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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, 2024

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 10, 2024, the registrant had 40,823,387 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 may include, but not be limited to, statements about:

our recent history of losses and our ability to continue as a going concern;
our ability to meet our publicly announced guidance or other expectations about our business;
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;
our ability to defend against claims and mitigate adverse results from any legal proceedings against us and the merits of any claims or suits against us;
our ability to limit our accounts receivable and credit risk exposure;
our future investments, if any, in additional facilities to facilitate our expected growth;
our future uses of capital to purse potential acquisitions, if any, 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;
any failure to maintain effective internal controls over financial reporting or fully remediate any weaknesses in our internal controls that may arise or be identified in the future;
the impact of changes to our internal control over financial reporting, other than changes intended to remediate material weaknesses;
the impact of any pandemic, epidemic, or outbreak of infectious disease (including COVID-19), natural disasters, geopolitical unrest, war (including in Ukraine or the Middle East), terrorism, public health issues or other catastrophic events may have on our business and our ability to actively manage our response to these types of events;
our future adoption of critical accounting policies and estimates;
our ability to increase the scale and capacity of, or otherwise effectively adjust, our manufacturing processes and systems in response to market demands;
the impact of increased competition from additional companies entering the market and the availability of more advanced technologies in the market;
the impact of global economic conditions on us and our customers;
our ability to hire and retain key personnel;
our ability to obtain capital on favorable terms, or at all;
our ability to generate future revenue growth in market segments such as cell and gene therapy, liquid biopsy, and synthetic biology;
the impact of inflation and increased costs on our operations, including materials, labor, and rising interest rates;

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 the requirements of 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 a corporate culture that contributes to our success;
the marketability of our products across a wide range of markets and the probability of success or market opportunity in our target markets;
regulatory developments in the United States and other 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 ongoing 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” in Part I, Item 1A, of our Annual Report on Form 10-K filed with the SEC on March 27, 2024 (the 2023 Annual Report on Form 10-K) 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.

 

Unless the context otherwise requires, the terms “Teknova,” the “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to Alpha Teknova, Inc.

 

3


 

 

ALPHA TEKNOVA, INC.

 

Form 10-Q for the Quarter Ended March 31, 2024

 

INDEX

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Condensed Financial Statements (Unaudited)

 

5

 

 

Condensed Statements of Operations (Unaudited) for the Three Months Ended March 31, 2024 and 2023

 

5

 

 

Condensed Balance Sheets (Unaudited) at March 31, 2024 and December 31, 2023

 

6

 

 

Condensed Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2024 and 2023

 

7

 

 

Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023

 

8

 

 

Notes to Unaudited Condensed Financial Statements

 

9

Item 2.

 

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

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

Item 4.

 

Controls and Procedures

 

25

 

PART II.

 

OTHER INFORMATION

 

26

Item 1.

 

Legal Proceedings

 

26

Item 1A.

 

Risk Factors

 

27

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

Item 3.

 

Defaults Upon Senior Securities

 

28

Item 4.

 

Mine Safety Disclosures

 

28

Item 5.

 

Other Information

 

28

Item 6.

 

Exhibits

 

28

 

Signatures

 

 

 

30

 

4


 

PART I – FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

 

ALPHA TEKNOVA, INC.

Condensed Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenue

 

$

9,290

 

 

$

9,121

 

Cost of sales

 

 

7,081

 

 

 

6,698

 

Gross profit

 

 

2,209

 

 

 

2,423

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

860

 

 

 

1,395

 

Sales and marketing

 

 

1,667

 

 

 

2,343

 

General and administrative

 

 

7,381

 

 

 

7,345

 

Amortization of intangible assets

 

 

287

 

 

 

286

 

Total operating expenses

 

 

10,195

 

 

 

11,369

 

Loss from operations

 

 

(7,986

)

 

 

(8,946

)

Other (expenses) income, net

 

 

 

 

 

 

Interest (expense) income, net

 

 

(145

)

 

 

93

 

Other income, net

 

 

 

 

 

18

 

Total other (expenses) income, net

 

 

(145

)

 

 

111

 

Loss before income taxes

 

 

(8,131

)

 

 

(8,835

)

