ..................... Accounts receivable / Accounts receivable / 6,764 / 6,764 / 3,725 / 3,725
Inventory ............................... Inventory / Inventory / 49,082 / 49,082 / 19,536 / 19,536
Prepaid expenses and other current assets ... Prepaid expenses and other current assets / Prepaid expenses and other current assets / 4,039 / 4,039 / 4,454 / 4,454
Total current assets .................... Total current assets / Total current assets / 212,292 / 212,292 / 253,168 / 253,168
Property and equipment, net ............. Property and equipment, net / Property and equipment, net / 12,513 / 12,513 / 26,833 / 26,833
Right-of-use assets ..................... Right-of-use assets / Right-of-use assets / 519 / 519 / 1,240 / 1,240
Other assets ............................ Other assets / Other assets / 173 / 173 / 250 / 250
Total assets ............................ Total assets / Total assets / $ / 225,497 / $ / 281,491
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT ... LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT / LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current liabilities: .................... Current liabilities: / Current liabilities:
Accounts payable ........................ Accounts payable / Accounts payable / $ / 14,694 / $ / 5,050
Accrued expenses ........................ Accrued expenses / Accrued expenses / 12,688 / 12,688 / 2,589 / 2,589
Accrued compensation .................... Accrued compensation / Accrued compensation / 7,593 / 7,593 / 8,903 / 8,903
Deferred revenue, current ............... Deferred revenue, current / Deferred revenue, current / 13,675 / 13,675 / 2,562 / 2,562
Current portion of operating lease liabilities ... Current portion of operating lease liabilities / Current portion of operating lease liabilities / 318 / 318 / 736 / 736
Liability related to early exercised options ... Liability related to early exercised options / Liability related to early exercised options / 210 / 210 / 1,060 / 1,060
Provision for product warranties ........ Provision for product warranties / Provision for product warranties / 3,633 / 3,633 / 538 / 538
Other current liabilities ............... Other current liabilities / Other current liabilities / 1,830 / 1,830 / 362 / 362
Total current liabilities ............... Total current liabilities / Total current liabilities / 54,641 / 54,641 / 21,800 / 21,800
Deferred revenue, net of current portion ... Deferred revenue, net of current portion / Deferred revenue, net of current portion / 5,551 / 5,551 / 1,428 / 1,428
Deferred tax liability .................. Deferred tax liability / Deferred tax liability / 132 / 132 / 114 / 114
Warrant liability ....................... Warrant liability / Warrant liability / 1,113 / 1,113 / 1,141 / 1,141
Operating lease liability, net of current portion ... Operating lease liability, net of current portion / Operating lease liability, net of current portion / 242 / 242 / 562 / 562
Total liabilities ....................... Total liabilities / Total liabilities / 61,679 / 61,679 / 25,045 / 25,045
Commitments and contingencies (Note 15) ... Commitments and contingencies (Note 15) / Commitments and contingencies (Note 15)
Redeemable convertible preferred stock, $0.00001 par value per share: 78,745,488 shares authorized, 77,032,857 shares issued and outstanding December 31, 2023 and 2022 ... Redeemable convertible preferred stock, $0.00001 par value per share: 78,745,488 shares authorized, 77,032,857 shares issued and outstanding December 31, 2023 and 2022 / Redeemable convertible preferred stock, $0.00001 par value per share: 78,745,488 shares authorized, 77,032,857 shares issued and outstanding December 31, 2023 and 2022 / $ / 722,780 / $ / 722,780
Stockholders’ deficit ................... Stockholders’ deficit / Stockholders’ deficit
Common stock, $0.00001 par value; 168,000,000 and 158,000,000 authorized shares at December 31, 2023 and 2022, respectively; 45,361,795 and 43,011,356 issued and outstanding as of December 31, 2023 and 2022, respectively ... Common stock, $0.00001 par value; 168,000,000 and 158,000,000 authorized shares at December 31, 2023 and 2022, respectively; 45,361,795 and 43,011,356 issued and outstanding as of December 31, 2023 and 2022, respectively / Common stock, $0.00001 par value; 168,000,000 and 158,000,000 authorized shares at December 31, 2023 and 2022, respectively; 45,361,795 and 43,011,356 issued and outstanding as of December 31, 2023 and 2022, respectively / — / — / — / —
Additional paid in capital .............. Additional paid in capital / Additional paid in capital / 101,578 / 101,578 / 68,473 / 68,473
Treasury stock, 300,138 shares of common stock outstanding as of December 31, 2023 and 2022 ... Treasury stock, 300,138 shares of common stock outstanding as of December 31, 2023 and 2022 / Treasury stock, 300,138 shares of common stock outstanding as of December 31, 2023 and 2022 / (88) / (88) / (88) / (88)
Accumulated other comprehensive income (loss) ... Accumulated other comprehensive income (loss) / Accumulated other comprehensive income (loss) / 1,103 / 1,103 / (319) / (319)
Accumulated deficit ..................... Accumulated deficit / Accumulated deficit / (661,555) / (661,555) / (534,400) / (534,400)
Total stockholders’ deficit ............. Total stockholders’ deficit / Total stockholders’ deficit / (558,962) / (558,962) / (466,334) / (466,334)
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit ... Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit / Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit / $ / 225,497 / $ / 281,491
The accompanying notes are an integral part of these consolidated financial statements. F-3
CEREBRAS SYSTEMS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Revenue ................................. Revenue / Revenue
Hardware ................................ Hardware / Hardware / $ / 57,114 / $ / 15,599
Services and other ...................... Services and other / Services and other / 21,630 / 21,630 / 9,020 / 9,020
Total revenue ........................... Total revenue / Total revenue / 78,744 / 78,744 / 24,619 / 24,619
Cost of sales ........................... Cost of sales / Cost of sales
Hardware ................................ Hardware / Hardware / 45,559 / 45,559 / 19,195 / 19,195
Services and other ...................... Services and other / Services and other / 6,827 / 6,827 / 2,534 / 2,534
Total cost of sales ..................... Total cost of sales / Total cost of sales / 52,386 / 52,386 / 21,729 / 21,729
Gross profit ............................ Gross profit / Gross profit / 26,358 / 26,358 / 2,890 / 2,890
Operating expenses ...................... Operating expenses / Operating expenses
Research and development ................ Research and development / Research and development / 140,057 / 140,057 / 155,408 / 155,408
Sales and marketing ..................... Sales and marketing / Sales and marketing / 9,642 / 9,642 / 9,401 / 9,401
General and administrative .............. General and administrative / General and administrative / 10,593 / 10,593 / 16,902 / 16,902
Total operating expenses ................ Total operating expenses / Total operating expenses / 160,292 / 160,292 / 181,711 / 181,711
Loss from operations .................... Loss from operations / Loss from operations / (133,934) / (133,934) / (178,821) / (178,821)
Interest income ......................... Interest income / Interest income / 5,683 / 5,683 / 1,076 / 1,076
Other income, net ....................... Other income, net / Other income, net / 1,228 / 1,228 / 230 / 230
Loss before income taxes ................ Loss before income taxes / Loss before income taxes / (127,023) / (127,023) / (177,515) / (177,515)
Income tax expense ...................... Income tax expense / Income tax expense / 132 / 132 / 204 / 204
Net loss ................................ Net loss / Net loss / $ / (127,155) / $ / (177,719)
Net loss per share – basic and diluted ... Net loss per share – basic and diluted / Net loss per share – basic and diluted / $ / (2.92) / $ / (4.28)
Weighted average number of common shares outstanding, basic and diluted ... Weighted average number of common shares outstanding, basic and diluted / Weighted average number of common shares outstanding, basic and diluted / 43,552 / 43,552 / 41,485 / 41,485
The accompanying notes are an integral part of these consolidated financial statements. F-4
CEREBRAS SYSTEMS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands)
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Net loss ................................ Net loss / Net loss / $ / (127,155) / $ / (177,719)
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / (73) / (73) / (331) / (331)
Available-for-sale investments: ......... Available-for-sale investments: / Available-for-sale investments:
Change in net unrealized gain on debt securities, net of tax ... Change in net unrealized gain on debt securities, net of tax / Change in net unrealized gain on debt securities, net of tax / 1,495 / 1,495 / 541 / 541
Comprehensive loss ...................... Comprehensive loss / Comprehensive loss / $ / (125,733) / $ / (177,509)
The accompanying notes are an integral part of these consolidated financial statements. F-5
CEREBRAS SYSTEMS INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (in thousands)
Redeemable Convertible Preferred Stock
Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Additional / Additional / Additional / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Accumulated Other Comprehensive Income (Loss) / Accumulated Other Comprehensive Income (Loss) / Accumulated Other Comprehensive Income (Loss) / Accumulated Deficit / Accumulated Deficit / Accumulated Deficit / Total Stockholders’ Deficit / Total Stockholders’ Deficit / Total Stockholders’ Deficit
Shares / Shares / Shares / Amount / Amount / Amount / Shares / Shares / Shares / Amount / Amount / Amount / Paid-in Capital / Paid-in Capital / Paid-in Capital / Shares / Shares / Shares / Amount / Amount / Amount / Accumulated Other Comprehensive Income (Loss) / Accumulated Deficit / Total Stockholders’ Deficit
Balance as of January 1, 2022 ........... Balance as of January 1, 2022 / Balance as of January 1, 2022 / 77,033 / 77,033 / 77,033 / $ / 722,780 / 41,430 / 41,430 / 41,430 / $ / — / $ / 39,549 / (300) / (300) / (300) / $ / (88) / $ / (529) / $ / (353,641) / $ / (314,709)
Shares issued upon exercise of stock options, net of repurchases of early exercised stock options ... Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / — / — / — / — / — / 1,581 / 1,581 / 1,581 / — / — / 2,758 / 2,758 / — / — / — / — / — / — / — / — / — / 2,758 / 2,758
Vesting of early exercised stock options ... Vesting of early exercised stock options / Vesting of early exercised stock options / — / — / — / — / — / — / — / — / — / — / 1,235 / 1,235 / — / — / — / — / — / — / — / — / — / 1,235 / 1,235
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / — / — / — / — / — / — / — / — / — / — / 15,518 / 15,518 / — / — / — / — / — / — / — / — / — / 15,518 / 15,518
Conversion of stock-based liability classified awards to stock-based equity classified awards ... Conversion of stock-based liability classified awards to stock-based equity classified awards / Conversion of stock-based liability classified awards to stock-based equity classified awards / — / — / — / — / — / — / — / — / — / — / 206 / 206 / — / — / — / — / — / — / — / — / — / 206 / 206
Common stock repurchased and retired .... Common stock repurchased and retired / Common stock repurchased and retired / — / — / — / — / — / (600) / (600) / (600) / — / — / (842) / (842) / — / — / — / — / — / — / — / (3,040) / (3,040) / (3,882) / (3,882)
Issuance of common stock ................ Issuance of common stock / Issuance of common stock / — / — / — / — / — / 600 / 600 / 600 / — / — / 10,049 / 10,049 / — / — / — / — / — / — / — / — / — / 10,049 / 10,049
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (331) / (331) / — / — / (331) / (331)
Change in net unrealized gain on debt securities, net of tax ... Change in net unrealized gain on debt securities, net of tax / Change in net unrealized gain on debt securities, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / 541 / 541 / — / — / 541 / 541
Net loss ................................ Net loss / Net loss / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (177,719) / (177,719) / (177,719) / (177,719)
Balance as of December 31, 2022 ......... Balance as of December 31, 2022 / Balance as of December 31, 2022 / 77,033 / 77,033 / 77,033 / 722,780 / 722,780 / 43,011 / 43,011 / 43,011 / — / — / 68,473 / 68,473 / (300) / (300) / (300) / (88) / (88) / (319) / (319) / (534,400) / (534,400) / (466,334) / (466,334)
Shares issued upon exercise of stock options, net of repurchases of early exercised stock options ... Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / — / — / — / — / — / 2,351 / 2,351 / 2,351 / — / — / 5,937 / 5,937 / — / — / — / — / — / — / — / — / — / 5,937 / 5,937
Vesting of early exercised stock options ... Vesting of early exercised stock options / Vesting of early exercised stock options / — / — / — / — / — / — / — / — / — / — / 847 / 847 / — / — / — / — / — / — / — / — / — / 847 / 847
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / — / — / — / — / — / — / — / — / — / — / 25,666 / 25,666 / — / — / — / — / — / — / — / — / — / 25,666 / 25,666
Conversion of stock-based liability classified awards to stock-based equity classified awards ... Conversion of stock-based liability classified awards to stock-based equity classified awards / Conversion of stock-based liability classified awards to stock-based equity classified awards / — / — / — / — / — / — / — / — / — / — / 655 / 655 / — / — / — / — / — / — / — / — / — / 655 / 655
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (73) / (73) / — / — / (73) / (73)
Change in net unrealized gain on debt securities, net of tax ... Change in net unrealized gain on debt securities, net of tax / Change in net unrealized gain on debt securities, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / 1,495 / 1,495 / — / — / 1,495 / 1,495
Net loss ................................ Net loss / Net loss / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (127,155) / (127,155) / (127,155) / (127,155)
Balance as of December 31, 2023 ......... Balance as of December 31, 2023 / Balance as of December 31, 2023 / 77,033 / 77,033 / 77,033 / $ / 722,780 / 45,362 / 45,362 / 45,362 / $ / — / $ / 101,578 / (300) / (300) / (300) / $ / (88) / $ / 1,103 / $ / (661,555) / $ / (558,962)
The accompanying notes are an integral part of these consolidated financial statements. F-6
CEREBRAS SYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
CASH FLOWS FROM OPERATING ACTIVITIES .... CASH FLOWS FROM OPERATING ACTIVITIES / CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................ Net loss / Net loss / $ / (127,155) / $ / (177,719)
Adjustments to reconcile net loss to net cash flows used in operating activities: ... Adjustments to reconcile net loss to net cash flows used in operating activities: / Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization expense ... Depreciation and amortization expense / Depreciation and amortization expense / 10,583 / 10,583 / 11,941 / 11,941
Gain on sale of investments, net ........ Gain on sale of investments, net / Gain on sale of investments, net / (221) / (221) / (363) / (363)
Loss on disposal of property and equipment ... Loss on disposal of property and equipment / Loss on disposal of property and equipment / 3,143 / 3,143 / 6,912 / 6,912
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / 26,631 / 26,631 / 16,876 / 16,876
Amortization of premium and accretion of discount on investments, net ... Amortization of premium and accretion of discount on investments, net / Amortization of premium and accretion of discount on investments, net / (4,948) / (4,948) / 1,547 / 1,547
Non-cash lease expense .................. Non-cash lease expense / Non-cash lease expense / 721 / 721 / 1,351 / 1,351
Write-offs and provision for excess and obsolete inventories ... Write-offs and provision for excess and obsolete inventories / Write-offs and provision for excess and obsolete inventories / 2,469 / 2,469 / 10,790 / 10,790
Change in fair value of warrant liability ... Change in fair value of warrant liability / Change in fair value of warrant liability / (28) / (28) / 492 / 492
Change in deferred tax liability ........ Change in deferred tax liability / Change in deferred tax liability / 18 / 18 / 114 / 114
Changes in operating assets and liabilities: ... Changes in operating assets and liabilities: / Changes in operating assets and liabilities:
Accounts receivable ..................... Accounts receivable / Accounts receivable / (3,039) / (3,039) / 4,244 / 4,244
Inventory ............................... Inventory / Inventory / (25,191) / (25,191) / (37,502) / (37,502)
Prepaid expenses and other assets ....... Prepaid expenses and other assets / Prepaid expenses and other assets / 492 / 492 / 17 / 17
Accounts payable ........................ Accounts payable / Accounts payable / 9,777 / 9,777 / 250 / 250
Accrued expenses ........................ Accrued expenses / Accrued expenses / 10,331 / 10,331 / (1,549) / (1,549)
Accrued compensation .................... Accrued compensation / Accrued compensation / (1,621) / (1,621) / (588) / (588)
Deferred revenue ........................ Deferred revenue / Deferred revenue / 15,236 / 15,236 / (825) / (825)
Operating lease liability ............... Operating lease liability / Operating lease liability / (738) / (738) / (706) / (706)
Provision for product warranties ........ Provision for product warranties / Provision for product warranties / 3,095 / 3,095 / 288 / 288
Other current liabilities ............... Other current liabilities / Other current liabilities / 1,468 / 1,468 / 28 / 28
Net cash flows used in operating activities ... Net cash flows used in operating activities / Net cash flows used in operating activities / (78,977) / (78,977) / (164,402) / (164,402)
CASH FLOWS FROM INVESTING ACTIVITIES .... CASH FLOWS FROM INVESTING ACTIVITIES / CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ..... Purchases of property and equipment / Purchases of property and equipment / (6,593) / (6,593) / (10,463) / (10,463)
Proceeds from sale of property and equipment ... Proceeds from sale of property and equipment / Proceeds from sale of property and equipment / — / — / 24 / 24
Purchases of investments ................ Purchases of investments / Purchases of investments / (265,593) / (265,593) / (207,228) / (207,228)
Maturities and sales of investments ..... Maturities and sales of investments / Maturities and sales of investments / 353,887 / 353,887 / 355,060 / 355,060
Net cash flows provided by investing activities ... Net cash flows provided by investing activities / Net cash flows provided by investing activities / 81,701 / 81,701 / 137,393 / 137,393
CASH FLOWS FROM FINANCING ACTIVITIES .... CASH FLOWS FROM FINANCING ACTIVITIES / CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock ...... Proceeds from sale of common stock / Proceeds from sale of common stock / — / — / 10,049 / 10,049
Proceeds from exercise of stock options ... Proceeds from exercise of stock options / Proceeds from exercise of stock options / 5,996 / 5,996 / 2,973 / 2,973
Repurchases of early exercised stock options ... Repurchases of early exercised stock options / Repurchases of early exercised stock options / (63) / (63) / (37) / (37)
Repurchases of common stock ............. Repurchases of common stock / Repurchases of common stock / — / — / (3,881) / (3,881)
Net cash flows provided by financing activities ... Net cash flows provided by financing activities / Net cash flows provided by financing activities / 5,933 / 5,933 / 9,104 / 9,104
Increase (decrease) in cash, cash equivalents, and restricted cash ... Increase (decrease) in cash, cash equivalents, and restricted cash / Increase (decrease) in cash, cash equivalents, and restricted cash / 8,657 / 8,657 / (17,905) / (17,905)
Effect of exchange rate on cash ......... Effect of exchange rate on cash / Effect of exchange rate on cash / (73) / (73) / (331) / (331)
Cash, cash equivalents, and restricted cash beginning of period ... Cash, cash equivalents, and restricted cash beginning of period / Cash, cash equivalents, and restricted cash beginning of period / 26,196 / 26,196 / 44,432 / 44,432
Cash, cash equivalents, and restricted cash end of period ... Cash, cash equivalents, and restricted cash end of period / Cash, cash equivalents, and restricted cash end of period / $ / 34,780 / $ / 26,196
F-7
CEREBRAS SYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands)
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: ... SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: / SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds ... Cash paid for income taxes, net of refunds / Cash paid for income taxes, net of refunds / $ / 126 / $ / 39
NON-CASH INVESTING AND FINANCING ACTIVITIES: ... NON-CASH INVESTING AND FINANCING ACTIVITIES: / NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of property and equipment out of inventory ... Transfer of property and equipment out of inventory / Transfer of property and equipment out of inventory / $ / 5,032 / $ / 29,515
Transfer of property and equipment into inventory ... Transfer of property and equipment into inventory / Transfer of property and equipment into inventory / 11,856 / 11,856 / 2,846 / 2,846
Purchases of property and equipment included in accounts payable and accrued expenses ... Purchases of property and equipment included in accounts payable and accrued expenses / Purchases of property and equipment included in accounts payable and accrued expenses / 365 / 365 / — / —
Vesting of early exercised options ...... Vesting of early exercised options / Vesting of early exercised options / 847 / 847 / 1,235 / 1,235
Right-of-use assets obtained in exchange for lease obligations ... Right-of-use assets obtained in exchange for lease obligations / Right-of-use assets obtained in exchange for lease obligations / — / — / 1,119 / 1,119
The accompanying notes are an integral part of these consolidated financial statements. F-8
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Operations Cerebras Systems Inc. (the “Company” or “Cerebras”) was incorporated in Delaware in April 2016. Cerebras is an enterprise artificial intelligence (“AI”) company that designs and deploys an AI compute platform, purpose built for accelerating AI’s most complex workloads. The Company’s Wafer-Scale Engine (“WSE”), a chip encompassing an entire silicon wafer—specifically designed to tackle the computational demands of Generative AI (“GenAI”) applications. The Company architects AI systems, utilizing WSE, and the integrated software connects these systems into a cluster to form supercomputers. The AI compute platform is designed to reduce training times and inference latencies, while reducing programming complexity. The Company leverages this technology to train AI models in collaboration with its customers. Since its inception, Cerebras Systems Inc. has dedicated resources to research and development activities that support its current projects and future development efforts. The Company is headquartered in Sunnyvale, California.
Note 2 – Basis of Presentation and Liquidity These consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts and operations of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Certain amounts reported in the prior year financial statements have been reclassified to conform to the current year presentation. These changes in presentation do not affect previously reported results. The Company has financed operations to date primarily through equity financing arrangements and has incurred operating losses and negative cash flows since its inception. As of December 31, 2023, the Company had a total cash, cash equivalents, and restricted cash balance of $34.8 million; an investments balance of $117.6 million, which was classified as available-for-sale; and an accumulated deficit of $661.6 million. During the year ended December 31, 2023, net loss incurred was $127.2 million and net cash used in operations was $79.0 million. The Company expects to continue to incur operating losses and negative cash flows from operations to support the development and marketing of its products, for the expansion of its product portfolio, and to continue its research and development activities. The Company’s activities are subject to significant risks and uncertainties, including market acceptance of the Company’s products, as well as the timing and extent of spending on research and development. The Company’s management plans to monitor expenses and raise additional capital through a combination of an initial public offering of shares of common stock, and potentially, strategic alliances. In May 2024, the Company received commitments from certain investors to provide additional capital of $380.0 million through the purchase of shares of the Company’s Series F-1 redeemable convertible preferred stock, subject to regulatory approval and satisfaction of customary closing conditions. Refer to Note 16 for further details. The Company’s ability to access capital when needed is not assured and, if capital is not available on acceptable terms to the Company when, and in the amounts, needed, the Company could be required to delay, scale back or abandon some or all of its development programs and other operations, which could materially harm the Company’s business, financial condition, and results of operations. If the Company is unable to obtain further funding, the Company may be forced to delay, reduce, or eliminate some or all of its research and development programs, product portfolio expansion, or commercialization efforts, which could adversely affect its business prospects. Management believes that the Company’s current cash and cash equivalents and investments are adequate to meet its needs for the next 12 months from the issuance of these consolidated financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. F-9
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Areas of significant estimates include, but are not limited to, revenue recognition, including the determination of the standalone selling price (“SSP”) of performance obligations, useful life of property, plant and equipment, product warranty accruals, impairment of long-lived assets, the market value of and demand for inventory, valuation allowance on deferred income tax assets, the fair value of common stock and other assumptions used to measure stock-based compensation, and warrant liability. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts, and experience. Changes in estimates are recorded prospectively in the period in which they become known. Actual results could significantly differ from those estimates.
Note 3 – Recent Accounting Pronouncements Not Yet Adopted In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company does not expect this ASU to have a material impact on its consolidated financial statements. In June 2022, the FASB issued ASU No. 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value; clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires the additional disclosures for equity securities subject to contractual sale restrictions. ASU 2022-03 is effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company does not expect this ASU to have a material impact on its consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. For all other entities, the standard is effective for annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. F-10
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Significant Accounting Policies Risks and Uncertainties Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, cash equivalents, investments, and accounts receivable. Investments are made with the primary objective of preservation of capital and maintenance of liquidity. The Company believes that the quality of financial instruments minimizes the exposure to concentration of credit risk. The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed insurance limits set by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not historically experienced any losses due to such concentration of credit risk. The Company has no significant off-balance sheet risk, such as foreign exchange contracts, options contracts, or other hedging arrangements. The Company believes its credit policies are prudent and reflect normal industry terms and business risk. The Company’s exposure to credit risk for accounts receivable is indicated by the carrying value of its accounts receivable. The Company does not require customers to provide collateral to support accounts receivable. If deemed necessary, credit reviews of significant customers may be performed prior to extending credit. The determination of a customer’s ability to pay requires judgment, and failure to collect from a customer can adversely affect revenue, cash, and net earnings. Expected credit losses for uncollectible receivable balances consider both current conditions and reasonable and supportable forecasts of future conditions. Current conditions considered include predefined aging criteria, as well as specified events that indicate the balance due is not collectible. Reasonable and supportable forecasts used in determining the probability of future collections consider publicly available macroeconomic data and whether future credit losses are expected to differ from historical losses. The Company currently does not have an allowance for credit losses and expects to collect the full balance of accounts receivable. Significant Customers Revenue from significant customers, meaning those representing 10% or more of total revenue, was composed of one customer accounting for 83% of the Company’s revenue for the year ended December 31, 2023. Three customers accounted for 17%, 15%, and 13%, respectively, of the Company’s revenue for the year ended December 31, 2022. Accounts receivable from significant customers, those representing 10% or more of the total accounts receivable, was composed of four customers accounting for 43%, 22%, 15%, and 15%, respectively, of the Company’s accounts receivable balance as of December 31, 2023. Two customers accounted for 64%, and 35%, respectively, of the Company’s accounts receivable balance as of December 31, 2022. Supplier Risk Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry. Three suppliers accounted for 21%, 19%, and 15% of total purchases for the year ended December 31, 2023. Two suppliers accounted for 25% and 11% of total purchases for the year ended December 31, 2022. Other Risks and Uncertainties The Company is subject to certain other risks and uncertainties, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: the Company’s ability to advance the development its products; market acceptance of its products; performance of third-party data center vendors; competition from other companies with greater financial resources or expertise; protection of intellectual property; litigation or claims brought by or made against the Company relating to intellectual property or other factors; and its ability to attract and retain employees necessary to support its growth. F-11
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company’s business and operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges, such as the effects of the ongoing conflict between Russia and Ukraine and between Israel and Palestine, tensions between the United States and China, uncertainty in the financial markets, including disruptions in the banking industry and inflationary trends. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which provides a five-step framework through which revenue is recognized when control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company concludes are within the scope of ASC 606, management performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract(s); (iii) determines the transaction price, including whether there are any constraints on variable consideration; (iv) allocates the transaction price to the performance obligations; and (v) recognizes revenue when (or as) the Company satisfies a performance obligation. Revenue is recognized when control of the promised goods or services, through performance obligations by the Company, is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for the performance obligations. The Company combines and accounts for multiple contracts as a single contract when they are negotiated together with the same customer at or near the same time in order to achieve a single commercial objective, or when the contracts are related in other ways. Transaction price may be comprised of fixed consideration, variable consideration, significant financing component, non-cash consideration, and consideration payable to a customer. The Company’s contracts are typically for fixed consideration. For all contracts with customers that have more than one performance obligation, the Company allocates the transaction price to each separate performance obligation based on the relative SSP of each performance obligation. The SSP is typically the price at which the Company sells a promised good or service separately to a customer. The best evidence of an SSP, if available, is the observable price charged in similar circumstances and to similar customers. If an SSP is not directly observable, the Company estimates SSP using various observable inputs including historical internal pricing data and cost-plus expected margin analysis due to the limited standalone sales history. The Company generates revenue primarily from the sale of AI Systems, support services, cloud-based computing services and custom AI modeling services. Hardware Sales Revenue and Installation, Integration, and Acceptance Testing Hardware revenue primarily consists of sales of the Company’s AI systems and other equipment. Revenue from the sale of AI systems is recognized upon transfer of control of promised goods to customers at a point in time. Revenue is recognized in an amount that reflects the consideration the Company expects to receive in exchange for those goods, net of allowances for returns, customer programs, and any taxes collected from customers. Generally, control of the goods transfers to the customer upon shipment, or delivery, depending on shipping terms, in the absence of installation, integration, and acceptance testing requirements. In certain cases, the Company may be contracted to install the hardware at the customer’s facility, and subsequent to installation, the Company may provide further integration services and conduct acceptance testing. When installation, integration, and acceptance testing is bundled with the hardware, control of the goods is transferred upon meeting the contractual acceptance provisions. Transaction price allocated to installation and integration services is recognized at a point in time upon completion of services, which generally coincides with the timing of customer acceptance and recognition of F-12
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
revenue for the AI system. Revenue for installation and integration services is included in Services and other on the consolidated statement of operations. Other Equipment Customers regularly contract with the Company to purchase other equipment as needed, such as racks, coolant distribution units, and power supply units. In arrangements where another party is involved in providing specified goods or services to a customer, the Company evaluates whether it is the principal or agent. In this evaluation, the Company considers if control of the specified goods or services is obtained before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion in establishing price. For revenue arrangements where the Company is not the principal, revenue is recognized on a net basis. For the periods presented, revenue for arrangements where the Company was determined to be the agent was not material. Revenue recognized from sales of additional equipment follows similar revenue recognition patterns as hardware sales. Support Services The Company sells support services—including software updates, and customer care support—in one-year, two-year, or three-year terms. The support services represent an obligation of the Company to stand-ready to provide an undefined quantity of support over the duration of the service term. Under the provisions of the arrangement, customers may make requests of the Company to deliver some or all of the customer support services at some point during the period defined in the contract, or the delivery of some or all of the services on a when-and-if-available basis may be in the control of the entity (i.e., software updates). The customer benefits from the Company’s stand-ready obligation evenly throughout the contract period, and as a result, revenue is recognized ratably over the service term. Cloud-based Computing Services The Company also provides cloud-based computing services to customers. In each case, the totality of services provided represents a single integrated solution tailored to the customer’s specific needs. As such, the performance obligations to the customers consists of a single integrated solution delivered as a series of distinct daily services. The customers benefit from the services over the contract term and as such revenue is recognized over time as services are provided. AI Modeling Services The Company also generates revenue from custom AI modeling service agreements with customers, whereby the Company is engaged to help customers throughout the AI workflow, starting with developing strategy, designing and building the model, and deploying the final model. The totality of services in such arrangements are broken into different milestones within the contract. In certain contracts, each milestone builds upon progress achieved in earlier milestones. Upon completion of each milestone, the Company provides a deliverable to the customer in certain contracts, which must be accepted by the customer in order to proceed with the next phase of the contract. Each milestone is typically for fixed consideration. If an SSP is not directly observable, the Company estimates SSP using various observable inputs including cost-plus expected margin analysis due to the limited standalone sales history. The Company recognizes revenue from AI modeling services over time as services are provided or at a point in time upon completion and acceptance by the customer of contract deliverables, depending on the terms of the agreement. The Company generally warrants its products to be free of defects generally for a period of one to two years. This assurance-type warranty is not considered a separate performance obligation, and thus, no transaction price is allocated to it. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in the cost of sales. F-13
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Contract Assets and Liabilities The payment terms and conditions in the Company’s customer contracts vary. In some cases, customers prepay for their goods and services; in other cases, after appropriate credit evaluations, payment is due in arrears, typically no longer than one year. When the timing of the Company’s delivery of hardware and provision of services is different from the timing of the payments made by customers, the Company recognizes either a contract asset or a contract liability. Contract assets represent deferred cost of sales related to revenue that has not yet been recognized, and unbilled receivables related to revenue that has been recognized but not yet invoiced. The balance of contract assets was $0.2 million, $0.5 million and $0.5 million as of December 31, 2023, December 31, 2022 and December 31, 2021, respectively, in prepaid expenses and other current assets. Contract liabilities are recorded in deferred revenue and represent amounts that have been invoiced, or received in advance, but have not yet been recognized as revenue. Revenue allocated to remaining performance obligations that is unsatisfied (or partially unsatisfied) includes amounts received from customers and amounts that will be invoiced and recognized as revenue in future periods, was $19.2 million as of December 31, 2023. The Company expects to recognize approximately 71% of this revenue over the next 12 months and the remainder thereafter. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents include cash on hand and highly liquid investments with an original maturity of three months or less. The Company’s cash and cash equivalents are invested in various investment grade institutional money market funds and bank money market and interest-bearing accounts. Restricted cash includes cash and cash equivalents that are not readily available for use in the Company’s operating activities. Restricted cash is attributable to minimum cash reserve requirements under the Company’s letter of credit issued in connection with one of the Company’s real estate leases. Investments Investments consist primarily of time deposits, U.S. Treasury securities, and corporate debt securities that have an initial maturity of greater than three months but less than or equal to one year at period-end. The Company classifies its investments in debt securities as available for sale. These available-for-sale debt securities are reported at fair value. The fair value of interest-bearing debt securities includes accrued interest. Debt securities are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive loss, except for the changes in allowance for expected credit losses, which are recorded in other income, net. The Company determines any realized gains or losses on the sale of, or maturity of, debt securities on a specific identification method, and the Company records such realized gains and losses in other income, net. All of the Company’s available-for-sale debt investments are subject to a periodic impairment review. For available-for-sale debt securities in an unrealized loss position, the Company determines whether a credit loss exists. The credit loss is estimated by considering available information relevant to the collectability of the security and information about past events, current conditions, and reasonable and supportable forecasts. Any credit loss is recorded as a charge to other income, net, not to exceed the amount of the unrealized loss. Unrealized losses other than the credit loss are recognized in accumulated other comprehensive income (loss). If the Company has an intent to sell, or if it is more likely than not that the Company will be required to sell a debt security in an unrealized loss position before recovery of its amortized cost basis, it will write down the security to its fair value and record the corresponding charge as a component of other income, net. There were no credit losses or impairment charges for the years ended December 31, 2023 and 2022. F-14
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments The Company determines fair value measurements used in its consolidated financial statements based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: •Level 1 inputs are quoted prices in active markets for identical assets and liabilities; •Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and •Level 3 inputs are not observable in the market. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of the Company’s financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their relatively short maturities. The fair value of investments is estimated using Level 2 inputs (Note 8). The fair value of warrant liabilities is estimated using Level 3 inputs (Note 11). Accounts Receivable The Company has trade receivables which are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability of accounts receivable on a regular basis based on economic assessment of market conditions and review of customer financial history. There was no allowance for credit losses recorded as of December 31, 2023 and 2022. Inventory Inventories consist of raw materials, work-in-progress and finished goods and are stated at the lower of cost or net realizable value. Costs are measured on a weighted average cost basis. Net realizable value is the estimated selling price of the Company’s products in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventories are written down to their net realizable value if they have become obsolete, have a cost basis in excess of expected net realizable value, or are in excess of expected demand. Once inventory is written down, its new value is maintained until it is sold, scrapped, or written down for further valuation losses. The valuation of inventories requires the Company to make judgments based on currently available information about the likely method of disposition and current and future product demand relative to the remaining product life. Process and product development lifecycle corresponds with substantive engineering milestones. These engineering milestones are regularly and consistently applied in assessing the point at which activities and associated costs change in nature from research and development to cost of sales and when cost of sales can be capitalized as inventory. Inventory costs consist primarily of the cost of semiconductors, memory products, and other component parts purchased from subcontractors, including wafer fabrication, assembly, testing, and manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, and shipping costs. Inventory is valued at the lower of cost or net realizable value, based upon assumptions about future demand and market conditions. F-15
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The valuation of inventory also requires the Company to estimate obsolete and excess inventory, as well as inventory that is not salable quality. Cost of sales is charged for inventory provisions to write down inventory to the lower of cost or net realizable value or to completely write off excess or obsolete inventory. Most inventory provisions relate to write-downs for inventory that is not salable quality. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and improvements to property and equipment are capitalized and repairs and maintenance costs are expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the property and equipment as follows:
Asset Category
Asset Category / Asset Category / Useful Life (Years) / Useful Life (Years) / Useful Life (Years)
Computer equipment ...................... Computer equipment / Computer equipment / 1.5 – 3 / 1.5 – 3 / 1.5 – 3
Furniture and fixtures .................. Furniture and fixtures / Furniture and fixtures / 3 / 3 / 3
Software ................................ Software / Software / 3 / 3 / 3
Machinery and equipment ................. Machinery and equipment / Machinery and equipment / 7 / 7 / 7
Leasehold improvements .................. Leasehold improvements / Leasehold improvements / Lesser of estimated useful life or remaining lease term / Lesser of estimated useful life or remaining lease term / Lesser of estimated useful life or remaining lease term
Estimated useful lives are periodically assessed to determine if changes are appropriate. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are removed from the accounts and any resulting gains or losses are included in loss from operations in the period of disposal. Leases Lessee Accounting The Company determines if an arrangement is a lease at its inception. Operating leases with lease terms of more than 12 months are included in right-of-use assets and operating lease liabilities in the consolidated balance sheets. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments if an explicit rate is not available. The right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and straight-line rent expense impacts, which represent the differences between operating lease liabilities and right-of-use assets. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease and non-lease components have been combined. Lessor Accounting Leases not classified as sales-type or direct financing leases are classified as operating leases. If a lease that meets the criteria to be classified as either a sales-type or direct financing lease, and the application of such classification would result in the recognition of a selling loss, then the Company classifies such leases as an operating lease. The primary accounting criteria used to determine if the leases are sales-type or direct financing leases are: (i) review to determine if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term, (ii) review to determine if the lease grants the lessee a purchase option that the lessee is reasonably certain to exercise, (iii) determine if the lease term is for a major part of the remaining economic life of the F-16
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
underlying asset (iv) determine if the present value of the sum of the lease payments and any residual value guarantees equals or exceeds substantially all of the fair value of the underlying asset, (v) determine if the leased asset is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term, (vi) determine if the present value of the sum of the lease payments and any residual value guarantees by the lessee and/or any other third party unrelated to the lessor equals or exceeds substantially all of the fair value of the underlying asset, and (vii) determine if it is probable that the Company will collect the lease payments, plus any amount necessary to satisfy residual value guarantee. If none of the above criteria are met, the lease is classified as operating. The Company currently has only one lease as a lessor, which was initially classified as an operating lease and was subsequently classified as sales-type upon modification of the agreement with the customer. The Company recognized revenue associated with the sales-type lease upon delivery and acceptance by the customer. Assets leased under an operating lease are carried at cost, less accumulated depreciation. These assets are depreciated to their estimated residual value using the straight-line method over the lesser of the lease term or estimated useful life of the asset. The Company recognizes operating lease revenue on a straight-line basis over the lease term. Impairment of equipment under operating leases is assessed on the same basis as other long-lived assets. Impairment of Long-Lived Assets The Company assesses the recoverability of its long-lived assets, including property and equipment and right-of-use assets, for indicators of impairment. If events or changes in circumstances indicate impairment, the Company measures recoverability by a comparison of the asset’s carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. When quoted market prices are not available, the Company uses the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset as an estimate of fair value. No impairment of long-lived assets was identified for the years ended December 31, 2023 and 2022. Provision for Product Warranties The Company offers product warranties ranging from one to two years against any defective products. These standard warranties are assurance-type warranties, and the Company does not offer any services beyond the assurance that the product will continue working as specified. Therefore, these warranties are not considered separate performance obligations in the arrangement. Based on historical experience, the Company accrues for estimated returns of defective products at the time revenue is recognized. The Company monitors warranty obligations and may make revisions to its warranty reserve if actual costs of product repair and replacement are significantly higher or lower than estimated. Accruals for anticipated future warranty costs are charged to cost of sales. Warranty accruals are based on estimates that are updated on an ongoing basis taking into consideration inputs such as new product introductions, changes in the volume of claims compared with the Company's historical experience, and the changes in the cost of servicing warranty claims. The Company accounts for the effect of such changes in estimates prospectively. The following table shows the changes in provision for product warranty during the year ended December 31, 2023 and 2022 (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Balance at beginning of year ............ Balance at beginning of year / Balance at beginning of year / $ / 538 / $ / 250
Additions during the year ............... Additions during the year / Additions during the year / 3,633 / 3,633 / 1,150 / 1,150
Utilization during the year ............. Utilization during the year / Utilization during the year / (1,109) / (1,109) / (216) / (216)
Change in estimates ..................... Change in estimates / Change in estimates / 571 / 571 / (646) / (646)
Balance at end of year .................. Balance at end of year / Balance at end of year / $ / 3,633 / $ / 538
F-17
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Research and Development Costs Research and development costs are expensed in the period incurred. Research and development expenses primarily consist of costs incurred in performing research and development activities and include salaries, stock-based compensation, employee benefits, tape-out costs, which include layout services, mask sets, prototype components, system qualification and testing incurred before releasing new system designs into production, data center costs, depreciation and amortization, professional services fees, cloud computing costs and facilities expenses. The Company expenses software development costs, including costs to develop the software component of hardware to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, DTAs and DTLs are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. The Company recognizes DTAs to the extent that these assets are more likely than not to be realized. In making such a determination, all available positive and negative evidence are considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If it is determined that the DTAs in the future in excess of their net recorded amount can be realized, an adjustment to the DTA valuation allowance will be made, which would reduce the provision for income taxes. Due to the Company's historical operating performance and net losses, the net deferred tax assets have been fully offset by a valuation allowance. The Company records uncertain tax positions on the basis of a two-step process in which (1) determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority is realized. Changes in recognition or measurement are reflected in the period in which the judgment occurs. The Company's policy is to recognize interest and penalties related to the underpayment of income taxes as a component of the provision for income taxes. Stock-Based Compensation The Company’s 2016 Equity Incentive Plan (as amended, the “Equity Incentive Plan”) provides for the Company to grant incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units (“RSUs”), and restricted stock awards (“RSAs”) to employees, advisers, and directors. The Company measures stock-based compensation awards exchanged for employee services at fair value on the date of the grant and recognizes expense on a straight-line basis over the award’s vesting period. The requisite service period generally equals the vesting period of the awards. The Company estimates the grant date fair value using the Black-Scholes option-pricing model. The fair value of RSUs and RSAs are based on the Company’s stock price on the date of grant. The Company estimates forfeitures at the date of grant, based on historical experience, and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company’s estimates may be impacted by certain variables, including, but not limited to, stock price volatility, employee retirement eligibility dates, the Company’s performance, and related tax impacts. For certain equity awards that have both service and performance conditions, the Company recognizes the expense over the requisite service period if it is probable that F-18
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the performance conditions will be achieved. The Company reassesses the achievement of the performance conditions at each reporting date and adjusts the stock-based compensation accordingly. Treasury Stock The Company records repurchases of common shares as treasury stock at cost and records subsequent retirements of treasury shares at cost. The amount of cash or other assets transferred to repurchase an equity award is charged to equity to the extent that the amount paid does not exceed the fair value of the equity instrument being repurchased at the repurchase date. Any amount paid in excess of fair value is attributed to the other elements of the transaction and accounted for according to their substance. When treasury shares are retired, the excess of the repurchase price over the par value of the shares acquired is allocated to both retained earnings and additional paid-in capital. The portion allocated to additional paid-in capital is calculated on a pro rata basis of the shares to be retired and the total shares issued and outstanding as of the date of retirement. Foreign Currency Translation and Transaction Gains and Losses The functional currencies of the Company’s wholly owned subsidiaries in India, Canada and Japan are the Indian Rupee, Canadian Dollar, and Yen, respectively. Accordingly, asset and liability accounts of these subsidiaries are translated into U.S. dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into U.S. dollars using historical rates. The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the consolidated balance sheet. Foreign currency translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss and were $0.1 million and $0.3 million during the years ended December 31, 2023 and 2022, respectively. Foreign currency transaction gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss and were not material during the years ended December 31, 2023 and 2022. Comprehensive Loss The Company is required to report all components of comprehensive loss, including net loss, in the financial statements in the period in which they are recognized. Comprehensive gain or loss is defined as a change in equity of a business enterprise during a period, resulting from transactions and other events and circumstances from non-owner sources. The Company’s currency translation adjustment and unrealized gains and losses from marketable securities are the components of other comprehensive income (loss) that are excluded from the reported net loss for all periods presented. F-19
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Revenue Disaggregation of Revenue The Company recognizes revenue classified in hardware at a point in time, and revenue classified in services and other either at a point in time or over time. Revenue by point in time and over time was as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Hardware revenue recognized point in time ... Hardware revenue recognized point in time / Hardware revenue recognized point in time / $ / 57,114 / $ / 15,599
Services and other revenue recognized point in time ... Services and other revenue recognized point in time / Services and other revenue recognized point in time / 5,345 / 5,345 / 5,548 / 5,548
Services and other revenue recognized over time ... Services and other revenue recognized over time / Services and other revenue recognized over time / 16,285 / 16,285 / 3,472 / 3,472
Total revenue ........................... Total revenue / Total revenue / $ / 78,744 / $ / 24,619
The deferred revenue balance represents payments received for performance obligations not yet satisfied. The following table shows the changes in deferred revenue during the year ended December 31, 2023 and 2022 (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Balance at beginning of year ............ Balance at beginning of year / Balance at beginning of year / $ / 3,990 / $ / 4,816
Deferred revenue additions during year ... Deferred revenue additions during year / Deferred revenue additions during year / 24,102 / 24,102 / 4,857 / 4,857
Revenue recognized during year .......... Revenue recognized during year / Revenue recognized during year / (8,866) / (8,866) / (5,683) / (5,683)
Balance at end of year .................. Balance at end of year / Balance at end of year / $ / 19,226 / $ / 3,990
Less: Long-term portion of deferred revenue ... Less: Long-term portion of deferred revenue / Less: Long-term portion of deferred revenue / (5,551) / (5,551) / (1,428) / (1,428)
Balance at end of year – current portion ... Balance at end of year – current portion / Balance at end of year – current portion / $ / 13,675 / $ / 2,562
Revenue recognized during the year ended December 31, 2023 that was included in deferred revenue as of December 31, 2022 was $2.4 million. Revenue recognized during the year ended December 31, 2022 that was included in deferred revenue as of December 31, 2021 was $4.3 million.
