Teknova(TKNO) - 2023 Q2 - Quarterly Report

Filing Information This section provides the basic filing and cautionary information for Alpha Teknova, Inc.'s Form 10-Q Report Details 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][3] 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] Cautionary Note Regarding Forward-Looking Statements 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] - 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][11] - 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] 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) Alpha Teknova, Inc.'s unaudited condensed financial statements for Q2 2023 and 2022 present key financial positions Condensed Statements of Operations (Unaudited) 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) | $(0.15) | 35.7% | Condensed Balance Sheets (Unaudited) Condensed Balance Sheets present key financial figures Condensed Balance Sheets (Unaudited) - Key Figures (in thousands) | Item | June 30, 2023 | December 31, 2022 | Change ($) | 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) 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) | $86,208 | Condensed Statements of Cash Flows (Unaudited) Condensed Statements of Cash Flows present key financial figures Condensed Statements of Cash Flows (Unaudited) - Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | Change ($) | | :------------------------------------ | :----- | :----- | :--------- | | 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 This section provides detailed notes to the unaudited condensed financial statements Note 1. Nature of the Business 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] - Product offerings include pre-poured media plates, liquid cell culture media and supplements, and molecular biology reagents[29] - 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] Note 2. Basis of Presentation and Summary of Significant Accounting Policies 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][32] - 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][36] - 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] - 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] 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 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] 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 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 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 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] - 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] Note 7. Leases 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][57] - 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] 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 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] - The remaining weighted-average useful life of definite-lived intangible assets (customer relationships) was 3.5 years as of June 30, 2023[61] Note 9. Accrued Liabilities 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 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][64] - 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] - 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] - 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] 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 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][76] 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] Note 12. Income Taxes 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 $0.4 million benefit in Q2 2022, with effective tax rates of 0.2% and 6.0% respectively[81] - For YTD 2023, the benefit from income taxes was insignificant ($-3 thousand) compared to a $0.8 million benefit in YTD 2022, with effective tax rates of 0.0% and 6.1% respectively[82] - The effective tax rates differ from the federal statutory rate primarily due to operating losses not expected to produce a benefit[81][82] Note 13. Net Loss Per Share 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] Note 14. Related Parties Note 14 identifies related parties and transactions - Meeches LLC, controlled by founders Ted and Irene Davis, is identified as a related party[85] - 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] Note 15. Subsequent Events 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Alpha Teknova's financial condition and operational results for Q2 2023, including business and liquidity 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] - 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] - 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][97] Impact of Broader Economic Trends on Our Business 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] - These economic factors may cause customers to reduce, delay, or cancel orders, affecting sales timing and volume[98] Results of Operations 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 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] 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] Comparison of the Six Months Ended June 30, 2023 and Six Months Ended June 30, 2022 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] 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] Liquidity and Capital Resources 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] - 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] - 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] 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 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] Emerging Growth Company and Smaller Reporting Company 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][143] - The company has elected to delay adopting new or revised accounting standards until they apply to private companies[142] - The company is also a 'smaller reporting company,' which provides scaled disclosures until certain market value and revenue thresholds are met[145] Recent Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 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] Material Weakness in Internal Control Over Financial Reporting 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] Management's Plan to Remediate the Material Weakness 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] Changes in Internal Control Over Financial Reporting 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] Limitations on Effectiveness of Controls and Procedures 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] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings 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] - Legal proceedings are inherently unpredictable and expensive, potentially leading to monetary damages or operational limits if determined adversely[155] Item 1A. Risk Factors 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][159] - 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][162] - 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][164] - Sales of a substantial number of outstanding common stock shares, particularly by affiliates, could significantly reduce the market price of the stock[165][167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - The planned use of proceeds from the IPO has no material changes from previous disclosures[171] Item 3. Defaults Upon Senior Securities Alpha Teknova, Inc. reports no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[173] Item 4. Mine Safety Disclosures This item is not applicable to Alpha Teknova, Inc - This item is not applicable to the company[174] Item 5. Other Information Alpha Teknova, Inc. reports no other information required under this item - There is no other information to report under this item[175] Item 6. Exhibits 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] Signatures The Form 10-Q report is signed by Alpha Teknova Inc.'s CEO and CFO on August 11, 2023 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]