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 June 30, 2021

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.)
2290 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 August 11, 2021, the registrant had 28,011,917 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 consistently deliver high-quality, custom, made-to-order products meeting our customers’ expectations and
quality requirements, including as they increase the scale of their demand over time;

the continued adaptability and versatility of our proprietary manufacturing processes;

the longevity of our customer relationships and the likelihood that our customers substitute our products with alternatives;

the promising nature of cell and gene therapy research, the size and growth of our potential markets and our ability to
capture market share;

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;

the ability of our products and services to perform as expected and the reliability of the technology on which our products
and services are based;

the suitability of our products to meet customers’ growing needs and our ability to collaborate with our customers to meet
their demands;

the increasing use of messenger ribonucleic acid (“mRNA”) vaccines and therapies and the resulting demand for more
customized, Good Manufacturing Practices bacterial cell culture media and associated formulations over the short- and
long-terms;

our ability to make the investments required to maintain our operational excellence, including through extending our rapid
custom production capabilities;

our ability to continue to expand our total manufacturing capabilities;

our future investments to strengthen our marketing, sales, research and development (“R&D”) and technical support
organizations;

our ability to onboard new gene therapy and mRNA therapeutic customers and migrate our current customer base from
research to GMP-grade products;

our ongoing ability to hire and retain skilled personnel;

the accuracy of our estimates of market opportunity and forecasts of market growth, including our estimated total
addressable market;

regulatory developments in the United States and other foreign countries;

the impact of revenue recognition rules and other factors on our financial results;

our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;

2

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 June 30, 2021

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	5
	Condensed Balance Sheets (Unaudited) at June 30, 2021 and December 31, 2020	5
	Condensed Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020	6
	Condensed Statements of Convertible and Redeemable Preferred Stock and Stockholders' Equity (Deficit) (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020	7
	Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2021 and 2020	9
	Notes to Unaudited Condensed Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Default Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	72
Signatures		73

4

PART I – FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

ALPHA TEKNOVA, INC.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

	As of June 30, 2021			As of December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	108,022		$	3,315
Short-term investments - marketable securities		—			1,811
Accounts receivable, net of allowance for doubtful accounts of $20 thousand and $23 thousand		4,058			4,623
Inventories		3,880			3,582
Income taxes receivable		1,638			1,417
Prepaid expenses and other current assets		719			1,666
Total current assets		118,317			16,414
Property, plant and equipment, net		18,326			10,008
Goodwill		16,613			16,613
Intangible assets, net		19,278			19,852
Other non-current assets		31			24
Total assets	$	172,565		$	62,911
LIABILITIES, CONVERTIBLE AND REDEEMABLE PREFERRED STOCK    AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,640		$	1,635
Accrued liabilities		3,301			2,327
Total current liabilities		5,941			3,962
Deferred tax liabilities		5,242			5,990
Other accrued liabilities		312			350
Long term debt		11,782			—
Deferred rent		253			204
Total liabilities		23,530			10,506
Commitments and contingencies (See “Note 15—Commitments and Contingencies”)
Series A convertible and redeemable preferred stock, $0.00001 par value, zero and 9,600,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; zero and 9,342,092 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $41,586 thousand as of June 30, 2021 and December 31, 2020, respectively.		—			35,638
Stockholders’ equity:
Preferred stock, $0.00001 par value, 10,000,000 and zero shares authorized at June 30, 2021 and December 31, 2020, respectively, zero shares issued and outstanding at June 30, 2021 and December 31, 2020		—			—
Common stock, $0.00001 par value, 490,000,000 and 30,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively, 28,011,917 and 3,599,232 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		—			—
Additional paid-in capital		149,675			14,495
(Accumulated deficit) retained earnings		(640	)		2,265
Accumulated other comprehensive income		—			7
Total stockholders’ equity		149,035			16,767
Total liabilities, convertible and redeemable preferred stock and stockholders’ equity	$	172,565		$	62,911

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

5

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 June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
Revenue	$	8,313		$	6,044		$	17,391		$	12,156
Cost of sales		4,959			2,575			9,012			5,058
Gross profit		3,354			3,469			8,379			7,098
Operating expenses:
Research and development		851			341			1,548			667
Sales and marketing		904			481			1,609			831
General and administrative		3,838			1,656			8,002			3,310
Amortization of intangible assets		287			287			574			574
Total operating expenses		5,880			2,765			11,733			5,382
(Loss) income from operations		(2,526	)		704			(3,354	)		1,716
Other income (expenses), net
Interest income (expense), net		(304	)		23			(296	)		55
Other expense, net		(3	)		(4	)		(2	)		(25	)
Total other income (expenses), net		(307	)		19			(298	)		30
(Loss) income before income taxes		(2,833	)		723			(3,652	)		1,746
(Benefit from) provision for income taxes		(583	)		211			(747	)		286
Net (loss) income		(2,250	)		512			(2,905	)		1,460
Change in unrealized loss on available-for-sale securities, net of tax		—			43			(7	)		9
Comprehensive (loss) income	$	(2,250	)	$	555		$	(2,912	)	$	1,469
Net (loss) income available to common stockholders
Net (loss) income		(2,250	)		512			(2,905	)		1,460
Less: undistributed income attributable to preferred stockholders		—			(425	)		—			(1,211	)
Net (loss) income attributable to common stockholders	$	(2,250	)	$	87		$	(2,905	)	$	249
Net (loss) income per share attributable to common stockholders
Basic	$	(0.52	)	$	0.02		$	(0.73	)	$	0.07
Diluted	$	(0.52	)	$	0.02		$	(0.73	)	$	0.07
Weighted average shares used in computing net (loss) income per share    attributable to common stockholders
Basic		4,328,222			3,599,232			3,965,741			3,599,232
Diluted		4,328,222			3,636,724			3,965,741			3,636,724

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’ (Deficit) Equity

(in thousands, except share and per 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 (Deficit)
Balance at March 31, 2021 (unaudited)		9,342,092		$	35,638			3,599,232	$	—	$	14,678		$	—	$	1,610		$	16,288
Stock-based compensation		—			—			—		—		302			—		—			302
Accretion of convertible and redeemable    preferred stock to redemption value		—			300			—		—		(300	)		—		—			(300	)
Conversion of convertible and redeemable    preferred stock		(9,342,092	)		(35,938	)		17,512,685		—		35,938			—		—			35,938
Issuance of common stock upon initial public    offering, net of issuance costs and underwriting    discounts		—			—			6,900,000		—		99,057			—		—			99,057
Net loss		—			—			—		—		—			—		(2,250	)		(2,250	)
Balance at June 30, 2021 (unaudited)		—		$	—			28,011,917	$	—	$	149,675		$	—	$	(640	)	$	149,035

	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 (Deficit)
Balance at March 31, 2020 (unaudited)		9,342,092	$	35,638		3,599,232	$	—	$	14,195	$	(14	)	$	(357	)	$	13,824
Unrealized loss on available-for-sale securities		—		—		—		—		—		43			—			43
Net income		—		—		—		—		—		—			512			512
Balance at June 30, 2020 (unaudited)		9,342,092	$	35,638		3,599,232	$	—	$	14,195	$	29		$	155		$	14,379

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

7

ALPHA TEKNOVA, INC.

Condensed Statements of Convertible and Redeemable Preferred Stock and Stockholders’ (Deficit) Equity (Continued)

(in thousands, except share and per 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 (Deficit)
Balance at December 31, 2020		9,342,092		$	35,638			3,599,232	$	—	$	14,495		$	7		$	2,265		$	16,767
Stock-based compensation		—			—			—		—		485			—			—			485
Unrealized loss on available-for-sale securities		—			—			—		—		—			(7	)		—			(7	)
Accretion of convertible and redeemable    preferred stock to redemption value		—			300			—		—		(300	)		—			—			(300	)
Conversion of convertible and redeemable    preferred stock		(9,342,092	)		(35,938	)		17,512,685		—		35,938			—			—			35,938
Issuance of common stock upon initial public    offering, net of issuance costs and underwriting    discounts		—			—			6,900,000		—		99,057			—			—			99,057
Net loss		—			—			—		—		—			—			(2,905	)		(2,905	)
Balance at June 30, 2021 (unaudited)		—		$	—			28,011,917	$	—	$	149,675		$	—		$	(640	)	$	149,035

	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 (Deficit)
Balance at December 31, 2019		9,342,092	$	35,638		3,599,232	$	—	$	14,195	$	20	$	(1,305	)	$	12,910
Unrealized gain on available-for-sale securities		—		—		—		—		—		9		—			9
Net income		—		—		—		—		—		—		1,460			1,460
Balance at June 30, 2020 (unaudited)		9,342,092	$	35,638		3,599,232	$	—	$	14,195	$	29	$	155		$	14,379

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

8

ALPHA TEKNOVA, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

	Six months ended June 30,
	2021			2020
Operating activities:
Net (loss) income	$	(2,905	)	$	1,460
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Bad debt expense		231			(1	)
Depreciation and amortization		1,352			931
Stock-based compensation		485			—
Inventory reserve		699			1
Realized loss (gain) on marketable securities		(1	)		16
Amortization of (discount) premium on marketable securities		(9	)		11
Deferred taxes		(747	)		1,386
Amortization of debt issuance costs		46			—
Loss on disposal of property, plant and equipment		4			10
Changes in operating assets and liabilities:
Accounts receivable		334			(542	)
Inventories		(997	)		(525	)
Prepaid expenses and other assets		175			(1,370	)
Accounts payable, accrued liabilities, and other current and non-current liabilities		134			301
Deferred rent		49			18
Cash (used in) provided by operating activities		(1,150	)		1,696
Investing activities: