UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact name of registrant as specified in its charter) Delaware 94-3368109 (State or other jurisdiction of incorporation or organization) 2451 Bert Dr. Hollister, CA 95023 (Address of pri ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2023 was $8.2 million, a 24% decline from $10.7 million in Q3 2022. Excluding two large non-biotech customer deliveries in Q3 2022, underlying growth was approximately 5% [8][59] - Gross profit for Q3 2023 was $1.5 million compared to $4.8 million in Q3 2022, with gross margin at 18.0%, down from 44.6% in the prior year [9][80] - Net loss for Q3 2023 was $10.2 million or $0.34 per diluted share, compared to a net loss of $22.5 million or $0.80 per diluted share in Q3 2022 [81] - Adjusted EBITDA was negative $5.5 million for Q3 2023, compared to negative $4.6 million in Q3 2022 [60] Business Line Data and Key Metrics Changes - Lab Essentials revenue was $7.3 million in Q3 2023, a 23% decrease from $9.5 million in Q3 2022, attributed to a lower number of customers and lower average revenue per customer [79] - Clinical solutions revenue was $0.6 million in Q3 2023, a 35% decline from $0.9 million in Q3 2022, due to lower average revenue per customer, partially offset by a higher number of customers [58] Market Data and Key Metrics Changes - The company has been qualified by 12 high-profile customers since June, with eight involved in cell and gene therapy development, indicating a positive market response [5] - The company expects market conditions observed in Q3 to persist, anticipating total revenue for fiscal 2023 to be at the low end of the guidance range of $37 million to $40 million [7][61] Company Strategy and Development Direction - The company is focused on executing its growth strategy to help customers accelerate the introduction of novel therapies and diagnostics [14] - Significant investments have been made in a new GMP facility, which is expected to unlock potential for future growth, with capacity to deliver approximately $200 million in annual product revenue when fully utilized [76][54] - The company is committed to managing expenses while preserving critical investments for long-term growth [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2024, noting an increase in clinical customers and positive feedback from recent audits [56][71] - The company believes it is near the bottom of the current market conditions, with signs of order increases and stabilization in biotech funding [41][85] - Management highlighted the importance of maintaining investments while managing costs to support future growth [37][116] Other Important Information - The company raised $22.9 million in capital through a registered direct offering and paid down $10 million of long-term debt during Q3 2023 [10][75] - Operating expenses for Q3 2023 were $10.2 million, significantly reduced from $27.7 million in Q3 2022, driven by reduced headcount and spending [59] Q&A Session Summary Question: What is the outlook for revenue per customer in 2024? - Management indicated steady increases in average revenue per customer on the lab essentials side, but noted that newer clinical customers may lead to flat or declining revenue per customer in that segment [28][44] Question: What percentage of the customer base has visibility, particularly in biopharma? - Management stated that biopharma constitutes about half of the customer base, with emerging biotech making up a significant portion, and noted a decline in that segment due to funding issues [31][47] Question: Are there plans for further cost-cutting efforts? - Management confirmed that while they have made significant reductions in operating expenses, they do not anticipate dramatic cuts going forward to preserve critical investments [105][115] Question: What is the status of the new GMP facility and customer audits? - Management reported positive feedback from customers who have audited the new facility, with a pipeline of audits extending into 2024 [70][91]

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $11.5 million, a slight decline from $11.7 million in Q2 2022, attributed to lower demand from early-stage biopharma customers, partially offset by a large order delivery [12][19] - Gross profit for Q2 2023 was $5.1 million, compared to $5.2 million in Q2 2022, with a gross margin of 43.9%, down from 44.9% in the previous year [25] - Net loss for Q2 2023 was $7.2 million or $0.25 per diluted share, compared to a net loss of $6.2 million or $0.22 per diluted share in Q2 2022 [28] - Adjusted EBITDA was negative $2.3 million for Q2 2023, an improvement from negative $4.9 million in Q2 2022 [29] - Free cash outflow was $6.2 million for Q2 2023, down from $16.8 million in Q2 2022, marking the fourth consecutive quarter of lower cash outflow [49] Business Line Data and Key Metrics Changes - Lab Essentials revenue was $7.6 million in Q2 2023, a 10% decrease from $8.4 million in Q2 2022, due to a decreased number of customers, partially offset by higher average revenue per customer [23] - Clinical Solutions revenue was $3.7 million in Q2 2023, a 24% increase from $2.9 million in Q2 2022, driven by an increased number of customers [45] Market Data and Key Metrics Changes - The company expects a mid-single digit percentage year-on-year decline in top-line revenue for 2023, with a return to year-on-year growth anticipated in Q4 2023 [42] - The emerging biotech segment, historically a growth driver, is currently focused on conserving capital by delaying or canceling clinical trials, though this is viewed as a temporary situation [41] Company Strategy and Development Direction - The company is committed to executing its long-term growth strategy, focusing on accelerating the introduction of novel therapies and diagnostics [20][32] - The new GMP-grade modular manufacturing facility is expected to unlock significant potential for the business, with a capacity to deliver approximately $200 million in annual product revenue when fully utilized [21][40] - The company is diversifying its offerings beyond early-stage biopharma to include life science tools and diagnostics [55] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term potential of target markets despite current challenges in the biotech sector [20] - The company has seen positive early feedback on its new product line, with expectations for increased customer engagement as they ramp up purchase volumes [22][45] - Management anticipates that operating expenses will remain stable or decrease, allowing for growth without significant additional investments [75] Other Important Information - The company had $23.7 million in cash and cash equivalents and $22.1 million in gross debt as of June 30, 2023 [30] - The company has reclassified some long-term debt into the current portion due to covenant compliance issues, but no notices have been issued by lenders [76] Q&A Session Summary Question: Insights on macro landscape and growth drivers - Management acknowledged the difficult market backdrop but highlighted the company's ability to deliver and the diversity of market segments [38] Question: Sales cycle for converting facility audits to customers - Management indicated that the sales cycle is lengthy, typically taking 12 to 24 months for customers to scale up after initial engagement [70] Question: Guidance on Clinical Solutions revenue - Management noted that while Q2 saw a boost from a large order, Q3 and Q4 are expected to return to more normal levels, with smaller orders and delays being observed [101][102] Question: Impact of new GMP facility on business - Management expressed confidence that the new facility will attract both large and small customers, enhancing the company's ability to meet diverse needs [82][96]

Filing Information This section provides the basic filing and cautionary information for Alpha Teknova, Inc.'s Form 10-Q [Report Details](index=1&type=section&id=Report%20Details) Alpha Teknova, Inc.'s Form 10-Q provides basic filing information, registration details, and filer status - The registrant is Alpha Teknova, Inc., a Delaware corporation, with its **common stock** traded on The Nasdaq Stock Market LLC under the symbol TKNO[2](index=2&type=chunk)[3](index=3&type=chunk) Filer Status | Status | Indication | | :------------------------ | :--------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | - As of August 9, 2023, the company had **28,341,302** shares of **common stock outstanding**[4](index=4&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) The Form 10-Q highlights forward-looking statements subject to substantial risks, with actual results potentially differing - The report contains forward-looking statements regarding financial condition, **results of operations**, plans, objectives, future performance, and business, identifiable by words like 'may,' 'will,' 'expects,' 'plans,' 'anticipates,' and 'potential'[5](index=5&type=chunk) - Key risks include the company's history of **losses** and ability to continue as a **going concern**, ability to meet guidance, future financial performance, expansion capabilities, liquidity, legal proceedings, and the impact of global economic conditions and competition[6](index=6&type=chunk)[11](index=11&type=chunk) - The outcome of these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors detailed in the 'Risk Factors' section of the Annual Report on Form 10-K and this 10-Q[8](index=8&type=chunk) PART I. FINANCIAL INFORMATION This part presents Alpha Teknova, Inc.'s unaudited condensed financial statements and management's analysis [Item 1. Condensed Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) Alpha Teknova, Inc.'s unaudited condensed financial statements for Q2 2023 and 2022 present key financial positions [Condensed Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20(Unaudited)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) Condensed Statements of Operations present key financial figures Condensed Statements of Operations (Unaudited) - Three Months Ended June 30 | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Revenue | $11,527 | $11,690 | $(163) | -1.4% | | Cost of sales | $6,461 | $6,443 | $18 | 0.3% | | Gross profit | $5,066 | $5,247 | $(181) | -3.4% | | Total operating expenses | $12,063 | $11,873 | $190 | 1.6% | | Loss from operations | $(6,997) | $(6,626) | $(371) | 5.6% | | Net loss | $(7,154) | $(6,203) | $(951) | 15.3% | | Net loss per share | $(0.25) | $(0.22) | $(0.03) | 13.6% | Condensed Statements of Operations (Unaudited) - Six Months Ended June 30 | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :--- | :--- | :--------- | :--------- | | Revenue | $20,648 | $22,837 | $(2,189) | -9.6% | | Cost of sales | $13,159 | $12,241 | $918 | 7.5% | | Gross profit | $7,489 | $10,596 | $(3,107) | -29.3% | | Total operating expenses | $23,432 | $23,065 | $367 | 1.6% | | Loss from operations | $(15,943) | $(12,469) | $(3,474) | 27.9% | | Net loss | $(15,971) | $(11,700) | $(4,271) | 36.5% | | Net loss per share | $(0.57) | $(0.42) | $(0.15) | 35.7% | [Condensed Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Balance%20Sheets%20(Unaudited)%20at%20June%2030,%202023%20and%20December%2031,%202022) Condensed Balance Sheets present key financial figures Condensed Balance Sheets (Unaudited) - Key Figures (in thousands) | Item | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $23,710 | $42,236 | $(18,526) | -43.9% | | Total current assets | $43,113 | $61,140 | $(18,027) | -29.5% | | Total assets | $132,548 | $152,261 | $(19,713) | -13.0% | | Current debt, net | $22,162 | $0 | $22,162 | N/A | | Total current liabilities | $28,652 | $10,875 | $17,777 | 163.5% | | Total liabilities | $46,340 | $52,376 | $(6,036) | -11.5% | | Total stockholders' equity | $86,208 | $99,885 | $(13,677) | -13.7% | [Condensed Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) Condensed Statements of Stockholders' Equity present key financial figures Changes in Stockholders' Equity (in thousands) - Three Months Ended June 30, 2023 | Item | Additional Paid-in Capital | Accumulated Deficit | Stockholders' Equity | | :------------------------------------ | :------------------------- | :------------------ | :------------------- | | Balance at April 1, 2023 | $155,910 | $(63,823) | $92,087 | | Stock-based compensation | $1,070 | — | $1,070 | | Issuance of common stock (options/ESPP) | $205 | — | $205 | | Net loss | — | $(7,154) | $(7,154) | | Balance at June 30, 2023 | $157,185 | $(70,977) | $86,208 | Changes in Stockholders' Equity (in thousands) - Six Months Ended June 30, 2023 | Item | Additional Paid-in Capital | Accumulated Deficit | Stockholders' Equity | | :------------------------------------ | :------------------------- | :------------------ | :------------------- | | Balance at January 1, 2023 | $154,891 | $(55,006) | $99,885 | | Stock-based compensation | $2,080 | — | $2,080 | | Issuance of common stock (options/ESPP) | $214 | — | $214 | | Net loss | — | $(15,971) | $(15,971) |\ | Balance at June 30, 2023 | $157,185 | $(70,977) | $86,208 | [Condensed Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)%20for%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%202022) Condensed Statements of Cash Flows present key financial figures Condensed Statements of Cash Flows (Unaudited) - Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | Change ($) | | :------------------------------------ | :----- | :----- | :--------- | | Net cash used in operating activities | $(11,540) | $(11,039) | $(501) | | Net cash used in investing activities | $(6,650) | $(16,837) | $10,187 | | Net cash (used in) provided by financing activities | $(205) | $5,092 | $(5,297) | | Net decrease in cash and cash equivalents | $(18,395) | $(22,784) | $4,389 | | Cash, cash equivalents, and restricted cash at end of period | $23,841 | $64,734 | $(40,893) | [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) This section provides detailed notes to the unaudited condensed financial statements [Note 1. Nature of the Business](index=10&type=section&id=Note%201.%20Nature%20of%20the%20Business) Note 1 outlines Alpha Teknova, Inc.'s business as a producer of critical reagents for life sciences - **Alpha Teknova, Inc.** produces critical reagents for discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics[29](index=29&type=chunk) - Product offerings include pre-poured media plates, liquid cell culture media and supplements, and molecular biology reagents[29](index=29&type=chunk) - The company serves life sciences markets, including pharmaceutical, biotechnology, CDMOs, in vitro diagnostics, and academic/government research institutions, offering both catalog and custom products[29](index=29&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Note 2 details the basis of presentation and summary of significant accounting policies - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules, consistent with the 2022 annual financial statements[31](index=31&type=chunk)[32](index=32&type=chunk) - Management's assessment indicates **substantial doubt** about the Company's ability to continue as a **going concern** for the next twelve months due to limited capital resources, **net losses** (**$7.2 million** for Q2, **$16.0 million** for YTD), **accumulated deficit** (**$71.0 million**), and outstanding borrowings (**$22.1 million**)[35](index=35&type=chunk)[36](index=36&type=chunk) - The company implemented a **workforce reduction** of approximately **40 positions** on February 1, 2023, incurring **$0.7 million** in severance and termination benefits, recorded in general and administrative expenses[40](index=40&type=chunk) - An At-the-Market (ATM) Facility was established on March 30, 2023, with Cowen and Company, LLC, allowing the company to sell up to **$50.0 million** in **common stock**[41](index=41&type=chunk) Cash, Cash Equivalents, and Restricted Cash (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $23,710 | $42,236 | | Restricted cash included in other current assets | $131 | — | | Total cash, cash equivalents, and restricted cash | $23,841 | $42,236 | [Note 3. Revenue Recognition](index=12&type=section&id=Note%203.%20Revenue%20Recognition) Note 3 details revenue recognition policies and revenue by product category and geographic region - **Revenue** is recognized when control of promised goods or services is transferred to customers, typically at a point in time upon shipment[45](index=45&type=chunk) Revenue by Product Category (in thousands) | Product Category | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--------------- | :------ | :------ | :------- | :------- | | Lab Essentials | $7,581 | $8,393 | $14,838 | $15,368 | | Clinical Solutions | $3,653 | $2,943 | $5,262 | $6,755 | | Other | $293 | $354 | $548 | $714 | | **Total Revenue** | **$11,527** | **$11,690** | **$20,648** | **$22,837** | Revenue by Geographic Region (in thousands) | Geographic Region | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :---------------- | :------ | :------ | :------- | :------- | | United States | $11,075 | $11,285 | $19,801 | $22,105 | | International | $452 | $405 | $847 | $732 | | **Total Revenue** | **$11,527** | **$11,690** | **$20,648** | **$22,837** | [Note 4. Concentrations of Risk](index=12&type=section&id=Note%204.%20Concentrations%20of%20Risk) Note 4 details customer and supplier concentrations of risk Customer Concentrations (Revenue %) | Customer | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | AR June 30, 2023 | AR Dec 31, 2022 | | :--------------- | :------ | :------ | :------- | :------- | :--------------- | :-------------- | | Distributor B | **16%** | **14%** | **17%** | **13%** | **17%** | **17%** | | Direct Customer A | **24%** | <10% | **13%** | <10% | **26%** | <10% | Supplier Concentrations (Inventory Purchases %) | Supplier | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | AP June 30, 2023 | AP Dec 31, 2022 | | :--------------- | :------ | :------ | :------- | :------- | :--------------- | :-------------- | | Distributor A | **37%** | **39%** | **37%** | **35%** | **15%** | **11%** | | Direct Supplier A | **14%** | <10% | **12%** | **12%** | <10% | <10% | | Direct Supplier C | **13%** | <10% | <10% | <10% | <10% | <10% | | Direct Supplier D | **11%** | <10% | <10% | <10% | <10% | <10% | [Note 5. Inventories, Net](index=13&type=section&id=Note%205.%20Inventories,%20Net) Note 5 details the composition of inventories, net Inventories, Net (in thousands) | Inventory Type | June 30, 2023 | December 31, 2022 | | :------------- | :------------ | :---------------- | | Finished goods, net | $8,344 | $8,368 | | Work in process | $108 | $186 | | Raw materials, net | $3,566 | $3,693 | | **Total inventories, net** | **$12,018** | **$12,247** | [Note 6. Property, Plant, and Equipment, Net](index=13&type=section&id=Note%206.%20Property,%20Plant,%20and%20Equipment,%20Net) Note 6 details property, plant, and equipment, net, including depreciation and impairment Property, Plant, and Equipment, Net (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Machinery and equipment | $18,211 | $19,433 | | Office furniture and equipment | $739 | $628 | | Vehicles | $292 | $229 | | Leasehold improvements | $12,865 | $12,093 | | Less—Accumulated depreciation | $(5,406) | $(4,520) | | Construction in progress | $26,160 | $23,714 | | **Total property, plant, and equipment, net** | **$52,861** | **$51,577** | - **Depreciation expense** was **$1.0 million** for Q2 2023 (vs **$0.5 million** in Q2 2022) and **$1.9 million** for YTD 2023 (vs **$1.0 million** in YTD 2022)[53](index=53&type=chunk) - The company recorded a **$2.2 million impairment charge** related to certain long-lived assets for the three and six months ended June 30, 2023, due to changes in market price, continued **losses**, and expected early disposal[55](index=55&type=chunk) [Note 7. Leases](index=13&type=section&id=Note%207.%20Leases) Note 7 details the company's operating leases and related expenses - The company leases office, warehouse, manufacturing space, and equipment with remaining lease terms of one to **14 years**, all classified as **operating leases**[56](index=56&type=chunk)[57](index=57&type=chunk) - **Operating lease expense** was **$0.7 million** for Q2 2023 (vs **$0.8 million** in Q2 2022) and **$1.5 million** for YTD 2023 (vs **$1.6 million** in YTD 2022)[58](index=58&type=chunk) Maturities of Operating Lease Liabilities at June 30, 2023 (in thousands) | Period | Amount | | :--------------- | :----- | | Remainder of 2023 | $1,293 | | 2024 | $2,601 | | 2025 | $2,354 | | 2026 | $2,413 | | 2027 | $2,416 | | Thereafter | $11,917 | | **Total lease payments** | **$22,994** | | Less: imputed interest | $(4,921) | | **Present value of lease liabilities** | **$18,073** | [Note 8. Intangible Assets, Net](index=14&type=section&id=Note%208.%20Intangible%20Assets,%20Net) Note 8 details intangible assets, net, including customer relationships and tradename Intangible Assets, Net (in thousands) | Asset Type | Gross (June 30, 2023) | Accumulated Amortization (June 30, 2023) | Net (June 30, 2023) | Net (Dec 31, 2022) | | :-------------------- | :-------------------- | :--------------------------------------- | :------------------ | :----------------- | | Customer relationships | $9,180 | $5,116 | $4,064 | $4,637 | | Tradename | $12,919 | — | $12,919 | $12,919 | | **Total intangible assets** | **$22,099** | **$5,116** | **$16,983** | **$17,556** | - **Amortization expense** was **$0.3 million** for Q2 2023 and Q2 2022, and **$0.6 million** for YTD 2023 and YTD 2022[60](index=60&type=chunk) - The remaining weighted-average useful life of definite-lived **intangible assets** (**customer relationships**) was **3.5 years** as of June 30, 2023[61](index=61&type=chunk) [Note 9. Accrued Liabilities](index=15&type=section&id=Note%209.%20Accrued%20Liabilities) Note 9 details the composition of accrued liabilities Accrued Liabilities (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Payroll-related | $2,321 | $2,796 | | Property, plant, and equipment | $655 | $1,966 | | Deferred revenue | $36 | $198 | | Other | $646 | $1,243 | | **Total current accrued liabilities** | **$3,658** | **$6,203** | [Note 10. Debt, Net](index=15&type=section&id=Note%2010.%20Debt,%20Net) Note 10 details the company's debt, net, including credit facility terms and covenant compliance - The company has a **$57.135 million credit facility** with MidCap Financial Trust, consisting of a **$52.135 million Term Loan** and a **$5.0 million Revolver**[63](index=63&type=chunk)[64](index=64&type=chunk) - Interest rates for the **Term Loan** and **Revolver** are based on Term SOFR plus applicable margins (**7.00%** and **4.00%** respectively), with a Term SOFR floor of **4.50%** as per Amendment No. 2[68](index=68&type=chunk) - The company was in compliance with financial covenants as of June 30, 2023, but determined it was in **non-compliance** with the trailing twelve months minimum **net revenue** covenant as of July 31, 2023, making it unlikely to comply for the remainder of 2023[70](index=70&type=chunk) - **Non-compliance** with the **revenue** covenant constitutes an **event of default**, giving the lender the right to **accelerate debt repayment** of the outstanding **Term Loan** balance, leading to reclassification of long-term **debt** to current[70](index=70&type=chunk) Debt, Net (in thousands) | Item | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Debt | $22,135 | $22,135 | | Cumulative accretion of exit fee | $335 | $161 | | Unamortized debt discount and debt issuance costs | $(308) | $(320) | | **Debt, net** | **$22,162** | **$21,976** | [Note 11. Stock-Based Compensation](index=16&type=section&id=Note%2011.%20Stock-Based%20Compensation) Note 11 details the company's stock-based compensation plans and related expenses - The company maintains equity incentive plans (**stock options**, **restricted stock units**) and an **Employee Stock Purchase Plan** (ESPP) with various vesting schedules[72](index=72&type=chunk)[76](index=76&type=chunk) Stock Option Activity - Six Months Ended June 30, 2023 (in thousands, except per share data) | Item | Number of Shares | Weighted Average Exercise Price per Share | | :-------------------------- | :--------------- | :-------------------------------------- | | Outstanding at January 1, 2023 | 3,846,532 | $7.02 | | Granted | 548,152 | $5.37 | | Exercised | (51,774) | $1.47 | | Forfeited | (181,786) | $10.33 | | Expired | (29,701) | $16.14 | | Outstanding at June 30, 2023 | 4,131,423 | $6.66 | Stock-Based Compensation Expense (in thousands) | Expense Category | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :-------------------- | :------ | :------ | :------- | :------- | | Cost of sales | $40 | $44 | $76 | $63 |\ | Research and development | $40 | $48 | $77 | $113 | | Sales and marketing | $172 | $126 | $324 | $225 | | General and administrative | $818 | $716 | $1,603 | $1,320 | | **Total stock-based compensation expense** | **$1,070** | **$934** | **$2,080** | **$1,721** | - **Unrecognized compensation expense** for **stock options** was **$8.7 million** at June 30, 2023, expected to be recognized over **3.02 years**[77](index=77&type=chunk) [Note 12. Income Taxes](index=18&type=section&id=Note%2012.%20Income%20Taxes) Note 12 details the company's income tax provision and effective tax rates - For Q2 2023, the company recorded an insignificant **provision for income taxes** (**$15 thousand**) compared to a **$0.4 million benefit** in Q2 2022, with **effective tax rates** of **0.2%** and **6.0%** respectively[81](index=81&type=chunk) - For YTD 2023, the **benefit from income taxes** was insignificant (**$-3 thousand**) compared to a **$0.8 million benefit** in YTD 2022, with **effective tax rates** of **0.0%** and **6.1%** respectively[82](index=82&type=chunk) - The **effective tax rates** differ from the federal statutory rate primarily due to **operating losses** not expected to produce a benefit[81](index=81&type=chunk)[82](index=82&type=chunk) [Note 13. Net Loss Per Share](index=18&type=section&id=Note%2013.%20Net%20Loss%20Per%20Share) Note 13 details the calculation of net loss per share, both basic and diluted Net Loss Per Share - Basic and Diluted | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Net loss (in thousands) | $(7,154) | $(6,203) | $(15,971) | $(11,700) | | Weighted average shares (in thousands) | 28,272 | 28,058 | 28,227 | 28,044 | | **Net loss per share** | **$(0.25)** | **$(0.22)** | **$(0.57)** | **$(0.42)** | - **Stock options**, **restricted stock units**, and employee stock purchase rights were excluded from diluted EPS calculation as their effect was **anti-dilutive** for all periods presented[83](index=83&type=chunk) [Note 14. Related Parties](index=18&type=section&id=Note%2014.%20Related%20Parties) Note 14 identifies related parties and transactions - Meeches LLC, controlled by founders Ted and Irene Davis, is identified as a related party[85](index=85&type=chunk) - The company terminated its Mansfield lease with Meeches on May 16, 2023, and entered into an escrow agreement with the new property owner for early termination consideration[86](index=86&type=chunk) [Note 15. Subsequent Events](index=19&type=section&id=Note%2015.%20Subsequent%20Events) Note 15 details subsequent events, including credit agreement amendments and financing agreements - On July 13, 2023, the company entered into Amendment No. 3 to the **Credit Agreement**, increasing the Permitted Debt definition to **$1.1 million** to allow for D&O liability insurance financing[87](index=87&type=chunk) - A financing agreement for D&O liability insurance was also entered into on July 13, 2023, for **$1.2 million** in premiums, taxes, and fees, plus **7.74%** annual interest, payable in ten monthly installments[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Alpha Teknova's financial condition and operational results for Q2 2023, including business and liquidity [Overview](index=20&type=section&id=Overview) This section provides an overview of Alpha Teknova's business and operations - **Alpha Teknova** produces critical reagents for novel therapies, vaccines, and molecular diagnostics, serving over **3,000** customers in the life sciences market[92](index=92&type=chunk) - The company's proprietary manufacturing processes enable high-quality, custom, made-to-order products with short turnaround times across all stages of customer product development[92](index=92&type=chunk) - **Revenue** for Q2 2023 was **$11.5 million** (down **$0.2 million** YoY) and for YTD 2023 was **$20.6 million** (down **$2.2 million** YoY); **operating losses** were **$7.0 million** for Q2 2023 and **$15.9 million** for YTD 2023[96](index=96&type=chunk)[97](index=97&type=chunk) [Impact of Broader Economic Trends on Our Business](index=21&type=section&id=Impact%20of%20Broader%20Economic%20Trends%20on%20Our%20Business) This section analyzes the impact of broader economic trends on the company's business - General inflation and rising interest rates negatively impact the business by increasing **cost of sales** and **operating expenses**[98](index=98&type=chunk) - These economic factors may cause customers to reduce, delay, or cancel orders, affecting sales timing and volume[98](index=98&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section compares Alpha Teknova's operational results for the reported periods [Comparison of the Three Months Ended June 30, 2023 and Three Months Ended June 30, 2022](index=21&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202023%20and%20Three%20Months%20Ended%20June%2030,%202022) This section compares financial performance for the three months ended June 30, 2023 and 2022 Revenue by Product Category (Q2 YoY Change, in thousands) | Product Category | 2023 | 2022 | $ Change | % Change | | :--------------- | :--- | :--- | :------- | :------- | | Lab Essentials | $7,581 | $8,393 | $(812) | -9.7% | | Clinical Solutions | $3,653 | $2,943 | $710 | 24.1% | | Other | $293 | $354 | $(61) | -17.2% | | **Total Revenue** | **$11,527** | **$11,690** | **$(163)** | **-1.4%** | - **Gross profit percentage** decreased to **43.9%** in Q2 2023 from **44.9%** in Q2 2022, primarily due to increased overhead costs, partially offset by a higher percentage of **Clinical Solutions revenue**[104](index=104&type=chunk) Operating Expenses (Q2 YoY Change, in thousands) | Expense Category | 2023 | 2022 | $ Change | % Change | | :-------------------- | :--- | :--- | :------- | :------- | | Research and development | $1,464 | $1,929 | $(465) | -24.1% | | Sales and marketing | $2,174 | $2,598 | $(424) | -16.3% | | General and administrative | $5,943 | $7,059 | $(1,116) | -15.8% | | Long-lived assets impairment | $2,195 | — | $2,195 | 100.0% | | **Total operating expenses** | **$12,063** | **$11,873** | **$190** | **1.6%** | - **Interest expense, net**, increased significantly to **$(308) thousand** in Q2 2023 from **$28 thousand** in Q2 2022, driven by increased **debt** and higher interest rates[109](index=109&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and Six Months Ended June 30, 2022](index=24&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202023%20and%20Six%20Months%20Ended%20June%2030,%202022) This section compares financial performance for the six months ended June 30, 2023 and 2022 Revenue by Product Category (YTD YoY Change, in thousands) | Product Category | 2023 | 2022 | $ Change | % Change | | :--------------- | :--- | :--- | :------- | :------- | | Lab Essentials | $14,838 | $15,368 | $(530) | -3.4% | | Clinical Solutions | $5,262 | $6,755 | $(1,493) | -22.1% | | Other | $548 | $714 | $(166) | -23.2% | | **Total Revenue** | **$20,648** | **$22,837** | **$(2,189)** | **-9.6%** | - **Gross profit percentage** decreased to **36.3%** in YTD 2023 from **46.4%** in YTD 2022, primarily due to increased overhead costs and lower absorption of fixed manufacturing costs[117](index=117&type=chunk) Operating Expenses (YTD YoY Change, in thousands) | Expense Category | 2023 | 2022 | $ Change | % Change | | :-------------------- | :--- | :--- | :------- | :------- | | Research and development | $2,859 | $3,942 | $(1,083) | -27.5% | | Sales and marketing | $4,517 | $4,195 | $322 | 7.7% | | General and administrative | $13,288 | $14,354 | $(1,066) | -7.4% | | Long-lived assets impairment | $2,195 | — | $2,195 | 100.0% | | **Total operating expenses** | **$23,432** | **$23,065** | **$367** | **1.6%** | - **Interest expense, net**, increased to **$(215) thousand** in YTD 2023 from **$15 thousand** in YTD 2022, primarily due to increased **debt** and higher interest rates[123](index=123&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Alpha Teknova's liquidity and capital resources - The company's primary source of financing is its June 2021 IPO, which generated **$99.1 million** in net proceeds[125](index=125&type=chunk) - As of June 30, 2023, the company has **limited capital resources**, incurred **net losses** of **$7.2 million** (Q2) and **$16.0 million** (YTD), and has an **accumulated deficit** of **$71.0 million**, raising **substantial doubt** about its ability to continue as a **going concern**[127](index=127&type=chunk) - The company was in **non-compliance** with the trailing twelve months minimum **net revenue** covenant as of July 31, 2023, which constitutes an **event of default** under the Amended **Credit Agreement** and could lead to **accelerate debt repayment**[129](index=129&type=chunk) Net Cash Flows (in thousands) - Six Months Ended June 30 | Activity | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Net cash used in operating activities | $(11,540) | $(11,039) | | Net cash used in investing activities | $(6,650) | $(16,837) | | Net cash (used in) provided by financing activities | $(205) | $5,092 | | **Net decrease in cash and cash equivalents** | **$(18,395)** | **$(22,784)** | [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines Alpha Teknova's critical accounting policies and estimates - There have been no **material changes** to the company's critical accounting estimates since its 2022 Annual Report on Form 10-K[141](index=141&type=chunk) [Emerging Growth Company and Smaller Reporting Company](index=28&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company) This section describes Alpha Teknova's status as an emerging growth and smaller reporting company - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing exemptions from certain reporting requirements, including reduced financial data, auditor attestation, and executive compensation disclosures[142](index=142&type=chunk)[143](index=143&type=chunk) - The company has elected to delay adopting new or revised accounting standards until they apply to private companies[142](index=142&type=chunk) - The company is also a 'smaller reporting company,' which provides scaled disclosures until certain market value and **revenue** thresholds are met[145](index=145&type=chunk) [Recent Accounting Pronouncements](index=29&type=section&id=Recent%20Accounting%20Pronouncements) This section details recent accounting pronouncements relevant to the company - A description of recent accounting pronouncements is disclosed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to the condensed financial statements[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Alpha Teknova, Inc. is not required to provide market risk disclosures - The company is a smaller reporting company and is **not required** to provide information on market risk[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Evaluation of Alpha Teknova's disclosure controls identified a material weakness in income tax accounting, with a remediation plan [Evaluation of Disclosure Controls and Procedures](index=29&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section evaluates the effectiveness of Alpha Teknova's disclosure controls and procedures - Management concluded that **disclosure controls and procedures** were **not effective** as of June 30, 2023, due to a previously disclosed **material weakness** in **internal control over financial reporting**[148](index=148&type=chunk) [Material Weakness in Internal Control Over Financial Reporting](index=29&type=section&id=Material%20Weakness%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section addresses the identified material weakness in internal control over financial reporting - A **material weakness** was identified in accounting for income taxes due to errors and insufficient tax resources commensurate with the complexity of the process, which remained unremediated as of June 30, 2023[149](index=149&type=chunk) [Management's Plan to Remediate the Material Weakness](index=29&type=section&id=Management's%20Plan%20to%20Remediate%20the%20Material%20Weakness) This section outlines management's plan to remediate the material weakness - Management is taking measures to remediate the **material weakness** by engaging accounting personnel/consultants with specific income tax accounting experience and implementing additional controls and procedures[150](index=150&type=chunk) [Changes in Internal Control Over Financial Reporting](index=29&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on changes in internal control over financial reporting - There were no changes in **internal control over financial reporting** during the quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect **internal control over financial reporting**[151](index=151&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=29&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This section discusses inherent limitations on the effectiveness of controls and procedures - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance of achieving control objectives due to resource constraints and the need for judgment[152](index=152&type=chunk) PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other required disclosures [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Alpha Teknova, Inc. is not a party to material legal proceedings, but acknowledges litigation's unpredictable and costly nature - The company is **not a party** to any **material legal proceedings** at this time[155](index=155&type=chunk) - **Legal proceedings** are inherently unpredictable and expensive, potentially leading to monetary damages or operational limits if determined adversely[155](index=155&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors highlight substantial doubt about Alpha Teknova's going concern status due to capital and debt issues - The company has identified conditions that raise **substantial doubt** about its ability to continue as a **going concern**, including **insufficient capital resources** to meet obligations over the next twelve months[158](index=158&type=chunk)[159](index=159&type=chunk) - **Non-compliance** with the minimum **net revenue** covenant as of July 31, 2023, constitutes an **event of default** under the Amended **Credit Agreement**, potentially allowing lenders to **accelerate debt repayment**[160](index=160&type=chunk)[162](index=162&type=chunk) - The company has incurred significant **operating losses** in the past and may continue to do so, with **net losses** of **$7.2 million** (Q2 2023) and **$16.0 million** (YTD 2023)[163](index=163&type=chunk)[164](index=164&type=chunk) - Sales of a **substantial number** of outstanding **common stock** shares, particularly by affiliates, could significantly reduce the market price of the stock[165](index=165&type=chunk)[167](index=167&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Alpha Teknova, Inc. reports no unregistered equity sales, with IPO proceeds use consistent with prior disclosures - There were no unregistered sales of equity securities[170](index=170&type=chunk) - The planned use of proceeds from the IPO has no **material changes** from previous disclosures[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Alpha Teknova, Inc. reports no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Alpha Teknova, Inc - This item is **not applicable** to the company[174](index=174&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) Alpha Teknova, Inc. reports no other information required under this item - There is no other information to report under this item[175](index=175&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance and credit agreements - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Form of **Common Stock** Certificate, Investors' Rights Agreement, Amendment No. 3 to the Amended and Restated **Credit and Security Agreement** (**Term Loan** and **Revolving Loan**), Amended **Alpha Teknova, Inc.** 2021 **Employee Stock Purchase Plan**, and various certifications[176](index=176&type=chunk) Signatures The Form 10-Q report is signed by Alpha Teknova Inc.'s CEO and CFO on August 11, 2023 [Signatures](index=36&type=section&id=Signatures) The Form 10-Q report is signed by Alpha Teknova Inc.'s CEO and CFO on August 11, 2023 - The report was signed by Stephen Gunstream, President and Chief Executive Officer, and Matthew Lowell, Chief Financial Officer, on August 11, 2023[181](index=181&type=chunk)

Alpha Teknova, Inc. (NASDAQ:TKNO) Q1 2023 Earnings Conference Call May 10, 2023 5:30 PM ET Company Participants Jennifer Henry - Senior Vice President of Marketing Stephen Gunstream - President & Chief Executive Officer Matthew Lowell - Chief Financial Officer Conference Call Participants Jacob Johnson - Stephens Madeline Mollman - William Blair Steven Mah - TD Cowen Operator Good day, and welcome to the Teknova First Quarter 2023 Financial Results Call. [Operator Instructions] Please be advised that today' ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40538 ALPHA TEKNOVA, INC. (Exact name of registrant as specified in its charter) Delaware 94-3368109 (State or other jurisdiction ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-40538 ALPHA TEKNOVA, INC. Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acc ...

Alpha Teknova, Inc. (NASDAQ:TKNO) Q4 2022 Results Conference Call March 15, 2023 5:00 PM ET Company Participants Jen Henry - Senior Vice President of Marketing Stephen Gunstream - President & Chief Executive Officer Matt Lowell - Chief Financial Officer Conference Call Participants Joseph Flanagan - Cowen Matt Larew - William Blair Hannah Hefley - Stephens Operator Thank you for standing by, and welcome to Teknova's Fourth Quarter and Full Year 2022 Financial Results Call. At this time, all participants are ...

PART I. FINANCIAL INFORMATION [Condensed Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) Net loss significantly increased in Q3 and nine months 2022 due to a **$16.6 million** goodwill impairment, with cash and assets declining and liabilities rising Condensed Statements of Operations Highlights (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $10,692 | $9,392 | $33,529 | $26,783 | | **Gross Profit** | $4,770 | $4,263 | $15,366 | $12,642 | | **Goodwill Impairment** | $16,613 | $0 | $16,613 | $0 | | **Loss from Operations** | $(22,954) | $(3,888) | $(35,423) | $(7,241) | | **Net Loss** | $(22,474) | $(3,251) | $(34,174) | $(6,156) | | **Net Loss Per Share** | $(0.80) | $(0.12) | $(1.22) | $(0.51) | Condensed Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $49,855 | $87,518 | | **Total Current Assets** | $70,067 | $101,204 | | **Goodwill** | $0 | $16,613 | | **Total Assets** | $160,272 | $166,511 | | **Total Liabilities** | $48,276 | $23,308 | | **Total Stockholders' Equity** | $111,996 | $143,203 | - Net cash used in operating activities increased to **$19.4 million** for the nine months ended Sep 30, 2022, from **$6.0 million** in the prior year period, primarily due to a higher net loss[129](index=129&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Net cash used in investing activities increased to **$23.4 million** from **$10.1 million** year-over-year, driven by purchases of property, plant and equipment[129](index=129&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Net cash from financing activities was **$5.1 million**, primarily from long-term debt proceeds, a significant decrease from **$110.8 million** in the prior year which included IPO proceeds[129](index=129&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) [Note 1. Nature of the Business](index=10&type=section&id=Note%201.%20Nature%20of%20the%20Business) Alpha Teknova provides critical reagents for biopharmaceutical products, manufacturing under Research Use Only (RUO) and Good Manufacturing Practice (GMP) standards - The company provides critical reagents for biopharmaceutical products, including drug therapies, vaccines, and molecular diagnostics[27](index=27&type=chunk) - Teknova manufactures products in both Research Use Only (RUO) and the more stringent Good Manufacturing Practice (GMP) categories, holding an ISO 13485:2016 certification since 2017[29](index=29&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=Note%203.%20Revenue%20Recognition) Revenue is recognized upon goods transfer, with total revenue for the nine months ended September 30, 2022, reaching **$33.5 million**, primarily from Lab Essentials and Clinical Solutions in the United States Revenue by Business Line (in thousands) | Business Line | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Lab Essentials | $24,838 | $20,440 | | Clinical Solutions | $7,673 | $4,354 | | Sample Transport | $6 | $1,035 | | Other | $1,012 | $954 | | **Total Revenue** | **$33,529** | **$26,783** | Revenue by Geographic Region (in thousands) | Geographic Region | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | United States | $32,489 | $25,890 | | International | $1,040 | $893 | | **Total Revenue** | **$33,529** | **$26,783** | [Note 8. Goodwill and Intangible Assets, Net](index=13&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) An interim goodwill impairment test in Q3 2022, triggered by stock price decline, resulted in a full **$16.6 million** impairment charge, reducing goodwill to zero - A significant decline in the company's common stock price and market capitalization triggered an interim goodwill impairment test in Q3 2022[51](index=51&type=chunk) - The company determined that its goodwill was fully impaired and recorded an impairment charge of **$16.6 million** during the three months ended September 30, 2022[55](index=55&type=chunk) - As of September 30, 2022, the carrying amount of goodwill was reduced to zero from **$16.6 million** at the end of 2021[51](index=51&type=chunk) [Note 10. Long-Term Debt, Net](index=15&type=section&id=Note%2010.%20Long-Term%20Debt%2C%20Net) As of September 30, 2022, net long-term debt increased to **$16.9 million** from **$11.9 million** at year-end 2021, under a credit facility with MidCap Financial Trust - In May 2022, the company entered into an Amended and Restated Credit and Security Agreement with MidCap for a **$57.135 million** credit facility[59](index=59&type=chunk)[60](index=60&type=chunk) Long-Term Debt, Net (in thousands) | Component | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Long-term debt | $17,135 | $12,000 | | **Long-term debt, net** | **$16,878** | **$11,870** | [Note 15. Subsequent Events](index=18&type=section&id=Note%2015.%20Subsequent%20Events) On November 8, 2022, the credit agreement was amended to replace LIBOR with SOFR, increase the exit fee to **7%**, and reduce the TTM net revenue covenant for December 31, 2022, to **$38.0 million** - On November 8, 2022, the credit agreement was amended, replacing the LIBOR-based interest rate with a SOFR-based rate effective December 1, 2022[77](index=77&type=chunk) - The amendment reduced the trailing twelve-month net revenue covenant for the period ending December 31, 2022, from **$42.5 million** to **$38.0 million**[77](index=77&type=chunk) - The exit fee on the term loan was increased from **5% to 7%** of the total aggregate principal amount[77](index=77&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew in Q3 and nine months 2022, but operating losses widened significantly due to a **$16.6 million** goodwill impairment and increased expenses, impacting liquidity [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q3 and nine-month 2022 revenue increased, but operating losses significantly widened due to a **$16.6 million** goodwill impairment and surging operating expenses Q3 2022 vs Q3 2021 Revenue by Product (in thousands) | Product Category | Q3 2022 | Q3 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Lab Essentials | $9,470 | $7,195 | $2,275 | 31.6% | | Clinical Solutions | $919 | $1,690 | $(771) | (45.6)% | | Sample Transport | $0 | $73 | $(73) | (100.0)% | | **Total Revenue** | **$10,692** | **$9,392** | **$1,300** | **13.8%** | Nine Months 2022 vs 2021 Revenue by Product (in thousands) | Product Category | Nine Months 2022 | Nine Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Lab Essentials | $24,838 | $20,440 | $4,398 | 21.5% | | Clinical Solutions | $7,673 | $4,354 | $3,319 | 76.2% | | Sample Transport | $6 | $1,035 | $(1,029) | (99.4)% | | **Total Revenue** | **$33,529** | **$26,783** | **$6,746** | **25.2%** | - The company ceased production of Sample Transport medium in 2021 due to a decline in market demand for COVID-19 testing and an increase in market supply[92](index=92&type=chunk)[107](index=107&type=chunk) - A goodwill impairment charge of **$16.6 million** was the primary driver of the significant increase in operating loss for both the three and nine-month periods ended September 30, 2022[99](index=99&type=chunk)[103](index=103&type=chunk)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents significantly decreased to **$49.9 million** by September 30, 2022, due to operating activities and capital expenditures, requiring potential future financing - As of September 30, 2022, the company had **$49.9 million** in cash and cash equivalents and **$57.7 million** in net working capital[120](index=120&type=chunk) - A significant use of cash is the construction of a new manufacturing, warehouse, and distribution facility in Hollister, California[120](index=120&type=chunk)[121](index=121&type=chunk) - In November 2022, the company amended its credit agreement, replacing LIBOR with SOFR, increasing the exit fee to **7%**, and reducing the TTM net revenue covenant for Dec 31, 2022, to **$38.0 million**[126](index=126&type=chunk) - Management believes existing liquidity sources are sufficient to fund requirements for at least the next 24 months, but acknowledges that additional financing may be needed to execute its business strategy[127](index=127&type=chunk)[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Alpha Teknova is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Alpha Teknova is not required to provide quantitative and qualitative disclosures about market risk[143](index=143&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, having remediated a prior material weakness and implemented a new ERP system - Management concluded that disclosure controls and procedures were effective as of September 30, 2022[146](index=146&type=chunk) - A previously identified material weakness in the financial close and reporting process for complex transactions was remediated as of March 31, 2022[147](index=147&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk) - During the quarter ended September 30, 2022, the company implemented a new enterprise resource planning (ERP) system to enhance internal controls and support business scaling[149](index=149&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though it may become involved in ordinary course legal matters - As of the report date, the company is not a party to any material legal proceedings[154](index=154&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of operating losses, a **$16.6 million** goodwill impairment, customer and supplier dependence, restrictive debt covenants, and 'controlled company' governance - The company has a history of operating losses, including a net loss of **$22.5 million** in Q3 2022 and **$34.2 million** for the first nine months of 2022, and may not achieve or maintain profitability[156](index=156&type=chunk) - A significant goodwill impairment charge of **$16.6 million** was recorded in Q3 2022 due to a decline in market capitalization, and future impairments of intangible assets are possible[252](index=252&type=chunk) - The business is dependent on a limited number of customers, with those accounting for over **10%** of revenue representing **42%** of total revenue in Q3 2022[179](index=179&type=chunk) - The company is a 'controlled company' under Nasdaq rules due to THP's majority ownership, which exempts it from certain corporate governance requirements, such as having a majority-independent board[300](index=300&type=chunk) - The Amended Credit Agreement contains restrictive covenants that could limit operational flexibility, and failure to comply could lead to acceleration of debt[297](index=297&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities in the reported period, and the planned use of IPO proceeds has not materially changed - There were no unregistered sales of equity securities in the reported period[352](index=352&type=chunk) - The planned use of proceeds from the IPO has not materially changed from what was disclosed in the final prospectus[353](index=353&type=chunk) [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) On November 8, 2022, the company amended its credit agreement, replacing LIBOR with SOFR, increasing the exit fee to **7%**, and reducing the TTM net revenue covenant to **$38.0 million** - On November 8, 2022, the company amended its Credit Agreement with MidCap[357](index=357&type=chunk) - The amendment replaced the LIBOR-based interest rate with a SOFR-based rate, increased the exit fee to **7%**, and gave lenders discretion over a **$10.0 million** borrowing tranche for H1 2023[358](index=358&type=chunk)[359](index=359&type=chunk) - The minimum net revenue requirement for the twelve months ending December 31, 2022, was reduced from **$42.5 million** to **$38.0 million**[360](index=360&type=chunk)

Q3:2022 Financial Results Slide Supplement Nasdaq: TKNO November 9, 2022 TEKNOVA Today's Agenda 2 1. Welcome 2. Business Highlights & Updates — Stephen Gunstream, President and CEO 3. Financial Results — Matt Lowell, CFO 4. Q&A Forward-looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute "forwardlooking statements." These stateme ...