Benefit from income taxes

 

 

(34

)

 

 

(18

)

Net loss

 

$

(8,097

)

 

$

(8,817

)

Net loss per share—basic and diluted

 

$

(0.20

)

 

$

(0.31

)

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

 

 

40,804,885

 

 

 

28,181,457

 

 

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, 2024

 

 

As of
December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,596

 

 

$

28,484

 

Accounts receivable, net of allowance for doubtful accounts of $23 thousand and $20 thousand as of March 31, 2024 and December 31, 2023, respectively

 

 

4,560

 

 

 

3,948

 

Inventories, net

 

 

11,207

 

 

 

11,594

 

Prepaid expenses and other current assets

 

 

1,460

 

 

 

1,634

 

Total current assets

 

 

38,823

 

 

 

45,660

 

Property, plant, and equipment, net

 

 

48,907

 

 

 

50,364

 

Operating right-of-use lease assets

 

 

17,400

 

 

 

16,472

 

Intangible assets, net

 

 

13,952

 

 

 

14,239

 

Other non-current assets

 

 

1,735

 

 

 

1,852

 

Total assets

 

$

120,817

 

 

$

128,587

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,543

 

 

$

1,493

 

Accrued liabilities

 

 

3,574

 

 

 

5,579

 

Current portion of operating lease liabilities

 

 

1,922

 

 

 

1,803

 

Total current liabilities

 

 

7,039

 

 

 

8,875

 

Deferred tax liabilities

 

 

884

 

 

 

919

 

Other accrued liabilities

 

 

78

 

 

 

102

 

Long-term debt, net

 

 

13,178

 

 

 

13,251

 

Long-term operating lease liabilities

 

 

16,260

 

 

 

15,404

 

Total liabilities

 

 

37,439

 

 

 

38,551

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.00001 par value, 10,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively, zero shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.00001 par value, 490,000,000 shares authorized at March 31, 2024 and December 31, 2023, 40,823,387 and 40,793,848 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

183,261

 

 

 

181,822

 

Accumulated deficit

 

 

(99,883

)

 

 

(91,786

)

Total stockholders’ equity

 

 

83,378

 

 

 

90,036

 

Total liabilities and stockholders’ equity

 

$

120,817

 

 

$

128,587

 

 

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

6


 

ALPHA TEKNOVA, INC.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2024

 

 

40,793,848

 

 

$

 

 

$

181,822

 

 

$

(91,786

)

 

$

90,036

 

Issuance of common stock warrants

 

 

 

 

 

 

 

 

132

 

 

 

 

 

 

132

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,307

 

 

 

 

 

 

1,307

 

Vesting of restricted stock units

 

 

29,539

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,097

)

 

 

(8,097

)

Balance at March 31, 2024

 

 

40,823,387

 

 

$

 

 

$

183,261

 

 

$

(99,883

)

 

$

83,378

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2023

 

 

28,179,423

 

 

$

 

 

$

154,891

 

 

$

(55,006

)

 

$

99,885

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,010

 

 

 

 

 

 

1,010

 

Issuance of common stock upon exercise of stock options

 

 

10,769

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,817

)

 

 

(8,817

)

Balance at March 31, 2023

 

 

28,190,192

 

 

$

 

 

$

155,910

 

 

$

(63,823

)

 

$

92,087

 

 

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

 

 

 

7


 

ALPHA TEKNOVA, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(8,097

)

 

$

(8,817

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Bad debt expense

 

 

7

 

 

 

2

 

Inventory reserve

 

 

(91

)

 

 

(144

)

Depreciation and amortization

 

 

1,636

 

 

 

1,130

 

Stock-based compensation

 

 

1,307

 

 

 

1,010

 

Deferred taxes

 

 

(35

)

 

 

(19

)

Amortization of debt financing costs

 

 

84

 

 

 

90

 

Non-cash lease expense

 

 

47

 

 

 

47

 

Loss on disposal of property, plant, and equipment

 

 

49

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(619

)

 

 

(518

)

Inventories

 

 

478

 

 

 

240

 

Prepaid expenses and other current assets

 

 

174

 

 

 

271

 

Other non-current assets

 

 

117

 

 

 

102

 

Accounts payable

 

 

133

 

 

 

(386

)

Accrued liabilities

 

 

(1,724

)

 

 

(670

)

Other

 

 

(24

)

 

 

(22

)

Cash used in operating activities

 

 

(6,558

)

 

 

(7,684

)

Investing activities:

 

 

 

 

 

 

Proceeds from sale of property, plant, and equipment

 

 

125

 

 

 

 

Purchases of property, plant, and equipment

 

 

(112

)

 

 

(4,312

)

Cash provided by (used in) investing activities

 

 

13

 

 

 

(4,312

)

Financing activities:

 

 

 

 

 

 

Proceeds from equity financing, net

 

 

(37

)

 

 

 

Repayment of financed insurance premiums

 

 

(306

)

 

 

 

Payment of at-the-market facility costs

 

 

 

 

 

(34

)

Proceeds from exercise of stock options

 

 

 

 

 

9

 

Cash used in financing activities

 

 

(343

)

 

 

(25

)

Change in cash and cash equivalents

 

 

(6,888

)

 

 

(12,021

)

Cash and cash equivalents at beginning of period

 

 

28,484

 

 

 

42,236

 

Cash and cash equivalents at end of period

 

$

21,596

 

 

$

30,215

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

Income taxes paid

 

$

 

 

$

 

Interest paid, net of amounts capitalized

 

$

366

 

 

$

110

 

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

 

$

5

 

 

$

925

 

At-the-market facility costs included in accounts payable and accrued liabilities

 

$

 

 

$

329

 

Debt issuance costs included in accrued liabilities

 

$

25

 

 

$

30

 

Issuance of common stock warrants

 

$

132

 

 

$

 

Recognition of operating right-of-use lease asset

 

$

1,293

 

 

$

(648

)

Recognition of operating lease liabilities

 

$

1,306

 

 

$

(602

)

 

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

Teknova produces critical reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics. Our 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 warehouse in Hollister to its customers and distributors.

 

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, 2023, 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. Actual results may differ from those estimates.

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, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2024 (the 2023 Annual Report on Form 10-K). Refer to Notes to Financial Statements—Note 2. Summary of Significant Accounting Policies,” within the 2023 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 period.

Teknova has determined that it operates in one reporting unit, one operating segment, and one reportable segment, as the Chief Operating Decision Maker (CODM) of the Company reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Going Concern

Accounting Standards Codification (ASC) 205-40, Presentation of Financial Statements—Going Concern, requires management to evaluate an entity’s ability to continue as a going concern for the twelve-month period following the date on which the financial statements are available for issuance. Management performed an assessment to determine whether there were conditions or events that, considered individually and in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date on which the accompanying unaudited financial statements are being issued. This assessment indicated certain negative conditions and events, described further below, that raise substantial doubt about the Company’s ability to continue as a going concern.

As of March 31, 2024, the Company had limited capital resources to fund ongoing operations. During the three months ended March 31, 2024, Teknova incurred net losses of $8.1 million. In addition, as of March 31, 2024, the Company had an accumulated deficit of $99.9 million and a total principal amount of outstanding borrowings of $12.1 million. As of March 31, 2024, the Company had $31.8 million of working capital, which included $21.6 million in cash and cash equivalents. The Company’s available capital resources may not be sufficient for the Company to continue to meet its obligations as they become due over the next twelve months if the Company cannot improve its operating results or increase its operating cash inflows. If these capital resources are not sufficient,

9


 

the Company 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 facilities, or sell assets. However, there can be no assurance that the Company will be able to accomplish any of the foregoing or do so on favorable terms. If the Company is unable to meet its obligations when they become due over the next twelve months through its available capital resources, or obtain new sources of capital when needed, the Company may have to delay expenditures, reduce the scope of its manufacturing operations, reduce or eliminate one or more of its development programs, make significant changes to its operating plan, or cease its operations.

As disclosed in Note 10. Long-term Debt, Net, the Company is subject to certain financial covenants as set forth in the Amended Credit Agreement (defined in Note 10). These financial covenants include (i) a trailing twelve months minimum net revenue covenant that must be met each calendar month, and (ii) a requirement to maintain a minimum level of cash at all times through the term of the Amended Credit Agreement. The Company was in compliance with its financial covenants as of March 31, 2024; however, the Company continues to experience unfavorable market conditions, like other companies in the industry. As a result, the Company believes it 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 the Company violates one or more of its covenants under the Amended Credit Agreement, including the monthly revenue covenant, and is not able to obtain a waiver from or agree to an accommodation with the lender with respect to any such violation, the Company could be required to pay all or a portion of the outstanding amount under the Term Loan (defined in Note 10). In that event, the Company may need to seek other sources of capital and there can be no assurances that the Company would be able to do so on acceptable terms.

The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and the satisfaction of liabilities in the normal course of business for one year following the issuance of these unaudited financial statements. As such, the accompanying unaudited financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.

Reduction in Workforce

On January 11, 2024, the Company carried out a reduction in workforce of approximately 35 positions, aimed at reducing operating expenses. The Company incurred $1.3 million of costs in connection with the reduction in workforce related to severance pay and other termination benefits. The costs associated with the reduction in workforce were recorded in the quarter ended March 31, 2024, in general and administrative expenses.

On February 1, 2023, the Company carried out a reduction in workforce of approximately 40 positions, aimed at reducing operating expenses. The Company incurred $0.7 million of costs in connection with the reduction in workforce related to severance pay and other termination benefits. The costs associated with the reduction in workforce were recorded in the quarter ended March 31, 2023, in general and administrative expenses.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Additionally, all disclosure requirements under the guidance are also required for public entities with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard to determine its impact on the Company’s disclosures.

10


 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure in the rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciliation items in some categories if the items meet a quantitative threshold. The guidance also requires disclosure of income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this standard to determine its impact on the Company’s disclosures.

Recent Securities and Exchange Commission (SEC) Final Rules Not Yet Adopted

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires registrants to provide certain climate-related information in their registration statements and annual reports. The rules require information about a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on its business, results of operations, or financial condition. In addition, certain disclosures related to severe weather events and other natural conditions will be required in the registrant’s audited financial statements. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025. The Company is currently evaluating the impact of these new final rules on its financial statements and disclosures.

 

Note 3. Revenue Recognition

Teknova recognizes revenue from the sale of manufactured products and services when the Company transfers control of promised goods or services 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 product category, was as follows (in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Lab Essentials

 

$

7,266

 

 

$

7,257

 

Clinical Solutions

 

 

1,718

 

 

 

1,609

 

Other

 

 

306

 

 

 

255

 

Total revenue

 

$

9,290

 

 

$

9,121

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

United States

 

$

8,870

 

 

$

8,726

 

International

 

 

420

 

 

 

395

 

Total revenue

 

$

9,290

 

 

$

9,121

 

 

 

Note 4. Concentrations of Risk

Customers

Customers who accounted for 10% or more of the Company’s revenues and outstanding balance of accounts receivable and contract assets are presented as follows:

 

 

 

For the Three Months Ended March 31,

 

As of

 

As of

 

 

2024

 

2023

 

March 31, 2024

 

December 31, 2023

Distributor customer A

 

16%

 

19%

 

18%

 

16%

* Represents less than 10%.

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

11


 

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

 

 

2024

 

2023

 

March 31, 2024

 

December 31, 2023

Distributor supplier A

 

39%

 

36%

 

20%

 

18%

Direct supplier A

 

*

 

10%

 

*

 

*

* Represents less than 10%.

The Company’s suppliers that are distributors, as opposed to direct suppliers, represent highly diversified supplier bases.

Note 5. Inventories, Net

Inventories consisted of the following (in thousands):

 

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Finished goods, net

 

$

7,821

 

 

$

8,573

 

Work in process

 

 

276

 

 

 

47

 

Raw materials, net

 

 

3,110

 

 

 

2,974

 

Total inventories, net

 

$

11,207

 

 

$

11,594

 

 

Note 6. Property, Plant, and Equipment, Net

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

 

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Machinery and equipment

 

$

29,826

 

 

$

30,082

 

Office furniture and equipment

 

 

842

 

 

 

842

 

Vehicles

 

 

291

 

 

 

291

 

Leasehold improvements

 

 

24,726

 

 

 

24,673

 

 

 

55,685

 

 

 

55,888

 

Less—Accumulated depreciation

 

 

(8,764

)

 

 

(7,528

)

 

 

46,921

 

 

 

48,360

 

Construction in progress

 

 

1,986

 

 

 

2,004

 

Total property, plant, and equipment, net

 

$

48,907

 

 

$

50,364

 

For the three months ended March 31, 2024 and 2023, depreciation expense was $1.3 million and $0.8 million, respectively.

Teknova capitalizes interest on funds borrowed to finance certain of its capital expenditures. Capitalized interest is recorded as part of an asset’s cost and depreciated over the asset’s useful life. For the three months ended March 31, 2024 and 2023, capitalized interest costs were zero and $0.6 million, respectively.

 

Note 7. Leases

The Company leases office space, warehouse and manufacturing space, and equipment. The Companys lease agreements have remaining lease terms of one year to 14 years, and some of these leases have renewal and termination options exercisable at the Company’s election. Terms and conditions to extend or terminate such leases are recognized as part of the right-of-use assets and lease liabilities where reasonably certain to be exercised. All of the Companys leases are operating leases.

The components of lease expense and other information related to leases were as follows (in thousands):
 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating lease expense

 

$

745

 

 

$

761

 

Variable lease expense

 

 

109

 

 

 

55

 

Total lease expense

 

$

854

 

 

$

816

 

 

12


 

Cash paid for amounts included in the measurement of the lease liabilities was $0.7 million and $0.8 million for the three months ended March 31, 2024 and 2023, respectively. The weighted-average discount rate was 4.9% and the weighted-average remaining lease term was 8.6 years as of March 31, 2024.

Maturities of operating lease liabilities at March 31, 2024 were as follows (in thousands):

 

 

 

Amount

 

Remainder of 2024

 

$

2,110

 

2025

 

 

2,569

 

2026

 

 

2,627

 

2027

 

 

2,631

 

2028

 

 

2,480

 

Thereafter

 

 

10,297

 

Total lease payments

 

 

22,714

 

Less: imputed interest

 

 

(4,532

)

Present value of lease liabilities

 

$

18,182

 

 

Note 8. Intangible Assets, Net

The following is a summary of intangible assets with definite and indefinite lives (in thousands):

 

 

 

Balance at March 31, 2024

 

 

Balance at December 31, 2023

 

 

 

Gross

 

 

Accumulated
Amortization

 

 

Net

 

 

Gross

 

 

Accumulated
Amortization

 

 

Net

 

Definite Lived:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

9,180

 

 

$

5,978

 

 

$

3,202

 

 

$

9,180

 

 

$

5,691

 

 

$

3,489

 

Indefinite Lived:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradename

 

 

10,750

 

 

 

 

 

 

10,750

 

 

 

10,750

 

 

 

 

 

 

10,750

 

Total intangible assets

 

$

19,930

 

 

$

5,978

 

 

$

13,952

 

 

$

19,930

 

 

$

5,691

 

 

$

14,239

 

For each of the three months ended March 31, 2024 and 2023, amortization expense was $0.3 million.

As of March 31, 2024, the remaining weighted-average useful life of definite lived intangible assets was 2.8 years. The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands):

 

 

 

Amount

 

Remainder of 2024

 

$

861

 

2025

 

 

1,148

 

2026

 

 

1,148

 

2027

 

 

45

 

Estimated future amortization expense of definite-lived intangible assets

 

$

3,202

 

 

Note 9. Accrued Liabilities

Accrued liabilities were comprised of the following (in thousands):

 

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Payroll-related

 

$

1,859

 

 

$

3,826

 

Deferred revenue

 

 

30

 

 

 

16

 

Insurance premiums and accrued interest

 

 

103

 

 

 

409

 

Loss contingency accrual

 

 

300

 

 

 

300

 

Other

 

 

1,282

 

 

 

1,028

 

Total current accrued liabilities

 

$

3,574

 

 

$

5,579

 

 

 

13


 

Note 10. Long-term Debt, Net

On March 8, 2024, the Company entered into limited waivers and amendments (collectively Amendment No. 5) to (i) the May 10, 2022, Amended and Restated Credit and Security Agreement (Term Loan), as amended on November 8, 2022, March 28, 2023, July 13, 2023, and September 19, 2023 and (ii) the May 10, 2022, Amended and Restated Credit and Security Agreement (Revolving Loan) as amended on November 8, 2022, March 28, 2023, July 13, 2023 and September 19, 2023 (together, the Amended Credit Agreement), in each case with the Company as borrower and with MidCap Financial Trust (MidCap) as agent and lender, and the additional lenders from time to time party thereto.

Amendment No. 5 modifies the credit facility established under the Amended Credit Agreement, which provided for a $57.1 million credit facility (the Credit Facility) consisting of a $52.1 million senior secured term loan (the Term Loan) and a $5.0 million working capital facility (the Revolver).

The interest on the Term Loan is based on the forward-looking one-month term Secured Overnight Financing Rate adjusted upward by 0.10% (Term SOFR) plus an applicable margin of 7.00%, subject to a Term SOFR floor of 4.50%. If any advance under the Term Loan is prepaid at any time, a prepayment fee is based on the amount being prepaid and an applicable percentage amount, such as 4%, 3%, or 1%, based on the date the prepayment is made. Interest on an outstanding balance of the Revolver is payable monthly in arrears at an annual rate of Term SOFR plus an applicable margin of 4.00%, subject to a Term SOFR floor of 4.50%.

The Amended Credit Agreement includes minimum net revenue requirements that are measured on a trailing twelve-month basis and a minimum cash requirement. Amendment No. 5 reduced the minimum net revenue requirements for future periods up to and including for the twelve months ending December 31, 2024—for example, the Company’s minimum net revenue requirement was reduced 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. As a condition to the effectiveness of Amendment No. 5, the Company also issued equity-classified warrants with a fair value of $0.1 million as described further in Note 11, Stockholder’s Equity. These warrants were recorded as additional debt issuance costs, which are being amortized to interest expense over the term of the Amended Credit Agreement using the effective interest method.

The maturity date of the Credit Facility is May 1, 2027. On the date of termination of the Term Loan or the date on which the obligations under the Term Loan become due and payable in full, the Company will pay an exit fee in an amount equal to 9.00% of the total aggregate principal amount of term loans made pursuant to the Term Loan (including amendments thereto) as of such date. All loans issued under the Credit Facility are collateralized by the Company’s assets.

Long-term debt, net consisted of the following (in thousands):

 

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Long-term debt

 

$

12,135

 

 

$

12,135

 

Cumulative accretion of exit fee

 

 

1,330

 

 

 

1,261

 

Unamortized debt discount and debt issuance costs

 

 

(287

)

 

 

(145

)

Long-term debt, net

 

$

13,178

 

 

$

13,251

 

At March 31, 2024, the scheduled maturities of the Company's debt obligations were as follows (in thousands):

 

 

 

Amount

 

Remainder of 2024

 

$

 

2025

 

 

3,539

 

2026

 

 

6,068

 

2027

 

 

2,528

 

Total

 

$

12,135

 

 

14


 

As of March 31, 2024, the fair value of the Companys debt approximated its carrying value. The fair value of the Companys debt was based on observable market inputs (Level 2).

 

Note 11. Stockholders’ Equity

At-the-Market Facility

On March 30, 2023, the Company entered into a sales agreement (the ATM Facility) with Cowen and Company, LLC (Cowen), under which the Company may offer and sell, from time to time, shares of its common stock having aggregate gross proceeds of up to $50.0 million. The issuance and sale of these shares pursuant to the ATM Facility are deemed “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the Securities Act), and are registered under the Securities Act. The Company will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the ATM Facility. The aggregate market value of shares eligible for sale under the ATM Facility will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction.

Warrants to Purchase Common Stock

On March 8, 2024, as a condition to the effectiveness of Amendment No. 5, the Company issued to MidCap Funding XXVII a warrant to purchase up to an aggregate of 125,000 shares (the Common Warrant) of common stock with an exercise price of $2.9934 per share, subject to adjustment as provided therein. The Common Warrant is exercisable immediately, and will expire on the earlier to occur of the (i) expiration of the Common Warrant pursuant to Section 1.6 thereof, or (ii) tenth (10th) anniversary of the Issue Date (as defined therein). The exercise price and number of shares of common stock issuable upon the exercise of the Common Warrant will be subject to adjustment in the event of any stock dividend, stock split, recapitalization, reorganization, or similar transaction, as described in the Common Warrant. MidCap may exercise the Common Warrant for cash or by means of a “cashless exercise.”

The Company determined that the Common Warrant is not a liability within the scope of ASC 480, but met the requirements to be classified within stockholders’ equity, because the warrant is indexed to the Company’s own stock and met all of the conditions for equity classification in accordance with ASC 815. Accordingly, the warrants were recorded as a component of additional paid-in capital in the statements of stockholders’ equity at the time of issuance. The Common Warrant was valued using the Black-Scholes option pricing model with the following assumptions: i) fair value of common stock of $2.8500, ii) exercise price of $2.9934, iii) term of 5 years, iv) dividend rate of 0%, v) volatility of 36.70%, and vi) risk free interest rate of 4.06%.

 

Note 12. Stock-Based Compensation

Equity Incentive Plans

The Company maintains a stock incentive plan, that permits the granting of incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other stock-based awards. The equity-based awards for employees will generally vest over a four-year period, pursuant to two different vesting schedules. For initial equity-based awards granted to employees, the first vest is generally a one-year cliff vest, followed by monthly vesting for the final three years. Thereafter, annual equity-based awards granted to employees typically vest monthly over the four-year vest term. The initial equity-based awards granted to the Company’s non-employee, independent directors upon appointment to the board of directors will vest over a three-year period, with the first vest being a one-year cliff, followed by monthly vesting over the remaining two years. Thereafter, annual equity-based awards granted to the Company’s non-employee, independent directors will cliff vest after one year from the date of grant.

15


 

Stock Options

The following table summarizes the stock option activity for the three months ended March 31, 2024 (in thousands, except share and per share data):

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise
Price
per Share

 

 

Weighted Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding at January 1, 2024

 

 

4,041,807

 

 

$

6.41

 

 

 

7.53

 

 

$

5,159

 

Granted

 

 

727,500

 

 

$

2.85

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

Forfeited

 

 

(391,922

)

 

$

10.08

 

 

 

 

 

 

 

Expired

 

 

(7,186

)

 

$

12.07

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

4,370,199

 

 

$

5.48

 

 

 

7.11

 

 

$

3,201

 

Exercisable at March 31, 2024

 

 

2,352,970

 

 

$

5.82

 

 

 

6.03

 

 

$

2,356

 

Vested and expected to vest at March 31, 2024

 

 

4,085,517

 

 

$

5.83

 

 

 

7.27

 

 

$

2,576

 

The weighted average assumptions used in the Black-Scholes pricing model for stock options granted during the three months ended March 31, 2024, were as follows:

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Estimated dividend yield

 

 

-

%

 

 

-

%

Weighted-average expected stock price volatility

 

 

35.91

%

 

 

35.04

%

Weighted-average risk-free interest rate

 

 

4.33

%

 

 

4.11

%

Expected average term of options (in years)

 

 

6.25

 

 

 

6.25

 

Weighted-average fair value of common stock

 

$

2.85

 

 

$

5.41

 

Weighted-average fair value per option

 

$

1.24

 

 

$

2.29

 

Restricted Stock

The following table summarizes the restricted stock unit activity for the three months ended March 31, 2024 (in thousands, except share and per share data):

 

 

 

Number of
Shares

 

 

Weighted
Average
Grant Date
Fair Value
per Share

 

 

Weighted Average
Remaining
Contractual
Term (in
years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding at January 1, 2024

 

 

155,780

 

 

$

5.05

 

 

 

1.36

 

 

$

581

 

Granted

 

 

 

 

$

 

 

 

 

 

 

 

Vested

 

 

(29,539

)

 

$

5.41

 

 

 

 

 

 

 

Forfeited

 

 

(21,000

)

 

$

5.41

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

105,241

 

 

$

4.88

 

 

 

1.29

 

 

$

279

 

Vested and expected to vest at March 31, 2024

 

 

105,241

 

 

$

4.88

 

 

 

1.29

 

 

$

279

 

Employee Stock Purchase Plan

The Company also maintains an employee stock purchase plan (ESPP) that authorizes the issuance of shares of common stock pursuant to purchase rights granted to eligible employees. Unless otherwise determined by the Company’s board of directors, shares of the Company’s common stock will be purchased for the accounts of employees participating in the Company’s ESPP at a price per share equal to the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. Offering periods are generally six months long; offering periods begin on June 1 and December 1 of each year. The Company issued zero shares of common stock under the ESPP during each of the three months ended March 31, 2023 and March 31, 2024.

16


 

Repricing of Outstanding and Unexercised Options

In January 2024, the Company’s board of directors approved a one-time repricing of certain previously granted and still outstanding vested and unvested stock option awards held by eligible employees, executive officers, and non-employee directors. As a result, the exercise price for these awards will be lowered to $2.97 per share, which was the closing price of the Company’s common stock as reported on the Nasdaq Global Stock Market on March 14, 2024, so long as the holder remains employed by the Company or continues to serve as a member of the board of directors through September 14, 2025 absent earlier trigger events defined in the option repricing plan. No other terms of the stock options were modified, and the stock options will continue to vest according to their original vesting schedules and will retain their original expiration dates. As a result of the repricing, 1,631,016 vested and unvested stock options outstanding as of March 14, 2024, with original exercise prices ranging from $3.02 to $27.49, were repriced.

The repricing on March 14, 2024 resulted in incremental stock-based compensation expense of $0.9 million, of which $0.5 million related to vested stock option awards and was expensed on the repricing date. The remaining $0.4 million related to unvested stock option awards and is being amortized on a straight-line basis over the weighted-average vesting period of those awards of approximately 2.38 years as of March 14, 2024.

Stock-Based Compensation Expense

Stock-based compensation expense included in the accompanying condensed financial statements was as follows (in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cost of sales

 

$

49

 

 

$

36

 

Research and development

 

 

30

 

 

 

37

 

Sales and marketing

 

 

96

 

 

 

152

 

General and administrative

 

 

1,132

 

 

 

785

 

Total stock-based compensation expense

 

$

1,307

 

 

$

1,010

 

Stock-based compensation expense related to stock options was $1.2 million and $0.9 million for the three months ended March 31, 2024 and 2023, respectively. Unrecognized compensation expense related to stock options was $5.5 million at March 31, 2024, which is expected to be recognized as expense over the weighted-average period of 3.20 years.

Stock-based compensation expense related to restricted stock units was $0.1 million in each of the three months ended March 31, 2024 and 2023, respectively. Unrecognized compensation expense related to restricted stock units was $0.4 million at March 31, 2024, which is expected to be recognized as expense over the weighted-average period of 1.93 years.

Stock-based compensation expense related to the ESPP was not significant in either of the three months ended March 31, 2024 and 2023. Total compensation cost related to the ESPP not yet recognized was not significant at March 31, 2024. As of March 31, 2024, $0.1 million has been withheld on behalf of employees for future purchases under the ESPP.

 

Note 13. Income Taxes

For the three months ended March 31, 2024 the Company's income tax benefit was not significant, compared to the three months ended March 31, 2023, when the Company also recorded a minimal income tax benefit. 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.

The Company had insignificant unrecognized tax benefits as of March 31, 2024 and 2023. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not expect the balance of unrecognized tax benefits to change significantly over the next twelve months. The Company has not accrued interest or penalties related to uncertain tax positions as of March 31, 2024 and 2023.

 

Note 14. Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, stock options, restricted stock units, employee stock purchase rights, and warrants to purchase common stock, are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive for all periods presented.

17


 

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(8,097

)

 

$

(8,817

)

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

 

 

40,804,885

 

 

 

28,181,457

 

Net loss per share—basic and diluted

 

$

(0.20

)

 

$

(0.31

)

The following is a summary of the common stock equivalents for the securities outstanding during the respective periods that have been excluded from the computation of diluted net loss per common share, as their effect would be anti-dilutive: