Alpha Teknova Inc

Previous wording

We generated revenue of $9.3 million during the three months ended March 31, 2024, which represents an increase of $0.2 million compared to revenue of $9.1 million during the three months ended March 31, 2023. For the three months ended March 31, 2024 and 2023, only 4.5% and 4.3%, respectively, of our revenue was generated from customers located outside of the United States. Our sales outside of the United States are denominated in U.S. Dollars.

Current wording

We generated revenue of $9.6 million during the three months ended June 30, 2024, which represents a decrease of $1.9 million compared to revenue of $11.5 million during the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, only 4.0% and 3.9%, respectively, of our revenue was generated from customers located outside of the United States. We generated revenue of $18.9 million during the six months ended June 30, 2024, which represents a decrease of $1.7 million compared to revenue of $20.6 million during the six months ended June 30, 2023. Excluding revenue of $2.7 million from a single large Clinical Solutions order that was delivered during the three and six months ended June 30, 2023, total revenue was up 9% and 5% for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, respectively. For the six months ended June 30, 2024 and 2023, only 4.3% and 4.1%, respectively, of our revenue was generated from customers located outside of the United States. Our sales outside of the United States are denominated in U.S. Dollars.

Previous wording

We had an operating loss of $8.0 million during the three months ended March 31, 2024, compared to an operating loss of $8.9 million during the three months ended March 31, 2023. While our expenses may fluctuate over the short term, we expect our expenses will continue to increase in future periods, but at a slower rate, in connection with our ongoing activities as we:

Current wording

We had an operating loss of $5.1 million during the three months ended June 30, 2024, compared to an operating loss of $7.0 million during the three months ended June 30, 2023. We had an operating loss of $13.1 million during the six months ended June 30, 2024, compared to an operating loss of $15.9 million during the six months ended June 30, 2023. While our expenses may fluctuate over the short term, we expect our expenses will continue to increase in future periods, but at a slower rate, in connection with our ongoing activities as we:

Previous wording

invest in processes and infrastructure to enable manufacturing automation and expand capacity, including the ramp up of our new, state-of-the-art manufacturing, warehouse, and distribution facilities; and

Current wording

invest in processes and infrastructure to improve operating efficiency and expand capacity at our facilities, including the ramp up of our new, state-of-the-art manufacturing, warehouse, and distribution facilities; and

Previous wording

U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Inflation, together with increased interest rates, may cause our customers to reduce, delay, or cancel orders for our goods and services, thereby causing a decrease in or change in timing of sales of our products and services. We cannot predict the impact of future inflation and interest rate increases on the results of our operations. For further information regarding the impact of these economic factors on the Company, please see the risk factors identified in Part I, Item 1A, Risk Factors, of our 2023 Annual Report on Form 10-K.

Current wording

We are closely monitoring economic uncertainty in the U.S. and abroad. General inflation in the U.S. has risen to levels not experienced in recent decades. General inflation, including rising prices for our raw materials and other inputs, as well as rising salaries and other expenses, negatively impact our business by increasing our cost of sales and operating expenses. In addition, the U.S. Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Inflation, together with increased interest rates, may cause our customers to reduce, delay, or cancel orders for our goods and services, thereby causing a decrease in or change in timing of sales of our products and services. We cannot predict the impact of future inflation and interest rate increases on the results of our operations. For further information regarding the impact of these economic factors on the Company, please see the risk factors identified in Part I, Item 1A, Risk Factors, of our 2023 Annual Report on Form 10-K.

Previous wording

Lab Essentials revenue was $7.3 million in each of the three months ended March 31, 2024 and 2023, respectively. Lab Essentials revenue was consistent as the slight increase in number of customers, was offset by a similar decline in average revenue per customer.

Current wording

Lab Essentials revenue was $7.6 million in each of the three months ended June 30, 2024 and 2023. Lab Essentials revenue was consistent as an increase in number of customers was offset by a similar decline in average revenue per customer.

Previous wording

Clinical Solutions revenue was $1.7 million for the three months ended March 31, 2024, an increase of $0.1 million, or 6.8%, compared to $1.6 million for the three months ended March 31, 2023. The increase in Clinical Solutions revenue was attributable to an increased number of customers, partially offset by lower average revenue per customer.

Current wording

Clinical Solutions revenue was $1.6 million for the three months ended June 30, 2024, a decrease of $2.1 million, or 57.2%, compared to $3.7 million for the three months ended June 30, 2023. The decrease in Clinical Solutions revenue was attributable to lower average revenue per customer, partially offset by an increased number of customers.

Previous wording

Revenue from U.S. sales was $8.9 million and $8.7 million for the three months ended March 31, 2024 and 2023, respectively. Revenue from U.S. sales as a percentage of our total revenue was consistent period over period, representing 95.5% and 95.7% of our total revenue during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Revenue from U.S. sales was $9.2 million and $11.1 million for the three months ended June 30, 2024 and 2023, respectively. Revenue from U.S. sales as a percentage of our total revenue was consistent period over period, representing 96.0% and 96.1% of our total revenue during the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Gross profit percentage was 23.8% and 26.6% for the three months ended March 31, 2024 and 2023, respectively. The decrease in gross profit percentage was primarily driven by increased overhead costs, largely depreciation expense following the completion of our new manufacturing facility in the prior year, partially offset by reduced headcount.

Current wording

Gross profit percentage was 29.2% and 43.9% for the three months ended June 30, 2024 and 2023, respectively. The decrease in gross profit percentage was primarily driven by lower Clinical Solutions revenue and increased overhead costs, largely depreciation expense following the completion of our new manufacturing facility in the prior year, partially offset by reduced headcount.

Previous wording

Research and development expenses were $0.9 million and $1.4 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily driven by reduced headcount and supplies expense.

Current wording

Research and development expenses were $0.7 million and $1.5 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by reduced headcount and supplies expense.

Previous wording

Sales and marketing expenses were $1.7 million and $2.3 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily driven by reduced headcount.

Current wording

Sales and marketing expenses were $1.5 million and $2.2 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by reduced headcount.

Previous wording

Our other (expenses) income, net for the three months ended March 31, 2024 and 2023, were as follows (dollars in thousands):

Current wording

Our other expenses, net for the three months ended June 30, 2024 and 2023, were as follows (dollars in thousands):

Previous wording

Total other expenses, net was $0.1 million for the three months ended March 31, 2024, compared to total other income, net of $0.1 million for the three months ended March 31, 2023. The increase in total other expenses, net was attributable to higher interest expense driven by higher interest rates despite a lower debt balance outstanding as well as lower amounts of interest capitalized, partially offset by higher interest income due to higher interest rates earned on short-term liquid investments. Capitalized interest costs were zero and $0.6 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Total other expenses, net was $0.3 million and $0.1 million for the three months ended June 30, 2024 and 2023, respectively. The increase in total other expenses, net was primarily due to lower amounts of interest capitalized. Additionally, interest expense was lower due to a lower debt balance outstanding despite higher interest rates, partially offset by lower interest income earned on short-term liquid investments. Capitalized interest costs were zero and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Revenue from international sales was $0.4 million in each of the three months ended March 31, 2024 and 2023. Revenue from international sales as a percentage of our total revenue was also consistent, representing 4.5% and 4.3% of our total revenue during the three months ended March 31, 2024 and 2023, respectively.

Current wording

Revenue from international sales was $0.8 million in each of the six months ended June 30, 2024 and 2023. Revenue from international sales as a percentage of our total revenue was also consistent, representing 4.3% and 4.1% of our total revenue during the six months ended June 30, 2024 and 2023, respectively.

Previous wording

General and administrative expenses were $7.4 million in each of the three months ended March 31, 2024 and 2023. Excluding the one-time, non-recurring charges related to the reduction in workforce of $1.3 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively, general and administrative expenses decreased $0.5 million. The decrease was driven by reduced headcount, partially offset by increased stock-based compensation expense related to the stock option repricing. See “Notes to Financial Statements—Note 12. Stock-Based Compensation” for a more detailed discussion of the stock option repricing.

Current wording

General and administrative expenses were $12.9 million and $13.3 million for the six months ended June 30, 2024 and 2023, respectively. Excluding the one-time, non-recurring charges related to the reduction in workforce of $1.3 million and $0.7 million for the six months ended June 30, 2024 and 2023, respectively, general and administrative expenses decreased $1.0 million. The decrease was driven by reduced headcount and spending, primarily on professional fees and insurance, partially offset by increased stock-based compensation expense related to the stock option repricing as well as facility costs. See “Notes to Financial Statements—Note 12. Stock-Based Compensation” for a more detailed discussion of the stock option repricing.

Previous wording

Our benefit from income taxes for the three months ended March 31, 2024 and 2023, was as follows (dollars in thousands):

Current wording

Our benefit from income taxes for the six months ended June 30, 2024 and 2023, was as follows (dollars in thousands):

Previous wording

Our benefit from income taxes was not significant in either of the three months ended March 31, 2024 and 2023, respectively. The effective tax rates for the three months ended March 31, 2024 and 2023 were 0.4% and 0.2%, respectively. The effective tax rates differ from the federal statutory rate primarily due to operating losses not expected to produce an income tax benefit.

Current wording

Our benefit from income taxes was not significant in either of the six months ended June 30, 2024 and 2023. The effective tax rates for the six months ended June 30, 2024 and 2023 were 0.3% and 0.0%, respectively. The effective tax rates differ from the federal statutory rate primarily due to operating losses not expected to produce an income tax benefit.

Previous wording

The primary sources of financing for our operations were our (i) initial public offering, which we completed in June 2021 (IPO) and resulted in net proceeds to us of $99.1 million, and (ii) registered direct offering and concurrent private placement (collectively, the Offerings), which we completed in September 2023 and which resulted in aggregate gross proceeds of $22.9 million before deducting offering expenses of $0.4 million and the prepayment of $10.0 million owed under the Term Loan as discussed below.

Current wording

The primary sources of financing for our operations were our (i) initial public offering, which we completed in June 2021 (IPO) and resulted in net proceeds to us of $99.1 million, (ii) registered direct offering and concurrent private placement completed in September 2023 (collectively, the September 2023 Offerings), which resulted in aggregate gross proceeds of $22.9 million before deducting offering expenses of $0.4 million and the prepayment of $10.0 million owed under the Term Loan as discussed below, and (iii) private placement completed in July 2024 (the July 2024 Offering), which resulted in aggregate gross proceeds of $15.4 million before deducting offering expenses payable by the Company.

Previous wording

Our principal liquidity requirements are to fund our operations and capital expenditures. As of March 31, 2024, we have limited capital resources to fund ongoing operations. During the three months ended March 31, 2024, we incurred net losses of $8.1 million . In addition, as of March 31, 2024, we had an accumulated deficit of $99.9 million and borrowings outstanding under our Term Loan (defined below). As of March 31, 2024, we had $31.8 million of working capital, which included $21.6 million in cash and cash equivalents. Our available capital resources may not be sufficient for us to continue to meet our obligations as they become due over the next twelve months if we cannot improve our operating results or increase our operating cash inflows. If these capital resources are not sufficient, we may need to raise additional capital through the sale of equity or debt securities, enter into strategic business collaboration agreements with other companies, seek other funding sources, or sell assets. However, there can be no assurance that we will be able to accomplish any of the foregoing or do so on favorable terms. If we are unable to meet our obligations when they become due over the next twelve months through our available capital resources, or obtain new sources of capital when needed, we may have to delay expenditures, reduce the scope of our manufacturing operations, reduce or eliminate one or more of our development programs, make significant changes to our operating plan, or cease our operations.

Current wording

Our principal liquidity requirements are to fund our operations and capital expenditures. During the three and six months ended June 30, 2024, we incurred net losses of $5.4 million and $13.5 million, respectively. In addition, as of June 30, 2024, we had an accumulated deficit of $105.2 million and $12.1 million in borrowings outstanding under our Term Loan (defined below). As of June 30, 2024, we had $27.9 million of working capital, which included $18.6 million in cash and cash equivalents.

Previous wording

December 31, 2024, from $42.0 million to $34.0 million. Amendment No. 5 also removed those requirements for the periods ending January 31, 2025 through December 31, 2025, instead requiring that for each applicable twelve-month period ending after December 31, 2024, the Company’s minimum net revenue requirement will be determined by MidCap in its reasonable discretion in consultation with the Company’s senior management and based on financial statements and projections delivered to MidCap in accordance with the financial reporting requirements in the Amended Credit Agreement, so long as the minimum net revenue requirements for those periods shall not be less than the greater of (x) the applicable minimum net revenue requirement for the twelve-month period ending on the last day of the immediately preceding month and (y) $34.0 million. In addition, Amendment No. 5 also removed the advance rate for finished goods inventory in the determination of the borrowing base for the Revolving Loan and increased the minimum cash requirement from $9.0 million to $10.0 million. Finally, Amendment No. 5 conditions the next borrowing under the Revolving Loan on the Company achieving net revenue for the preceding twelve-month period of at least $38.0 million down from $45.0 million.

Current wording

As of June 30, 2024, we had an outstanding principal amount of $12.1 million under a senior secured term loan (the Term Loan) pursuant to Amendment No. 5 to our Credit Agreement with MidCap Financial Trust (MidCap). On March 8, 2024, we entered into limited waivers and amendments (collectively Amendment No. 5, or, as amended, the Amended Credit Agreement) which includes a waiver from MidCap of the revenue covenant violations for each of the periods ending November 30, 2023 and January 31, 2024. Amendment No. 5 also reduced the revenue covenants for future periods up to and including for the twelve months ending December 31, 2024, from $42.0 million to $34.0 million. Amendment No. 5 also removed those requirements for the periods ending January 31, 2025 through December 31, 2025, instead requiring that for each applicable twelve-month period ending after December 31, 2024, the Company’s minimum net revenue requirement will be determined by MidCap in its reasonable discretion in consultation with the Company’s senior management and based on financial statements and projections delivered to MidCap in accordance with the financial reporting requirements in the Amended Credit Agreement, so long as the minimum net revenue requirements for those periods shall not be less than the greater of (x) the applicable minimum net revenue requirement for the twelve-month period ending on the last day of the immediately preceding month and (y) $34.0 million. In addition, Amendment No. 5 also removed the advance rate for finished goods inventory in the determination of the borrowing base for the Revolving Loan and increased the minimum cash requirement from $9.0 million to $10.0 million. Finally, Amendment No. 5 conditions the next borrowing under the Revolving Loan on the Company achieving net revenue for the preceding twelve-month period of at least $38.0 million down from $45.0 million. See

Previous wording

We were in compliance with our financial covenants under the terms of the Amended Credit Agreement as of March 31, 2024. However, we continue to experience unfavorable market conditions, like other companies in our industry. As a result, we believe we may be unable to comply with the trailing twelve months revenue covenant for the twelve-month period following the date on which the financial statements are available for issuance. If we violate one or more of our covenants under the Amended Credit Agreement, including the monthly revenue covenant, and are not able to obtain a waiver from or agree to an accommodation with the lender with respect to any such violation, we could be required to pay all or a portion of the outstanding amount under the Term Loan. In that event, we may need to seek other sources of capital and there can be no assurances that we would be able to do so on acceptable terms. See “Notes to Financial Statements—Note 10—Debt, Net,” for a more detailed discussion of the material terms of our Amended Credit Agreement.

Current wording

“Notes to Financial Statements—Note 10—Long-term Debt, Net,” for a more detailed discussion of the material terms of our Amended Credit Agreement.

Previous wording

The following table sets forth, for the periods indicated, net cash flows used in operating activities, used in investing activities, and (used in) provided by financing activities (in thousands):

Current wording

The following table sets forth, for the periods indicated, net cash flows used in operating activities, used in investing activities, and used in financing activities (in thousands):

Previous wording

Net cash used in operating activities was $7.7 million for the three months ended March 31, 2023, which primarily consisted of net loss of $8.8 million plus net adjustments for non-cash charges of $2.1 million, offset by net changes in operating assets and liabilities of $1.0 million. The primary non-cash adjustments to net loss included $1.1 million of depreciation and amortization and $1.0 million of stock-based compensation. The main drivers of the changes in operating assets and liabilities were a $0.7 million decrease in accrued liabilities, a $0.5 million increase in accounts receivable, a $0.4 million decrease in accounts payable, partially offset by a $0.3 million decrease in prepaid expenses and other current assets, a $0.2 million decrease in inventories, and a $0.1 million decrease in other non-current assets.

Current wording

Net cash used in operating activities was $9.4 million for the six months ended June 30, 2024, which primarily consisted of net loss of $13.5 million plus net adjustments for non-cash charges of $6.6 million, offset by net changes in operating assets and liabilities of $2.6 million. The primary non-cash adjustments to net loss included $3.3 million of depreciation and amortization, $2.1 million of stock-based compensation, and $0.9 million provision for inventory. The main drivers of the changes in operating assets and liabilities were a $1.8 million decrease in accrued liabilities, a $0.7 million increase in accounts receivable, a $0.4 million decrease in accounts payable, and a $0.3 million increase in inventories, partially offset by a $0.4 million decrease in prepaid expenses and other current assets and a $0.2 million decrease other non-current assets.

Previous wording

Net cash used in operating activities was $6.6 million for the three months ended March 31, 2024, which primarily consisted of net loss of $8.1 million plus net adjustments for non-cash charges of $3.0 million, offset by net changes in operating assets and liabilities of $1.5 million. The primary non-cash adjustments to net loss included $1.6 million of depreciation and amortization and $1.3 million of stock-based compensation. The main drivers of the changes in operating assets and liabilities were a $1.7 million decrease in accrued liabilities, a $0.6 million increase in accounts receivable, partially offset by a $0.5 million decrease in inventories, a $0.2 million decrease in prepaid expenses and other current assets, a $0.1 million increase in accounts payable, and a $0.1 million decrease other non-current assets.

Current wording

Net cash used in operating activities was $11.5 million for the six months ended June 30, 2023, which primarily consisted of net loss of $16.0 million plus net adjustments for non-cash charges of $7.0 million, offset by net changes in operating assets and liabilities of $2.5 million. The primary non-cash adjustments to net loss included $2.4 million of depreciation and amortization, $2.2 million impairment charge related to long-lived assets, $2.1 million of stock-based compensation, and $0.2 million amortization of debt financing costs. The main drivers of the changes in operating assets and liabilities were a $1.4 million decrease in accounts payable, $1.2 million decrease in accrued liabilities, $1.1 million increase in contract assets, and a $0.3 increase in accounts receivable, partially offset by a $1.0 million decrease in prepaid expenses and other current assets, a $0.2 million decrease other non-current assets, and a $0.2 million decrease in inventories.

Previous wording

Net cash provided by investing activities was not significant for the three months ended March 31, 2024, as proceeds from the sale of certain long-lived assets of $0.1 million were partially offset by purchases of property, plant, and equipment of $0.1 million.

Current wording

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2024, which consisted of purchases of property, plant, and equipment of $0.2 million, partially offset by proceeds from the sale of certain long-lived assets of $0.1 million.

Previous wording

Net cash used in investing activities was $4.3 million for the three months ended March 31, 2023, which consisted of purchases of property, plant, and equipment.

Current wording

Net cash used in investing activities was $6.7 million for the six months ended June 30, 2023, which consisted of purchases of property, plant, and equipment.

Previous wording

Net cash used in financing activities was $0.3 million for the three months ended March 31, 2024, which primarily consisted of repayments of financed insurance premiums.

Current wording

Net cash used in financing activities was $0.4 million for the six months ended June 30, 2024, which was primarily attributable to repayments of financed insurance premiums of $0.4 million, partially offset by proceeds of $0.1 million from the issuance of common stock under our employee stock purchase plan.