Corporate and Financial Updates 1 Exhibit 99.1 Teknova Reports First Quarter 2024 Financial Results First quarter 2024 total revenue was $9.3 million, up 2% from prior year Launch of Build-TekTM Custom Configurator Company reaffirms 2024 revenue guidance of $35-38 million HOLLISTER, Calif., May 13, 2024 – Alpha Teknova, Inc. ("Teknova" or the "Company") (Nasdaq: TKNO), a leading producer of critical reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular di ...

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that forward-looking statements are subject to substantial risks and uncertainties, and actual results may differ materially - Forward-looking statements involve **substantial risks and uncertainties**[10](index=10&type=chunk) - Statements cover financial condition, results of operations, plans, objectives, future performance, and business[10](index=10&type=chunk) - Actual results could differ materially from forward-looking statements[12](index=12&type=chunk) - Company undertakes no obligation to update forward-looking statements, except as required by law[14](index=14&type=chunk) [Risk Factor Summary](index=5&type=section&id=RISK%20FACTOR%20SUMMARY) This section summarizes key speculative risks for common stock investment, covering operating losses, market fluctuations, competition, and IP challenges - Incurred operating losses in the past and may incur losses in the future[18](index=18&type=chunk) - Operating results may fluctuate significantly and be difficult to predict[18](index=18&type=chunk) - Significant capital invested in manufacturing facilities; scaling efforts could be disruptive[18](index=18&type=chunk) - Natural disasters, geopolitical unrest, war, public health issues, or other catastrophic events could disrupt operations[18](index=18&type=chunk) - Dependence on maintaining customer relationships and recurring revenue sources[18](index=18&type=chunk) - Faces intense competition from larger life science, pharmaceutical, and biotechnology companies[18](index=18&type=chunk) - Future capital needs are uncertain, and additional financing may not be secured on favorable terms[18](index=18&type=chunk) - Risks from recent workforce reductions include morale issues and ability to meet demand[18](index=18&type=chunk) - Reliance on trade secret laws for intellectual property protection, which may be vulnerable[18](index=18&type=chunk) - Credit Agreement terms may restrict operations; failure to comply could lead to accelerated debt[19](index=19&type=chunk) - Telegraph Hill Partners controls the company, and its interests may conflict with other stockholders[19](index=19&type=chunk) - Material weaknesses in internal control over financial reporting could lead to inaccurate financial results[19](index=19&type=chunk) [PART I](index=7&type=section&id=PART%20I) [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Alpha Teknova is a leading producer of critical reagents for life sciences, known for its adaptable manufacturing processes and ability to deliver custom, high-quality products quickly - Leading producer of critical reagents for discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics[21](index=21&type=chunk) - Proprietary processes enable manufacturing and delivery of high-quality, custom, made-to-order products with short turnaround times[21](index=21&type=chunk) - Achieved an annual customer retention rate of approximately **96%** for customers purchasing more than **$10,000** annually in 2023[25](index=25&type=chunk) - Participates in high-growth market segments including cell and gene therapy, mRNA vaccines, synthetic biology, and molecular diagnostics[26](index=26&type=chunk)[27](index=27&type=chunk) - **ISO 13485:2016 certified**, enabling products for diagnostic and therapeutic applications[32](index=32&type=chunk) [Overview](index=7&type=section&id=Overview) Alpha Teknova is a key supplier of critical reagents for life sciences, known for its adaptable manufacturing processes and ability to deliver custom, high-quality products quickly - Over **2,500 customers** across life sciences market[21](index=21&type=chunk) - **96% annual customer retention rate** for customers purchasing over **$10,000** annually in 2023[25](index=25&type=chunk) - New custom products moved into production in weeks from order receipt, compared to months from alternatives[22](index=22&type=chunk) - Products used in high-growth areas like cell and gene therapy, mRNA vaccines, synthetic biology, and molecular diagnostics[26](index=26&type=chunk)[27](index=27&type=chunk) - FDA approvals for gene therapies: **5 (2017-2022), 7 (2023), estimated up to 17 (2024)**[26](index=26&type=chunk) [Our Portfolio](index=8&type=section&id=Our%20Portfolio) Alpha Teknova's portfolio spans from common research applications to highly customized formulations for genomics and bioproduction, including GMP-grade products Revenue Contribution | Category | Revenue Contribution | | :--------------- | :------------------- | | Lab Essentials | ~**79%** of total revenue | | Clinical Solutions | ~**18%** of total revenue | - Product types include pre-poured media plates (Lab Essentials only), liquid cell culture media and supplements, and molecular biology reagents[33](index=33&type=chunk) - **ISO 13485:2016 certified** for diagnostic and therapeutic applications[32](index=32&type=chunk) [Competitive Strengths](index=12&type=section&id=Competitive%20Strengths) Alpha Teknova's strengths include expertise in complex custom chemical formulation, rapid delivery, quality, regulatory compliance, and strong customer relationships - Proprietary production system designed for rapid manufacturing and quality control of complex, custom chemical formulations[39](index=39&type=chunk) - Typically moves new custom products into production in weeks from order receipt; ships approximately **70%** of custom RUO products less than three weeks from order placement[41](index=41&type=chunk) - Customers frequently integrate Teknova's validated components into their production processes, leading to long-term relationships[40](index=40&type=chunk) - Leading provider of research and GMP-grade bacterial cell culture media and specialized chromatography solutions for cell and gene therapy[43](index=43&type=chunk) Supplier Concentration (2023) | Supplier Type | % of Total Inventory Purchases | | :-------------- | :----------------------------- | | Distributor supplier A | **40%** | | Direct supplier C | **10%** | [Our Markets](index=15&type=section&id=Our%20Markets) Alpha Teknova operates in diverse life sciences markets, benefiting from industry preferences for customized, high-quality products with short turnaround times - Key market growth drivers include expansion of cell and gene therapy, development of mRNA vaccines and therapies, and growth in molecular diagnostics and genomics[47](index=47&type=chunk) - Additional factors benefiting core markets: increased R&D funding, development of new therapeutic/diagnostic modalities, and favorable demographic trends[48](index=48&type=chunk) - Supplier to approximately **110 leading cell and gene therapy organizations**[48](index=48&type=chunk) Average Customer Spend Increase in Cell & Gene Therapy (vs. Phase 1) | Clinical Trial Phase | Spend Increase | | :------------------- | :------------- | | Phase 2 | **1.4 times** | | Phase 3 | **3.2 times** | | Commercial Production | **29.8 times** | - Global molecular diagnostics market estimated to reach **$27.0 billion** by 2030; global genomics market expected to grow to **$94.9 billion** by 2030[51](index=51&type=chunk) [Our Strategy](index=16&type=section&id=Our%20Strategy) Alpha Teknova's strategy focuses on accelerating therapeutic and diagnostic development by increasing product integration and providing superior customer service - Goal is to provide products necessary to accelerate therapeutic and diagnostic development from basic research to commercialization[52](index=52&type=chunk) Customer Expenditure Increase (2023, vs. Catalog only) | Product Type | Average Spend Multiplier | | :-------------------------------- | :----------------------- | | Custom products | ~**19 times more** | | GMP-grade products | ~**62 times more** | - Investing in automation, facilities, and operating infrastructure to increase manufacturing capacity, improve efficiency, and reduce delivery time[53](index=53&type=chunk) [Competition](index=17&type=section&id=Competition) Alpha Teknova operates in a highly competitive life sciences market, differentiating itself through custom formulations, rapid turnaround, and technical expertise - Operates in a highly competitive environment with diverse competitors, including large established life science companies (e.g., Thermo Fisher, Millipore, Cytiva, Hardy Diagnostics, Lonza) and smaller niche competitors[55](index=55&type=chunk)[56](index=56&type=chunk) - Competes with customers' established in-house production capabilities[55](index=55&type=chunk) - Differentiated by ability to offer customer-specified RUO and GMP formulations with short turnaround times, Teknova brand reputation (**25+ years**), and technical expertise[56](index=56&type=chunk) [Government Regulation](index=17&type=section&id=Government%20Regulation) Alpha Teknova's products are marketed as ancillary reagents, exempt from direct FDA regulation, but comply with ISO 13485:2016 standards and customer requirements - Products are marketed as ancillary reagents for research or further manufacture, not subject to direct FDA regulation under the U.S. Federal Food, Drug and Cosmetic Act[57](index=57&type=chunk) - Voluntarily built quality system to comply with specific sections of **ISO 13485:2016 standards** to meet customer requirements[59](index=59&type=chunk) - Complies with 'Research Use Only' (RUO) labeling guidance, ensuring products are not intended for clinical, therapeutic, or diagnostic use[61](index=61&type=chunk) - Subject to federal, state, and local environmental, health, and safety laws and regulations[62](index=62&type=chunk) [Intellectual Property](index=18&type=section&id=Intellectual%20Property) Alpha Teknova relies on trade secrets and contractual protections for intellectual property, acknowledging challenges in protection and enforcement - Relies primarily on trade secrets, including know-how, confidential information, unpatented technologies, and other proprietary information[65](index=65&type=chunk) - Protects intellectual property through confidentiality and non-disclosure agreements with employees, consultants, and contractors[65](index=65&type=chunk) - Does not currently own any issued patents but may file patent applications or acquire/license IP rights in the future[173](index=173&type=chunk) - Maintains physical and electronic security of premises and IT systems to preserve trade

Alpha Teknova, Inc. (NASDAQ:TKNO) Q4 2023 Earnings Conference Call March 11, 2024 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 Mark Massaro - BTIG Jacob Johnson - Stephens Steven Mah - TD Cohen Madeline Mollman - William Blair Paul Knight - KeyBanc Operator Hello, and thank you for standing by. Welcome to Teknova Fourth Quarter 2023 Financial Re ...

Exhibit 99.1 Teknova Reports Fourth Quarter and Full Year 2023 Financial Results Full year 2023 total revenue was $36.7 million, down 11% year-over-year Achieved 36% annual growth in the number of Clinical Solutions customers in 2023 Company provides 2024 revenue guidance of $35-38 million HOLLISTER, Calif., March 11, 2024 – Alpha Teknova, Inc. ("Teknova" or the "Company") (Nasdaq: TKNO), a leading producer of critical reagents for the discovery, development, and commercialization of novel therapies, vaccin ...

PART I. FINANCIAL INFORMATION Presents the unaudited condensed financial statements and management's discussion and analysis for Alpha Teknova, Inc. [Item 1. Condensed Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements for Alpha Teknova, Inc., including the Statements of Operations, Balance Sheets, Statements of Stockholders' Equity, and Statements of Cash Flows for the periods ended September 30, 2023, and 2022. It also includes detailed notes explaining the company's business, accounting policies, revenue recognition, concentrations of risk, inventory, property, plant, and equipment, leases, intangible assets, accrued liabilities, long-term debt, stock-based compensation, income taxes, net loss per share, and related party transactions [Condensed Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20(Unaudited)) Provides an overview of the company's revenues, expenses, and net loss for the specified interim periods Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $8,169 | $10,692 | $28,817 | $33,529 | | Gross profit | $1,472 | $4,770 | $8,961 | $15,366 | | Loss from operations | $(8,762) | $(22,954) | $(24,705) | $(35,423) | | Net loss | $(10,153) | $(22,474) | $(26,124) | $(34,174) | | Net loss per share | $(0.34) | $(0.80) | $(0.91) | $(1.22) | - The company experienced a significant decrease in revenue for both the three and nine months ended September 30, 2023, compared to the same periods in 2022, leading to reduced gross profit and continued net losses[16](index=16&type=chunk) [Condensed Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Balance%20Sheets%20(Unaudited)) Presents the company's financial position, including assets, liabilities, and stockholders' equity at specific interim dates Metric (in thousands) | Metric (in thousands) | As of Sep 30, 2023 | As of Dec 31, 2022 | | :-------------------- | :----------------- | :----------------- | | Total current assets | $51,078 | $61,140 | | Total assets | $138,385 | $152,261 | | Total current liabilities | $8,339 | $10,875 | | Total liabilities | $38,733 | $52,376 | | Total stockholders' equity | $99,652 | $99,885 | - Total assets and total liabilities decreased from December 31, 2022, to September 30, 2023, while stockholders' equity remained relatively stable[19](index=19&type=chunk) [Condensed Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Details changes in the company's equity accounts, including common stock and accumulated deficit, over the interim periods Metric (in thousands, except shares) | Metric (in thousands, except shares) | Balance at Jan 1, 2023 | Balance at Sep 30, 2023 | | :----------------------------------- | :--------------------- | :---------------------- | | Common Stock Shares | 28,179,423 | 40,727,780 | | Additional Paid-in Capital | $154,891 | $180,782 | | Accumulated Deficit | $(55,006) | $(81,130) | | Total Stockholders' Equity | $99,885 | $99,652 | - The company issued **12,386,478 shares** through equity financing, net of issuance costs, contributing **$22.562 million** to additional paid-in capital during the nine months ended September 30, 2023. Despite this, the accumulated deficit increased significantly due to net losses[25](index=25&type=chunk) [Condensed Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)) Summarizes the cash inflows and outflows from operating, investing, and financing activities for the interim periods Metric (in thousands) | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(15,922) | $(19,371) | | Net cash used in investing activities | $(7,622) | $(23,419) | | Net cash provided by financing activities | $13,420 | $5,127 | | Net decrease in cash and cash equivalents | $(10,124) | $(37,663) | - Net cash used in operating activities decreased, while net cash provided by financing activities increased significantly in 2023, primarily due to proceeds from equity financing, partially offsetting the cash used in operations and investing[28](index=28&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited condensed financial statements [Note 1. Nature of the Business](index=11&type=section&id=Note%201.%20Nature%20of%20the%20Business) Describes Alpha Teknova's core business activities, products, and target markets within the life sciences industry - Alpha Teknova, Inc. (Teknova) produces critical reagents for life sciences, including pre-poured media plates, liquid cell culture media, and molecular biology reagents. The company serves pharmaceutical, biotechnology, CDMOs, IVD franchises, and academic/government research institutions with catalog and custom products[30](index=30&type=chunk) - All products are manufactured and shipped from its Hollister, California headquarters[31](index=31&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the accounting principles used and key policies, including going concern considerations and recent equity transactions - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim reporting, consistent with the 2022 annual financial statements[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Management has identified conditions that raise substantial doubt about the company's ability to continue as a going concern for the next twelve months, citing limited capital resources, net losses (**$10.2 million** for Q3 2023, **$26.1 million** for 9M 2023), accumulated deficit (**$81.1 million**), and potential non-compliance with debt covenants[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - The company completed a reduction in workforce of approximately **40 positions** on February 1, 2023, incurring **$0.7 million** in severance costs[41](index=41&type=chunk) - On March 30, 2023, the company entered into an At-the-Market (ATM) Facility to sell up to **$50.0 million** of common stock. Costs of **$0.4 million** related to the ATM Facility were written off in Q3 2023[42](index=42&type=chunk) - On September 15, 2023, the company completed a Registered Direct Offering and a concurrent PIPE Private Placement, selling **12,386,478 shares** of common stock at **$1.85 per share**, generating aggregate gross proceeds of **$22.915 million**[43](index=43&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) - The adoption of ASU No. 2016-13 (Credit Losses) effective January 1, 2023, did not have a significant impact on the financial statements[49](index=49&type=chunk) [Note 3. Revenue Recognition](index=13&type=section&id=Note%203.%20Revenue%20Recognition) Explains the company's policy for recognizing revenue from its product categories and across geographic regions - Revenue is recognized when control of promised goods or services is transferred to customers, typically at the point of shipment[50](index=50&type=chunk) Revenue by Product Category (in thousands) | Product Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Lab Essentials | $7,274 | $9,470 | $22,112 | $24,838 | | Clinical Solutions | $597 | $919 | $5,859 | $7,673 | | Other | $298 | $303 | $846 | $1,018 | | **Total Revenue** | **$8,169** | **$10,692** | **$28,817** | **$33,529** | Revenue by Geographic Region (in thousands) | Geographic Region | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $7,827 | $10,384 | $27,628 | $32,489 | | International | $342 | $308 | $1,189 | $1,040 | | **Total Revenue** | **$8,169** | **$10,692** | **$28,817** | **$33,529** | [Note 4. Concentrations of Risk](index=14&type=section&id=Note%204.%20Concentrations%20of%20Risk) Identifies significant customer and supplier concentrations that could impact the company's financial performance Key Customer Concentrations (Revenue %) | Customer Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Distributor B | 20% | 14% | 18% | 14% | Key Customer Concentrations (Accounts Receivable %) | Customer Type | As of Sep 30, 2023 | As of Dec 31, 2022 | | :------------ | :----------------- | :----------------- | | Distributor B | 28% | 17% | | Direct A | 12% | * | Key Supplier Concentrations (Inventory Purchases %) | Supplier Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Distributor A | 46% | 37% | 39% | 36% | | Direct C | 13% | * | 10% | * | Key Supplier Concentrations (Accounts Payable %) | Supplier Type | As of Sep 30, 2023 | As of Dec 31, 2022 | | :------------ | :----------------- | :----------------- | | Distributor A | 12% | 11% | [Note 5. Inventories, Net](index=14&type=section&id=Note%205.%20Inventories,%20Net) Details the composition and valuation of the company's inventory, including finished goods, work in process, and raw materials Inventories, Net (in thousands) | Category | As of Sep 30, 2023 | As of Dec 31, 2022 | | :-------------- | :----------------- | :----------------- | | Finished goods, net | $8,155 | $8,368 | | Work in process | $58 | $186 | | Raw materials, net | $3,255 | $3,693 | | **Total inventories, net** | **$11,468** | **$12,247** | - Total inventories decreased by **$0.779 million** from December 31, 2022, to September 30, 2023, primarily due to reductions in finished goods, work in process, and raw materials[57](index=57&type=chunk) [Note 6. Property, Plant, and Equipment, Net](index=15&type=section&id=Note%206.%20Property,%20Plant,%20and%20Equipment,%20Net) Provides a breakdown of the company's tangible long-lived assets and related depreciation and impairment information Property, Plant, and Equipment, Net (in thousands) | Category | As of Sep 30, 2023 | As of Dec 31, 2022 | | :------------------------ | :----------------- | :----------------- | | Machinery and equipment | $29,475 | $19,433 | | Leasehold improvements | $24,609 | $12,093 | | Construction in progress | $3,015 | $23,714 | | **Total property, plant, and equipment, net** | **$51,579** | **$51,577** | - Total property, plant, and equipment remained stable, but there was a significant shift from construction in progress to machinery and equipment and leasehold improvements, indicating completion of capital projects[58](index=58&type=chunk) - A **$2.2 million** impairment charge was recorded in Q2 2023 for certain long-lived assets, which were subsequently sold[60](index=60&type=chunk) [Note 7. Leases](index=15&type=section&id=Note%207.%20Leases) Describes the company's operating lease arrangements for facilities and equipment, including lease terms and expenses - The company leases office, warehouse, manufacturing space, and equipment, with remaining lease terms ranging from one to 14 years. All leases are operating leases[61](index=61&type=chunk) Operating Lease Expense (in thousands) | Period | Operating Lease Expense | | :------------------------ | :---------------------- | | 3 Months Ended Sep 30, 2023 | $0.7 | | 3 Months Ended Sep 30, 2022 | $0.8 | | 9 Months Ended Sep 30, 2023 | $2.2 | | 9 Months Ended Sep 30, 2022 | $2.5 | - As of September 30, 2023, the weighted-average remaining lease term was **9.0 years** with a weighted-average discount rate of **5.0%**[62](index=62&type=chunk) [Note 8. Intangible Assets, Net](index=16&type=section&id=Note%208.%20Intangible%20Assets,%20Net) Presents the company's intangible assets, such as customer relationships and tradename, along with their amortization Intangible Assets, Net (in thousands) | Category | Gross (Sep 30, 2023) | Accumulated Amortization (Sep 30, 2023) | Net (Sep 30, 2023) | Net (Dec 31, 2022) | | :------------------- | :------------------- | :-------------------------------------- | :----------------- | :----------------- | | Customer relationships | $9,180 | $5,403 | $3,777 | $4,637 | | Tradename | $12,919 | $0 | $12,919 | $12,919 | | **Total intangible assets** | **$22,099** | **$5,403** | **$16,696** | **$17,556** | - Net intangible assets decreased slightly from **$17.556 million** to **$16.696 million**, primarily due to amortization of customer relationships[64](index=64&type=chunk) - Amortization expense was **$0.3 million** for the three months and **$0.9 million** for the nine months ended September 30, 2023 and 2022. The remaining weighted-average useful life of definite-lived intangible assets is **3.3 years**[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 9. Accrued Liabilities](index=16&type=section&id=Note%209.%20Accrued%20Liabilities) Details the company's short-term obligations, including payroll, property, plant, and equipment accruals, and deferred revenue Accrued Liabilities (in thousands) | Category | As of Sep 30, 2023 | As of Dec 31, 2022 | | :---------------------------- | :----------------- | :----------------- | | Payroll-related | $3,068 | $2,796 | | Property, plant, and equipment | $110 | $1,966 | | Deferred revenue | $24 | $198 | | Insurance premiums and accrued interest | $709 | $0 | | Other | $1,236 | $1,243 | | **Total current accrued liabilities** | **$5,147** | **$6,203** | - Total current accrued liabilities decreased by **$1.056 million**, primarily due to a significant reduction in accrued property, plant, and equipment, partially offset by new accrued insurance premiums[66](index=66&type=chunk) [Note 10. Long-term Debt, Net](index=17&type=section&id=Note%2010.%20Long-term%20Debt,%20Net) Outlines the company's credit facility, term loan, and revolving loan, including amendments and financial covenants - The company's credit facility includes a **$52.135 million** Term Loan and a **$5.0 million** Revolver, maturing on May 1, 2027[68](index=68&type=chunk)[70](index=70&type=chunk) - Multiple amendments to the Credit Agreement (Amendment No. 1, 2, 3, and 4) adjusted interest rates, prepayment fees, borrowing availability, financial covenants (minimum net revenue and cash), and exit fees[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - Amendment No. 4, effective September 19, 2023, waived a revenue covenant violation, reduced future minimum net revenue requirements, and lowered the minimum cash covenant from **$10.0 million** to **$9.0 million**. As a condition, the company prepaid **$10.0 million** of the Term Loan, resulting in an **$0.8 million** loss on extinguishment of debt[74](index=74&type=chunk) Debt, Net (in thousands) | Category | As of Sep 30, 2023 | As of Dec 31, 2022 | | :---------------------------- | :----------------- | :----------------- | | Debt | $12,135 | $22,135 | | Cumulative accretion of exit fee | $1,192 | $161 | | Unamortized debt discount and debt issuance costs | $(159) | $(320) | | **Debt, net** | **$13,168** | **$21,976** | - Scheduled maturities show no payments in 2023 or 2024, with payments resuming in 2025 (**$3.539 million**), 2026 (**$6.068 million**), and 2027 (**$2.528 million**)[75](index=75&type=chunk) [Note 11. Stock-Based Compensation](index=18&type=section&id=Note%2011.%20Stock-Based%20Compensation) Explains the company's equity incentive plans and the associated stock-based compensation expense - The company maintains equity incentive plans for stock options, restricted stock units (RSUs), and an Employee Stock Purchase Plan (ESPP)[76](index=76&type=chunk)[79](index=79&type=chunk) Stock Option Activity (9 Months Ended Sep 30, 2023) | Metric | Number of Shares | Weighted Average Exercise Price per Share | | :---------------------- | :--------------- | :---------------------------------------- | | Outstanding at Jan 1, 2023 | 3,846,532 | $7.02 | | Granted | 604,835 | $5.05 | | Exercised | (51,774) | $1.47 | | Forfeited | (263,348) | $10.24 | | Expired | (42,807) | $15.33 | | Outstanding at Sep 30, 2023 | 4,093,438 | $6.51 | | Exercisable at Sep 30, 2023 | 2,008,038 | $5.66 | Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cost of sales | $36 | $45 | $112 | $108 | | Research and development | $43 | $40 | $120 | $153 | | Sales and marketing | $168 | $126 | $492 | $351 | | General and administrative | $788 | $757 | $2,391 | $2,077 | | **Total** | **$1,035** | **$968** | **$3,115** | **$2,689** | - Total stock-based compensation expense increased to **$1.035 million** for the three months and **$3.115 million** for the nine months ended September 30, 2023, compared to the prior year periods[81](index=81&type=chunk) [Note 12. Income Taxes](index=20&type=section&id=Note%2012.%20Income%20Taxes) Discusses the company's provision for income taxes and effective tax rates for the interim periods - The company recorded a non-significant provision for income taxes for the three and nine months ended September 30, 2023, compared to income tax benefits of **$0.4 million** and **$1.1 million** for the same periods in 2022[84](index=84&type=chunk)[85](index=85&type=chunk) - Effective tax rates were **(0.1%)** and **0.0%** for the three and nine months ended September 30, 2023, respectively, primarily due to operating losses not expected to produce a benefit[84](index=84&type=chunk)[85](index=85&type=chunk) [Note 13. Net Loss Per Share](index=20&type=section&id=Note%2013.%20Net%20Loss%20Per%20Share) Presents the calculation of basic and diluted net loss per share for the interim periods Net Loss Per Share (in thousands, except share and per share data) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(10,153) | $(22,474) | $(26,124) | $(34,174) | | Weighted average shares (basic & diluted) | 29,956,930 | 28,090,267 | 28,810,068 | 28,059,897 | | **Net loss per share (basic & diluted)** | **$(0.34)** | **$(0.80)** | **$(0.91)** | **$(1.22)** | - Net loss per share improved for both the three and nine months ended September 30, 2023, compared to 2022, despite increased weighted average shares outstanding[87](index=87&type=chunk) - Stock options, restricted stock units, and employee stock purchase rights were excluded from diluted EPS calculation as their effect was anti-dilutive[86](index=86&type=chunk)[87](index=87&type=chunk) [Note 14. Related Parties](index=21&type=section&id=Note%2014.%20Related%20Parties) Discloses transactions and relationships with related parties, including lease agreements - The company previously leased property from Meeches LLC, a related party controlled by founders Ted and Irene Davis. The lease was terminated on May 16, 2023, with an escrow agreement for early termination consideration[88](index=88&type=chunk)[89](index=89&type=chunk) - Lease payments to Meeches were **$0.1 million** for the nine months ended September 30, 2023, and **$0.2 million** for the nine months ended September 30, 2022[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Alpha Teknova's financial condition and results of operations for the three and nine months ended September 30, 2023, compared to the same periods in 2022. It covers an overview of the business, the impact of broader economic trends, detailed analysis of revenue, gross profit, operating expenses, and other income/expenses, as well as a discussion of liquidity, capital resources, and critical accounting policies [Overview](index=22&type=section&id=Overview) Provides a high-level summary of Alpha Teknova's business, products, and recent financial performance - Alpha Teknova produces critical reagents for life sciences, serving over **3,000 customers** across pharmaceutical, biotech, CDMOs, IVD, and research institutions[92](index=92&type=chunk) - The company's proprietary manufacturing processes enable high-quality, custom, made-to-order products with short turnaround times[92](index=92&type=chunk) - Products fall into two categories: Lab Essentials and Clinical Solutions, offering pre-poured media plates, liquid cell culture media, and molecular biology reagents[93](index=93&type=chunk) - The company is ISO 13485:2016 certified, supporting diagnostic and therapeutic applications from research to commercialization[94](index=94&type=chunk) - Revenue decreased by **$2.5 million (23.6%)** to **$8.2 million** for the three months ended September 30, 2023, and by **$4.7 million (14.1%)** to **$28.8 million** for the nine months ended September 30, 2023, compared to the prior year periods[96](index=96&type=chunk) - Operating loss for the three months ended September 30, 2023, was **$8.8 million**, compared to **$6.3 million** (excluding goodwill impairment) in the prior year. For the nine months, operating loss was **$22.5 million** (excluding long-lived asset impairment) compared to **$18.8 million** (excluding goodwill impairment) in the prior year[97](index=97&type=chunk) [Impact of Broader Economic Trends on Our Business](index=23&type=section&id=Impact%20of%20Broader%20Economic%20Trends%20on%20Our%20Business) Discusses how general economic conditions, such as inflation and interest rates, affect the company's operations and sales - General inflation and rising interest rates negatively impact the business by increasing cost of sales and operating expenses[98](index=98&type=chunk) - Economic uncertainty may cause customers to reduce, delay, or cancel orders, affecting sales timing and volume[98](index=98&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance by comparing key metrics across different reporting periods [Comparison of the Three Months Ended September 30, 2023, and Three Months Ended September 30, 2022](index=23&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202023,%20and%20Three%20Months%20Ended%20September%2030,%202022) Compares the company's financial results for the three-month periods ended September 30, 2023, and 2022 Key Financials (3 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :------------------------ | :-------- | :-------- | :-------- | :--------- | | Revenue | $8,169 | $10,692 | $(2,523) | (23.6)% | | Cost of sales | $6,697 | $5,922 | $775 | 13.1% | | Gross profit | $1,472 | $4,770 | $(3,298) | (69.1)% | | Research and development | $1,397 | $1,925 | $(528) | (27.4)% | | Sales and marketing | $2,412 | $2,397 | $15 | 0.6% | | General and administrative | $6,138 | $6,502 | $(364) | (5.6)% | | Goodwill impairment | $0 | $16,613 | $(16,613) | (100.0)% |\ | Loss from operations | $(8,762) | $(22,954) | $14,192 | (61.8)% | | Net loss | $(10,153) | $(22,474) | $12,321 | (54.8)% | [Revenue (Three Months)](index=24&type=section&id=Revenue) Analyzes revenue performance for the three months ended September 30, 2023, compared to the prior year Revenue by Product Category (3 Months Ended Sep 30, in thousands) | Product Category | 2023 | 2022 | $ Change | % Change | | :--------------- | :----- | :----- | :------- | :------- | | Lab Essentials | $7,274 | $9,470 | $(2,196) | (23.2)% | | Clinical Solutions | $597 | $919 | $(322) | (35.0)% | | Other | $298 | $303 | $(5) | (1.7)% | | **Total Revenue** | **$8,169** | **$10,692** | **$(2,523)** | **(23.6)%** | - Lab Essentials revenue decreased by **23.2%** due to fewer customers and lower average revenue per customer. Clinical Solutions revenue decreased by **35.0%** due to lower average revenue per customer, partially offset by an increased number of customers[101](index=101&type=chunk)[102](index=102&type=chunk) - U.S. sales decreased by **24.6%** to **$7.8 million**, while international sales increased by **11.0%** to **$0.3 million**[102](index=102&type=chunk) [Gross profit (Three Months)](index=24&type=section&id=Gross%20profit) Examines gross profit and gross profit percentage for the three months ended September 30, 2023, compared to the prior year Gross Profit (3 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :-------------- | :----- | :----- | :------- | :------- | | Cost of sales | $6,697 | $5,922 | $775 | 13.1% | | Gross profit | $1,472 | $4,770 | $(3,298) | (69.1)% | | Gross profit % | 18.0% | 44.6% | | | - Gross profit percentage significantly decreased from **44.6%** to **18.0%**, primarily due to decreased revenue and lower absorption of fixed manufacturing costs, partially offset by reduced headcount[104](index=104&type=chunk) [Operating expenses (Three Months)](index=24&type=section&id=Operating%20expenses) Reviews operating expenses, including R&D, sales and marketing, G&A, and impairment charges, for the three months ended September 30, 2023, compared to the prior year Operating Expenses (3 Months Ended Sep 30, in thousands) | Expense Category | 2023 | 2022 | $ Change | % Change | | :------------------------ | :-------- | :-------- | :-------- | :--------- | | Research and development | $1,397 | $1,925 | $(528) | (27.4)% |\ | Sales and marketing | $2,412 | $2,397 | $15 | 0.6% | | General and administrative | $6,138 | $6,502 | $(364) | (5.6)% | | Amortization of intangible assets | $287 | $287 | $0 | 0.0% | | Goodwill impairment | $0 | $16,613 | $(16,613) | (100.0)% | | **Total operating expenses** | **$10,234** | **$27,724** | **$(17,490)** | **(63.1)%** | - Total operating expenses decreased significantly due to the absence of a **$16.6 million** goodwill impairment charge incurred in Q3 2022. R&D and G&A expenses also decreased due to reduced headcount and professional fees[106](index=106&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Other (expenses) income, net (Three Months)](index=25&type=section&id=Other%20(expenses)%20income,%20net) Details other non-operating income and expenses, including interest and debt extinguishment losses, for the three months ended September 30, 2023, compared to the prior year Other (Expenses) Income, Net (3 Months Ended Sep 30, in thousands) | Category | 2023 | 2022 | $ Change | % Change | | :---------------------------- | :-------- | :------ | :-------- | :---------- | | Interest (expense) income, net | $(791) | $70 | $(861) | (1230.0)% | | Loss on extinguishment of debt | $(824) | $0 | $(824) | (100.0)% | | Other income, net | $233 | $36 | $197 | 547.2% | | **Total other (expenses) income, net** | **$(1,382)** | **$106** | **$(1,488)** | **(1403.8)%** | - Total other expenses, net, increased significantly due to an **$0.8 million** loss on extinguishment of debt and higher interest expense from increased rates and lower capitalized interest. This was partially offset by higher interest income from short-term investments[110](index=110&type=chunk) [Provision for (benefit from) income taxes (Three Months)](index=25&type=section&id=Provision%20for%20(benefit%20from)%20income%20taxes) Discusses the income tax provision or benefit for the three months ended September 30, 2023, compared to the prior year Provision for (Benefit from) Income Taxes (3 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :----------------------------------- | :--- | :----- | :------- | :---------- | | Provision for (benefit from) income taxes | $9 | $(374) | $383 | (102.4)% | | Effective tax rate | (0.1)% | 1.6% | | | - The company recorded a non-significant income tax provision in Q3 2023, compared to a **$0.4 million** benefit in Q3 2022, primarily due to operating losses not expected to produce a benefit[112](index=112&type=chunk) [Comparison of the Nine Months Ended September 30, 2023, and Nine Months Ended September 30, 2022](index=26&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202023,%20and%20Nine%20Months%20Ended%20September%2030,%202022) Compares the company's financial results for the nine-month periods ended September 30, 2023, and 2022 Key Financials (9 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :------------------------ | :-------- | :-------- | :-------- | :--------- | | Revenue | $28,817 | $33,529 | $(4,712) | (14.1)% | | Cost of sales | $19,856 | $18,163 | $1,693 | 9.3% | | Gross profit | $8,961 | $15,366 | $(6,405) | (41.7)% | | Research and development | $4,256 | $5,867 | $(1,611) | (27.5)% | | Sales and marketing | $6,929 | $6,592 | $337 | 5.1% | | General and administrative | $19,426 | $20,856 | $(1,430) | (6.9)% | | Long-lived assets impairment | $2,195 | $0 | $2,195 | 100.0% | | Goodwill impairment | $0 | $16,613 | $(16,613) | (100.0)% | | Loss from operations | $(24,705) | $(35,423) | $10,718 | (30.3)% | | Net loss | $(26,124) | $(34,174) | $8,050 | (23.6)% | [Revenue (Nine Months)](index=26&type=section&id=Revenue) Analyzes revenue performance for the nine months ended September 30, 2023, compared to the prior year Revenue by Product Category (9 Months Ended Sep 30, in thousands) | Product Category | 2023 | 2022 | $ Change | % Change | | :--------------- | :------ | :------ | :------- | :------- | | Lab Essentials | $22,112 | $24,838 | $(2,726) | (11.0)% | | Clinical Solutions | $5,859 | $7,673 | $(1,814) | (23.6)% | | Other | $846 | $1,018 | $(172) | (16.9)% | | **Total Revenue** | **$28,817** | **$33,529** | **$(4,712)** | **(14.1)%** | - Lab Essentials revenue decreased by **11.0%** due to fewer customers, partially offset by higher average revenue per customer. Clinical Solutions revenue decreased by **23.6%** due to lower average revenue per customer, partially offset by an increased number of customers[115](index=115&type=chunk)[116](index=116&type=chunk) - U.S. sales decreased by **15.0%** to **$27.6 million**, while international sales increased by **14.3%** to **$1.2 million**[117](index=117&type=chunk)[118](index=118&type=chunk) [Gross profit (Nine Months)](index=27&type=section&id=Gross%20profit) Examines gross profit and gross profit percentage for the nine months ended September 30, 2023, compared to the prior year Gross Profit (9 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :-------------- | :------ | :------ | :------- | :------- | | Cost of sales | $19,856 | $18,163 | $1,693 | 9.3% | | Gross profit | $8,961 | $15,366 | $(6,405) | (41.7)% | | Gross profit % | 31.1% | 45.8% | | | - Gross profit percentage decreased from **45.8%** to **31.1%**, primarily due to decreased revenue and lower absorption of fixed manufacturing costs, partially offset by reduced headcount[119](index=119&type=chunk) [Operating expenses (Nine Months)](index=27&type=section&id=Operating%20expenses) Reviews operating expenses, including R&D, sales and marketing, G&A, and impairment charges, for the nine months ended September 30, 2023, compared to the prior year Operating Expenses (9 Months Ended Sep 30, in thousands) | Expense Category | 2023 | 2022 | $ Change | % Change | | :------------------------ | :-------- | :-------- | :-------- | :--------- | | Research and development | $4,256 | $5,867 | $(1,611) | (27.5)% | | Sales and marketing | $6,929 | $6,592 | $337 | 5.1% | | General and administrative | $19,426 | $20,856 | $(1,430) | (6.9)% | | Amortization of intangible assets | $860 | $861 | $(1) | (0.1)% | | Long-lived assets impairment | $2,195 | $0 | $2,195 | 100.0% | | Goodwill impairment | $0 | $16,613 | $(16,613) | (100.0)% | | **Total operating expenses** | **$33,666** | **$50,789** | **$(17,123)** | **(33.7)%** | - Total operating expenses decreased by **33.7%** due to the absence of a **$16.6 million** goodwill impairment charge in 2023, partially offset by a **$2.2 million** long-lived asset impairment charge[120](index=120&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - R&D and G&A expenses decreased due to reduced headcount, professional fees, and occupancy costs, while sales and marketing expenses increased due to higher labor and stock-based compensation[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Other (expenses) income, net (Nine Months)](index=28&type=section&id=Other%20(expenses)%20income,%20net) Details other non-operating income and expenses, including interest and debt extinguishment losses, for the nine months ended September 30, 2023, compared to the prior year Other (Expenses) Income, Net (9 Months Ended Sep 30, in thousands) | Category | 2023 | 2022 | $ Change | % Change | | :---------------------------- | :-------- | :------ | :-------- | :---------- | | Interest (expense) income, net | $(1,006) | $85 | $(1,091) | (1283.5)% | | Loss on extinguishment of debt | $(824) | $0 | $(824) | (100.0)% | | Other income, net | $417 | $36 | $381 | 1058.3% | | **Total other (expenses) income, net** | **$(1,413)** | **$121** | **$(1,534)** | **(1267.8)%** | - Total other expenses, net, increased significantly due to higher interest expense from increased debt and rates, and an **$0.8 million** loss on extinguishment of debt. This was partially offset by higher interest income[126](index=126&type=chunk) [Provision for (benefit from) income taxes (Nine Months)](index=28&type=section&id=Provision%20for%20(benefit%20from)%20income%20taxes) Discusses the income tax provision or benefit for the nine months ended September 30, 2023, compared to the prior year Provision for (Benefit from) Income Taxes (9 Months Ended Sep 30, in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :----------------------------------- | :--- | :------- | :------- | :---------- | | Provision for (benefit from) income taxes | $6 | $(1,128) | $1,134 | (100.5)% | | Effective tax rate | (0.0)% | 3.2% | | | - The company recorded a non-significant income tax provision in 9M 2023, compared to a **$1.1 million** benefit in 9M 2022, primarily due to operating losses not expected to produce a benefit[127](index=127&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Evaluates the company's ability to generate and manage cash flows, including financing sources, working capital, and debt covenants - Primary financing sources include a **$99.1 million** IPO in June 2021 and **$22.915 million** gross proceeds from a registered direct offering and private placement in September 2023[128](index=128&type=chunk) - As of September 30, 2023, the company had limited capital resources, with **$42.7 million** in working capital and **$32.1 million** in cash and cash equivalents, and an accumulated deficit of **$81.1 million**[130](index=130&type=chunk) - The company's ability to continue as a going concern is in substantial doubt due to ongoing net losses and potential non-compliance with debt covenants, requiring additional capital or operational adjustments[131](index=131&type=chunk)[133](index=133&type=chunk)[160](index=160&type=chunk) - The Amended Credit Agreement includes minimum net revenue and cash covenants. While compliant as of September 30, 2023, the company anticipates potential non-compliance with the trailing twelve months revenue covenant due to unfavorable market conditions and lowered revenue projections[132](index=132&type=chunk)[133](index=133&type=chunk) - An ATM Facility allows for the sale of up to **$50.0 million** in common stock, subject to limitations[134](index=134&type=chunk) Cash Flows (9 Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :------------------------ | :-------- | :-------- | | Net cash used in operating activities | $(15,922) | $(19,371) | | Net cash used in investing activities | $(7,622) | $(23,419) |\ | Net cash provided by financing activities | $13,420 | $5,127 | | **Net decrease in cash and cash equivalents** | **$(10,124)** | **$(37,663)** | - Net cash used in operating activities decreased in 2023, primarily due to lower net loss and non-cash adjustments. Net cash used in investing activities decreased due to lower purchases of property, plant, and equipment. Net cash provided by financing activities increased significantly due to equity financing proceeds[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Identifies and discusses the accounting policies and estimates that require significant judgment and could materially impact financial results - There have been no material changes to the company's critical accounting estimates since the 2022 Annual Report on Form 10-K[144](index=144&type=chunk) [Emerging Growth Company and Smaller Reporting Company](index=31&type=section&id=Emerging%20Growth%20Company%20and%20Smaller%20Reporting%20Company) Explains the company's status as an emerging growth company and smaller reporting company, and the associated regulatory exemptions - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing exemptions from certain reporting requirements and the option to delay adopting new accounting standards[145](index=145&type=chunk) - The company is also a 'smaller reporting company,' which provides scaled disclosures until certain market value or revenue thresholds are met[146](index=146&type=chunk) [Recent Accounting Pronouncements](index=31&type=section&id=Recent%20Accounting%20Pronouncements) Refers to disclosures regarding recently issued accounting standards and their potential impact on the company's financial statements - A description of recent accounting pronouncements is disclosed in Note 2 to the condensed financial statements[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&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 for this reporting period - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of Alpha Teknova's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective due to an un-remediated material weakness in accounting for income taxes. The company is implementing measures to remediate this weakness [Evaluation of Disclosure Controls and Procedures](index=31&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Assesses the effectiveness of the company's disclosure controls and procedures as of the end of the reporting period - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to a previously disclosed material weakness in internal control over financial reporting[149](index=149&type=chunk)[151](index=151&type=chunk) [Material Weakness in Internal Control Over Financial Reporting](index=32&type=section&id=Material%20Weakness%20in%20Internal%20Control%20Over%20Financial%20Reporting) Identifies and describes any material weaknesses in the company's internal control over financial reporting - A material weakness in accounting for income taxes was identified during the 2022 fiscal year audit, stemming from a lack of appropriate tax resources. This material weakness remained un-remediated as of September 30, 2023[152](index=152&type=chunk) [Management's Plan to Remediate the Material Weakness](index=32&type=section&id=Management's%20Plan%20to%20Remediate%20the%20Material%20Weakness) Outlines the steps management is taking to address and resolve the identified material weakness in internal control - 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[153](index=153&type=chunk) [Changes in Internal Control Over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Reports any changes in internal control over financial reporting that occurred during the reporting period - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected or are reasonably likely to materially affect internal control over financial reporting[154](index=154&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=32&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) Acknowledges the inherent limitations of internal controls and the reasonable assurance they provide - Management acknowledges that controls and procedures can only provide reasonable assurance of achieving control objectives, and judgment is applied in evaluating benefits versus costs[155](index=155&type=chunk) PART II. OTHER INFORMATION Contains legal proceedings, risk factors, equity sales, defaults, and exhibits for Alpha Teknova, Inc. [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) Alpha Teknova is not currently a party to any material legal proceedings. However, the company acknowledges that it may become involved in various legal actions in the ordinary course of business, which could be time-consuming, costly, and potentially adverse to its financial condition and operating results - The company is not currently involved in any material legal proceedings[158](index=158&type=chunk) - Future legal proceedings, if adverse, could result in monetary damages or operational limits, negatively impacting the business[158](index=158&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section highlights key risks and uncertainties affecting Alpha Teknova's business, including substantial doubt about its ability to continue as a going concern, potential non-compliance with debt covenants, historical and future operating losses, and the impact of potential stock sales on market price. These factors could materially affect the company's financial condition and operations - Conditions and events raise substantial doubt about the company's ability to continue as a going concern, requiring additional capital or operational changes[160](index=160&type=chunk)[161](index=161&type=chunk) - The company may be unable to comply with trailing twelve months revenue covenants under the Amended Credit Agreement, which could lead to acceleration of debt obligations and potential foreclosure on assets[162](index=162&type=chunk)[164](index=164&type=chunk) - Alpha Teknova has a history of operating losses and may continue to incur losses, with no assurance of achieving or maintaining profitability[165](index=165&type=chunk)[166](index=166&type=chunk) - Sales of a substantial number of common stock shares, including those held by affiliates or issued under equity plans, could significantly reduce the market price of the stock[167](index=167&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - The company's cash and cash equivalents could be adversely affected if financial institutions holding deposits fail, impacting liquidity[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms that there were no unregistered sales of equity securities during the reporting period. It also states that there has been no material change in the planned use of proceeds from the initial public offering (IPO) as previously disclosed - No unregistered sales of equity securities occurred during the period[172](index=172&type=chunk) - There has been no material change in the planned use of proceeds from the IPO[173](index=173&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Alpha Teknova reports no defaults upon senior securities during the period - There were no defaults upon senior securities[175](index=175&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Alpha Teknova - This item is not applicable to the company[176](index=176&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) Alpha Teknova reports no other information for this item - No other information is reported for this item[177](index=177&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate documents, securities purchase agreements, registration rights agreements, and amendments to credit and security agreements, along with certifications - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), securities agreements (Registered Direct Offering, PIPE Private Placement, Registration Rights Agreement), and amendments to the Credit and Security Agreement (Term Loan and Revolving Loan)[178](index=178&type=chunk)[179](index=179&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are also included[181](index=181&type=chunk)

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 ...