10-Q
--12-31 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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, 2022

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 of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2451 Bert Dr.

Hollister, CA

95023

(Address of principal executive offices)

(Zip Code)

(831) 637-1100

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

 

TKNO

 

The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 No ☒

As of May 9, 2022, the registrant had 28,042,479 shares of common stock, $0.00001 par value per share, outstanding.

 

 

 


 

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:

our future financial performance, including our revenue, costs of revenue and operating expenses;
our ability to achieve and grow profitability;
our ability to expand our operations and increase capacity;
our anticipated uses of cash in the short and long terms and the sufficiency of our sources of liquidity for funding our liquidity requirements;
our ability to defend against claims and mitigate adverse results in any legal proceedings against us and the merits of any claims or suits against us;
our ability to maintain cash and cash equivalents without losses or write-offs and limit our accounts receivable and credit risk exposure;
our future investments in additional facilities to facilitate our expected growth;
our future uses of liquidity to purse potential acquisitions that further or accelerate our strategy;
our future use of equity or debt financings to execute our business strategy;
our ability to take advantage of certain exemptions from various reporting requirements generally applicable to public companies;
our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act);
the impact of recent accounting pronouncements on our financial position, results of operations or cash flows, specifically the impact of the adoption of Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326);
any failure to fully remediate material weaknesses in our internal controls over financial reporting and maintain effective internal controls in the future;
the impact of changes to our internal control over financial reporting, other than changes intended to remediate material weaknesses;
the impact the novel coronavirus (COVID-19) or any pandemic, epidemic or outbreak of infectious disease, natural
disasters, geopolitical unrest, war, terrorism, public health issues or other catastrophic events may have on our business;
our ability to actively manage our response to the COVID-19 pandemic;
our future adoption of critical accounting policies and estimates;
our ability to increase the scale and capacity of our manufacturing processes and systems;
the impact of increased competition from additional companies entering the market and the availability of more advanced technologies in the market;
our ability to hire aggressively as we expand;
our ability to attract capital for product development and refinement on favorable terms;
our ability to generate future revenue growth from introducing new products to support the growing cell and gene therapy market and the increasing use of messenger ribonucleic acid (mRNA) vaccines and therapies;
the impact of increased costs of future global operations;

2


 

our ability to use cash on hand to meet current and future financial obligations, including funding our operations, debt service requirements and capital expenditures;
the enforceability of our exclusive forum provisions in our amended and restated certificate of incorporation;
our customers’ sensitivity to product nonconformances, defects and errors;
the availability of exemption of our products from compliance with the U.S. Food, Drug and Cosmetic Act (FDCA);
our ability to secure and maintain a stable supply of raw materials in the future;
our ability to maintain corporate culture that contributes to our success;
the applicability of our products across a wide range of markets and the probability of success or revenue opportunity in our target markets;
the impact of the phase-out of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, on the interests rates applicable to our financing arrangements;
regulatory developments in the United States and other foreign countries;
the impact of revenue recognition rules and other factors on our financial results;
our ability to obtain, maintain and enforce intellectual property protection for our current and future products, including our ability to protect our trade secrets, trademarks and trade names; and
the increased expenses associated with being a public company.

 

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

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Condensed Financial Statements (Unaudited)

 

5

 

 

Condensed Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2022 and 2021

 

5

 

 

Condensed Balance Sheets (Unaudited) at March 31, 2022 and December 31, 2021

 

6

 

 

Condensed Statements of Convertible and Redeemable Preferred Stock and Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2022 and 2021

 

7

 

 

Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021

 

8

 

 

Notes to Unaudited Condensed Financial Statements

 

9

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

24

Item 4.

 

Controls and Procedures

 

24

 

PART II.

 

OTHER INFORMATION

 

25

Item 1.

 

Legal Proceedings

 

25

Item 1A.

 

Risk Factors

 

26

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

61

Item 3.

 

Default Upon Senior Securities

 

61

Item 4.

 

Mine Safety Disclosures

 

61

Item 5.

 

Other Information

 

61

Item 6.

 

Exhibits

 

61

 

Signatures

 

 

 

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)

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

11,147

 

 

$

9,078

 

Cost of sales

 

 

5,798

 

 

 

4,053

 

Gross profit

 

 

5,349

 

 

 

5,025

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

2,013

 

 

 

700

 

Sales and marketing

 

 

1,597

 

 

 

705

 

General and administrative

 

 

7,295

 

 

 

4,161

 

Amortization of intangible assets

 

 

287

 

 

 

287

 

Total operating expenses

 

 

11,192

 

 

 

5,853

 

Loss from operations

 

 

(5,843

)

 

 

(828

)

Other (expenses) income, net

 

 

 

 

 

 

Interest (expense) income, net

 

 

(13

)

 

 

7

 

Other expense, net

 

 

 

 

 

1

 

Total other (expenses) income, net

 

 

(13

)

 

 

8

 

Loss before income taxes

 

 

(5,856

)

 

 

(820

)

Benefit from income taxes

 

 

(359

)

 

 

(165

)

Net loss

 

 

(5,497

)

 

 

(655

)

Change in unrealized loss on available-for-sale securities, net of tax

 

 

 

 

 

(7

)

Comprehensive loss

 

$

(5,497

)

 

$

(648

)

Net loss per share—basic and diluted

 

$

(0.20

)

 

$

(0.18

)

Weighted average shares used in computing net loss per share—basic and diluted

 

 

28,030,971

 

 

 

3,599,232

 

 

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)

 

 

 

As of
March 31, 2022

 

 

As of
December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

76,455

 

 

$

87,518

 

Accounts receivable, net of allowance for doubtful accounts of $30 thousand and $23 thousand

 

 

5,978

 

 

 

4,666

 

Inventories, net

 

 

6,426

 

 

 

5,394

 

Income taxes receivable

 

 

1,188

 

 

 

1,188

 

Prepaid expenses and other current assets

 

 

1,891

 

 

 

2,438

 

Total current assets

 

 

91,938

 

 

 

101,204

 

Property, plant and equipment, net

 

 

37,059

 

 

 

29,810

 

Operating right-of-use lease assets

 

 

19,661

 

 

 

 

Goodwill

 

 

16,613

 

 

 

16,613

 

Intangible assets, net

 

 

18,417

 

 

 

18,704

 

Other non-current assets

 

 

396

 

 

 

180

 

Total assets

 

$

184,084

 

 

$

166,511

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,028

 

 

$

2,248

 

Accrued liabilities

 

 

7,510

 

 

 

5,495

 

Current portion of operating lease liabilities

 

 

2,098

 

 

 

 

Total current liabilities

 

 

12,636

 

 

 

7,743

 

Deferred tax liabilities

 

 

2,793

 

 

 

3,153

 

Other accrued liabilities

 

 

253

 

 

 

273

 

Long-term debt, net

 

 

11,916

 

 

 

11,870

 

Deferred rent

 

 

 

 

 

269

 

Long-term operating lease liabilities

 

 

17,938

 

 

 

 

Total liabilities

 

 

45,536

 

 

 

23,308

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.00001 par value, 10,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively, zero shares issued and outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.00001 par value, 490,000,000 shares authorized at March 31, 2022 and December 31, 2021, 28,042,479 and 28,012,017 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

151,583

 

 

 

150,741

 

Accumulated deficit

 

 

(13,035

)

 

 

(7,538

)

Total stockholders’ equity

 

 

138,548

 

 

 

143,203

 

Total liabilities and stockholders’ equity

 

$

184,084

 

 

$

166,511

 

 

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)

 

 

 

Convertible and
Redeemable Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
other
comprehensive

 

 

Retained
Earnings
(Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

income (loss)

 

 

Deficit)

 

 

Equity

 

Balance at January 1, 2022

 

 

 

 

$

 

 

 

 

28,012,017

 

 

$

 

 

$

150,741

 

 

$

 

 

$

(7,538

)

 

$

143,203

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

787

 

 

 

 

 

 

 

 

 

787

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

30,462

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,497

)

 

 

(5,497

)

Balance at March 31, 2022

 

 

 

 

$

 

 

 

 

28,042,479

 

 

$

 

 

$

151,583

 

 

$

 

 

$

(13,035

)

 

$

138,548

 

 

 

 

Convertible and
Redeemable Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
other
comprehensive

 

 

Retained
Earnings
(Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

income (loss)

 

 

Deficit)

 

 

Equity

 

Balance at January 1, 2021

 

 

9,342,092

 

 

$

35,638

 

 

 

 

3,599,232

 

 

$

 

 

$

14,495

 

 

$

7

 

 

$

2,265

 

 

$

16,767

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

183

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(655

)

 

 

(655

)

Balance at March 31, 2021

 

 

9,342,092

 

 

$

35,638

 

 

 

 

3,599,232

 

 

$

 

 

$

14,678

 

 

$

 

 

$

1,610

 

 

$

16,288

 

 

The accompanying notes are an integral part of these condensed financial statements.

7


 

ALPHA TEKNOVA, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(5,497

)

 

$

(655

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Bad debt expense

 

 

7

 

 

 

(88

)

Inventory reserve

 

 

(4

)

 

 

(2

)

Depreciation and amortization

 

 

751

 

 

 

652

 

Stock-based compensation

 

 

787

 

 

 

183

 

Deferred taxes

 

 

(360

)

 

 

(164

)

Amortization of debt financing costs

 

 

46

 

 

 

 

Non-cash lease expense

 

 

106

 

 

 

 

Other

 

 

 

 

 

(10

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(1,319

)

 

 

400

 

Inventories

 

 

(1,028

)

 

 

(295

)

Income taxes receivable

 

 

 

 

 

(177

)

Prepaid expenses and other current assets

 

 

547

 

 

 

348

 

Accounts payable

 

 

237

 

 

 

1,283

 

Accrued liabilities

 

 

762

 

 

 

847

 

Other

 

 

(236

)

 

 

79

 

Cash (used in) provided by operating activities

 

 

(5,201

)

 

 

2,401

 

Investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(5,917

)

 

 

(3,884

)

Proceeds from loan to related party

 

 

 

 

 

529

 

Proceeds on sales of short-term marketable securities

 

 

 

 

 

1,132

 

Proceeds from maturities of short-term marketable securities

 

 

 

 

 

695

 

Cash used in investing activities

 

 

(5,917

)

 

 

(1,528

)

Financing activities:

 

 

 

 

 

 

Proceeds from long-term debt

 

 

 

 

 

11,889

 

Debt issuance costs

 

 

 

 

 

(153

)

Payment of costs related to initial public offering

 

 

 

 

 

(1,458

)

Proceeds from exercise of stock options

 

 

55

 

 

 

 

Cash provided by financing activities

 

 

55

 

 

 

10,278

 

Change in cash and cash equivalents

 

 

(11,063

)

 

 

11,151

 

Cash and cash equivalents at beginning of period

 

 

87,518

 

 

 

3,315

 

Cash and cash equivalents at end of period

 

$

76,455

 

 

$

14,466

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Income taxes paid

 

$

 

 

$

 

Interest paid, net of amounts capitalized

 

$

 

 

$

13

 

Capitalized property, plant and equipment included in accounts payable and accrued liabilities

 

$

3,884

 

 

$

673

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

1,425

 

Recognition of operating right-of-use lease asset

 

$

20,237

 

 

$

 

Recognition of operating lease liabilities

 

$

20,507

 

 

$

 

 

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.

 

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

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 $20.3 million, which included reclassifying approximately $0.2 million of deferred rent as a component of the operating lease asset as of January 1, 2022. The adoption also resulted in recording operating lease liabilities of $20.5 million as of January 1, 2022. The standard did not have an impact on the condensed statements of operations and cash flows. Refer to Note 7, Leases, herein for additional information pertaining to the adoption of the new standard.

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):

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Lab Essentials

 

$

6,975

 

 

$

6,790

 

Clinical Solutions

 

 

3,812

 

 

 

1,071

 

Sample Transport

 

 

6

 

 

 

924

 

Other

 

 

354

 

 

 

293

 

Total revenue

 

$

11,147

 

 

$

9,078

 

Teknova’s revenue, disaggregated by geographic region, was as follows (in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

United States

 

$

10,820

 

 

$

8,715

 

International

 

 

327

 

 

 

363

 

Total revenue

 

$

11,147

 

 

$

9,078

 

 

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

 

*

 

*

 

*

 

16%

Distributor customer B

 

13%

 

15%

 

11%

 

10%

Direct customer A

 

15%

 

*

 

*

 

*

Direct customer B

 

*

 

*

 

*

 

12%

Direct customer C

 

12%

 

*

 

11%

 

*

Direct customer D

 

*

 

*

 

12%

 

*

* Represents less than 10%.

The Company's customers that are distributors, as opposed to direct customers, represent highly diversified customer bases.

Suppliers

Suppliers who accounted for 10% or more of the Company's inventory purchases and outstanding balance of accounts payable are presented as follows:

 

 

 

For the Three Months Ended March 31,

 

As of

 

As of

 

 

2022

 

2021

 

March 31, 2022

 

December 31, 2021

Distributor supplier A

 

30%

 

41%

 

*

 

20%

Distributor supplier B

 

10%

 

*

 

*

 

*

Direct supplier A

 

18%

 

*

 

*

 

*

Direct supplier B

 

11%

 

*

 

*

 

*

Direct supplier C

 

*

 

11%

 

*

 

*

* Represents less than 10%.

 

Note 5. Inventories, Net

Inventories consist of the following (in thousands):

 

 

 

As of
March 31, 2022

 

 

As of
December 31, 2021

 

Finished goods, net

 

$

3,891

 

 

$

3,172

 

Work in process

 

 

168

 

 

 

105

 

Raw materials, net

 

 

2,367

 

 

 

2,117

 

Total inventories, net

 

$

6,426

 

 

$

5,394

 

 

Note 6. Property, Plant and Equipment, Net

Property, plant and equipment consist of the following (in thousands):

 

 

 

As of
March 31, 2022

 

 

As of
December 31, 2021

 

Machinery and equipment

 

$

10,696

 

 

$

9,942

 

Office furniture and equipment

 

 

673

 

 

 

649

 

Vehicles

 

 

70

 

 

 

70

 

Leasehold improvements

 

 

2,820

 

 

 

2,805

 

 

 

 

14,259