Note 6 – Segment and Geographical Information The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. The Company is not organized by market and is managed and operated as one business. Accordingly, the Company does not accumulate discrete financial information with respect to separate divisions and does not have separate operating or reportable segments. Since the Company operates as one operating segment, all required financial segment information can be found in the consolidated financial statements. F-20
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revenue by geographic area is designated based upon the billing location of the customer. Revenue by geographic areas was as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
United States ........................... United States / United States / $ / 77,655 / $ / 19,195
Europe .................................. Europe / Europe / 1,059 / 1,059 / 5,424 / 5,424
Asia .................................... Asia / Asia / 30 / 30 / — / —
Total revenue ........................... Total revenue / Total revenue / $ / 78,744 / $ / 24,619
The Company had property and equipment, net of $24 thousand and $29 thousand as of December 31, 2023 and 2022, respectively, located in India. The remainder of the Company’s property and equipment, net is located in the United States.
Note 7 – Net Loss Per Share Basic net loss per share is computed by dividing reported net loss by the weighted-average number of common shares outstanding for the reported period. The Company’s potential common share equivalents were as follows:
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Redeemable convertible preferred stock ... Redeemable convertible preferred stock / Redeemable convertible preferred stock / 77,032,857 / 77,032,857 / 77,032,857 / 77,032,857
Restricted stock ........................ Restricted stock / Restricted stock / 1,516,408 / 1,516,408 / 725,000 / 725,000
Early exercised shares subject to repurchase ... Early exercised shares subject to repurchase / Early exercised shares subject to repurchase / 95,905 / 95,905 / 400,145 / 400,145
Options to purchase common stock ........ Options to purchase common stock / Options to purchase common stock / 33,705,603 / 33,705,603 / 28,535,425 / 28,535,425
Total potential common stock excluded from net loss per share ... Total potential common stock excluded from net loss per share / Total potential common stock excluded from net loss per share / 112,350,773 / 112,350,773 / 106,693,427 / 106,693,427
In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be antidilutive. Since the Company was in a net loss for all periods presented in these consolidated financial statements, diluted net loss per share was the same as basic net loss per share.
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Numerator: .............................. Numerator: / Numerator:
Net loss (in thousands) ................. Net loss (in thousands) / Net loss (in thousands) / $ / (127,155) / $ / (177,719)
Denominator: ............................ Denominator: / Denominator:
Weighted-average common shares outstanding (in thousands) ... Weighted-average common shares outstanding (in thousands) / Weighted-average common shares outstanding (in thousands) / 43,552 / 43,552 / 41,485 / 41,485
Net loss per common share – basic and diluted ... Net loss per common share – basic and diluted / Net loss per common share – basic and diluted / $ / (2.92) / $ / (4.28)
Note 8 – Investments The Company classifies its corporate debt securities and U.S. Treasury securities, which are accounted for as available-for-sale, and time deposits within Level 2 in the fair value hierarchy because it uses quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. There were no transfers between Level 1 and Level 2 during the years ended December 31, 2023 and 2022. F-21
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following tables summarize the Company’s investments (in thousands):
As of December 31, 2023
As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023
Fair Value Hierarchy / Fair Value Hierarchy / Fair Value Hierarchy / Amortized Cost / Amortized Cost / Amortized Cost / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Losses / Gross Unrealized Losses / Gross Unrealized Losses / Fair Value / Fair Value / Fair Value
U.S. Treasury securities ................ U.S. Treasury securities / U.S. Treasury securities / Level 2 / Level 2 / Level 2 / $ / 113,434 / $ / 1,783 / $ / — / $ / 115,217
Time deposits ........................... Time deposits / Time deposits / Level 2 / Level 2 / Level 2 / 2,410 / 2,410 / — / — / — / — / 2,410 / 2,410
Total ................................... Total / Total / $ / 115,844 / $ / 1,783 / $ / — / $ / 117,627
As of December 31, 2022
As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022 / As of December 31, 2022
Fair Value Hierarchy / Fair Value Hierarchy / Fair Value Hierarchy / Amortized Cost / Amortized Cost / Amortized Cost / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Losses / Gross Unrealized Losses / Gross Unrealized Losses / Fair Value / Fair Value / Fair Value
Corporate debt securities ............... Corporate debt securities / Corporate debt securities / Level 2 / Level 2 / Level 2 / $ / 72,363 / $ / 28 / $ / (695) / $ / 71,696
U.S. Treasury securities ................ U.S. Treasury securities / U.S. Treasury securities / Level 2 / Level 2 / Level 2 / 123,326 / 123,326 / 982 / 982 / (27) / (27) / 124,281 / 124,281
Time deposits ........................... Time deposits / Time deposits / Level 2 / Level 2 / Level 2 / 3,280 / 3,280 / — / — / — / — / 3,280 / 3,280
Total ................................... Total / Total / $ / 198,969 / $ / 1,010 / $ / (722) / $ / 199,257
The Company recognized gross realized gains of $0.2 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively. The Company recognized gross realized losses of $0 and $20 thousand for the years ended December 31, 2023 and 2022, respectively. The Company reflects these gains and losses as a component of other income, net. All of the Company’s investments have a stated contractual maturity date of less than one year.
Note 9 – Balance Sheet Detail Inventory was composed of the following (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Raw materials ........................... Raw materials / Raw materials / $ / 31,766 / $ / 11,952
Work in progress ........................ Work in progress / Work in progress / 7,331 / 7,331 / 3,865 / 3,865
Finished goods .......................... Finished goods / Finished goods / 9,985 / 9,985 / 3,719 / 3,719
Total inventory ......................... Total inventory / Total inventory / $ / 49,082 / $ / 19,536
As of December 31, 2023 and 2022, the Company’s provision for excess and obsolete inventory was $1.3 million and $3.9 million, respectively. During the years ended December 31, 2023 and 2022, the Company recorded a charge of approximately $2.5 million and $10.8 million, respectively, to cost of sales related to provision for excess and obsolete inventory and scrapped inventory, primarily related to the transition to the next generation of the Company’s product offering. F-22
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Prepaid expenses and other current assets consisted of the following (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Prepaid expenses ........................ Prepaid expenses / Prepaid expenses / $ / 3,380 / $ / 2,019
Other receivables ....................... Other receivables / Other receivables / 2 / 2 / 1,355 / 1,355
Security deposit ........................ Security deposit / Security deposit / 247 / 247 / 229 / 229
Deferred cost of sales .................. Deferred cost of sales / Deferred cost of sales / 127 / 127 / 504 / 504
Other prepaid expenses and current assets ... Other prepaid expenses and current assets / Other prepaid expenses and current assets / 283 / 283 / 347 / 347
Total prepaid expenses and other current assets ... Total prepaid expenses and other current assets / Total prepaid expenses and other current assets / $ / 4,039 / $ / 4,454
Property and equipment, net consisted of the following (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Computer equipment ...................... Computer equipment / Computer equipment / $ / 25,997 / $ / 37,361
Software ................................ Software / Software / 1,584 / 1,584 / 1,584 / 1,584
Machinery and equipment ................. Machinery and equipment / Machinery and equipment / 2,644 / 2,644 / 2,243 / 2,243
Leasehold improvements .................. Leasehold improvements / Leasehold improvements / 488 / 488 / 399 / 399
Furniture and fixtures .................. Furniture and fixtures / Furniture and fixtures / 12 / 12 / 12 / 12
Construction in progress ................ Construction in progress / Construction in progress / — / — / 97 / 97
30,725 / 30,725 / 41,696 / 41,696
Less: accumulated depreciation .......... Less: accumulated depreciation / Less: accumulated depreciation / (18,212) / (18,212) / (14,863) / (14,863)
Total property and equipment, net ....... Total property and equipment, net / Total property and equipment, net / $ / 12,513 / $ / 26,833
During the year ended December 31, 2023, the Company recognized $1.5 million, $8.9 million, and $0.2 million of depreciation expense in cost of sales, research and development expenses, and general and administrative expenses on the consolidated statement of operations, respectively. During the year ended December 31, 2022, the Company recognized $0.3 million, $11.4 million, and $0.3 million of depreciation expense in cost of sales, research and development expenses, and general and administrative expenses on the consolidated statement of operations, respectively. Accrued compensation was composed of the following (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Accrued vacation ........................ Accrued vacation / Accrued vacation / $ / 3,892 / $ / 4,061
Accrued bonuses ......................... Accrued bonuses / Accrued bonuses / 3,251 / 3,251 / 4,167 / 4,167
Other accrued compensation .............. Other accrued compensation / Other accrued compensation / 450 / 450 / 675 / 675
Total accrued compensation .............. Total accrued compensation / Total accrued compensation / $ / 7,593 / $ / 8,903
F-23
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other current liabilities were composed of the following (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Taxes payable ........................... Taxes payable / Taxes payable / $ / 788 / $ / 219
Sales taxes payable ..................... Sales taxes payable / Sales taxes payable / 845 / 845 / 100 / 100
Employee liability related to stock option exercise ... Employee liability related to stock option exercise / Employee liability related to stock option exercise / 164 / 164 / — / —
Other current liabilities ............... Other current liabilities / Other current liabilities / 33 / 33 / 43 / 43
Total other current liabilities ......... Total other current liabilities / Total other current liabilities / $ / 1,830 / $ / 362
Note 10 – Redeemable Convertible Preferred Stock In May 2016, the Company issued an aggregate of 32,058,817 shares of its Series A redeemable convertible preferred stock for gross proceeds of $27.2 million, or $0.85 per share, to certain stockholders pursuant to a stock purchase agreement. Subsequently, in 2020, the Company repurchased 327,423 shares of its Series A convertible preferred stock from certain investors at a purchase price of $18.32 per share and immediately retired such shares. In January 2017, the Company issued an aggregate of 9,076,079 shares of its Series B redeemable convertible preferred stock for gross proceeds of $25.0 million, or $2.75 per share, to certain stockholders pursuant to a stock purchase agreement. In July and October 2017, the Company issued an aggregate of 7,264,680 shares of its Series C redeemable convertible preferred stock for gross proceeds of $65.0 million, or $8.95 per share, to certain stockholders pursuant to a stock purchase agreement. In November and December 2018, and February and April 2019, the Company issued an aggregate of 4,943,849 shares of its Series D redeemable convertible preferred stock for gross proceeds of $79.8 million, or $16.15 per share, to certain stockholders pursuant to a stock purchase agreement. In November 2019, and between February and May 2020, the Company issued an aggregate of 14,848,436 shares of its Series E redeemable convertible preferred stock for gross proceeds of $272.1 million or $18.32 per share, to certain stockholders pursuant to a stock purchase agreement. In October and November 2021, the Company issued an aggregate of 9,168,419 shares of its Series F redeemable convertible preferred stock for gross proceeds of $254.4 million or $27.74 per share, to certain stockholders pursuant to a stock purchase agreement. The Company had the following shares of redeemable convertible preferred stock, $0.00001 par value per share, authorized, issued, and outstanding as of December 31, 2023 and 2022 (in thousands, except for share amounts):
Shares Authorized
Shares Authorized / Shares Authorized / Shares Issued and Outstanding / Shares Issued and Outstanding / Shares Issued and Outstanding / Liquidation Preference / Liquidation Preference / Liquidation Preference / Net Carrying Value / Net Carrying Value / Net Carrying Value
Series A redeemable convertible preferred stock ... Series A redeemable convertible preferred stock / Series A redeemable convertible preferred stock / 31,731,394 / 31,731,394 / 31,731,394 / 31,731,394 / $ / 26,972 / $ / 26,924
Series B redeemable convertible preferred stock ... Series B redeemable convertible preferred stock / Series B redeemable convertible preferred stock / 9,076,079 / 9,076,079 / 9,076,079 / 9,076,079 / 25,000 / 25,000 / 24,955 / 24,955
Series C redeemable convertible preferred stock ... Series C redeemable convertible preferred stock / Series C redeemable convertible preferred stock / 7,264,680 / 7,264,680 / 7,264,680 / 7,264,680 / 65,000 / 65,000 / 64,952 / 64,952
Series D redeemable convertible preferred stock ... Series D redeemable convertible preferred stock / Series D redeemable convertible preferred stock / 4,943,849 / 4,943,849 / 4,943,849 / 4,943,849 / 79,822 / 79,822 / 79,735 / 79,735
Series E redeemable convertible preferred stock ... Series E redeemable convertible preferred stock / Series E redeemable convertible preferred stock / 14,916,649 / 14,916,649 / 14,848,436 / 14,848,436 / 272,096 / 272,096 / 272,023 / 272,023
Series F redeemable convertible preferred stock ... Series F redeemable convertible preferred stock / Series F redeemable convertible preferred stock / 10,812,837 / 10,812,837 / 9,168,419 / 9,168,419 / 254,376 / 254,376 / 254,191 / 254,191
F-24
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The holders of redeemable convertible preferred stock have various rights and preferences, including the following: Conversion The redeemable convertible preferred stock is convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable shares of common stock at a 1:1 ratio, subject to certain adjustments for splits, dividends, other similar recapitalization, and the like. Conversion of all classes of redeemable convertible preferred stock to shares of common stock is automatic in the event of a qualified initial public offering with a public offering price of at least $100 million in the aggregate. Voting The holders of the redeemable convertible preferred stock are entitled to vote, together with the holders of shares of common stock, as a single class, on all matters submitted to the stockholders for a vote and are entitled to the number of votes equal to the number of shares of common stock into which the shares of redeemable convertible preferred stock could convert on the record date for determination of stockholders entitled to vote. Dividends The holders of the redeemable convertible preferred stock are entitled to receive noncumulative dividends, as and if declared by the board of directors. The Company may not pay any dividends on shares of common stock of the Company unless the holders of shares of redeemable convertible preferred stock then outstanding first receive, or simultaneously receive, a dividend on each outstanding share of redeemable convertible preferred stock in an amount equal to 8% of the original issue price per share of such redeemable convertible preferred stock. Liquidation Preference In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Company or deemed liquidation events, the holders of shares of redeemable convertible preferred stock then outstanding are entitled to be paid out of the funds and assets available for distribution to the Company’s stockholders an amount per share equal to the greater of (a) the original issue price for such series of redeemable convertible preferred stock, plus any dividends declared but unpaid, or (b) such amount per share as would have been payable had all shares of such series of redeemable convertible preferred stock been converted into shares of common stock immediately prior to such liquidation, dissolution, winding-up, or deemed liquidation event. Redemption In addition, holders of the redeemable convertible preferred stock are eligible to demand redemption of their shares in the event of certain deemed liquidation events, as defined in the restated certificate of incorporation. Due to the various rights and privileges within the existing redeemable convertible preferred stock and common stockholder agreements, the Company concluded the triggering of a deemed liquidation event is not solely within the control of the Company and, accordingly, has presented the redeemable convertible preferred stock as temporary equity. As of December 31, 2023, the Company determined that a deemed liquidation event is not probable because there are currently no plans for a change of control, merger or consolidation, or sale of substantially all assets. Therefore, subsequent remeasurement of redeemable convertible preferred stock presented in temporary equity is not required. As of each reporting date and on an ongoing basis, the Company will continue to assess the probability of redemption.
Note 11 – Common Stock As of December 31, 2023 and 2022, the Company was authorized to issue 168,000,000 shares and 158,000,000 shares of $0.00001 par value common stock, respectively. As of December 31, 2023 and 2022, the Company had F-25
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
45,361,795 and 43,011,356 shares of common stock legally issued and outstanding, respectively, of which 95,905 and 400,145, respectively, shares of common stock were subject to repurchase as of such date for early exercised stock options. As of December 31, 2023 and 2022, the Company had 300,138 shares of common stock held as treasury shares, which may be used for issuance under the Equity Incentive Plan. All shares that were issued upon early exercise of stock options are considered legally issued and outstanding. However, for accounting purposes, only shares that are fully vested or are not subject to repurchase are considered issued and outstanding. Below is a reconciliation of shares issued and outstanding:
December 31,
December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) ... Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) / Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) / 45,361,795 / 45,361,795 / 43,011,356 / 43,011,356
Less: Shares subject to repurchase for early exercised stock options ... Less: Shares subject to repurchase for early exercised stock options / Less: Shares subject to repurchase for early exercised stock options / (95,905) / (95,905) / (400,145) / (400,145)
Total shares issued and outstanding not subject to repurchase ... Total shares issued and outstanding not subject to repurchase / Total shares issued and outstanding not subject to repurchase / 45,265,890 / 45,265,890 / 42,611,211 / 42,611,211
The voting, dividend, and liquidation rights of the holders of the Company’s shares of common stock are subject to and qualified by the rights, powers, and preferences of the holders of shares of the Company’s redeemable convertible preferred stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, if any, as may be declared by the board of directors, subject to the preferential dividend rights of the preferred shares. Through December 31, 2023, no cash dividends had been declared or paid by the Company. In August 2022, the Company issued 599,880 shares of common stock for gross proceeds of $10.0 million to a certain stockholder pursuant to a stock purchase agreement. Additionally, the board of directors authorized the repurchase of shares of the Company’s common stock from certain founders and employees in August 2022. For the year ended December 31, 2022, the Company repurchased an aggregate of 599,880 shares for an aggregate purchase price of $10.0 million. The repurchased shares were immediately retired. All of the shares were repurchased above fair value, and as such, the amount paid in excess of fair value has been attributed to other elements of the transaction and accounted for according to their substance. In this case, the excess of $6.2 million was recognized in compensation expense as the repurchased shares of common stock had initially been issued as compensatory shares. Also, in connection with this transaction, the Company allocated $0.8 million to additional paid-in capital and $3.0 million to accumulated deficit. There were no shares repurchased during and for the year ended December 31, 2023. Warrants In August 2020, the Company entered into an equity arrangement with one of its customers whereby the Company issued a warrant that is exercisable for up to 68,213 shares of its Series E redeemable convertible preferred stock. The warrant is classified as a liability and remeasured to fair value and fall under Level 3 of the fair value hierarchy. As of December 31, 2023 and 2022, the warrant was valued at $1.1 million and $1.1 million, respectively. The Company provided services and issued the warrant to the customer, and the customer paid the consideration to the Company for the provision of services. The warrant has a contractual term of seven years and an exercise price of $0.00001 per share. The customer is able to either exercise the warrants at the exercise price or convert a portion of the warrants into a number of shares of Series E redeemable convertible preferred stock adjusted to equal the fair market value, less the exercise price. The fair value of warrants is determined using a Black-Scholes option-pricing model as of the grant date. The amount representing the fair value of the equity provided to the customer from the warrant is recognized as adjustments of revenue in the consolidated statements of operations and comprehensive loss over the term of such commercial agreement or based on the achievement of certain performance targets in accordance with ASC 505-50. F-26
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the warrant accrued was determined using the following assumptions:
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Remaining contractual life (years) ...... Remaining contractual life (years) / Remaining contractual life (years) / 3.60 / 3.60 / 3.60 / 4.60 / 4.60 / 4.60
Expected volatility (%) ................. Expected volatility (%) / Expected volatility (%) / 51.70 / 51.70 / 57.10 / 57.10
Expected risk-free interest rate (%) .... Expected risk-free interest rate (%) / Expected risk-free interest rate (%) / 4.01 / 4.01 / 3.99 / 3.99
Dividend yield (%) ...................... Dividend yield (%) / Dividend yield (%) / — / — / — / —
The following table provides a reconciliation of the beginning and ending balances for the Level 3 warrant liability measured at fair value using significant unobservable inputs (in thousands):
Warrant Liability / Warrant Liability / Warrant Liability
Balance as of January 1, 2022 ........... Balance as of January 1, 2022 / Balance as of January 1, 2022 / $ / 649
Change in fair value .................... Change in fair value / Change in fair value / 492 / 492
Balance as of December 31, 2022 ......... Balance as of December 31, 2022 / Balance as of December 31, 2022 / 1,141 / 1,141
Change in fair value .................... Change in fair value / Change in fair value / (28) / (28)
Balance as of December 31, 2023 ......... Balance as of December 31, 2023 / Balance as of December 31, 2023 / $ / 1,113
For the years ended December 31, 2023 and 2022, a decrease in fair value of $28 thousand and an increase in $0.5 million related to the warrant was recognized in other income, net, respectively.
Note 12 – Stock-Based Compensation The Equity Incentive Plan provides for the Company to grant ISOs, NSOs, RSUs, and RSAs to employees, advisers, and directors. As of December 31, 2023 and 2022, there were 51,711,838 and 45,711,838 equity awards authorized, respectively. Stock Options Stock options represent the right to purchase shares of common stock on the date of exercise at a stated exercise price. The exercise price of a stock option generally must be at least equal to the fair market value of the common stock on the date of grant. Options vest over periods of two years or more and are exercisable over a period of time not to exceed 10 years from the grant date. For the years ended December 31, 2023 and 2022, the Company recorded aggregate stock-based compensation expense of $26.6 million and $23.0 million, respectively. Approximately $1.0 million and $1.4 million of the compensation expense recognized for the years ended December 31, 2023 and 2022, respectively, was attributed to certain share-based awards, which provided the employee the option to choose between equity or cash, of which approximately $0.4 million and $0.7 million was included in accrued compensation on the consolidated balance sheets as of December 31, 2023 and 2022, respectively. Approximately $9.0 million and $2.4 million of the compensation expense recognized for the years ended December 31, 2023 and 2022, respectively, was attributed to sales of shares of common stock by certain current and former employees of the Company to certain economic interest holders in the Company, through secondary market transactions, where the excess price paid above fair value for shares was recorded as stock-based compensation expense. Approximately $0 and $6.2 million of the compensation expense recognized for the years ended December 31, 2023 and 2022, respectively, was attributable to the allocation of the excess price paid above fair value of shares for F-27
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
shares repurchased from employees during the year by the Company. Stock-based compensation expense is reflected in research and development, general and administrative, sales and marketing, and cost of sales on the consolidated statements of operations. The terms of the plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. Upon early exercise, the awards become subject to a restricted stock agreement. The shares of restricted stock granted upon early exercise of the options are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not been vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the price paid by the purchaser. Such shares are not deemed to be issued for accounting purposes until they vest. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. As of December 31, 2023 and 2022, 95,905 and 400,145 unvested shares, respectively, were held by employees. Accordingly, the Company recorded the unvested portion of the exercise proceeds of $0.2 million and $1.0 million as a liability from the early exercise in the accompanying consolidated balance sheets as of December 31, 2023 and 2022, respectively. The following table summarizes the Company’s stock option activity and related information:
Number of Shares
Number of Shares / Number of Shares / Weighted Average Exercise Price / Weighted Average Exercise Price / Weighted Average Exercise Price / Aggregate Intrinsic Value (in thousands) / Aggregate Intrinsic Value (in thousands) / Aggregate Intrinsic Value (in thousands) / Weighted Average Remaining Life / Weighted Average Remaining Life / Weighted Average Remaining Life
Outstanding, as of January 1, 2023 ...... Outstanding, as of January 1, 2023 / Outstanding, as of January 1, 2023 / 28,535,425 / 28,535,425 / $ / 3.64 / $ / 88,101 / 7.32 / 7.32
Granted ................................. Granted / Granted / 11,724,523 / 11,724,523 / $ / 5.02
Exercised during period ................. Exercised during period / Exercised during period / (2,373,505) / (2,373,505) / $ / 2.52
Forfeited ............................... Forfeited / Forfeited / (2,986,951) / (2,986,951) / $ / 5.45
Expired ................................. Expired / Expired / (1,193,889) / (1,193,889) / $ / 4.02
Outstanding and Exercisable, as of December 31, 2023 ... Outstanding and Exercisable, as of December 31, 2023 / Outstanding and Exercisable, as of December 31, 2023 / 33,705,603 / 33,705,603 / $ / 4.02 / $ / 59,924 / 7.24 / 7.24
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s shares of common stock for those options that had exercise prices lower than the fair value of the Company’s shares of common stock. The total intrinsic value for stock options exercised during the years ended December 31, 2023 and 2022, was $6.7 million and $8.7 million, respectively. The total intrinsic value of stock options vested during the years ended December 31, 2023 and 2022 was $8.6 million and $20.5 million, respectively. The weighted-average grant date fair value of options granted was $3.05 and $4.18 per share for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the total remaining unrecognized compensation expense related to non-vested stock options was $42.0 million and $32.9 million, respectively, which will be amortized over the weighted-average period of 2.50 years and 2.55 years, respectively. The fair value of each option award is determined on the date of grant using the Black-Scholes option-pricing model. The calculation of fair value includes several assumptions that require management’s judgment. The absence of a public market for the Company’s common stock requires the Company’s board of directors with assistance from management and external valuation experts, to estimate the fair value of its common stock for purposes of granting options and for determining stock-based compensation expense by using a reasonable method of valuation and considering several objective and subjective factors, including obtaining contemporaneous independent third-party valuations, actual and forecasted operating and financial results, market conditions and performance of comparable publicly traded companies, developments and milestones in the Company, the rights and preferences of redeemable convertible preferred stock and common stock, and transactions involving the Company’s stock. The fair value of F-28
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the Company’s common stock was determined in accordance with applicable elements of the American Institute of Certified Public Accountants guide, Valuation of Privately Held Company Equity Securities Issued as Compensation. The estimated fair value of stock options was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Expected term of options (years) ........ Expected term of options (years) / Expected term of options (years) / 5.87 / 5.87 / 5.87 / 6.03 / 6.03 / 6.03
Expected volatility (%) ................. Expected volatility (%) / Expected volatility (%) / 60 / 60 / 59.91 / 59.91
Risk-free interest rate (%) ............. Risk-free interest rate (%) / Risk-free interest rate (%) / 3.50 – 4.84 / 3.50 – 4.84 / 3.50 – 4.84 / 1.59 – 4.30 / 1.59 – 4.30 / 1.59 – 4.30
Expected dividend yield (%) ............. Expected dividend yield (%) / Expected dividend yield (%) / — / — / — / —
Expected term: The expected term of the stock options represents the period of time stock options are expected to be outstanding and is based on the “simplified method.” Under this method, the term is estimated using the midpoint between the requisite service period and the contractual term of the option. This method is used due to the lack of sufficient historical exercise data. Expected volatility: The expected volatility is a measure of the amount by which a financial variable, such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. As the Company does not yet have a sufficient history of its own volatility, the Company has identified several public entities of similar complexity and industry and calculates historical volatility based on the volatilities of these companies. Risk-free interest rate: The risk-free interest rate is based on U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield: No dividends have been paid or expected to be paid by the Company. Total stock-based compensation expense for the years ended December 31, 2023 and 2022 was as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Cost of sales ........................... Cost of sales / Cost of sales / $ / 309 / $ / 223
Research and development ................ Research and development / Research and development / 21,187 / 21,187 / 17,732 / 17,732
Sales and marketing ..................... Sales and marketing / Sales and marketing / 3,563 / 3,563 / 832 / 832
General and administrative .............. General and administrative / General and administrative / 1,572 / 1,572 / 4,257 / 4,257
Total stock-based compensation expense ... Total stock-based compensation expense / Total stock-based compensation expense / $ / 26,631 / $ / 23,044
RSUs and RSAs RSUs represent a right to receive one share of common stock for each RSU that vests. Unless otherwise determined by the Compensation Committee at the time of grant, vesting ceases on the date the participant no longer provides services to the Company and unvested shares are forfeited. If an RSU has not been forfeited, then on the date specified in the RSUs, the Company delivers to the holder a number of whole shares of common stock. Dividend equivalents, if any, are not credited in respect of shares covered by the RSUs, except as otherwise permitted by the Compensation Committee. As of December 31, 2023 and 2022, the Company had 1,516,408 and F-29
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
725,000 non-vested RSUs, respectively. The Company has granted RSUs that vest on satisfaction of both service- and liquidity-based vesting conditions. An RSA is an offer by the Company to sell shares of common stock that are subject to certain specified restrictions determined by the Compensation Committee. Prior to vesting or forfeiture, a participant will have all rights of a stockholder with respect to the shares of common stock underlying the RSA, including the right to receive dividends and vote the underlying shares of common stock; provided, however, the participant may not transfer the shares. As of December 31, 2023 and 2022, the Company had no unvested RSAs. The following table summarizes RSU/RSA activity and related information:
Number of Shares
Number of Shares / Number of Shares / Weighted Average Grant Date Fair Value / Weighted Average Grant Date Fair Value / Weighted Average Grant Date Fair Value
Non-Vested, as of December 31, 2022 ..... Non-Vested, as of December 31, 2022 / Non-Vested, as of December 31, 2022 / 725,000 / 725,000 / 725,000 / $ / 5.04
Granted ................................. Granted / Granted / 972,658 / 972,658 / 972,658 / $ / 5.11
Vested .................................. Vested / Vested / — / — / — / $ / —
Forfeited ............................... Forfeited / Forfeited / (181,250) / (181,250) / (181,250) / $ / 2.72
Non-Vested, as of December 31, 2023 ..... Non-Vested, as of December 31, 2023 / Non-Vested, as of December 31, 2023 / 1,516,408 / 1,516,408 / 1,516,408 / $ / 5.36
As of December 31, 2023 and 2022, the total remaining unrecognized compensation expense related to non-vested restricted stock was $8.1 million and $3.7 million, respectively. This unrecognized compensation expense will be recognized when the liquidity-based vesting condition becomes probable for certain restricted stock that have a performance condition, and service-based vesting condition will be satisfied over the weighted-average period of 2.04 years and 2.68 years, respectively. The total intrinsic value of restricted stock vested in 2023 and 2022 was approximately $0 and $0.2 million, respectively.
Note 13 – Income Taxes The components of loss before income taxes were as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Domestic ................................ Domestic / Domestic / $ / (129,008) / $ / (179,214)
Foreign ................................. Foreign / Foreign / 1,985 / 1,985 / 1,699 / 1,699
Loss, before income taxes ............... Loss, before income taxes / Loss, before income taxes / $ / (127,023) / $ / (177,515)
F-30
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The components of the income tax expense were as follows (in thousands):
December 31,
December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Current ................................. Current / Current
Federal ................................. Federal / Federal / $ / — / $ / —
State ................................... State / State / 3 / 3 / — / —
Foreign ................................. Foreign / Foreign / 113 / 113 / 90 / 90
Total current tax expense ............... Total current tax expense / Total current tax expense / 116 / 116 / 90 / 90
Deferred ................................ Deferred / Deferred
Federal ................................. Federal / Federal / — / — / — / —
State ................................... State / State / — / — / — / —
Foreign ................................. Foreign / Foreign / 16 / 16 / 114 / 114
Total deferred tax expense .............. Total deferred tax expense / Total deferred tax expense / 16 / 16 / 114 / 114
Total income tax expense ................ Total income tax expense / Total income tax expense / $ / 132 / $ / 204
A reconciliation of the Company’s recorded income tax expense to the U.S. statutory rate was as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Income taxes computed at U.S. federal statutory rate ... Income taxes computed at U.S. federal statutory rate / Income taxes computed at U.S. federal statutory rate / $ / (26,675) / $ / (37,278)
Stock based compensation ................ Stock based compensation / Stock based compensation / 3,487 / 3,487 / 2,528 / 2,528
Foreign rate differential ............... Foreign rate differential / Foreign rate differential / 9 / 9 / 140 / 140
Tax credits, net ........................ Tax credits, net / Tax credits, net / (2,483) / (2,483) / (4,496) / (4,496)
Change in valuation allowance ........... Change in valuation allowance / Change in valuation allowance / 24,272 / 24,272 / 38,864 / 38,864
Other ................................... Other / Other / 1,522 / 1,522 / 446 / 446
Income tax expense ...................... Income tax expense / Income tax expense / $ / 132 / $ / 204
Deferred income taxes arise from temporary differences between the carrying value of assets and liabilities for financial reporting purposes and income tax reporting purposes, as well as net operating losses and tax credit F-31
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
carryforwards. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Deferred Tax Assets: .................... Deferred Tax Assets: / Deferred Tax Assets:
Net operating losses .................... Net operating losses / Net operating losses / $ / 104,852 / $ / 91,498
Allowances and accruals ................. Allowances and accruals / Allowances and accruals / 3,896 / 3,896 / 2,679 / 2,679
Tax credits ............................. Tax credits / Tax credits / 26,298 / 26,298 / 22,482 / 22,482
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / 5,192 / 5,192 / 3,255 / 3,255
Lease liability ......................... Lease liability / Lease liability / 56 / 56 / 252 / 252
Capitalized research and development .... Capitalized research and development / Capitalized research and development / 43,582 / 43,582 / 30,900 / 30,900
Other ................................... Other / Other / 510 / 510 / 623 / 623
Gross deferred tax assets ............... Gross deferred tax assets / Gross deferred tax assets / 184,386 / 184,386 / 151,689 / 151,689
Less: Valuation Allowance ............... Less: Valuation Allowance / Less: Valuation Allowance / (184,340) / (184,340) / (151,408) / (151,408)
Net deferred tax assets ................. Net deferred tax assets / Net deferred tax assets / 46 / 46 / 281 / 281
Deferred Tax Liabilities: ............... Deferred Tax Liabilities: / Deferred Tax Liabilities:
Right-of-use asset ...................... Right-of-use asset / Right-of-use asset / (48) / (48) / (240) / (240)
Other ................................... Other / Other / (130) / (130) / (155) / (155)
Gross deferred tax liabilities .......... Gross deferred tax liabilities / Gross deferred tax liabilities / (178) / (178) / (395) / (395)
Net deferred tax liabilities ............ Net deferred tax liabilities / Net deferred tax liabilities / $ / (132) / $ / (114)
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company regularly assesses the ability to realize its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies. Due to the weight of objectively verifiable negative evidence, including its history of losses in the United States, the Company believes that it is more likely than not that its U.S. federal and state deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance on such deferred tax assets. The valuation allowance against the Company’s various deferred tax assets increased by $32.9 million and $47.9 million during the years ended December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023, the Company had federal, state, and foreign net operating loss carryforwards in the amount of $333.8 million, $395.5 million, and $10 thousand, respectively, available to offset future taxable income. The federal net operating loss has an indefinite carryforward period but is limited to offset 80% of taxable income in the year utilized, except for $20.6 million that will begin to expire in 2036. The state net operating loss carryforwards have various carryover periods and will begin to expire as early as 2036. As of December 31, 2023, the Company had federal, California, and Canadian research and development credit carryforwards of $28.1 million, $22.6 million, and $2 million, respectively. The federal research and development credits will begin to expire in 2037, the California research and development credits have no expiration, and the Canadian research and development credits will begin to expire in 2041. Utilization of the Company’s net operating loss and credits may be subject to annual limitations due to the ownership change limitations provided by section 382 of the Internal Revenue Code (“Section 382”) and similar provisions. If ownership changes within the meaning of Section 382 have occurred, the amount of remaining tax attribute carryforwards available to offset future taxable income and income taxes in future years may be restricted. Further, the Company’s deferred tax assets, along with the corresponding valuation allowance, associated with such F-32
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
tax attributes could be impacted upon an ownership change within the meaning of Section 382. Due to the existences of the valuation allowance, changes in the Company’s deferred tax assets from any such limitation will not impact the Company’s effective tax rate. The Company’s net operating loss carryforwards and credits could expire before utilization if subject to annual limitations. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
December 31,
December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31, / December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Gross unrecognized tax benefits, beginning of year ... Gross unrecognized tax benefits, beginning of year / Gross unrecognized tax benefits, beginning of year / $ / 22,368 / $ / 14,499
Gross increases related to prior-year positions ... Gross increases related to prior-year positions / Gross increases related to prior-year positions / — / — / — / —
Gross decreases related to prior-year positions ... Gross decreases related to prior-year positions / Gross decreases related to prior-year positions / (974) / (974) / — / —
Gross increases related to current-year positions ... Gross increases related to current-year positions / Gross increases related to current-year positions / 4,345 / 4,345 / 7,869 / 7,869
Gross unrecognized tax benefits, end of year ... Gross unrecognized tax benefits, end of year / Gross unrecognized tax benefits, end of year / $ / 25,739 / $ / 22,368
All of the Company’s tax years remain open for examination by U.S. federal and state tax authorities. The non-U.S. tax returns remain open for examination for the years 2020 and onwards. Due to the Company’s federal and state valuation allowance, none of the unrecognized tax benefits as of December 31, 2023 and December 31, 2022, respectively, would affect the effective tax rate if recognized. As of December 31, 2023 and 2022, there were no accrued interest and penalties related to uncertain tax positions. The Company does not believe its unrecognized tax benefits will significantly change in the next 12 months. U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the United States. As a result of the Tax Act, the tax impact of future distributions of foreign earnings would generally be limited to withholding tax from local jurisdictions. The amount of the deferred tax liability on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries was not material.
Note 14 – Leases As a Lessee The Company’s lease obligations consist of operating leases for facilities and offices. The extension periods have not been included in the determination of the right-of-use assets or the lease liability for operating leases as the Company did not consider it reasonably certain that it would exercise these options. The Company has elected not to recognize right-of-use assets and operating lease liabilities that arise from short-term (12 months or less) leases for any class of underlying assets. The Company has elected not to separate lease and non-lease components for any class of underlying asset. As of December 31, 2023, future minimum lease payments of the Company’s operating lease liabilities were due as follows (in thousands):
Year ending December 31,
Year ending December 31, / Year ending December 31, / Operating Leases / Operating Leases / Operating Leases
2024 .................................... 2024 / 2024 / $ / 348
2025 .................................... 2025 / 2025 / 156 / 156
2026 .................................... 2026 / 2026 / 104 / 104
Total future lease payments ............. Total future lease payments / Total future lease payments / $ / 608
Less: Imputed interest .................. Less: Imputed interest / Less: Imputed interest / (48) / (48)
Present value of operating lease liabilities ... Present value of operating lease liabilities / Present value of operating lease liabilities / $ / 560
F-33
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023 and 2022, the remaining weighted-average lease term is 2.09 years and 2.26 years, respectively, and weighted-average discount rate used to determine the operating lease liability is 7.3% and 6.9%, respectively. During the years ended December 31, 2023 and 2022, the Company incurred total operating lease expenses of $0.8 million and $1.4 million, respectively. During the years ended December 31, 2023 and 2022, the Company incurred variable lease costs of $0.6 million and $0.1 million, respectively. During the years ended December 31, 2023 and 2022, the Company’s costs related to short-term lease arrangements for real estate were $2.2 million and $0.5 million, respectively. Supplemental cash flow information related to leases was as follows (in thousands):
Years Ended December 31,
Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
2023 / 2023 / 2023 / 2022 / 2022 / 2022
Cash paid for amounts included in the measurement of lease liabilities: ... Cash paid for amounts included in the measurement of lease liabilities: / Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases ... Operating cash flows for operating leases / Operating cash flows for operating leases / $ / 803 / $ / 731
Right-of-use assets obtained in exchange for lease obligations: ... Right-of-use assets obtained in exchange for lease obligations: / Right-of-use assets obtained in exchange for lease obligations:
Operating leases ........................ Operating leases / Operating leases / $ / — / $ / 1,119
On November 10, 2023, the Company entered into a 41-month lease agreement with the owner and landlord of a data center in Stockton, California. The lease commences January 4, 2024, terminates May 31, 2027, and is an operating lease. The agreement includes a non-recurring custom installation fee of $2.7 million due in 2024. Monthly recurring charges for rent and power are $0.6 million per month from June 2024 through May 2026, increasing to $0.7 million per month through May 2027. The agreement also includes variable monthly charges for metered power usage. Monthly recurring charges for rent and power shall be abated during the first five months of the term of the lease. As a Lessor As of January 1, 2022, the Company had an operating lease arrangement where it was acting as a lessor, leasing equipment to a customer for a term of three years. From January 1, 2022 to July 4, 2022, operating lease income was $0.7 million and operating lease depreciation expense was $0.1 million, which is included in revenue and cost of sales, respectively, on the consolidated statements of operations. On July 5, 2022, the lease was modified, which resulted in a sales-type lease of the equipment. Lease income recognized was as follows (in thousands):
Statement of Operations
Statement of Operations / Statement of Operations / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31, / Years Ended December 31,
Statement of Operations / 2023 / 2023 / 2023 / 2022 / 2022 / 2022
Operating income ........................ Operating income / Operating income
Selling price as lease commencement ..... Selling price as lease commencement / Selling price as lease commencement / Revenue / Revenue / Revenue / $ / — / $ / 2,250
Cost of underlying asset ................ Cost of underlying asset / Cost of underlying asset / Cost of Sales / Cost of Sales / Cost of Sales / — / — / (482) / (482)
Total operating income .................. Total operating income / Total operating income / — / — / 1,768 / 1,768
Interest income on lease receivable ..... Interest income on lease receivable / Interest income on lease receivable / Other income, net / Other income, net / Other income, net / 32 / 32 / 456 / 456
Total lease income ...................... Total lease income / Total lease income / $ / 32 / $ / 2,224
F-34
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023, the lease receivable balance under this arrangement was $0. As of December 31, 2022 the lease receivable balance under this arrangement was as follows (in thousands):
December 31, 2022 / December 31, 2022 / December 31, 2022
Total minimum lease payments receivable ... Total minimum lease payments receivable / Total minimum lease payments receivable / $ / 1,387
Less: unearned income ................... Less: unearned income / Less: unearned income / (32) / (32)
Recorded lease receivable in sales-type lease ... Recorded lease receivable in sales-type lease / Recorded lease receivable in sales-type lease / $ / 1,355
The lease receivable balance as of December 31, 2022 was collected in full during the year ended December 31, 2023. As of December 31, 2022, the lease receivable in this sales-type lease was classified to prepaid expenses and other current assets in the consolidated balance sheets.
Note 15 – Commitments and Contingencies The Company has entered into certain contracts to receive consulting and other services that represent unconditional purchase obligations to purchase goods or services that are enforceable and legally binding. Purchase commitments exclude agreements that are cancellable without penalty and unconditional purchase commitments with a remaining term of one year or less. As of December 31, 2023, future payments related to non-cancelable commitments under these contracts are due as follows: $8.7 million (2024), $8.7 million (2025), and $1.5 million (2026). In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. Although the Company cannot predict with assurance the outcome of any litigation, it does not believe there are currently any such actions that, if resolved unfavorable, would have a material impact on the Company’s financial condition, results of operations, or cash flows.
Note 16 – Subsequent Events The Company has evaluated all transactions through June 17, 2024, the date these consolidated financial statements were available to be issued and has determined that there are no other events, other than the following, that would require disclosure in or adjustment to these financial statements. Series F-1 Financing In May 2024, the Company entered into a Series F-1 redeemable convertible preferred stock purchase agreement (the “Series F-1 Purchase Agreement”) with various investors. Pursuant to the Series F-1 Purchase Agreement, an entity affiliated with Group 42 Holding Ltd (together with its affiliates, “G42”) agreed to purchase 22,851,296 shares of the Company’s Series F-1 redeemable convertible preferred stock, and an existing stockholder agreed to purchase 3,069,577 shares of the Company’s Series F-1 redeemable convertible preferred stock, in each case at a purchase price of $14.66 per share (the “Series F-1 Financing”). G42’s purchase of shares in the Series F-1 Financing is subject to regulatory approval, as well as the satisfaction of customary closing conditions. Pursuant to the Series F-1 Purchase Agreement, if G42 or certain third parties at the direction of G42 purchase more than $500.0 million in one purchase order, and less than $5.0 billion in the aggregate, of high-performance computing clusters from us (the “G42 Option Threshold”), the Company will grant G42 the option to purchase additional shares of Series F-1 redeemable convertible preferred stock (or, if such option is granted or exercised following the completion of the Company’s initial public offering, shares of the Company’s common stock), subject to the terms thereof (the “G42 Option”). The maximum number of shares that may be purchased pursuant to the G42 Option will be the quotient of (i) the total aggregate purchase price for the G42 Option, which will equal 10% of the value of the relevant purchaser order(s), divided by (ii) (A) if the G42 Option is granted and exercised prior to the completion of the Company’s initial public offering, a price per share that is 17.5% below the price per share of the Company’s then most recent arms-length sale of the Company’s redeemable convertible preferred stock (excluding F-35
CEREBRAS SYSTEMS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
the Company’s Series F-1 redeemable convertible preferred stock), or (B) if the G42 Option is granted or exercised following the completion of the Company’s initial public offering, a price per share that is 17.5% below the average closing price per share of the Company’s common stock over the 30-day period prior to the G42 Option Threshold being met. The G42 Option expires on December 31, 2025. G42’s ability to purchase shares in connection with the G42 Option is subject to regulatory approval. Customer Prepayment In April 2024, the Company and G42 entered into an agreement pursuant to which G42, or a third party nominee affiliated with G42, intends to issue purchase orders for the Company’s AI supercomputer products for a minimum value of $300 million. Pursuant to the terms of the agreement, the Company received a prepayment of $300 million from G42 in May 2024, which is restricted to be used only for payments to third-party vendors to manufacture high performance computing infrastructure. If the purchase orders are not issued by G42, any portion of the prepayment not paid by the Company to its third-party vendors will be payable to G42 on demand and the Company’s rights on inventory purchased from the prepayment will transfer to G42. Headquarters Lease Renewal In June 2024, the Company entered into an agreement to modify the lease for its headquarters located in Sunnyvale, California, to extend the term of the existing lease from December 1, 2024 to November 30, 2027. The Company expects to pay total rent of approximately $5.5 million for the extended term of the lease. The agreement also includes variable monthly charges for building operating costs. The agreement also provides for an improvement allowance for up to $0.3 million. F-36
CEREBRAS SYSTEMS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except per share and share amounts)
June 30,2024
June 30,2024 / June 30,2024 / December 31,2023 / December 31,2023 / December 31,2023
ASSETS .................................. ASSETS / ASSETS
Current assets: ......................... Current assets: / Current assets:
Cash and cash equivalents ............... Cash and cash equivalents / Cash and cash equivalents / $ / 90,931 / $ / 34,761
Restricted cash ......................... Restricted cash / Restricted cash / 262,956 / 262,956 / 19 / 19
Investments ............................. Investments / Investments / 118,565 / 118,565 / 117,627 / 117,627
Accounts receivable ..................... Accounts receivable / Accounts receivable / 5,840 / 5,840 / 6,764 / 6,764
Inventories ............................. Inventories / Inventories / 78,020 / 78,020 / 49,082 / 49,082
Prepaid expenses and other current assets ... Prepaid expenses and other current assets / Prepaid expenses and other current assets / 15,510 / 15,510 / 4,039 / 4,039
Total current assets .................... Total current assets / Total current assets / 571,822 / 571,822 / 212,292 / 212,292
Property and equipment, net ............. Property and equipment, net / Property and equipment, net / 23,288 / 23,288 / 12,513 / 12,513
Right-of-use assets ..................... Right-of-use assets / Right-of-use assets / 25,141 / 25,141 / 519 / 519
Other assets ............................ Other assets / Other assets / 2,611 / 2,611 / 173 / 173
Total assets ............................ Total assets / Total assets / $ / 622,862 / $ / 225,497
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT ... LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT / LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current liabilities: .................... Current liabilities: / Current liabilities:
Accounts payable ........................ Accounts payable / Accounts payable / $ / 13,382 / $ / 14,694
Deferred revenue, current ............... Deferred revenue, current / Deferred revenue, current / 33,716 / 33,716 / 13,675 / 13,675
Customer deposits ....................... Customer deposits / Customer deposits / 300,049 / 300,049 / — / —
Forward contract liability .............. Forward contract liability / Forward contract liability / 30,327 / 30,327 / — / —
Accrued and other current liabilities ... Accrued and other current liabilities / Accrued and other current liabilities / 65,259 / 65,259 / 26,272 / 26,272
Total current liabilities ............... Total current liabilities / Total current liabilities / 442,733 / 442,733 / 54,641 / 54,641
Deferred revenue, net of current portion ... Deferred revenue, net of current portion / Deferred revenue, net of current portion / 15,249 / 15,249 / 5,551 / 5,551
Other liabilities ....................... Other liabilities / Other liabilities / 21,412 / 21,412 / 1,487 / 1,487
Total liabilities ....................... Total liabilities / Total liabilities / 479,394 / 479,394 / 61,679 / 61,679
Commitments and contingencies (Note 15) ... Commitments and contingencies (Note 15) / Commitments and contingencies (Note 15)
Redeemable convertible preferred stock, $0.00001 par value per share: 104,386,199 shares and 78,745,488 shares authorized, at June 30, 2024 and December 31, 2023, respectively, 77,032,857 shares issued and outstanding as of June 30, 2024 and December 31, 2023 ... Redeemable convertible preferred stock, $0.00001 par value per share: 104,386,199 shares and 78,745,488 shares authorized, at June 30, 2024 and December 31, 2023, respectively, 77,032,857 shares issued and outstanding as of June 30, 2024 and December 31, 2023 / Redeemable convertible preferred stock, $0.00001 par value per share: 104,386,199 shares and 78,745,488 shares authorized, at June 30, 2024 and December 31, 2023, respectively, 77,032,857 shares issued and outstanding as of June 30, 2024 and December 31, 2023 / $ / 722,780 / $ / 722,780
Stockholders’ deficit ................... Stockholders’ deficit / Stockholders’ deficit
Common stock, $0.00001 par value; 203,087,000 and 168,000,000 shares authorized at June 30, 2024 and December 31, 2023, respectively; 51,177,237 and 45,361,795 shares issued and outstanding as of June 30, 2024 and December 31, 2023 respectively ... Common stock, $0.00001 par value; 203,087,000 and 168,000,000 shares authorized at June 30, 2024 and December 31, 2023, respectively; 51,177,237 and 45,361,795 shares issued and outstanding as of June 30, 2024 and December 31, 2023 respectively / Common stock, $0.00001 par value; 203,087,000 and 168,000,000 shares authorized at June 30, 2024 and December 31, 2023, respectively; 51,177,237 and 45,361,795 shares issued and outstanding as of June 30, 2024 and December 31, 2023 respectively / — / — / — / —
Additional paid in capital .............. Additional paid in capital / Additional paid in capital / 148,386 / 148,386 / 101,578 / 101,578
Treasury stock, 300,138 shares of common stock outstanding as of June 30, 2024 and December 31, 2023 ... Treasury stock, 300,138 shares of common stock outstanding as of June 30, 2024 and December 31, 2023 / Treasury stock, 300,138 shares of common stock outstanding as of June 30, 2024 and December 31, 2023 / (88) / (88) / (88) / (88)
Accumulated other comprehensive income ... Accumulated other comprehensive income / Accumulated other comprehensive income / 550 / 550 / 1,103 / 1,103
Accumulated deficit ..................... Accumulated deficit / Accumulated deficit / (728,160) / (728,160) / (661,555) / (661,555)
Total stockholders’ deficit ............. Total stockholders’ deficit / Total stockholders’ deficit / (579,312) / (579,312) / (558,962) / (558,962)
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit ... Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit / Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit / $ / 622,862 / $ / 225,497
The accompanying notes are an integral part of these condensed consolidated financial statements. F-37
CEREBRAS SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data)
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
Revenue ................................. Revenue / Revenue
Hardware ................................ Hardware / Hardware / $ / 104,269 / $ / 1,559
Services and other ...................... Services and other / Services and other / 32,133 / 32,133 / 7,105 / 7,105
Total revenue ........................... Total revenue / Total revenue / 136,402 / 136,402 / 8,664 / 8,664
Cost of sales ........................... Cost of sales / Cost of sales
Hardware ................................ Hardware / Hardware / 66,442 / 66,442 / 1,980 / 1,980
Services and other ...................... Services and other / Services and other / 13,941 / 13,941 / 2,306 / 2,306
Total cost of sales ..................... Total cost of sales / Total cost of sales / 80,383 / 80,383 / 4,286 / 4,286
Gross profit ............................ Gross profit / Gross profit / 56,019 / 56,019 / 4,378 / 4,378
Operating expenses ...................... Operating expenses / Operating expenses
Research and development ................ Research and development / Research and development / 77,742 / 77,742 / 76,295 / 76,295
Sales and marketing ..................... Sales and marketing / Sales and marketing / 7,237 / 7,237 / 4,176 / 4,176
General and administrative .............. General and administrative / General and administrative / 12,851 / 12,851 / 4,922 / 4,922
Total operating expenses ................ Total operating expenses / Total operating expenses / 97,830 / 97,830 / 85,393 / 85,393
Loss from operations .................... Loss from operations / Loss from operations / (41,811) / (41,811) / (81,015) / (81,015)
Interest income ......................... Interest income / Interest income / 3,809 / 3,809 / 2,349 / 2,349
Other (expense) income, net ............. Other (expense) income, net / Other (expense) income, net / (28,284) / (28,284) / 918 / 918
Loss before income taxes ................ Loss before income taxes / Loss before income taxes / (66,286) / (66,286) / (77,748) / (77,748)
Income tax expense ...................... Income tax expense / Income tax expense / 319 / 319 / 72 / 72
Net loss ................................ Net loss / Net loss / $ / (66,605) / $ / (77,820)
Net loss per share – basic and diluted ... Net loss per share – basic and diluted / Net loss per share – basic and diluted / $ / (1.42) / $ / (1.82)
Weighted average number of common shares outstanding, basic and diluted ... Weighted average number of common shares outstanding, basic and diluted / Weighted average number of common shares outstanding, basic and diluted / 46,945 / 46,945 / 42,857 / 42,857
The accompanying notes are an integral part of these condensed consolidated financial statements. F-38
CEREBRAS SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited, in thousands)
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
Net loss ................................ Net loss / Net loss / $ / (66,605) / $ / (77,820)
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / (181) / (181) / 22 / 22
Available-for-sale investments: ......... Available-for-sale investments: / Available-for-sale investments:
Change in net unrealized (loss) / gain on debt securities, net of tax ... Change in net unrealized (loss) / gain on debt securities, net of tax / Change in net unrealized (loss) / gain on debt securities, net of tax / (372) / (372) / 1,222 / 1,222
Comprehensive loss ...................... Comprehensive loss / Comprehensive loss / $ / (67,158) / $ / (76,576)
The accompanying notes are an integral part of these condensed consolidated financial statements. F-39
CEREBRAS SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Redeemable Convertible Preferred Stock
Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Redeemable Convertible Preferred Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Common Stock / Additional / Additional / Additional / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Treasury Stock / Accumulated Other Comprehensive Income (Loss) / Accumulated Other Comprehensive Income (Loss) / Accumulated Other Comprehensive Income (Loss) / Accumulated Deficit / Accumulated Deficit / Accumulated Deficit / Total Stockholders’ Deficit / Total Stockholders’ Deficit / Total Stockholders’ Deficit
(unaudited, in thousands) ............... (unaudited, in thousands) / (unaudited, in thousands) / Shares / Shares / Shares / Amount / Amount / Amount / Shares / Shares / Shares / Amount / Amount / Amount / Paid-in Capital / Paid-in Capital / Paid-in Capital / Shares / Shares / Shares / Amount / Amount / Amount / Accumulated Other Comprehensive Income (Loss) / Accumulated Deficit / Total Stockholders’ Deficit
Balance as of December 31, 2023 ......... Balance as of December 31, 2023 / Balance as of December 31, 2023 / 77,033 / 77,033 / $ / 722,780 / 45,362 / 45,362 / $ / — / $ / 101,578 / (300) / (300) / $ / (88) / $ / 1,103 / $ / (661,555) / $ / (558,962)
Shares issued upon exercise of stock options, net of repurchases of early exercised stock options ... Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / — / — / — / — / 5,815 / 5,815 / — / — / 14,051 / 14,051 / — / — / — / — / — / — / — / — / 14,051 / 14,051
Vesting of early exercised stock options ... Vesting of early exercised stock options / Vesting of early exercised stock options / — / — / — / — / — / — / — / — / 659 / 659 / — / — / — / — / — / — / — / — / 659 / 659
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / — / — / — / — / — / — / — / — / 31,806 / 31,806 / — / — / — / — / — / — / — / — / 31,806 / 31,806
Conversion of stock-based liability classified awards to stock-based equity classified awards ... Conversion of stock-based liability classified awards to stock-based equity classified awards / Conversion of stock-based liability classified awards to stock-based equity classified awards / — / — / — / — / — / — / — / — / 292 / 292 / — / — / — / — / — / — / — / — / 292 / 292
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (181) / (181) / — / — / (181) / (181)
Change in net unrealized loss on debt securities, net of tax ... Change in net unrealized loss on debt securities, net of tax / Change in net unrealized loss on debt securities, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (372) / (372) / — / — / (372) / (372)
Net loss ................................ Net loss / Net loss / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (66,605) / (66,605) / (66,605) / (66,605)
Balance as of June 30, 2024 ............. Balance as of June 30, 2024 / Balance as of June 30, 2024 / 77,033 / 77,033 / $ / 722,780 / 51,177 / 51,177 / $ / — / $ / 148,386 / (300) / (300) / $ / (88) / $ / 550 / $ / (728,160) / $ / (579,312)
Balance as of December 31, 2022 ......... Balance as of December 31, 2022 / Balance as of December 31, 2022 / 77,033 / 77,033 / $ / 722,780 / 43,011 / 43,011 / $ / — / $ / 68,473 / (300) / (300) / $ / (88) / $ / (319) / $ / (534,400) / $ / (466,334)
Shares issued upon exercise of stock options, net of repurchases of early exercised stock options ... Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / Shares issued upon exercise of stock options, net of repurchases of early exercised stock options / — / — / — / — / 1,009 / 1,009 / — / — / 2,439 / 2,439 / — / — / — / — / — / — / — / — / 2,439 / 2,439
Vesting of early exercised stock options ... Vesting of early exercised stock options / Vesting of early exercised stock options / — / — / — / — / — / — / — / — / 423 / 423 / — / — / — / — / — / — / — / — / 423 / 423
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / — / — / — / — / — / — / — / — / 8,773 / 8,773 / — / — / — / — / — / — / — / — / 8,773 / 8,773
Conversion of stock-based liability classified awards to stock-based equity classified awards ... Conversion of stock-based liability classified awards to stock-based equity classified awards / Conversion of stock-based liability classified awards to stock-based equity classified awards / — / — / — / — / — / — / — / — / 568 / 568 / — / — / — / — / — / — / — / — / 568 / 568
Foreign currency translation adjustments, net of tax ... Foreign currency translation adjustments, net of tax / Foreign currency translation adjustments, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / 22 / 22 / — / — / 22 / 22
Change in net unrealized gain on debt securities, net of tax ... Change in net unrealized gain on debt securities, net of tax / Change in net unrealized gain on debt securities, net of tax / — / — / — / — / — / — / — / — / — / — / — / — / — / — / 1,222 / 1,222 / — / — / 1,222 / 1,222
Net loss ................................ Net loss / Net loss / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / — / (77,820) / (77,820) / (77,820) / (77,820)
Balance as of June 30, 2023 ............. Balance as of June 30, 2023 / Balance as of June 30, 2023 / 77,033 / 77,033 / $ / 722,780 / 44,020 / 44,020 / $ / — / $ / 80,676 / (300) / (300) / $ / (88) / $ / 925 / $ / (612,220) / $ / (530,707)
The accompanying notes are an integral part of these condensed consolidated financial statements. F-40
CEREBRAS SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands)
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
CASH FLOWS FROM OPERATING ACTIVITIES .... CASH FLOWS FROM OPERATING ACTIVITIES / CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................ Net loss / Net loss / $ / (66,605) / $ / (77,820)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities: ... Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities: / Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization expense ... Depreciation and amortization expense / Depreciation and amortization expense / 4,185 / 4,185 / 5,674 / 5,674
Stock-based compensation ................ Stock-based compensation / Stock-based compensation / 32,329 / 32,329 / 9,260 / 9,260
Amortization of premium and accretion of discount on investments, net ... Amortization of premium and accretion of discount on investments, net / Amortization of premium and accretion of discount on investments, net / (3,349) / (3,349) / (1,843) / (1,843)
Non-cash lease expense .................. Non-cash lease expense / Non-cash lease expense / 2,554 / 2,554 / 290 / 290
Write-offs and provision for excess and obsolete inventories ... Write-offs and provision for excess and obsolete inventories / Write-offs and provision for excess and obsolete inventories / 2,057 / 2,057 / 983 / 983
Change in fair value of forward contract liability ... Change in fair value of forward contract liability / Change in fair value of forward contract liability / 30,327 / 30,327 / — / —
Provision for product warranties ........ Provision for product warranties / Provision for product warranties / 6,279 / 6,279 / — / —
Other ................................... Other / Other / 600 / 600 / 861 / 861
Changes in operating assets and liabilities: ... Changes in operating assets and liabilities: / Changes in operating assets and liabilities:
Accounts receivable ..................... Accounts receivable / Accounts receivable / 924 / 924 / (907) / (907)
Inventories ............................. Inventories / Inventories / (33,895) / (33,895) / (9,007) / (9,007)
Prepaid expenses and other assets ....... Prepaid expenses and other assets / Prepaid expenses and other assets / (11,840) / (11,840) / 1,881 / 1,881
Accounts payable ........................ Accounts payable / Accounts payable / (2,111) / (2,111) / (1,616) / (1,616)
Deferred revenue ........................ Deferred revenue / Deferred revenue / 29,738 / 29,738 / 1,859 / 1,859
Customer deposits ....................... Customer deposits / Customer deposits / 300,049 / 300,049 / — / —
Other liabilities ....................... Other liabilities / Other liabilities / 20,571 / 20,571 / 200 / 200
Net cash flows provided by (used in) operating activities ... Net cash flows provided by (used in) operating activities / Net cash flows provided by (used in) operating activities / 311,813 / 311,813 / (70,185) / (70,185)
CASH FLOWS FROM INVESTING ACTIVITIES .... CASH FLOWS FROM INVESTING ACTIVITIES / CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment ..... Purchases of property and equipment / Purchases of property and equipment / (11,788) / (11,788) / (454) / (454)
Purchases of investments ................ Purchases of investments / Purchases of investments / (152,823) / (152,823) / (138,884) / (138,884)
Maturities and sales of investments ..... Maturities and sales of investments / Maturities and sales of investments / 154,861 / 154,861 / 194,828 / 194,828
Net cash flows (used in) provided by investing activities ... Net cash flows (used in) provided by investing activities / Net cash flows (used in) provided by investing activities / (9,750) / (9,750) / 55,490 / 55,490
CASH FLOWS FROM FINANCING ACTIVITIES .... CASH FLOWS FROM FINANCING ACTIVITIES / CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options ... Proceeds from exercise of stock options / Proceeds from exercise of stock options / 18,253 / 18,253 / 2,439 / 2,439
Repurchases of early exercised stock options ... Repurchases of early exercised stock options / Repurchases of early exercised stock options / (28) / (28) / (63) / (63)
Payments of deferred offering costs ..... Payments of deferred offering costs / Payments of deferred offering costs / (1,000) / (1,000) / — / —
Net cash flows provided by financing activities ... Net cash flows provided by financing activities / Net cash flows provided by financing activities / 17,225 / 17,225 / 2,376 / 2,376
Increase (decrease) in cash, cash equivalents, and restricted cash ... Increase (decrease) in cash, cash equivalents, and restricted cash / Increase (decrease) in cash, cash equivalents, and restricted cash / 319,288 / 319,288 / (12,319) / (12,319)
Effect of exchange rate on cash ......... Effect of exchange rate on cash / Effect of exchange rate on cash / (181) / (181) / 22 / 22
Cash, cash equivalents, and restricted cash beginning of period ... Cash, cash equivalents, and restricted cash beginning of period / Cash, cash equivalents, and restricted cash beginning of period / 34,780 / 34,780 / 26,196 / 26,196
Cash, cash equivalents, and restricted cash end of period ... Cash, cash equivalents, and restricted cash end of period / Cash, cash equivalents, and restricted cash end of period / $ / 353,887 / $ / 13,899
NON-CASH INVESTING AND FINANCING ACTIVITIES: ... NON-CASH INVESTING AND FINANCING ACTIVITIES: / NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of property and equipment out of inventories ... Transfer of property and equipment out of inventories / Transfer of property and equipment out of inventories / $ / 4,978 / $ / 2,807
Transfer of property and equipment into inventories ... Transfer of property and equipment into inventories / Transfer of property and equipment into inventories / 2,077 / 2,077 / 470 / 470
Purchases of property and equipment included in accounts payable and accrued and other current liabilities ... Purchases of property and equipment included in accounts payable and accrued and other current liabilities / Purchases of property and equipment included in accounts payable and accrued and other current liabilities / 814 / 814 / — / —
Vesting of early exercised options ...... Vesting of early exercised options / Vesting of early exercised options / 659 / 659 / 423 / 423
Right-of-use assets obtained in exchange for lease obligations ... Right-of-use assets obtained in exchange for lease obligations / Right-of-use assets obtained in exchange for lease obligations / 27,176 / 27,176 / — / —
Unpaid deferred offering costs included in accrued and other current liabilities ... Unpaid deferred offering costs included in accrued and other current liabilities / Unpaid deferred offering costs included in accrued and other current liabilities / 1,068 / 1,068 / — / —
The accompanying notes are an integral part of these condensed consolidated financial statements. F-41
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Operations Cerebras Systems Inc. (the “Company” or “Cerebras”) was incorporated in Delaware in April 2016. Cerebras is an enterprise artificial intelligence (“AI”) company that designs and deploys an AI compute platform, purpose built for accelerating AI’s most complex workloads. The Company’s Wafer-Scale Engine (“WSE”), a chip encompassing an entire silicon wafer—specifically designed to tackle the computational demands of Generative AI (“GenAI”) applications. The Company architects AI systems, utilizing WSE, and the integrated software connects these systems into a cluster to form supercomputers. The AI compute platform is designed to reduce training times and inference latencies, while reducing programming complexity. The Company leverages this technology to train AI models in collaboration with its customers. Since its inception, Cerebras Systems Inc. has dedicated resources to research and development activities that support its current projects and future development efforts. The Company is headquartered in Sunnyvale, California.
Note 2 – Basis of Presentation and Liquidity The accompanying unaudited condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements as of and for the years ended December 31, 2023, and 2022 that are included elsewhere in this prospectus. The unaudited condensed consolidated financial statements include all adjustments, including normal recurring adjustments and other adjustments, that are considered necessary for fair presentation of the Company’s financial position and results of operations. All inter-company accounts and transactions have been eliminated. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for the entire year. Management believes that the Company’s current cash and cash equivalents and investments are adequate to meet its needs for the next 12 months from the issuance of these condensed consolidated financial statements.
Note 3 – Recent Accounting Pronouncements Not Yet Adopted In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim condensed consolidated financial statements. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. For all other entities, the standard is effective for annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.
Note 4 – Significant Accounting Policies There have been no significant changes during the six months ended June 30, 2024 and 2023 to the items disclosed in “Significant Accounting Policies” in Note 4 of the Company’s audited consolidated financial statements for the years ended December 31, 2023 and 2022 included elsewhere in this prospectus, other than as described below: F-42
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restricted Cash Restricted cash includes cash and cash equivalents that are not readily available for use in the Company’s operating activities. Restricted cash is primarily attributable to a cash advance received from a customer that the Company is contractually restricted to use for the limited purposes of satisfying obligations under a certain contract with that customer. See “Customer Deposits” for additional information. Customer Deposits In April 2024, the Company entered into an agreement with G42 (the “G42 April 2024 Agreement”) pursuant to which G42, or a third party nominee affiliated with G42, indicated its intent to issue purchase orders for AI supercomputer products and services for a minimum value of $300 million. Pursuant to the G42 April 2024 Agreement, the Company received a prepayment of $300 million from G42 in May 2024 to be used for payments to third-party vendors to manufacture high performance computing infrastructure. If the purchase orders are not issued by G42, any portion of the prepayment not paid to the Company’s third-party vendors will be payable to G42 on demand and the Company’s rights to inventory purchased with the prepayment will transfer to G42. In May 2024, the Company also entered into an agreement with G42 (the “G42 May 2024 Agreement”) pursuant to which the Company agreed to certain pricing commitments with G42 through the end of 2025, and G42 agreed that it will purchase, or will cause a third party that may be affiliated or unaffiliated and under a commercial agreement with G42 to purchase, high-performance computing systems, installation, and support services in an aggregate amount of approximately $1.43 billion by completing the prepayment of such amount before February 28, 2025 and executing binding purchase orders totaling such amount. Subsequent to June 30, 2024, the Company received certain purchase orders from G42. As of June 30, 2024, the Company recorded the $300 million received pursuant to the G42 April 2024 Agreement as a customer deposit on the condensed consolidated balance sheet. See Note 16 for additional information. Deferred Offering Costs Deferred offering costs, consisting of legal, accounting, and other fees and costs relating to the Company’s planned initial public offering, are capitalized within other assets on the condensed consolidated balance sheet. The deferred offering costs will be offset against the proceeds received by the Company upon the completion of the planned initial public offering. In the event the planned initial public offering is terminated, all of the deferred offering costs will be expensed as general and administrative expense. As of June 30, 2024 and December 31, 2023, the deferred offering costs were $2.0 million and $0, respectively. Forward Contract Liability The Company determined that its obligation to issue, and the Company’s investors’ obligation to purchase, shares of Series F-1 redeemable convertible preferred stock at a fixed price in the future represented a freestanding financial instrument (“forward contract liability”) and is classified as a liability because the underlying shares of forward contract liability are redeemable upon the occurrence of certain events outside the control of the Company. This liability is measured at fair value upon initial recognition and at each subsequent reporting date through the settlement date, with changes in fair value for each reporting period recognized in other (expense) income, net on the consolidated statements of operations. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. F-43
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Areas of significant estimates include, but are not limited to, revenue recognition, including the determination of the standalone selling price (“SSP”) of performance obligations, useful life of property, plant and equipment, product warranty accruals, impairment of long-lived assets, the market value of and demand for inventory, valuation allowance on deferred income tax assets, the fair value of common stock, and other assumptions used to measure stock-based compensation, forward contract liability, and warrant liability. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts, and experience. Changes in estimates are recorded prospectively in the period in which they become known. Actual results could significantly differ from those estimates. Risks and Uncertainties Customer Concentration Revenue from significant customers, meaning those representing 10% or more of total revenue, was composed of one customer accounting for 87% of the Company’s revenue for the six months ended June 30, 2024. Two customers accounted for 43% and 14%, respectively, of the Company’s revenue for the six months ended June 30, 2023. Accounts receivable from significant customers, meaning those representing 10% or more of the total accounts receivable, was composed of two customers accounting for 68% and 16%, respectively, of the Company’s accounts receivable balance as of June 30, 2024. Four customers accounted for 43%, 22%, 15%, and 15%, respectively, of the Company’s accounts receivable balance as of December 31, 2023 Supplier Concentration Certain materials used by the Company in the manufacturing of its products are available from a limited number of suppliers. Shortages could occur in these materials due to an interruption of supply or increased demand in the industry. Two suppliers accounted for 26% and 15% of total purchases for the six months ended June 30, 2024. One supplier accounted for 47% of total purchases for the six months ended June 30, 2023.
Note 5 – Revenue Disaggregation of Revenue The Company recognizes revenue classified in hardware at a point in time, and revenue classified in services and other either at a point in time or over time. Revenue by point in time and over time was as follows (in thousands):
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
Hardware revenue recognized point in time ... Hardware revenue recognized point in time / Hardware revenue recognized point in time / $ / 104,269 / $ / 1,559
Services and other revenue recognized point in time ... Services and other revenue recognized point in time / Services and other revenue recognized point in time / 147 / 147 / 1,490 / 1,490
Services and other revenue recognized over time ... Services and other revenue recognized over time / Services and other revenue recognized over time / 31,986 / 31,986 / 5,615 / 5,615
Total revenue ........................... Total revenue / Total revenue / $ / 136,402 / $ / 8,664
F-44
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The deferred revenue balance represents payments received for performance obligations not yet satisfied. The following table shows the changes in deferred revenue during the six months ended June 30, 2024, and 2023 respectively (in thousands):
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
Balance at beginning of period .......... Balance at beginning of period / Balance at beginning of period / $ / 19,226 / $ / 3,990
Deferred revenue additions during period ... Deferred revenue additions during period / Deferred revenue additions during period / 88,220 / 88,220 / 4,009 / 4,009
Revenue recognized during period ........ Revenue recognized during period / Revenue recognized during period / (58,481) / (58,481) / (2,150) / (2,150)
Balance at end of period ................ Balance at end of period / Balance at end of period / $ / 48,965 / $ / 5,849
Less: Long-term portion of deferred revenue ... Less: Long-term portion of deferred revenue / Less: Long-term portion of deferred revenue / (15,249) / (15,249) / (1,070) / (1,070)
Balance at end of period – current portion ... Balance at end of period – current portion / Balance at end of period – current portion / $ / 33,716 / $ / 4,779
Revenue recognized during the six months ended June 30, 2024 that was included in deferred revenue as of December 31, 2023 was $8.7 million. Revenue recognized during the six months ended June 30, 2023 that was included in deferred revenue as of December 31, 2022 was $1.4 million. Contract assets represent deferred cost of sales related to revenue that has not yet been recognized and unbilled receivables related to revenue that has been recognized but not yet invoiced. The balance of contract assets was $4.3 million and $0.2 million as of June 30, 2024 and December 31, 2023, respectively, in prepaid expenses and other current assets. Contract liabilities are recorded in deferred revenue and represent amounts that have been invoiced or received in advance but have not yet been recognized as revenue. Revenue allocated to remaining performance obligations that is unsatisfied (or partially unsatisfied), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $49.0 million as of June 30, 2024. The Company expects to recognize approximately 69% of this revenue over the next 12 months and the remainder thereafter. This excludes revenue related to performance obligations for contracts with a length of one year or less.
Note 6 – Segment and Geographical Information The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. The Company is not organized by market and is managed and operated as one business. Accordingly, the Company does not accumulate discrete financial information with respect to separate divisions and does not have separate operating or reportable segments. Since the Company operates as one operating segment, all required financial segment information can be found in the condensed consolidated financial statements. F-45
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revenue by geographic area is designated based upon the billing location of the customer. Revenue by geographic areas was as follows (in thousands):
Six Months EndedJune 30,
Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30, / Six Months EndedJune 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
United States ........................... United States / United States / $ / 133,080 / $ / 7,992
Europe .................................. Europe / Europe / 3,322 / 3,322 / 642 / 642
Asia .................................... Asia / Asia / — / — / 30 / 30
Total revenue ........................... Total revenue / Total revenue / $ / 136,402 / $ / 8,664
As of June 30, 2024 and December 31, 2023, substantially all of the Company’s property and equipment was located in the United States.
Note 7 – Net Loss Per Share Basic net loss per share is computed by dividing reported net loss by the weighted-average number of common shares outstanding for the reported period. The Company’s potential common share equivalents were as follows:
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Redeemable convertible preferred stock ... Redeemable convertible preferred stock / Redeemable convertible preferred stock / 77,032,857 / 77,032,857 / 77,032,857 / 77,032,857
Restricted stock ........................ Restricted stock / Restricted stock / 1,573,908 / 1,573,908 / 1,516,408 / 1,516,408
Early exercised shares subject to repurchase ... Early exercised shares subject to repurchase / Early exercised shares subject to repurchase / 746,473 / 746,473 / 95,905 / 95,905
Options to purchase common stock ........ Options to purchase common stock / Options to purchase common stock / 36,952,039 / 36,952,039 / 33,705,603 / 33,705,603
Total potential common stock excluded from net loss per share ... Total potential common stock excluded from net loss per share / Total potential common stock excluded from net loss per share / 116,305,277 / 116,305,277 / 112,350,773 / 112,350,773
In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be antidilutive. Since the Company was in a net loss for all periods presented in these condensed consolidated financial statements, diluted net loss per share was the same as basic net loss per share.
For the Six Months Ended
For the Six Months Ended / For the Six Months Ended / For the Six Months Ended / For the Six Months Ended / For the Six Months Ended / For the Six Months Ended / For the Six Months Ended / For the Six Months Ended
June 30, 2024 / June 30, 2024 / June 30, 2024 / June 30, 2023 / June 30, 2023 / June 30, 2023
Numerator: .............................. Numerator: / Numerator:
Net loss (in thousands) ................. Net loss (in thousands) / Net loss (in thousands) / $ / (66,605) / $ / (77,820)
Denominator: ............................ Denominator: / Denominator:
Weighted-average common shares outstanding (in thousands) ... Weighted-average common shares outstanding (in thousands) / Weighted-average common shares outstanding (in thousands) / 46,945 / 46,945 / 42,857 / 42,857
Net loss per common share – basic and diluted ... Net loss per common share – basic and diluted / Net loss per common share – basic and diluted / $ / (1.42) / $ / (1.82)
Note 8 – Investments The Company classifies its U.S. Treasury securities, which are accounted for as available-for-sale, and time deposits within Level 2 in the fair value hierarchy because it uses quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. There were no transfers between Level 1 and Level 2 as of June 30, 2024 and December 31, 2023. F-46
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables summarize the Company’s investments (in thousands):
As of June 30, 2024
As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024 / As of June 30, 2024
Fair Value Hierarchy / Fair Value Hierarchy / Fair Value Hierarchy / Amortized Cost / Amortized Cost / Amortized Cost / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Losses / Gross Unrealized Losses / Gross Unrealized Losses / Fair Value / Fair Value / Fair Value
U.S. Treasury securities ................ U.S. Treasury securities / U.S. Treasury securities / Level 2 / Level 2 / Level 2 / $ / 113,663 / $ / 1,411 / $ / — / $ / 115,074
Time deposits ........................... Time deposits / Time deposits / Level 2 / Level 2 / Level 2 / 3,491 / 3,491 / — / — / — / — / 3,491 / 3,491
Total ................................... Total / Total / $ / 117,154 / $ / 1,411 / $ / — / $ / 118,565
As of December 31, 2023
As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023 / As of December 31, 2023
Fair Value Hierarchy / Fair Value Hierarchy / Fair Value Hierarchy / Amortized Cost / Amortized Cost / Amortized Cost / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Gains / Gross Unrealized Losses / Gross Unrealized Losses / Gross Unrealized Losses / Fair Value / Fair Value / Fair Value
U.S. Treasury securities ................ U.S. Treasury securities / U.S. Treasury securities / Level 2 / Level 2 / Level 2 / $ / 113,434 / $ / 1,783 / $ / — / $ / 115,217
Time deposits ........................... Time deposits / Time deposits / Level 2 / Level 2 / Level 2 / 2,410 / 2,410 / — / — / — / — / 2,410 / 2,410
Total ................................... Total / Total / $ / 115,844 / $ / 1,783 / $ / — / $ / 117,627
Net realized gains and losses were not significant for each period presented. All of the Company’s investments have a stated contractual maturity date of less than one year.
Note 9 – Balance Sheet Detail Inventories was composed of the following (in thousands):
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Raw materials ........................... Raw materials / Raw materials / $ / 49,751 / $ / 31,766
Work in progress ........................ Work in progress / Work in progress / 5,398 / 5,398 / 7,331 / 7,331
Finished goods .......................... Finished goods / Finished goods / 22,871 / 22,871 / 9,985 / 9,985
Total inventories ....................... Total inventories / Total inventories / $ / 78,020 / $ / 49,082
As of June 30, 2024 and December 31, 2023, the Company’s provision for excess and obsolete inventory was $0.9 million and $1.3 million, respectively. During the six months ended June 30, 2024 and 2023, the Company recorded a charge of approximately $2.1 million and $1.0 million, respectively, to cost of sales related to provision for excess, obsolete, and scrapped inventory, primarily related to the transition to the next generation of the Company’s product offering. Prepaid expenses and other current assets consisted of the following (in thousands):
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Prepaid expenses ........................ Prepaid expenses / Prepaid expenses / $ / 10,748 / $ / 3,380
Other current assets .................... Other current assets / Other current assets / 4,762 / 4,762 / 659 / 659
Total prepaid expenses and other current assets ... Total prepaid expenses and other current assets / Total prepaid expenses and other current assets / $ / 15,510 / $ / 4,039
F-47
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Property and equipment, net consisted of the following (in thousands):
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Computer equipment ...................... Computer equipment / Computer equipment / $ / 31,223 / $ / 25,997
Software ................................ Software / Software / 1,584 / 1,584 / 1,584 / 1,584
Machinery and equipment ................. Machinery and equipment / Machinery and equipment / 3,558 / 3,558 / 2,644 / 2,644
Leasehold improvements .................. Leasehold improvements / Leasehold improvements / 3,496 / 3,496 / 488 / 488
Furniture and fixtures .................. Furniture and fixtures / Furniture and fixtures / 12 / 12 / 12 / 12
Construction in progress ................ Construction in progress / Construction in progress / 4,493 / 4,493 / — / —
44,366 / 44,366 / 30,725 / 30,725
Less: accumulated depreciation .......... Less: accumulated depreciation / Less: accumulated depreciation / (21,078) / (21,078) / (18,212) / (18,212)
Total property and equipment, net ....... Total property and equipment, net / Total property and equipment, net / $ / 23,288 / $ / 12,513
During the six months ended June 30, 2024, the Company recognized $0.5 million, $3.6 million, and $0.1 million of depreciation expense in cost of sales, research and development expenses, and general and administrative expenses on the consolidated statement of operations, respectively. During the six months ended June 30, 2023, the Company recognized $1.2 million, $4.3 million, and $0.1 million of depreciation expense in cost of sales, research and development expenses, and general and administrative expenses on the consolidated statement of operations, respectively. Accrued and other current liabilities was composed of the following (in thousands):
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Accrued expenses ........................ Accrued expenses / Accrued expenses / $ / 24,313 / $ / 12,688
Accrued compensation .................... Accrued compensation / Accrued compensation / 11,578 / 11,578 / 7,593 / 7,593
Provision for product warranty .......... Provision for product warranty / Provision for product warranty / 9,280 / 9,280 / 3,633 / 3,633
Operating lease liability, current ...... Operating lease liability, current / Operating lease liability, current / 7,864 / 7,864 / 318 / 318
Sales tax payable ....................... Sales tax payable / Sales tax payable / 7,445 / 7,445 / 845 / 845
Liability related to early exercised options ... Liability related to early exercised options / Liability related to early exercised options / 3,724 / 3,724 / 210 / 210
Other ................................... Other / Other / 1,055 / 1,055 / 985 / 985
Total accrued and other current liabilities ... Total accrued and other current liabilities / Total accrued and other current liabilities / $ / 65,259 / $ / 26,272
Other liabilities were composed of the following (in thousands):
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Operating lease liability, non-current ... Operating lease liability, non-current / Operating lease liability, non-current / $ / 20,109 / $ / 242
Warrant liability ....................... Warrant liability / Warrant liability / 1,128 / 1,128 / 1,113 / 1,113
Other ................................... Other / Other / 175 / 175 / 132 / 132
Total other liabilities ................. Total other liabilities / Total other liabilities / $ / 21,412 / $ / 1,487
F-48
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the changes in provision for product warranty during the six months ended June 30, 2024 and 2023 (in thousands):
Six Months Ended June 30,
Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30, / Six Months Ended June 30,
2024 / 2024 / 2024 / 2023 / 2023 / 2023
Balance at beginning of period .......... Balance at beginning of period / Balance at beginning of period / $ / 3,633 / $ / 538
Additions during the period ............. Additions during the period / Additions during the period / 5,728 / 5,728 / — / —
Utilization during the period ........... Utilization during the period / Utilization during the period / (632) / (632) / (213) / (213)
Change in estimates ..................... Change in estimates / Change in estimates / 551 / 551 / — / —
Balance at end of period ................ Balance at end of period / Balance at end of period / $ / 9,280 / $ / 325
Note 10 – Redeemable Convertible Preferred Stock The Company had the following shares of redeemable convertible preferred stock, $0.00001 par value per share, authorized, issued, and outstanding as of June 30, 2024 and December 31, 2023 (in thousands, except for share amounts) other than Series F-1 redeemable convertible preferred stock, which was authorized in May 2024:
Shares Authorized
Shares Authorized / Shares Authorized / Shares Issued and Outstanding / Shares Issued and Outstanding / Shares Issued and Outstanding / Liquidation Preference / Liquidation Preference / Liquidation Preference / Net Carrying Value / Net Carrying Value / Net Carrying Value
Series A redeemable convertible preferred stock ... Series A redeemable convertible preferred stock / Series A redeemable convertible preferred stock / 31,731,394 / 31,731,394 / 31,731,394 / 31,731,394 / $ / 26,972 / $ / 26,924
Series B redeemable convertible preferred stock ... Series B redeemable convertible preferred stock / Series B redeemable convertible preferred stock / 9,076,079 / 9,076,079 / 9,076,079 / 9,076,079 / 25,000 / 25,000 / 24,955 / 24,955
Series C redeemable convertible preferred stock ... Series C redeemable convertible preferred stock / Series C redeemable convertible preferred stock / 7,264,680 / 7,264,680 / 7,264,680 / 7,264,680 / 65,000 / 65,000 / 64,952 / 64,952
Series D redeemable convertible preferred stock ... Series D redeemable convertible preferred stock / Series D redeemable convertible preferred stock / 4,943,849 / 4,943,849 / 4,943,849 / 4,943,849 / 79,822 / 79,822 / 79,735 / 79,735
Series E redeemable convertible preferred stock ... Series E redeemable convertible preferred stock / Series E redeemable convertible preferred stock / 14,916,649 / 14,916,649 / 14,848,436 / 14,848,436 / 272,096 / 272,096 / 272,023 / 272,023
Series F redeemable convertible preferred stock ... Series F redeemable convertible preferred stock / Series F redeemable convertible preferred stock / 10,812,837 / 10,812,837 / 9,168,419 / 9,168,419 / 254,376 / 254,376 / 254,191 / 254,191
Series F-1 redeemable convertible preferred stock ... Series F-1 redeemable convertible preferred stock / Series F-1 redeemable convertible preferred stock / 27,285,129 / 27,285,129 / — / — / — / — / — / —
In May 2024, the Company entered into a Series F-1 redeemable convertible preferred stock purchase agreement (the “Series F-1 Purchase Agreement”) with various investors to issue up to 27,285,129 shares of the Company’s Series F-1 redeemable convertible preferred stock. Pursuant to the terms of the Series F-1 Purchase Agreement, G42 agreed to purchase approximately 22.9 million shares of the Company’s Series F-1 redeemable convertible preferred stock at $14.66 per share, for anticipated gross proceeds of $335 million (the “G42 Primary Purchase”). The closing of the G42 Primary Purchase is subject to regulatory approval, as well as the satisfaction of customary closing conditions. Pursuant to the Series F-1 Purchase Agreement, if G42, or certain third parties at the direction of G42, purchase more than $500.0 million in one purchase order, and less than $5.0 billion in the aggregate, of high-performance computing clusters (the “G42 Option Threshold”), the Company will grant G42 the option to purchase additional shares of Series F-1 redeemable convertible preferred stock (or, if such option is granted or exercised following the completion of the Company’s initial public offering, shares of the Company’s common stock), subject to the terms thereof (the “G42 Option”). The maximum number of shares that may be purchased pursuant to the G42 Option will be the quotient of (i) the total aggregate purchase price for the G42 Option, which will equal 10% of the value of the relevant purchaser order(s), divided by (ii) (A) if the G42 Option is granted and exercised prior to the completion of the Company’s initial public offering, a price per share that is 17.5% below the price per share of the Company’s then most recent arms-length sale of the Company’s redeemable convertible preferred stock (excluding the Company’s Series F-1 redeemable convertible preferred stock), or (B) if the G42 Option is granted or exercised following the completion of the Company’s initial public offering, a price per share that is 17.5% below the average closing price per share of the Company’s common stock over the 30-day period prior to the G42 Option Threshold being met. The G42 Option expires on December 31, 2025. G42’s ability to purchase shares in connection with the G42 Option is subject to regulatory approval. Additionally, an existing F-49
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
investor agreed to purchase approximately 3.1 million shares of the Company’s Series F-1 redeemable convertible preferred stock at a price of $14.66 per share, for anticipated gross proceeds of $45 million. The commitments made by these investors to purchase shares of the Company’s Series F-1 redeemable convertible preferred stock at a future date for a fixed price of $14.66 per share represent a forward contract between the Company and the counterparties. The forward contracts are classified as a liability and remeasured to fair value at each reporting date, with changes in fair value recorded to other (expense) income, net. The forward contract was considered to be a Level 3 liability in the fair value hierarchy due to certain unobservable inputs. The primary input in the valuation of the forward liability is the fair value of the Company’s Series F-1 redeemable convertible preferred stock which was determined in accordance with the applicable elements of the American Institute of Certified Public Accountants guide, Valuation of Privately Held Company Equity Securities Issued as Compensation and derived from a hybrid method that considered both an option pricing model (“OPM”) and the probability weighted expected return method (“PWERM”) to allocate the value among the various classes of securities to arrive at the fair value of Series F-1 redeemable convertible preferred stock. The OPM is based on the Black-Scholes-Merton option pricing model, which allows for the identification for a range of possible future outcomes, each with an associated probability. The OPM is appropriate to use when the range of possible future outcomes is difficult to predict and thus creates highly speculative forecasts. PWERM involves a forward-looking analysis of the possible future outcomes of the enterprise including an initial public offering as well as non-initial public offering market-based outcomes. As of June 30, 2024, the fair value of the Series F-1 redeemable convertible preferred stock was $15.83 per share. The following table provides a reconciliation of the beginning and ending balances for forward contract liability measured at fair value using significant unobservable inputs (in thousands):
Balance as of January 1, 2024
Balance as of January 1, 2024 / Balance as of January 1, 2024 / $ / —
Fair value at inception of contract ..... Fair value at inception of contract / Fair value at inception of contract / — / —
Change in fair value .................... Change in fair value / Change in fair value / 30,327 / 30,327
Balance as of June 30, 2024 ............. Balance as of June 30, 2024 / Balance as of June 30, 2024 / $ / 30,327
For the six months ended June 30, 2024, the change in fair value related to forward contract liability was recognized in other (expense) income, net.
Note 11 – Common Stock As of June 30, 2024 and December 31, 2023, respectively, the Company was authorized to issue 203,087,000 shares and 168,000,000 shares of common stock, $0.00001 par value per share. As of June 30, 2024 and December 31, 2023, respectively, the Company had 51,177,237 and 45,361,795 shares of common stock issued and outstanding, of which 746,473 and 95,905 shares of common stock were subject to repurchase as of such date for early exercised stock options. As of June 30, 2024 and December 31, 2023, the Company had 300,138 shares of common stock held as treasury shares, which may be used for issuance under the Equity Incentive Plan. All shares that were issued upon early exercise of stock options are considered legally issued and outstanding. However, for accounting purposes, only shares that are fully vested or are not subject to repurchase are considered issued and outstanding. Below is a reconciliation of shares issued and outstanding:
June 30, 2024
June 30, 2024 / June 30, 2024 / Dec 31, 2023 / Dec 31, 2023 / Dec 31, 2023
Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) ... Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) / Total shares of common stock legally issued and outstanding (including shares issued upon early exercise of stock options) / 51,177,237 / 51,177,237 / 45,361,795 / 45,361,795
Less: Shares subject to repurchase for early exercised stock options ... Less: Shares subject to repurchase for early exercised stock options / Less: Shares subject to repurchase for early exercised stock options / (746,473) / (746,473) / (95,905) / (95,905)
Total shares issued and outstanding not subject to repurchase ... Total shares issued and outstanding not subject to repurchase / Total shares issued and outstanding not subject to repurchase / 50,430,764 / 50,430,764 / 45,265,890 / 45,265,890
F-50
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants In 2020, the Company entered into an equity arrangement with one of its customers whereby the Company issued a warrant that is exercisable for up to 68,213 shares of its Series E redeemable convertible preferred stock. The warrant is classified as a liability and remeasured to fair value and falls under Level 3 of the fair value hierarchy. As of June 30, 2024 and December 31, 2023, the warrant was valued at $1.1 million. The Company provided services and issued the warrant to the customer, and the customer paid the consideration to the Company for the provision of services. The warrant has a contractual term of seven years and an exercise price of $0.00001 per share. The customer is able to either exercise the warrants at the exercise price or convert a portion of the warrants into a number of shares of Series E redeemable convertible preferred stock adjusted to equal the fair market value, less the exercise price. The fair value of warrants is determined using a Black-Scholes option-pricing model as of the grant date. The amount representing the fair value of the equity provided to the customer from the warrant is recognized as adjustments of revenue in the consolidated statements of operations and comprehensive loss over the term of such commercial agreement or based on the achievement of certain performance targets in accordance with ASC 505-50. As of June 30, 2024, fair value of the warrant accrued was determined using the following assumptions:
June 30, 2024 / June 30, 2024 / June 30, 2024
Remaining contractual life (years) ...... Remaining contractual life (years) / Remaining contractual life (years) / 3.10 / 3.10 / 3.10
Expected volatility (%) ................. Expected volatility (%) / Expected volatility (%) / 58.90 / 58.90
Expected risk-free interest rate (%) .... Expected risk-free interest rate (%) / Expected risk-free interest rate (%) / 4.52 / 4.52
Dividend yield (%) ...................... Dividend yield (%) / Dividend yield (%) / — / —
The following table provides a reconciliation of the beginning and ending balances for the Level 3 warrant liability measured at fair value using significant unobservable inputs (in thousands):
| Warrant Liability | Warrant Liability | Warrant Liability | |||
| Balance as of January 1, 2024 | Balance as of January 1, 2024 | Balance as of January 1, 2024 | $ | 1,113 | |
| Change in fair value | Change in fair value | Change in fair value | 15 | 15 | |
| Balance as of June 30, 2024 | Balance as of June 30, 2024 | Balance as of June 30, 2024 | $ | 1,128 | |
| Balance as of January 1, 2023 | Balance as of January 1, 2023 | Balance as of January 1, 2023 | $ | 1,141 | |
| Change in fair value | Change in fair value | Change in fair value | (221) | (221) | |
| Balance as of June 30, 2023 | Balance as of June 30, 2023 | Balance as of June 30, 2023 | $ | 920 |
For the six months ended June 30, 2024 and 2023, the change in fair value related to the warrant was recognized in other (expense) income, net. F-51
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Stock-Based Compensation Stock Options Total stock-based compensation expense for the six months ended June 30, 2024 and 2023 was as follows (in thousands):
Six Months Ended
Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended
June 30, 2024 / June 30, 2024 / June 30, 2024 / June 30, 2023 / June 30, 2023 / June 30, 2023
Cost of sales ........................... Cost of sales / Cost of sales / 420 / 420 / 51 / 51
Research and development ................ Research and development / Research and development / $ / 23,905 / $ / 7,367
Sales and marketing ..................... Sales and marketing / Sales and marketing / 3,195 / 3,195 / 1,075 / 1,075
General and administrative .............. General and administrative / General and administrative / 4,809 / 4,809 / 767 / 767
Total stock-based compensation expense ... Total stock-based compensation expense / Total stock-based compensation expense / $ / 32,329 / $ / 9,260
Approximately $18.5 million and $0.9 million of the compensation expense recognized for the six months ended June 30, 2024 and 2023, respectively, was attributed to sales of shares of common stock by certain current and former employees of the Company to existing economic interest holders in the Company, through secondary market transactions, where the excess price paid above fair value for the shares was recorded as stock-based compensation expense. The following table summarizes the Company’s stock option activity and related information:
Number of Shares
Number of Shares / Number of Shares / Weighted Average Exercise Price / Weighted Average Exercise Price / Weighted Average Exercise Price / Aggregate Intrinsic Value (in thousands) / Aggregate Intrinsic Value (in thousands) / Aggregate Intrinsic Value (in thousands) / Weighted Average Remaining Life / Weighted Average Remaining Life / Weighted Average Remaining Life
Outstanding, as of January 1, 2024 ...... Outstanding, as of January 1, 2024 / Outstanding, as of January 1, 2024 / 33,705,603 / 33,705,603 / $ / 4.02 / $ / 59,924 / 7.24 / 7.24 / 7.24
Granted ................................. Granted / Granted / 9,497,328 / 9,497,328 / $ / 5.98
Exercised during period ................. Exercised during period / Exercised during period / (5,821,067) / (5,821,067) / $ / 3.14
Forfeited ............................... Forfeited / Forfeited / (421,189) / (421,189) / $ / 5.58
Expired ................................. Expired / Expired / (8,636) / (8,636) / $ / 7.37
Outstanding and Exercisable, as of June 30, 2024 ... Outstanding and Exercisable, as of June 30, 2024 / Outstanding and Exercisable, as of June 30, 2024 / 36,952,039 / 36,952,039 / $ / 4.62 / $ / 254,559 / 7.62 / 7.62 / 7.62
The total intrinsic value for stock options exercised during the six months ended June 30, 2024 and 2023 was $34.6 million and $3.0 million, respectively. The weighted-average grant date fair value of options granted was $4.92 per share for the six months ended June 30, 2024. As of June 30, 2024, the total remaining unrecognized compensation expense related to non-vested stock options was $68.6 million, which will be amortized over the weighted-average period of 2.74 years. F-52
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RSUs The following table summarizes RSU activity and related information:
Number of Shares
Number of Shares / Number of Shares / Weighted Average Grant Date Fair Value / Weighted Average Grant Date Fair Value / Weighted Average Grant Date Fair Value
Non-Vested, as of January 1, 2024 ....... Non-Vested, as of January 1, 2024 / Non-Vested, as of January 1, 2024 / 1,516,408 / 1,516,408 / $ / 5.36
Granted ................................. Granted / Granted / 57,500 / 57,500 / $ / 11.11
Vested .................................. Vested / Vested / — / — / $ / —
Forfeited ............................... Forfeited / Forfeited / — / — / $ / —
Non-Vested, as of June 30, 2024 ......... Non-Vested, as of June 30, 2024 / Non-Vested, as of June 30, 2024 / 1,573,908 / 1,573,908 / $ / 5.57
As of June 30, 2024, the total remaining unrecognized compensation expense related to non-vested RSUs was $8.8 million. This unrecognized compensation expense will be recognized when the liquidity-based vesting condition becomes probable for certain RSUs that have a performance-based vesting condition, and the service-based vesting condition will be satisfied over the weighted-average period of 1.72 years.
Note 13 – Income Taxes The Company’s quarterly tax provision and estimate of its annual effective tax rate is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income (or loss) relates, changes in how the Company does business, and tax law developments. The Company’s estimated effective tax rate for the year differs from the U.S. statutory rate of 21% primarily as a result of not benefiting U.S. losses as those losses are not more likely than not to be realized, as well as its foreign operations, which are subject to tax rates that differ from those in the United States. The Company recorded an income tax expense of $319 thousand and $72 thousand for the six months ended June 30, 2024 and 2023, respectively.
Note 14 – Leases The Company’s lease obligations consist of operating leases for data centers and offices. The extension periods have not been included in the determination of the right-of-use assets or the lease liability for operating leases as the Company did not consider it reasonably certain that it would exercise these options. The Company has elected not to recognize right-of-use assets and operating lease liabilities that arise from short-term (12 months or less) leases for any class of underlying assets. The Company has elected not to separate lease and non-lease components for any class of underlying asset. In June 2024, the Company entered into an agreement to modify the lease for its headquarters located in Sunnyvale, California, to extend the term of the existing lease from December 1, 2024 to November 30, 2027. The lease is an operating lease, and the Company expects to pay total rent of approximately $5.5 million for the extended term of the lease. The agreement also includes variable monthly charges for building operating costs. In February 2024, the Company entered into a 55-month lease agreement for office space in Toronto, Canada. The lease commenced April 8, 2024, terminates March 16, 2029. The lease is an operating lease, and the Company expects to pay a total rent of $1.2 million for the term of the lease. The agreement also includes variable monthly charges for building operating costs. In November 2023, the Company entered into a 41-month lease agreement with the owner and landlord of a data center in Stockton, California. The lease commenced January 4, 2024, terminates on May 31, 2027, and is an operating lease. Monthly recurring charges for rent and power are $0.6 million per month from June 2024 through May 2026, increasing to $0.7 million per month through May 2027. The agreement also includes variable monthly F-53
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
charges for metered power usage. Monthly recurring charges for rent and power shall be abated during the first five months of the term of the lease. In August 2024, the Company added additional capacity to this existing lease which is expected to commence from September 2024 for a period of 39 months. The Company will pay additional monthly rent of $0.5 million during the term of the lease. As of June 30, 2024, future minimum lease payments of the Company’s operating lease liabilities were due as follows (in thousands):
June 30, 2024 / June 30, 2024 / June 30, 2024
Year ending December 31, ................ Year ending December 31, / Year ending December 31, / Operating Leases / Operating Leases / Operating Leases
Remainder of 2024 ....................... Remainder of 2024 / Remainder of 2024 / $ / 5,121
2025 .................................... 2025 / 2025 / 10,485 / 10,485
2026 .................................... 2026 / 2026 / 10,743 / 10,743
2027 .................................... 2027 / 2027 / 5,914 / 5,914
2028 .................................... 2028 / 2028 / 267 / 267
Thereafter .............................. Thereafter / Thereafter / 34 / 34
Total future lease payments ............. Total future lease payments / Total future lease payments / $ / 32,564
Less: Imputed interest .................. Less: Imputed interest / Less: Imputed interest / (4,591) / (4,591)
Present value of operating lease liabilities ... Present value of operating lease liabilities / Present value of operating lease liabilities / $ / 27,973
As of June 30, 2024 and 2023, the remaining weighted-average lease term was 3.10 years and 2.01 years, respectively, and weighted-average discount rate used to determine the operating lease liability was 10.3% and 7.0%, respectively. During the six months ended June 30, 2024, and 2023, the Company incurred total operating lease expenses of $3.6 million and $0.4 million, respectively. During the six months ended June 30, 2024 and 2023, the Company incurred variable lease costs of $0.3 million and $0.3 million, respectively. During the six months ended June 30, 2024 and 2023, the Company’s costs related to short-term lease arrangements for real estate were $1.2 million and $1.1 million, respectively. Supplemental cash flow information related to leases was as follows (in thousands):
Six Months Ended
Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended / Six Months Ended
June 30, 2024 / June 30, 2024 / June 30, 2024 / June 30, 2023 / June 30, 2023 / June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities: ... Cash paid for amounts included in the measurement of lease liabilities: / Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases ... Operating cash flows for operating leases / Operating cash flows for operating leases / $ / 792 / $ / 400
Right-of-use assets obtained in exchange for lease obligations: ... Right-of-use assets obtained in exchange for lease obligations: / Right-of-use assets obtained in exchange for lease obligations:
Operating leases ........................ Operating leases / Operating leases / $ / 27,176 / $ / —
Note 15 – Commitments and Contingencies The Company has entered into certain contracts to receive consulting and other services that represent unconditional purchase obligations to purchase goods or services that are enforceable and legally binding. Purchase commitments exclude agreements that are cancellable without penalty and unconditional purchase commitments with a remaining term of one year or less. As of June 30, 2024, future payments related to non-cancelable commitments under these contracts are due as follows: $5.9 million (2024), $11.0 million (2025), and $2.7 million (2026). In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes, or claims. Although the Company cannot predict with assurance the outcome of any litigation, it does not believe there are currently any such actions that, if resolved unfavorable, would have a material impact on the Company’s financial condition, results of operations, or cash flows. F-54
CEREBRAS SYSTEMS INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 16 – Subsequent Events The Company has evaluated all transactions through August 29, 2024, the date these condensed consolidated financial statements were available to be issued, and for disclosure purposes, through September 30, 2024, and has determined that there are no other events, other than the following, that would require disclosure in or adjustment to these financial statements. Series F-1 and Series F-2 Financing In July 2024, the Company amended its certificate of incorporation to increase the number of authorized shares of its Series F-1 redeemable convertible preferred stock to 28,649,385 shares. In July and August 2024, the Company sold an aggregate of 2,728,512 shares of its Series F-1 redeemable convertible preferred stock at a purchase price of $14.66 per share, for aggregate proceeds of $40.0 million. In September 2024, the Company sold 3,069,577 shares of its Series F-1 redeemable convertible preferred stock to an investor at a purchase price of $14.66 per share, for aggregate proceeds of $45.0 million. The Company amended and restated the Series F-1 Purchase Agreement in September 2024. Pursuant to the Series F-1 Purchase Agreement, as amended, G42 agreed to purchase an aggregate of approximately 22.9 million shares of the Company’s non-voting Series F-2 redeemable convertible preferred stock (or, if purchased following the completion of the Company’s initial public offering, shares of the Company’s non-voting Class N common stock) at a purchase price of $14.66 per share, for anticipated gross proceeds to the Company of $335.0 million. G42 has committed to purchase these shares by April 15, 2025. Each share of the non-voting Class N common stock is convertible at any time at the option of the holder into one share of Class A common stock. G42 has agreed to not convert its shares of Class N common stock before July 31, 2025. Additionally, pursuant to the amended and restated Series F-1 Purchase Agreement, under certain circumstances, G42 will have the option to purchase additional shares of the Company’s Series F-2 redeemable convertible preferred stock (or, if purchased following the completion of the Company’s initial public offering, shares of the Company’s Class N common stock) at a 17.5% discount to the then-fair market value of the Company’s shares of Class A common stock. Customer Deposits In July 2024, the Company received a purchase order from G42 for the sale of $178.7 million of its high-performance computing systems, including installation and support services. Additionally, the Company entered into a new agreement, and modified an existing agreement, pursuant to which it agreed to provide operation and management services for certain high-performance computing systems purchased by G42. The fees to be paid by G42 under these agreements will be deducted from the initial $300.0 million prepayment received as part of the G42 April 2024 Agreement, and the $178.7 million fee for a July 2024 purchase order from G42 fulfills a portion of the prepayment and purchase order commitments under the G42 May 2024 Agreement. In September 2024, the Company received a purchase order and prepayment from a customer for high performance computing systems, installations, and support services for a total of $350.0 million. The prepayment will be used for payments to third-party vendors to manufacture high performance computing infrastructure and fulfills a portion of the purchase order commitments under the G42 May 2024 Agreement. F-55
Shares Cerebras Systems Inc. Class A Common Stock
*cerebraslogo1.jpg*
| --- | --- | --- | --- | --- | --- | | Citigroup | Citigroup | Citigroup | Barclays | Barclays | Barclays |
UBS Investment Bank
UBS Investment Bank / UBS Investment Bank / Wells Fargo Securities / Wells Fargo Securities / Wells Fargo Securities
UBS Investment Bank ..................... UBS Investment Bank / UBS Investment Bank / Wells Fargo Securities / Wells Fargo Securities / Wells Fargo Securities
| --- | --- | --- | --- | --- | --- | | Mizuho | Mizuho | Mizuho | TD Cowen | TD Cowen | TD Cowen |
Needham & Company
Needham & Company / Needham & Company / Craig-Hallum / Craig-Hallum / Craig-Hallum / Wedbush Securities / Wedbush Securities / Wedbush Securities / Rosenblatt / Rosenblatt / Rosenblatt / Academy Securities / Academy Securities / Academy Securities
Needham & Company ....................... Needham & Company / Needham & Company / Craig-Hallum / Craig-Hallum / Craig-Hallum / Wedbush Securities / Wedbush Securities / Wedbush Securities / Rosenblatt / Rosenblatt / Rosenblatt / Academy Securities / Academy Securities / Academy Securities
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the registrant in connection with the sale of the Class A common stock being registered. All amounts are estimates except for the Securities and Exchange Commission (the “SEC”) registration fee, the Financial Industry Regulatory Authority (“FINRA”) filing fee, and the Nasdaq Stock Market LLC listing fee.
Amount to Be Paid
Amount to Be Paid / Amount to Be Paid / Amount to Be Paid / Amount to Be Paid / Amount to Be Paid
SEC registration fee .................... SEC registration fee / SEC registration fee / $ / $ / $ / * / * / *
FINRA filing fee ........................ FINRA filing fee / FINRA filing fee / 15,500 / 15,500 / 15,500 / 15,500 / 15,500 / 15,500
Nasdaq Stock Market LLC listing fee ..... Nasdaq Stock Market LLC listing fee / Nasdaq Stock Market LLC listing fee / 25,000 / 25,000 / 25,000 / 25,000 / 25,000 / 25,000
Transfer agent’s fees and expenses ...... Transfer agent’s fees and expenses / Transfer agent’s fees and expenses / * / * / * / * / * / *
Printing and engraving expenses ......... Printing and engraving expenses / Printing and engraving expenses / * / * / * / * / * / *
Legal fees and expenses ................. Legal fees and expenses / Legal fees and expenses / * / * / * / * / * / *
Accounting fees and expenses ............ Accounting fees and expenses / Accounting fees and expenses / * / * / * / * / * / *
Blue Sky fees and expenses .............. Blue Sky fees and expenses / Blue Sky fees and expenses / * / * / * / * / * / *
Miscellaneous expenses .................. Miscellaneous expenses / Miscellaneous expenses / * / * / * / * / * / *
Total ................................... Total / Total / $ / $ / $ / * / * / *
_______________ *To be completed by amendment.
Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending, or completed actions, suits, or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee, or agent to the registrant. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. Article 9 of the registrant’s amended and restated certificate of incorporation, to be in effect immediately prior to the completion of this offering, provides for indemnification by the registrant of its directors, officers, and employees to the fullest extent permitted by the Delaware General Corporation Law. The registrant has entered or will enter into indemnification agreements with each of its current directors, executive officers, and certain other officers to provide these directors and officers additional contractual assurances regarding the scope of the indemnification set forth in the registrant’s amended and restated certificate of incorporation and amended and restated bylaws, each to be in effect immediately prior to the completion of this offering, and to provide additional procedural protections. There is no pending litigation or proceeding involving a director or executive officer of the registrant for which indemnification is sought. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director or officer of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except for liability (i) for any breach of the director’s or officer’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) in the case of directors, for unlawful payments of dividends or unlawful stock repurchases, redemptions, or other distributions, or (iv) for any transaction from which the director or officer derived an improper personal benefit, provided that II-1
officers may not be indemnified for actions by or in the right of the corporation. The registrant’s amended and restated certificate of incorporation, to be in effect immediately prior to the completion of this offering, provides for such limitation of liability. The registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (b) to the registrant with respect to payments that may be made by the registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law. The proposed form of underwriting agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification of directors and officers of the registrant by the underwriters against certain liabilities.
Item 15. Recent Sales of Unregistered Securities Since January 1, 2021, the registrant made sales of the following unregistered securities: Option and Common Stock Issuances Since January 1, 2021, the registrant granted to its employees, consultants, and other service providers options to purchase an aggregate of 36,325,064 shares of its Class A common stock under its 2016 Equity Incentive Plan (as amended, the “2016 Plan”), at exercise prices ranging from $2.40 to $13.01 per share. Since January 1, 2021, the registrant issued and sold to its employees, consultants, and other service providers an aggregate of 13,261,206 shares of its Class A common stock upon the exercise of stock options under its 2016 Plan, at exercise prices ranging from $0.09 to $11.51 per share, for a weighted-average exercise price of $2.93. Since January 1, 2021, the registrant granted to its employees, consultants, and other service providers restricted stock units covering an aggregate of 4,124,851 shares of its Class A common stock under its 2016 Plan. In August 2022, the registrant sold an aggregate of 599,880 shares of its Class A common stock to an accredited investor at a purchase price of $16.7525 per share, for an aggregate purchase price of $10.0 million. Redeemable Convertible Preferred Stock Issuances Between October and December 2021, the registrant issued and sold an aggregate of 9,168,419 shares of its Series F redeemable convertible preferred stock to eight accredited investors at a purchase price of $27.7448 per share, for an aggregate purchase price of $254.4 million. In July and August 2024, the registrant sold an aggregate of 2,728,512 shares of its Series F-1 redeemable convertible preferred stock to five accredited investors at a purchase price of $14.66 per share, for an aggregate purchase price of $40.0 million. In September 2024, the registrant issued and sold 3,069,577 shares of its Series F-1 redeemable convertible preferred stock to an accredited investor at a purchase price of $14.66 per share, for a purchase price of $45.0 million. In August 2024, the registrant issued 68,213 shares of its Series E redeemable convertible preferred stock to an accredited investor pursuant to a warrant with an exercise price of $0.00001 per share. The registrant believes these offers, sales, and issuances were exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under the Securities Act as transactions by an issuer not involving a public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock II-2
certificates issued in these transactions. All recipients had adequate access, through their relationships with the registrant, to information about the registrant.
Item 16. Exhibits and Financial Statement Schedules See the Exhibit Index attached to this registration statement, which Exhibit Index is incorporated herein by reference. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
Item 17. Undertakings (a)Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b)The undersigned registrant hereby undertakes that: (1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2)For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3
EXHIBIT INDEX
ExhibitNumber
ExhibitNumber / ExhibitNumber / Exhibit Description / Exhibit Description / Exhibit Description
1.1* .................................... 1.1* / 1.1* / Form of Underwriting Agreement / Form of Underwriting Agreement / Form of Underwriting Agreement
3.1 ..................................... 3.1 / 3.1 / Amended and Restated Certificate of Incorporation, as amended, as currently in effect / Amended and Restated Certificate of Incorporation, as amended, as currently in effect / Amended and Restated Certificate of Incorporation, as amended, as currently in effect
3.2 ..................................... 3.2 / 3.2 / Form of Amended and Restated Certificate of Incorporation, to be in effect immediately prior to the completion of this offering / Form of Amended and Restated Certificate of Incorporation, to be in effect immediately prior to the completion of this offering / Form of Amended and Restated Certificate of Incorporation, to be in effect immediately prior to the completion of this offering
3.3 ..................................... 3.3 / 3.3 / Bylaws, as currently in effect / Bylaws, as currently in effect / Bylaws, as currently in effect
3.4 ..................................... 3.4 / 3.4 / Form of Amended and Restated Bylaws, to be in effect immediately prior to the completion of this offering / Form of Amended and Restated Bylaws, to be in effect immediately prior to the completion of this offering / Form of Amended and Restated Bylaws, to be in effect immediately prior to the completion of this offering
4.1* .................................... 4.1* / 4.1* / Reference is made to Exhibits 3.1 through 3.4 / Reference is made to Exhibits 3.1 through 3.4 / Reference is made to Exhibits 3.1 through 3.4
4.2* .................................... 4.2* / 4.2* / Form of Class A Common Stock Certificate / Form of Class A Common Stock Certificate / Form of Class A Common Stock Certificate
4.3 ..................................... 4.3 / 4.3 / Amended and Restated Investors’ Rights Agreement, dated as of June 25, 2024 , by and among the Registrant and the investors listed therein / Amended and Restated Investors’ Rights Agreement, dated as of June 25, 2024 , by and among the Registrant and the investors listed therein / Amended and Restated Investors’ Rights Agreement, dated as of June 25, 2024 , by and among the Registrant and the investors listed therein
5.1* .................................... 5.1* / 5.1* / Opinion of Latham & Watkins LLP / Opinion of Latham & Watkins LLP / Opinion of Latham & Watkins LLP
10.1 .................................... 10.1 / 10.1 / Standard Industrial/Commercial Single-Tenant Lease, dated as of January 27, 2022, by and between the Registrant and Xinbei Tech, Inc. / Standard Industrial/Commercial Single-Tenant Lease, dated as of January 27, 2022, by and between the Registrant and Xinbei Tech, Inc. / Standard Industrial/Commercial Single-Tenant Lease, dated as of January 27, 2022, by and between the Registrant and Xinbei Tech, Inc.
10.2 .................................... 10.2 / 10.2 / First Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 2, 2023, by and between the Registrant and Xinbei Tech, Inc. / First Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 2, 2023, by and between the Registrant and Xinbei Tech, Inc. / First Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 2, 2023, by and between the Registrant and Xinbei Tech, Inc.
10.3 .................................... 10.3 / 10.3 / Second Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 4, 2024, by and between the Registrant and Xinbei Tech, Inc. / Second Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 4, 2024, by and between the Registrant and Xinbei Tech, Inc. / Second Amendment to Standard Industrial/Commercial Single-Tenant Lease, dated as of June 4, 2024, by and between the Registrant and Xinbei Tech, Inc.
10.4(a)# ................................ 10.4(a)# / 10.4(a)# / 2016 Equity Incentive Plan, as amended / 2016 Equity Incentive Plan, as amended / 2016 Equity Incentive Plan, as amended
10.4(b)# ................................ 10.4(b)# / 10.4(b)# / F orm of Notice of Stock Option Grant and Stock Option Agreement under the 2016 Eq u ity Incentive P lan / F orm of Notice of Stock Option Grant and Stock Option Agreement under the 2016 Eq u ity Incentive P lan / F orm of Notice of Stock Option Grant and Stock Option Agreement under the 2016 Eq u ity Incentive P lan
10.4(c)# ................................ 10.4(c)# / 10.4(c)# / Form of Notice of Restricted Stock Unit Award Grant and Restricted Stock Unit Agreement under the 2016 Equity Incentive P lan / Form of Notice of Restricted Stock Unit Award Grant and Restricted Stock Unit Agreement under the 2016 Equity Incentive P lan / Form of Notice of Restricted Stock Unit Award Grant and Restricted Stock Unit Agreement under the 2016 Equity Incentive P lan
10.5(a)# ................................ 10.5(a)# / 10.5(a)# / 2024 Incentive Award Plan / 2024 Incentive Award Plan / 2024 Incentive Award Plan
10.5(b)# ................................ 10.5(b)# / 10.5(b)# / Form of Stock Option Grant Notice and Stock Option Agreement under the 2024 Incentive Award Plan / Form of Stock Option Grant Notice and Stock Option Agreement under the 2024 Incentive Award Plan / Form of Stock Option Grant Notice and Stock Option Agreement under the 2024 Incentive Award Plan
10.5(c)# ................................ 10.5(c)# / 10.5(c)# / Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2024 Incentive Award Plan / Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2024 Incentive Award Plan / Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the 2024 Incentive Award Plan
10.6# ................................... 10.6# / 10.6# / 2024 Employee Stock Purchase Plan / 2024 Employee Stock Purchase Plan / 2024 Employee Stock Purchase Plan
10.7*# .................................. 10.7*# / 10.7*# / Non-Employee Director Compensation Program / Non-Employee Director Compensation Program / Non-Employee Director Compensation Program
10.8# ................................... 10.8# / 10.8# / Form of Indemnification and Advancement Agreement between the Registrant and each of its Directors and Executive Officers / Form of Indemnification and Advancement Agreement between the Registrant and each of its Directors and Executive Officers / Form of Indemnification and Advancement Agreement between the Registrant and each of its Directors and Executive Officers
10.9# ................................... 10.9# / 10.9# / Offer Letter, dated as of April 20, 2018, by and between the Registrant and Dhiraj Mallick / Offer Letter, dated as of April 20, 2018, by and between the Registrant and Dhiraj Mallick / Offer Letter, dated as of April 20, 2018, by and between the Registrant and Dhiraj Mallick
10.10# .................................. 10.10# / 10.10# / Offer Letter, dated as of December 6, 2019, by and between the Registrant and Anthony Maslowski / Offer Letter, dated as of December 6, 2019, by and between the Registrant and Anthony Maslowski / Offer Letter, dated as of December 6, 2019, by and between the Registrant and Anthony Maslowski
10.11# .................................. 10.11# / 10.11# / Separation and Release Agreement, dated as of February 15, 2024, by and between the Registrant and Anthony Maslowski / Separation and Release Agreement, dated as of February 15, 2024, by and between the Registrant and Anthony Maslowski / Separation and Release Agreement, dated as of February 15, 2024, by and between the Registrant and Anthony Maslowski
10.12(a)†+ .............................. 10.12(a)†+ / 10.12(a)†+ / Framework Agreement for the Supply of Goods, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Framework Agreement for the Supply of Goods, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Framework Agreement for the Supply of Goods, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC
10.12(b)†+ .............................. 10.12(b)†+ / 10.12(b)†+ / Purchase Order # 2023-0001, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0001, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0001, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC
10.12(c)†+ .............................. 10.12(c)†+ / 10.12(c)†+ / Purchase Order # 2023-0002, dated as of October 7, 2023, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0002, dated as of October 7, 2023, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0002, dated as of October 7, 2023, by and between the Registrant and G42 Holding US LLC
10.12(d)†+ .............................. 10.12(d)†+ / 10.12(d)†+ / Purchase Order # 2023-0004, dated as of December 29, 2023 , by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0004, dated as of December 29, 2023 , by and between the Registrant and G42 Holding US LLC / Purchase Order # 2023-0004, dated as of December 29, 2023 , by and between the Registrant and G42 Holding US LLC
10.12(e)†+ .............................. 10.12(e)†+ / 10.12(e)†+ / Amendment and Restatement Agreement relating to Purchase Order # 2023-0004, dated as of January 24, 2024, by and between the Registrant and G42 Holding US LLC / Amendment and Restatement Agreement relating to Purchase Order # 2023-0004, dated as of January 24, 2024, by and between the Registrant and G42 Holding US LLC / Amendment and Restatement Agreement relating to Purchase Order # 2023-0004, dated as of January 24, 2024, by and between the Registrant and G42 Holding US LLC
10.12(f)†+ .............................. 10.12(f)†+ / 10.12(f)†+ / Purchase Order # 2024-0003, dated as of July 10, 2024, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2024-0003, dated as of July 10, 2024, by and between the Registrant and G42 Holding US LLC / Purchase Order # 2024-0003, dated as of July 10, 2024, by and between the Registrant and G42 Holding US LLC
II-4
ExhibitNumber
ExhibitNumber / ExhibitNumber / Exhibit Description / Exhibit Description / Exhibit Description
10.13(a)†+ .............................. 10.13(a)†+ / 10.13(a)†+ / Master Services Agreement, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Master Services Agreement, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Master Services Agreement, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC
10.13(b)†+ .............................. 10.13(b)†+ / 10.13(b)†+ / Statement of Work, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of September 13, 2023, by and between the Registrant and G42 Holding US LLC
10.13(c)†+ .............................. 10.13(c)†+ / 10.13(c)†+ / Statement of Work, dated as of February 23, 2024, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of February 23, 2024, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of February 23, 2024, by and between the Registrant and G42 Holding US LLC
10.13(d)†+ .............................. 10.13(d)†+ / 10.13(d)†+ / Amendment and Restatement Agreement relating to Purc hase Order # 2024-0 0 01 , dated as of July 10 , 2024, by and between the Registrant and Core 42 Holding US LLC / Amendment and Restatement Agreement relating to Purc hase Order # 2024-0 0 01 , dated as of July 10 , 2024, by and between the Registrant and Core 42 Holding US LLC / Amendment and Restatement Agreement relating to Purc hase Order # 2024-0 0 01 , dated as of July 10 , 2024, by and between the Registrant and Core 42 Holding US LLC
10.13(e)†+ .............................. 10.13(e)†+ / 10.13(e)†+ / Statement of Work, dated as of Jul y 10 , 2024, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of Jul y 10 , 2024, by and between the Registrant and G42 Holding US LLC / Statement of Work, dated as of Jul y 10 , 2024, by and between the Registrant and G42 Holding US LLC
10.14† .................................. 10.14† / 10.14† / Letter of Award in Respect of HPC Infrastructure PO, dated as of April 24, 2024, by and between the Registrant and G42 Holding US LLC / Letter of Award in Respect of HPC Infrastructure PO, dated as of April 24, 2024, by and between the Registrant and G42 Holding US LLC / Letter of Award in Respect of HPC Infrastructure PO, dated as of April 24, 2024, by and between the Registrant and G42 Holding US LLC
10.15(a)†+ .............................. 10.15(a)†+ / 10.15(a)†+ / Series F-1 Preferred Stock Purchase Agreement, dated as of May 30, 2024, by and between the Registrant and the investors listed therein, as amended / Series F-1 Preferred Stock Purchase Agreement, dated as of May 30, 2024, by and between the Registrant and the investors listed therein, as amended / Series F-1 Preferred Stock Purchase Agreement, dated as of May 30, 2024, by and between the Registrant and the investors listed therein, as amended
10.15(b)†+ .............................. 10.15(b)†+ / 10.15(b)†+ / Amended and Restated Series F-1 a nd F-2 Preferred Stock Purchase Agreement , dated as of September 27 , 2024, by and between the Registrant and the investors listed therein / Amended and Restated Series F-1 a nd F-2 Preferred Stock Purchase Agreement , dated as of September 27 , 2024, by and between the Registrant and the investors listed therein / Amended and Restated Series F-1 a nd F-2 Preferred Stock Purchase Agreement , dated as of September 27 , 2024, by and between the Registrant and the investors listed therein
10.16†+ ................................. 10.16†+ / 10.16†+ / Letter Agreement, dated as of May 30, 2024, by and between the Registrant, Expansion Project Technologies Holding 8 SPV RSC Ltd., and MOZN Holding RSC Ltd. / Letter Agreement, dated as of May 30, 2024, by and between the Registrant, Expansion Project Technologies Holding 8 SPV RSC Ltd., and MOZN Holding RSC Ltd. / Letter Agreement, dated as of May 30, 2024, by and between the Registrant, Expansion Project Technologies Holding 8 SPV RSC Ltd., and MOZN Holding RSC Ltd.
10.17†+ ................................. 10.17†+ / 10.17†+ / Purchase Order , dated as of September 1 , 2024, by and between the Registrant and Mohamed bin Zayed University of Artificial Intelligence / Purchase Order , dated as of September 1 , 2024, by and between the Registrant and Mohamed bin Zayed University of Artificial Intelligence / Purchase Order , dated as of September 1 , 2024, by and between the Registrant and Mohamed bin Zayed University of Artificial Intelligence
21.1 .................................... 21.1 / 21.1 / List of subsidiaries of th e Registrant / List of subsidiaries of th e Registrant / List of subsidiaries of th e Registrant
23.1 .................................... 23.1 / 23.1 / Consent of BDO USA, P.C. , independent registered public accounting firm / Consent of BDO USA, P.C. , independent registered public accounting firm / Consent of BDO USA, P.C. , independent registered public accounting firm
23.2* ................................... 23.2* / 23.2* / Consent of Latham & Watkins LLP (included in Exhibit 5.1) / Consent of Latham & Watkins LLP (included in Exhibit 5.1) / Consent of Latham & Watkins LLP (included in Exhibit 5.1)
24.1 .................................... 24.1 / 24.1 / Power of Attorney (reference is made to the signature page to the Registration Statement) / Power of Attorney (reference is made to the signature page to the Registration Statement) / Power of Attorney (reference is made to the signature page to the Registration Statement)
107.1 ................................... 107.1 / 107.1 / Filing Fee Table / Filing Fee Table / Filing Fee Table
_______________ *To be filed by amendment.
†Portions of this exhibit (indicated by asterisks) have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K because they are both not material and are the type that the Registrant treats as private or confidential. +Portions of this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The Registrant undertakes to furnish a copy of all omitted schedules and exhibits to the SEC upon its request. II-5
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on the 30th day of September, 2024.
CEREBRAS SYSTEMS INC.
CEREBRAS SYSTEMS INC. / CEREBRAS SYSTEMS INC. / CEREBRAS SYSTEMS INC. / CEREBRAS SYSTEMS INC. / CEREBRAS SYSTEMS INC.
By: ..................................... By: / By: / /s/ Andrew D. Feldman / /s/ Andrew D. Feldman / /s/ Andrew D. Feldman
Name: ................................... Name: / Name: / Andrew D. Feldman / Andrew D. Feldman / Andrew D. Feldman
Title: .................................. Title: / Title: / Chief Executive Officer / Chief Executive Officer / Chief Executive Officer
POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew D. Feldman, Robert Komin, and Shirley X. Li, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
Signature / Signature / Title / Title / Title / Date / Date / Date
/s/ Andrew D. Feldman ................... /s/ Andrew D. Feldman / /s/ Andrew D. Feldman / Chief Executive Officer, President, and Director (Principal Executive Officer) / Chief Executive Officer, President, and Director (Principal Executive Officer) / Chief Executive Officer, President, and Director (Principal Executive Officer) / September 30, 2024 / September 30, 2024 / September 30, 2024
Andrew D. Feldman ....................... Andrew D. Feldman / Andrew D. Feldman / Chief Executive Officer, President, and Director (Principal Executive Officer) / September 30, 2024
/s/ Robert Komin ........................ /s/ Robert Komin / /s/ Robert Komin / Chief Financial Officer (Principal Financial Officer) / Chief Financial Officer (Principal Financial Officer) / Chief Financial Officer (Principal Financial Officer) / September 30, 2024 / September 30, 2024 / September 30, 2024
Robert Komin ............................ Robert Komin / Robert Komin / Chief Financial Officer (Principal Financial Officer) / September 30, 2024
/s/ Terumi Katano ....................... /s/ Terumi Katano / /s/ Terumi Katano / Chief Accounting Officer (Principal Accounting Officer) / Chief Accounting Officer (Principal Accounting Officer) / Chief Accounting Officer (Principal Accounting Officer) / September 30, 2024 / September 30, 2024 / September 30, 2024
Terumi Katano ........................... Terumi Katano / Terumi Katano / Chief Accounting Officer (Principal Accounting Officer) / September 30, 2024
/s/ Paul Auvil .......................... /s/ Paul Auvil / /s/ Paul Auvil / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Paul Auvil .............................. Paul Auvil / Paul Auvil / Director / September 30, 2024
/s/ Glenda Dorchak ...................... /s/ Glenda Dorchak / /s/ Glenda Dorchak / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Glenda Dorchak .......................... Glenda Dorchak / Glenda Dorchak / Director / September 30, 2024
/s/ Thomas Lantzsch ..................... /s/ Thomas Lantzsch / /s/ Thomas Lantzsch / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Thomas Lantzsch ......................... Thomas Lantzsch / Thomas Lantzsch / Director / September 30, 2024
/s/ Lior Susan .......................... /s/ Lior Susan / /s/ Lior Susan / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Lior Susan .............................. Lior Susan / Lior Susan / Director / September 30, 2024
/s/ Steve Vassallo ...................... /s/ Steve Vassallo / /s/ Steve Vassallo / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Steve Vassallo .......................... Steve Vassallo / Steve Vassallo / Director / September 30, 2024
/s/ Eric Vishria ........................ /s/ Eric Vishria / /s/ Eric Vishria / Director / Director / Director / September 30, 2024 / September 30, 2024 / September 30, 2024
Eric Vishria ............................ Eric Vishria / Eric Vishria / Director / September 30, 2024
II-6
