UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
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Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 9, 2022, the registrant had
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements relating to our financial condition, results of operations, plans, objectives, future performance and business, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “would,” “potential,” “likely,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
2
We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.
We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors that could adversely impact our business and financial performance. Furthermore, new risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by law.
3
ALPHA TEKNOVA, INC.
Form 10-Q for the Quarter Ended March 31, 2022
INDEX
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PART I. |
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Item 1. |
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5 |
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5 |
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Condensed Balance Sheets (Unaudited) at March 31, 2022 and December 31, 2021 |
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6 |
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7 |
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Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021 |
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8 |
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9 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
Item 3. |
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24 |
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Item 4. |
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24 |
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PART II. |
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25 |
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Item 1. |
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25 |
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Item 1A. |
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26 |
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Item 2. |
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61 |
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Item 3. |
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61 |
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Item 4. |
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61 |
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Item 5. |
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61 |
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Item 6. |
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61 |
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63 |
4
PART I – FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
ALPHA TEKNOVA, INC.
Condensed Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(in thousands, except share and per share data)
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For the Three Months Ended March 31, |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization of intangible assets |
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Total operating expenses |
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Loss from operations |
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Other (expenses) income, net |
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Interest (expense) income, net |
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Other expense, net |
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— |
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Total other (expenses) income, net |
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Loss before income taxes |
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Benefit from income taxes |
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Net loss |
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Change in unrealized loss on available-for-sale securities, net of tax |
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— |
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Comprehensive loss |
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$ |
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$ |
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Net loss per share—basic and diluted |
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$ |
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$ |
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Weighted average shares used in computing net loss per share—basic and diluted |
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The accompanying notes are an integral part of these condensed financial statements.
5
ALPHA TEKNOVA, INC.
Condensed Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
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As of |
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As of |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories, net |
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Income taxes receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating right-of-use lease assets |
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Goodwill |
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Intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Deferred tax liabilities |
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Other accrued liabilities |
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Long-term debt, net |
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Deferred rent |
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Long-term operating lease liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
6
ALPHA TEKNOVA, INC.
Condensed Statements of Convertible and Redeemable Preferred Stock and Stockholders’ Equity
(in thousands, except share data)
(Unaudited)
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Convertible and |
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Common Stock |
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Additional |
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Accumulated |
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Retained |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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income (loss) |
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Deficit) |
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Equity |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Convertible and |
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Common Stock |
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Additional |
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Accumulated |
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Retained |
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Stockholders’ |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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income (loss) |
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Deficit) |
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Equity |
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Balance at January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale securities |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
7
ALPHA TEKNOVA, INC.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Operating activities: |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Bad debt expense |
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Inventory reserve |
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Depreciation and amortization |
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Stock-based compensation |
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Deferred taxes |
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Amortization of debt financing costs |
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Non-cash lease expense |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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Income taxes receivable |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued liabilities |
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Other |
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Cash (used in) provided by operating activities |
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Investing activities: |
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Purchase of property, plant and equipment |
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Proceeds from loan to related party |
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Proceeds on sales of short-term marketable securities |
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Proceeds from maturities of short-term marketable securities |
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Cash used in investing activities |
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Financing activities: |
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Proceeds from long-term debt |
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Debt issuance costs |
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Payment of costs related to initial public offering |
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Proceeds from exercise of stock options |
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Cash provided by financing activities |
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Change in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow disclosures: |
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Income taxes paid |
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$ |
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$ |
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Interest paid, net of amounts capitalized |
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$ |
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$ |
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Capitalized property, plant and equipment included in accounts payable and accrued liabilities |
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$ |
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$ |
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Deferred offering costs included in accounts payable and accrued liabilities |
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$ |
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$ |
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Recognition of operating right-of-use lease asset |
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$ |
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$ |
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Recognition of operating lease liabilities |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
8
ALPHA TEKNOVA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of the Business
Alpha Teknova, Inc. (referred to herein as the Company or Teknova), provides critical reagents that enable the discovery, development, and production of biopharmaceutical products such as drug therapies, novel vaccines, and molecular diagnostics. Product offerings include pre-poured media plates for cell growth and cloning, liquid cell culture media and supplements for cellular expansion, and molecular biology reagents for sample manipulation, resuspension, and purification. Teknova supports customers spanning the life sciences market, including pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostic franchises, and academic and government research institutions, with catalog and custom, made-to-order products.
Teknova manufactures its products at its Hollister, California headquarters and stocks inventory of raw materials, components, and finished goods at that location. The Company ships products directly from its warehouses in Hollister, California and Mansfield, Massachusetts.
Teknova manufactures its products in Research Use Only (RUO) or Good Manufacturing Practice (GMP) categories, the latter of which refers to more stringent quality standards supported by additional levels of documentation, testing, and traceability. In 2017, Teknova achieved International Organization for Standardization (ISO) 13485:2016 certification, enabling the Company to manufacture products for use in diagnostic and therapeutic applications.
Basis of Accounting, Presentation and Use of Estimates
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations.
The unaudited condensed financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the results for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. The Company's critical and significant accounting estimates are influenced by the Company's assessment of the economic implications of COVID-19. Actual results can differ from those estimates. Certain prior period amounts have been reclassified to conform to presentation for the current year.
These unaudited condensed financial statements should be read in conjunction with the Company's audited financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K filed with the SEC on March 18, 2022 (the 2021 Annual Report on Form 10-K). Refer to "Notes to Financial Statements—Note 2 Summary of Significant Accounting Policies," within the 2021 Annual Report on Form 10-K for a full list of the Company's significant accounting policies. The information in those notes has not changed except as a result of normal adjustments in the interim periods.
Teknova has determined that it operates in one reporting unit, one operating segment and one reportable segment, as the chief operating decision maker of the Company reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
Recently Adopted Accounting Pronouncements
Effective January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective approach, applied at the beginning of the period of adoption, and elected the package of transitional practical expedients. The adoption of this standard resulted in recording operating right-of-use lease assets of $
9
Effective January 1, 2022, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which removed certain exceptions to the general principles in Accounting Standards Codification (ASC) 740 and clarified and amended certain guidance to promote consistent application. The adoption of this standard did not have a significant impact on the Company's condensed financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses and will apply to accounts receivable. The new guidance will be effective for Teknova’s annual and interim periods beginning after December 15, 2022. Teknova is currently evaluating the impact of the adoption of the standard on the financial statements and does not anticipate the standard to have a significant impact.
Note 3. Revenue Recognition
Teknova recognizes revenue from the sale of manufactured products and services when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer.
Teknova’s revenue, disaggregated by business line, was as follows (in thousands):
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For the Three Months Ended March 31, |
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2022 |
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2021 |
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Lab Essentials |
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$ |
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$ |
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Clinical Solutions |
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Sample Transport |
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Other |
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Total revenue |
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$ |
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$ |
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Teknova’s revenue, disaggregated by geographic region, was as follows (in thousands):
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For the Three Months Ended March 31, |
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2022 |
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2021 |
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United States |
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$ |
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$ |
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International |
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||
Total revenue |
|
$ |
|
|
$ |
|
Note 4. Concentrations of Risk
Teknova’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high quality banking institutions. At times, the Company’s cash and cash equivalent balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit. Teknova has never experienced any losses related to its cash and cash equivalent balances. Teknova routinely communicates with its customers regarding payments and has a history of limited write-offs. Therefore, the Company believes that its accounts receivable credit risk exposure is limited.
Customers
Customers who accounted for 10% or more of the Company's revenues and outstanding balance of accounts receivable are presented as follows:
10
|
|
For the Three Months Ended March 31, |
|
As of |
|
As of |
||
|
|
2022 |
|
2021 |
|
March 31, 2022 |
|
December 31, 2021 |
Distributor customer A |
|
* |
|
* |
|
* |
|
|
Distributor customer B |
|
|
|
|
||||
Direct customer A |
|
|
* |
|
* |
|
* |
|
Direct customer B |
|
* |
|
* |
|
* |
|
|
Direct customer C |
|
|
* |
|
|
* |
||
Direct customer D |
|
* |
|
* |
|
|
* |
* Represents less than 10%.
The Company's customers that are distributors, as opposed to direct customers, represent highly diversified customer bases.
Suppliers
S
|
|
For the Three Months Ended March 31, |
|
As of |
|
As of |
||
|
|
2022 |
|
2021 |
|
March 31, 2022 |
|
December 31, 2021 |
Distributor supplier A |
|
|
|
* |
|
|||
Distributor supplier B |
|
|
* |
|
* |
|
* |
|
Direct supplier A |
|
|
* |
|
* |
|
* |
|
Direct supplier B |
|
|
* |
|
* |
|
* |
|
Direct supplier C |
|
* |
|
|
* |
|
* |
* Represents less than 10%.
Note 5. Inventories, Net
Inventories consist of the following (in thousands):
|
|
As of |
|
|
As of |
|
||
Finished goods, net |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Raw materials, net |
|
|
|
|
|
|
||
Total inventories, net |
|
$ |
|
|
$ |
|
Note 6. Property, Plant and Equipment, Net
Property, plant and equipment consist of the following (in thousands):
|
|
As of |
|
|
As of |
|
||
Machinery and equipment |
|
$ |
|
|
$ |
|
||
Office furniture and equipment |
|
|
|
|
|
|
||
Vehicles |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|