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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of Alpha Teknova, Inc.’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect its future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to "the Company," “Teknova,” we,” “us,” and “our” are intended to mean the business and operations of Alpha Teknova, Inc.

Overview

Since our founding in 1996, we have been providing critical reagents that enable the discovery, research, development, and production of biopharmaceutical products such as drug therapies, novel vaccines, and molecular diagnostics. Our more than 3,000 active customers span the entire continuum of the life sciences market, including leading pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostics franchises, and academic and government research institutions. We offer three primary product types: 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.

In 2017, we achieved ISO 13485:2016 certification, enabling us to manufacture products for use in diagnostic and therapeutic applications. Our certification allows us to offer solutions across the entire customer product development workflow, supporting our customers' need for materials in greater volume and that meet increasingly stringent regulatory requirements as they scale from research to commercialization.

We manufacture our products at our Hollister, California headquarters and stock inventory of raw materials, components, and finished goods at that location. We rely on a limited number of suppliers for certain raw materials, and we have no long-term supply arrangements with our suppliers, as we order on a purchase order basis. We ship our products directly from our warehouses in Hollister, California and Mansfield, Massachusetts to our customers and distributors pursuant to purchase orders. We typically recognize revenue when products are shipped.

We generated revenue of $36.9 million in 2021, which represents an increase of $5.6 million as compared to 2020. In 2021 and 2020, only 2.9% and 3.7%, respectively, of our revenue was generated from customers located outside of the U.S. Our sales outside of the U.S. are denominated in U.S. dollars. Approximately 71% of our revenue for the year ended December 31, 2021 was generated from sales through direct channels and a limited salesforce, with the remainder generated through distributor sales.

We had an operating loss of $12.0 million in 2021 compared to $4.7 million of operating income in 2020. We expect our expenses will continue to increase in future periods in connection with our ongoing activities as we:

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attract, hire, and retain qualified personnel;

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invest in processes and infrastructure to enable manufacturing automation and expand capacity;

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build research and development (R&D) capacity to introduce new products and services and create intellectual property;

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build our brand, market, and sell new and existing products and services;

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potentially acquire businesses or technologies to accelerate the growth of our business; and

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function as a public company.

Key Developments

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On March 26, 2021, we entered into the Credit Agreement which provides for loan commitments in an aggregate amount of up to $27.0 million and drew down $12.0 million on the term loan thereunder. See "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility” for more information regarding the credit facility.

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On June 29, 2021, we completed an IPO in which we issued and sold 6,900,000 shares of our common stock at a public offering price of $16.00 per share. We received $99.1 million in net proceeds, after deducting underwriting discounts and commissions of $7.7 million and offering expenses of $3.6 million.

Impact of COVID-19 on Our Business

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact customers, employees, suppliers, vendors, business partners, and distribution channels. In an effort to protect the health and safety of our employees, we took proactive action from the earliest signs of the outbreak, which included implementing social distancing policies at our facilities, facilitating remote working arrangements and imposing employee travel restrictions. We are unable to predict the impact that the COVID-19 pandemic will have on our future financial position and operating results due to numerous uncertainties. These uncertainties include the severity of the virus and any variants, the duration of the outbreak, governmental, business or other actions, impacts on our supply chain, the effect on customer demand, and buying patterns, the health of our workforce and our ability to meet staffing needs throughout the critical functions. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. In addition, we cannot predict the impact that the COVID-19 pandemic will have on our customers, vendors, suppliers, and other business partners; however, any material effect on these parties could adversely impact us.

We believe that we have successfully, and will continue to successfully, navigate the uncertain environment associated with the COVID-19 pandemic. This includes implementing enhanced measures focusing on the safety of our customers and employees as well as improved operating discipline across our business. Our overall liquidity is strong, and we believe we are able to meet our operating cash needs and other investing and financing cash requirements at this time, including those necessary to grow the business as economic conditions improve.

The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response in collaboration with customers, team members, and business partners. For further information regarding the impact of the COVID-19 pandemic on the Company, please see Item 1A., "Risk Factors" in this report, which is incorporated herein by reference.

Results of Operations

The following tables set forth our results of operations for the years ended December 31, 2021 and 2020 (dollars in thousands):

For the Year Ended December 31,

Operating expenses:

Amortization of intangible assets 1,148 1,148 — —

Other income (expenses), net

Revenue

Our revenue disaggregated by product category, for the years ended December 31, 2021 and 2020 was as follows (dollars in thousands):

For the Year Ended December 31,

Total revenue was $36.9 million in 2021, an increase of $5.6 million, or 17.9%, compared with $31.3 million in 2020.

Lab Essentials revenue was $27.2 million in 2021, an increase of $5.9 million, or 28.0%, compared with $21.2 million in 2020. The increase in Lab Essentials revenue was due in roughly equal measure to a higher average revenue per customer and an increased number of customers.

Clinical Solutions revenue was $6.8 million in 2021, an increase of $2.0 million, or 41.3%, compared with $4.8 million in 2020. The increase in Clinical Solutions revenue was attributable to an increased number of customers somewhat offset by lower average revenue per customer.

Sample Transport revenue was $1.5 million in 2021, a decrease of $2.8 million, or 64.4%, compared with $4.3 million in 2020. The decline in Sample Transport revenue was due to the decline in market demand for COVID-19 testing and an increase in market supply of sample transport products, each of which began in early 2021. Please see Item 1A., “Risk Factors”, for a discussion of the impact of the COVID-19 pandemic on the operations of our business and the uncertainties associated with global epidemics that may have an adverse impact on our operating results, cash flows and financial condition in the future.

Our revenue disaggregated by geographic region, for the years ended December 31, 2021 and 2020, was as follows (dollars in thousands):

For the Year Ended December 31,

Revenue from sales to customers in the United States was $35.8 million in 2021, and $30.1 million in 2020. Revenue from U.S. sales represented 97.1% percent and 96.3% of our total revenue in 2021 and 2020, respectively. We experienced significant U.S. growth due to higher revenue in all product categories except Sample Transport.

Revenue from sales to customers in markets outside of the U.S. was $1.1 million in 2021, and $1.2 million in 2020. Revenue from international sales represented 2.9% and 3.7% of our total revenue in 2021 and 2020, respectively. Revenue from sales to customers in markets outside the U.S. decreased as a percentage of total revenue due to lower international revenue and higher overall revenue in 2021. Our sales to customers outside of the U.S. are denominated in U.S. dollars.

Gross profit

Our gross profit for the years ended December 31, 2021 and 2020 was as follows (dollars in thousands):

For the Year Ended December 31,

Gross profit percentage was 47.8% in 2021, and 56.7% in 2020. The decrease in gross profit percentage in 2021 was primarily driven by an increase in manufacturing overhead and higher labor costs as a percentage of revenue as well as a $0.4 million reserve taken against Sample Transport inventory.

Operating expenses

Our operating expenses for the years ended December 31, 2021 and 2020 were as follows (dollars in thousands):

For the Year Ended December 31,

Amortization of intangible assets 1,148 1,148 — 0.0 %

Research and development expenses were $4.3 million in 2021 and $1.5 million in 2020. The increase was primarily driven by increased headcount, depreciation, and various discretionary costs to support our new product and process development efforts.

Sales and marketing expenses were $3.8 million in 2021 and $2.2 million in 2020. The increase was primarily driven by increased headcount to develop our commercial presence and increase customer support, as well as higher levels of promotional spending.

General and administrative expenses were $20.4 million in 2021 and $8.2 million in 2020. The increase was primarily driven by increased headcount as well as professional fees, stock-based compensation, insurance, and information technology expenses, to build the infrastructure necessary to support our growth strategy.

Provision for (benefit from) income taxes

Our provision for (benefit from) income taxes for the years ended December 31, 2021 and 2020 was as follows (dollars in thousands):

For the Year Ended December 31,

Effective tax rate 22.4 % 24.5 %

Our benefit from income taxes was $2.8 million in 2021, which was primarily due to a federal deferred tax benefit from losses during such period. Our provision for income taxes was $1.2 million in 2020. The decrease in our provision for income taxes was attributable to a decrease in operating income.

Other income (expenses), net

Other income (expenses), net for the years ended December 31, 2021 and 2020 was as follows (dollars in thousands):

For the Year Ended December 31,

Interest income (expense), net $ (589 ) $ 87 $ (676 ) (777.0 )%

Total other income (expenses), net $ (629 ) $ 63 $ (692 ) (1098.4 )%

Other expenses, net was $0.6 million in 2021 compared to $0.1 million of total other income, net in 2020. The increase in other expenses, net was primarily driven by interest expense due to debt outstanding in 2021 with no comparable debt balance in 2020.

Liquidity and Capital Resources

The primary source of financing for our operations was our IPO, which we completed in June 2021 and resulted in net proceeds to us of $99.1 million, after deducting underwriting discounts and commissions of $7.7 million and offering expenses of $3.6 million. As of December 31, 2021, we had $93.5 million in working capital, which included $87.5 million in cash and cash equivalents.

In addition to our existing cash and cash equivalents balance, another source of liquidity is our credit facility as described below in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility”.

To facilitate our expected growth, we expect to continue to use our sources of liquidity to make investments as we expand our operations and increase capacity. In particular, we are building out new manufacturing, warehouse and distribution facilities in Hollister, California, which we expect to be a significant use of cash over the next 12 to 18 months. We are carrying the majority of these fixed assets as construction in progress on our balance sheet until the facilities and related equipment are put into service. These uses of cash are not reasonably likely to result in material changes in the Company’s liquidity. In addition, we may also lease or purchase additional office, manufacturing, warehouse and/or distribution facilities. See “Notes to Financial Statements—Note 15—Obligations under Operating Leases,” for a discussion of our lease obligations reflected on our balance sheet.

We may also use our liquidity to pursue potential acquisitions that further or accelerate our business strategy.

Credit Facility

On March 26, 2021, we entered into the Credit Agreement. The Credit Agreement provides for a $27.0 million credit facility (the Facility) consisting of a $22.0 million senior, secured term loan (the Term Loan), and a $5.0 million working capital facility (the Revolving Loan). The Term Loan is staged such that $12.0 million was available immediately, an additional $5.0 million was available on September 30, 2021, and $5.0 million may be available in 2022, contingent upon achieving (i) trailing twelve months of net revenue of $37.0 million if the proposed funding date is on or after January 1, 2022 and before July 1, 2022 or $38.5 million if the proposed funding date is on or after July 1, 2022 and on or before September 30, 2022 and (ii) earnings before interest, taxes, depreciation and amortization (EBITDA) targets (as defined in the Credit Agreement). We opted not to draw down the $5.0 million Term Loan tranche available on September 30, 2021. Borrowings on the Revolving Loan are limited to a borrowing base calculation. As of December 31, 2021, there was no drawdown on the Revolving Loan. The proceeds from the Facility are being used for working capital and general corporate purposes.

The interest on the Term Loan is based on the annual rate of one-month LIBOR plus 6.45%, subject to a LIBOR floor of 1.50%. If any advance under the Term Loan is prepaid at any time, the prepayment fee is based on the amount being prepaid and an applicable percentage amount, such as 3%, 2%, or 1%, based on the date the prepayment is made after the closing date of the Term Loan. The Credit Agreement contains a financial covenant based upon a trailing twelve months of net revenue, including a requirement of $32.0 million in the twelve months ended December 31, 2021. As of December 31, 2021, we were in compliance with this requirement. The outstanding balance on the Facility will be due in full on March 1, 2026. At the end of the Term Loan, we will pay an exit fee of $0.6 million, which represents 5% of the $12.0 million in borrowings made available immediately on March 26, 2021. Such fee is being accreted to interest expense over the life of the Term Loan. We incurred $0.3 million of debt issuance costs which are recorded in long-term debt, net of current portion in the balance sheets. On March 26, 2021, we drew the full $12.0 million of the Term Loan available. As of December 31, 2021, the outstanding balance on the Term Loan was $12.0 million ($11.9 million net of debt issuance costs), and such balance is presented as long-term debt on the balance sheet (in thousands).

The maximum loan amount under the Revolving Loan (the Revolving Loan Commitment Amount) is $5.0 million, which we may request the Lenders to increase up to $15.0 million. The amount available to us under the Revolving Loan at any one time shall be based upon an amount equal to: (i) 85% of the net collectable value of our domestic accounts receivable; plus (ii) 50% of domestic eligible finished goods inventory that does not exceed $1.0 million. Additionally, availability from finished goods inventory cannot exceed 25% of the total borrowing base availability. Interest on the outstanding balance of the Revolving Loan will be payable monthly in arrears at an annual rate of one-month LIBOR plus 3.75%, subject to a LIBOR floor of 1.50%. There was no outstanding balance on the Revolving Loan as of December 31, 2021.

The Credit Agreement includes a financial covenant that requires us to maintain certain minimum revenue, tested monthly based on trailing 12 months net revenue. Calendar year-end net revenue covenants are a based on the achievement of a minimum revenue of $32.0 million at December 31, 2021, $37.5 million at December 31, 2022, $42.0 million at December 31, 2023, $46.5 million at December 31, 2024 and $51.5 million at December 31, 2025. In connection with the Facility, the Lenders received a perfected first priority security interest in all existing and after-acquired assets of the Company.

We believe these sources of liquidity, in addition to the net proceeds from our IPO, which closed on June 29, 2021, will be sufficient to fund our liquidity requirements for at least the next 24 months. Our principal liquidity requirements are to fund our operations (which includes, but is not limited to, maintaining sufficient levels of inventory to meet the anticipated demand of our customers), and to fund our capital expenditures, including the expansion of our manufacturing operations such as the construction of a new manufacturing, warehouse and distribution facilities in Hollister, California, which we expect to be a significant use of cash over the next 12 months. We may, however, require or elect to secure additional financing as we continue to execute our business strategy. If we require or elect to raise additional funds, we may do so through equity or debt financing, which may or may not be available on favorable terms and could require us to agree to covenants that limit our operating flexibility.

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

For the Year Ended December 31,

Net cash provided by (used in) operating activities $ (9,069 ) $ 2,505

Net cash provided by (used in) investing activities (17,521 ) (1,735 )

Net cash provided by (used in) financing activities 110,793 (1,599 )

Net increase in cash and cash equivalents $ 84,203 $ (829 )

Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for certain non-cash items (including depreciation and amortization, bad debt expense, deferred taxes, loss on disposal of property, plant and equipment, inventory reserve, amortization of debt issuance costs, and stock-based compensation expense), and the effect of changes in working capital and other activities.

Net cash used in operating activities was $9.1 million in 2021, which primarily consisted of net loss of $9.8 million plus net adjustments for non-cash charges of $2.4 million, offset by net changes in operating assets and liabilities of $1.7 million. The primary non-cash adjustments to net income included $2.9 million of depreciation and amortization, $1.6 million of stock-based compensation, $0.4 million of inventory reserve, partially offset by $2.8 million in deferred taxes. Net cash used in changes in operating assets and liabilities consisted primarily of a $2.3 million increase in inventories, $1.3 million increase in prepaid expenses and other current assets, partially offset by a $1.8 million increase in accrued liabilities and $0.3 million increase in accounts payable.

Net cash provided by operating activities was $2.5 million for the year ended December 31, 2020, which primarily consisted of net income of $3.6 million plus net adjustments for non-cash charges of $4.4 million, partially offset by net changes in operating assets and liabilities of $5.5 million. The primary non-cash adjustments to net income are $2.0 million of depreciation and amortization and $2.1 million of deferred taxes. The significant impact from changes in net operating assets and liabilities was primarily driven by a $2.4 million increase in accounts receivable, $1.2 million increase in income taxes receivable, $0.9 million increase in prepaid expenses and other current assets, and $1.0 million increase in inventories.

Investing Activities

Net cash (used in) provided by investing activities relates primarily to capital expenditures and purchases of marketable securities, partially offset by proceeds from maturities and sales of marketable investments.

Net cash used in investing activities was $17.6 million for the year ended December 31, 2021, which primarily consisted of purchases of property, plant and equipment of $20.0 million. This was partially offset by receipt of proceeds from sales and maturities of short-term marketable securities of $1.1 million and $0.7 million, respectively, and proceeds from a loan to a related party of $0.5 million.

Net cash used in investing activities was $1.7 million for the year ended December 31, 2020, which primarily consisted of purchase of property, plant and equipment of $5.5 million and purchase of short-term marketable securities of $1.8 million. This was partially offset by proceeds from sales and maturities of short-term marketable securities of $1.7 million and $3.7 million, respectively.

Financing Activities

Net cash provided by (used in) financing activities primarily relates to proceeds from our IPO, net of underwriters’ commissions and discounts, payment of issuance costs of the IPO, and proceeds from long-term debt.

Net cash provided by financing activities was $110.8 million for the year ended December 31, 2021, which was primarily attributable to proceeds from the IPO, net of underwriters’ commissions and discounts, of $102.7

million and proceeds from long-term debt pursuant to the Facility of $11.9 million, partially offset by payment of costs related to our IPO of $3.6 million.

Net cash used in financing activities was $1.6 million for the year ended December 31, 2020 and was primarily attributable to pushdown accounting adjustments.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, future events may cause us to change our assumptions and estimates, which may require adjustment. Actual results could differ from these estimates.

We believe the following critical accounting policies involve significant areas where management applies judgments and estimates in the preparation of our financial statements.

Revenue Recognition

We account for revenue in accordance with ASC 606. This process involves identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when or as we satisfy performance obligations.

We recognize revenue from the sale of manufactured products and services when control of promised goods or services are transferred to customers in an amount that reflects the consideration we expect 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 our sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer.

Occasionally, we offer rebates, discounts, and returns on our products, however returns and refunds are an extremely rare occurrence and are not explicitly or implicitly part of the purchase order. We record rebates, discounts, and returns at the time in which they occur. The difference between recording these as they occur and estimating the amount of consideration in exchange for the transfer of promised goods would not have a material impact on the financial statements.

Goodwill

Goodwill is the excess of the fair value of the company above the fair value accounting basis of the net assets and liabilities of the company under pushdown accounting. Goodwill is not amortized, but is tested for impairment annually as of October 1, or more frequently if events or circumstances indicate that the carrying value may no longer be recoverable and that an impairment may have occurred. We operate as one segment and one reporting unit, and therefore goodwill is tested for impairment at the entity level.

We first consider qualitative factors that indicate impairment may have occurred. Such indicators may include macro-economic conditions such as adverse industry or market conditions; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel. If the qualitative assessment indicates a reduction in the carrying value is more likely than not to have occurred, we perform a quantitative assessment, comparing the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds the fair value, an impairment has occurred, and an impairment loss is recognized for the difference up to the carrying value of the reporting unit’s goodwill.

The fair value of the reporting unit was determined using a combination of an income approach and market approach. We completed our annual impairment assessment in the fourth quarter of 2021 and determined that it is not more likely than not that the fair value of the entity is less than its carrying amount.

Application of the goodwill impairment test requires judgments, including a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of the reporting unit. A number of significant assumptions and estimates are involved in a quantitative assessment. In the application of the income approach to forecast future cash flows, revenue and operating income growth rates, discount rates and other factors are used. Additionally, assumptions related to guideline company financial multiples are used in the market approach.

While we believe that our estimates of current value are reasonable, if actual results differ from the estimates and judgments used including such items as future cash flows and the volatility inherent in markets which we serve, impairment charges against the carrying value of those assets could be required in the future.

Intangible Assets and Other Long-Lived Assets

We review our definite-lived intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of our long-lived assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated. Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows. The key assumptions that we use in our discounted cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.

Indefinite-lived intangible assets are also subject to an impairment test at least annually, as of October 1, or more frequently if events or circumstances indicate that it is more likely than not that the asset is impaired. If the fair value of the asset is less than the carrying amount, an impairment loss would be recognized in an amount equal to the difference between the carrying amount and the fair value. We completed our assessment in the fourth quarter of 2021 and determined that it is not more likely than not that the fair value of our indefinite-lived intangible assets is less than the carrying amount.

Assumptions and estimates about future values and remaining useful lives are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.

Income Taxes

The asset and liability method is used in accounting for deferred income taxes. Under this method, deferred income taxes are provided for differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accordingly, our tax provision contemplates tax rates currently in effect to determine our current tax provision as well as enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled to determine our deferred tax provision. Any significant fluctuation in rates or changes in tax laws could lead to either increases or decreases in our effective tax rate.

Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Significant judgments and estimates based on interpretations of existing tax laws or regulations are required in determining our provision for income taxes. Changes in tax laws, statutory tax rates, and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the financial statements and would require an adjustment to the provision for income taxes.

Stock-Based Compensation

Stock-based compensation expense is recognized based on the fair value and is expensed on a straight-line basis over the requisite service periods of the award, which generally represents the scheduled vesting period. Forfeitures are recognized as they occur. We account for stock-based compensation expense based on the estimated grant date fair value, using the Black-Scholes option-pricing model which requires us to make a number of assumptions, including expected volatility, the expected risk-free interest rate, the expected term and the expected dividend.

These inputs are subjective and generally require significant analysis and judgment to develop. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation is recognized.

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Volatility. Since we have limited historical data on volatility of our stock, expected volatility is based on the volatility of the stock of similar publicly traded entities. In evaluating similarity, we consider factors such as industry, stage of life cycle, size, and financial leverage.

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Risk-free interest rate. The risk-free rate that we use is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

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Expected term. As we do not have sufficient historical exercise activity to estimate expected life, the expected life of options granted is determined using the simplified method. The simplified method is based on the vesting period and the contractual term for each grant or for each vesting tranche for awards with graded vesting. The midpoint of the vesting date and the maximum contractual expiration date is used as the expected term under this method.

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Dividend yield.We have never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future. Therefore, we use an expected dividend yield of zero. In addition, the terms of the Credit Agreement prohibit us from paying dividends, other than dividends payable on our common stock, without the prior consent of the lender.

Prior to our IPO, the fair value of our common stock was determined by the board of directors with assistance from management and, in part, on input from an independent third-party valuation firm. The board of directors determined the fair value of common stock by considering a number of objective and subjective factors, including valuations of comparable companies, operating and financial performance, the lack of liquidity of our common stock and the general and industry-specific economic outlook.

Beginning September 30, 2020, in valuing our common stock, the fair value of our business, or enterprise value, was determined using the market approach. The market approach involves identifying and evaluating comparable public companies and acquisition targets that operate in the same industry or which have similar operating characteristics as the subject company. Publicly available information regarding the comparable companies is used to extrapolate market-based valuation multiples that are applied to historical or prospective financial information in order to derive an indication of value.

The resulting equity value is then allocated to each share class using an Option Pricing Model (OPM). The OPM allocates the overall company value to the various share classes based on differences in liquidation preferences, participation rights, dividend policy, and conversion rights, using a series of call options. After the share value of our common stock was determined, a discount for lack of marketability (DLOM) was applied to arrive at the fair value of the common stock shares on a non-marketable, minority basis. A DLOM was applied in order to reflect the lack of a recognized market for a closely held interest.

For valuations after the completion of our IPO, the fair value of each share of underlying common stock is determined based on the closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded.

Emerging Growth Company and a Smaller Reporting Company

We qualify as an “emerging growth company” as defined in the JOBS Act. For as long as we qualify as an emerging growth company, we may take advantage of certain exemptions from various reporting requirements and

other burdens that are otherwise applicable generally to public companies. These provisions include, but are not limited to:

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reduced obligations with respect to financial data, including presenting only two years of audited financial statements;

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an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

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reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements; and

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exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from adopting new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

Under the JOBS Act, we will remain an emerging growth company until the earliest of:

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the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more;

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the last day of our fiscal year following the fifth anniversary of the date of the closing of our initial public offering (IPO);

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the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and

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the date on which we are deemed to be a “large accelerated filer” under the Exchange Act (i.e., the first day of the fiscal year after we have (i) more than $700.0 million in outstanding common equity held by our non-affiliates, measured each year on the last business day of our most recently completed second fiscal quarter, and (ii) been public for at least 12 months).

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases and its related interpretations, codified as ASC 842 (ASC 842). The new standard requires lessees to generally recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. The new standard is effective with respect to Teknova beginning January 1, 2022 on a modified retrospective basis, and early adoption is permitted. We expect that most of the operating lease commitments will be subject to the new standard and will be recognized as operating lease liabilities and right-of-use assets of approximately $20 million upon adoption of ASC 842, which will increase the Company’s total assets and total liabilities.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and clarifies and amends certain guidance to promote consistent application. ASU 2019-12 is effective for the Company’s annual and interim periods beginning after December 15, 2021, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. We are currently evaluating the impact of the adoption of the standard on the financial statements and do not anticipate the standard to have a significant impact.

current expected credit losses and will apply to accounts receivable. The new guidance will be effective for Teknova’s annual and interim periods beginning after December 15, 2022. We are currently evaluating the impact of the adoption of the standard on the financial statements and do not anticipate the standard to have a significant impact.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

Item 8. Financial Statements and Supplementary Data.

The information required by this item is set forth at the pages indicated in Part IV, Item 15(a)(1) and 15(a)(2), respectively, of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based upon our evaluation of the Company’s disclosure controls and procedures, as of December 31, 2021, the CEO and the CFO concluded that the disclosure controls were not effective, due to the material weaknesses in internal control over financial reporting described below, to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and were not effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Notwithstanding this material weakness, management has concluded that our audited financial statements included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with GAAP for each of the periods presented herein.

Internal Control Over Financial Reporting

Management's Report on Internal Controls Over Financial Reporting

This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.

Attestation of Independent Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation by our independent registered public accounting firm regarding our internal control over financial reporting due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Ongoing Remediation of Material Weakness

As previously disclosed in the final prospectus to our Registration Statement on Form S-1, as amended (File No. 333-256795), filed with the SEC on June 25, 2021, and in connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2020 and 2019, a material weakness (as defined under the Exchange Act and by the auditing standards of the U.S. Public Company Accounting Oversight Board, (PCAOB)), was identified in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Specifically, the financial close and reporting process was not adequately designed, documented, and executed to support the accurate and timely reporting of the Company’s financial results with respect to complex, non-routine transactions, such as business combinations. Consequently, we inappropriately accounted for the THP Transaction in 2019, including certain tax benefits and the allocation of transaction costs across periods. Our audited financial statements that were included in the final prospectus to our Registration Statement on Form S-1, as amended (File No. 333-256795), filed with the SEC on June 25, 2021, present the THP Transaction in accordance with GAAP. In the aggregate, such adjustments amounted to a material weakness. The material weakness has not been remediated as of December 31, 2021. There were no material adjustments required in the 2021 annual financial statements due this material weakness.

We have begun taking significant measures, and plan to continue to take measures, to remediate this material weakness. These measures include hiring and engaging additional accounting personnel and/or consultants with specific technical accounting experience necessary to assist with complex, non-routine transactions, and implementing and adopting additional controls and procedures. These remediation measures may be time consuming, costly, and might place significant demands on our financial and operational resources. Although we have made enhancements to our control procedures in this area, the material weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively. See Item 1A. “Risk Factors”.

Item 9B. Other Information.

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item will be contained in our definitive proxy statement on Schedule 14A to be filed with the SEC in connection with our 2022 Annual Meeting of the Stockholders (the Proxy Statement), which we expect to file not later than 120 days after the end of our fiscal year ended December 31, 2021, and is incorporated in this report by reference.

Item 11. Executive Compensation.

The information required by this Item will be contained in our Proxy Statement, which we expect to file not later than 120 days after the end of our fiscal year ended December 31, 2021, and is incorporated in this report by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)The following documents are filed as a part of this report:

(1)Financial Statements

Our Financial Statements are listed in the “Index to Financial Statements” of Alpha Teknova, Inc. beginning on page F-1 immediately following the signature pages of this Annual Report on Form 10-K.

(2)Financial Statement Schedules

All financial statement schedules called for under Regulation S-X are omitted because either they are not applicable or not required under the related instructions, or because the required information is included either in the Financial Statements or Notes thereto included elsewhere in this Annual Report on Form 10-K.

(3)Exhibits

The following exhibits are incorporated by reference or filed with this report, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

Exhibit Index

ExhibitNumber Description

4.3 * Description of the Registrant’s capital stock.

24.1 * Power of Attorney (see page 79 of this Annual Report on Form 10-K).

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB Inline XBRL Taxonomy Extension Label Linkbase

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase

104 Cover Page Interactive Data File, formatted in Inline XBRL

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

(c)Financial Statement Schedules

No financial statement schedules are provided because the information called for is not applicable.

Item 16. Form 10-K Summary

None.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen Gunstream and Matt Lowell, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Alpha Teknova, Inc.

Date: March 18, 2022 By: /s/ Stephen Gunstream

Stephen Gunstream

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

/s/ Stephen Gunstream President and Chief Executive Officer March 18, 2022

Stephen Gunstream

Matt Lowell

/s/ Paul Grossman Chairman of the Board March 18, 2022

Paul Grossman

/s/ Irene Davis Director March 18, 2022

Irene Davis

/s/ Ted Davis Director March 18, 2022

Ted Davis

/s/ Alexander Herzick Director March 18, 2022

Alexander Herzick

/s/ J. Matthew Mackowski Director March 18, 2022

J. Matthew Mackowski

/s/ Robert E. McNamara Director March 18, 2022

Robert E. McNamara

/s/ Brett Robertson Director March 18, 2022

Brett Robertson

/s/ Alexander Vos Director March 18, 2022

Alexander Vos

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) F-2

Statements of Cash Flows for the Years ended December 31, 2021 and 2020 F-6

Notes to Financial Statements F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Alpha Teknova, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Alpha Teknova, Inc. as of December 31, 2021 and December 31, 2020, the related statements of operations and comprehensive income (loss), convertible and redeemable preferred stock and stockholders' equity and cash flows for the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

San Jose, CA

March 18, 2022

F-2

ALPHA TEKNOVA, INC.

Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data)

For the Year Ended December 31,

Operating expenses:

Amortization of intangible assets 1,148 1,148

Other income (expenses), net

Interest income (expense), net (589 ) 87

Other expense, net (40 ) (24 )

Total other income (expenses), net (629 ) 63

Income (loss) before income taxes (12,637 ) 4,726

Provision for (benefit from) income taxes (2,834 ) 1,156

Comprehensive income (loss) $ (9,810 ) $ 3,557

Net income (loss) available to common stockholders

Less: undistributed income attributable to preferred stockholders — (2,962 )

Net income (loss) attributable to common stockholders $ (9,803 ) $ 608

Net income (loss) per share attributable to common stockholders

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

F-3

ALPHA TEKNOVA, INC.

Balance Sheets

(in thousands, except share and per share data)

As of December 31,

ASSETS

Current assets:

Short-term investments - marketable securities — 1,811

Prepaid expenses and other current assets 2,438 1,666

Other non-current assets 180 24

LIABILITIES, CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

Other accrued liabilities 273 350

Commitments and contingencies (See “Note 15—Commitments and Contingencies”)

Stockholders’ equity:

Retained earnings (accumulated deficit) (7,538 ) 2,265

Accumulated other comprehensive income — 7

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

F-4

ALPHA TEKNOVA, INC.

Statements of Convertible and Redeemable Preferred Stock and Stockholders’ Equity

(in thousands, except share data)

Successor Shares Amount Shares Amount Capital income (loss) Deficit) Equity

Stock-based compensation — — — — 300 — — 300

Unrealized loss on available-for-sale securities — — — — — (13 ) — (13 )

Stock-based compensation — — — — 1,551 — — 1,551

Unrealized loss on available-for-sale securities — — — — — (7 ) — (7 )

Issuance of stock under employee stock plans, net — — 100 — — — — —

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

F-5

ALPHA TEKNOVA, INC.

Statements of Cash Flows

(in thousands)

For the Year Ended December 31,

Operating activities:

Bad debt expense 235 (12 )

Depreciation and amortization 2,883 2,044

Inventory reserve 441 (29 )

Amortization of debt issuance costs 134 -

Loss on disposal of property, plant and equipment 41 11

Changes in operating assets and liabilities:

Income taxes receivable 229 (1,241 )

Prepaid expenses and other current assets (1,301 ) (949 )

Cash provided by (used in) operating activities (9,069 ) 2,505

Investing activities:

Purchase of property, plant and equipment (19,877 ) (5,466 )

Proceeds from loan to related party 529 27

Purchase of short-term marketable securities - (1,763 )

Proceeds on sales of short-term marketable securities 1,132 1,747

Proceeds from maturities of short-term marketable securities 695 3,720

Cash provided by (used in) investing activities (17,521 ) (1,735 )

Financing activities:

Repayment of long-term debt — (45 )

Indemnity holdback release — (1,554 )

Proceeds from long-term debt, net 11,889 —

Debt issuance costs (153 ) —

Payment of issuance costs for initial public offering (3,615 ) —

Cash provided by (used in) financing activities 110,793 (1,599 )

Change in cash and cash equivalents 84,203 (829 )

Cash and cash equivalents at beginning of period 3,315 4,144

Cash and cash equivalents at end of period $ 87,518 $ 3,315

Supplemental cash flow disclosures:

Income taxes paid $ 8 $ 323

Interest paid, net of amounts capitalized $ 414 $ 36

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

F-6

ALPHA TEKNOVA, INC.

Notes to Financial Statements

Note 1. Nature of the Business

Alpha Teknova, Inc. (referred to herein as the Company or Teknova), provides critical reagents that enable the discovery, development, and production of biopharmaceutical products such as drug therapies, novel vaccines, and molecular diagnostics. Product offerings include pre-poured media plates for cell growth and cloning, liquid cell culture media and supplements for cellular expansion, and molecular biology reagents for sample manipulation, resuspension, and purification. Teknova supports customers spanning the life sciences market, including pharmaceutical and biotechnology companies, contract development and manufacturing organizations, in vitro diagnostic franchises, and academic and government research institutions, with catalog and custom, made-to-order products.

Teknova manufactures its products at its Hollister, California headquarters and stocks inventory of raw materials, components, and finished goods at that location. The Company ships products directly from its warehouses in Hollister, California and Mansfield, Massachusetts.

Teknova manufactures its products under Research Use Only or Good Manufacturing Processes regulatory standards, the latter of which refers to a more stringent level of quality standards supported by additional levels of documentation, testing, and traceability. In 2017, Teknova achieved ISO 13485:2016 certification, enabling the Company to manufacture products for use in diagnostic and therapeutic applications.

Stock Split

In June 2021, the Company’s board of directors and stockholders, respectively, approved a 1.8746 for-one forward stock split of the Company’s issued and outstanding shares of common stock, including the shares of common stock underlying outstanding stock options. This stock split was effected on June 17, 2021. The par value of the Company’s common stock was not adjusted as a result of the stock split. All issued and outstanding share and per share amounts of the Company’s common stock and stock options included in the accompanying financial statements have been retroactively adjusted to reflect this stock split for all periods presented.

Initial Public Offering

On June 29, 2021, the Company completed its initial public offering (IPO) in which the Company issued and sold 6,900,000 shares of its common stock, including shares issued upon the exercise in full of the underwriters’ option to purchase 900,000 additional shares of its common stock, at a public offering price of $16.00 per share. The Company received $99.1 million in net proceeds, after deducting underwriting discounts and commissions of $7.7 million and offering expenses of $3.6 million.

On June 28, 2021, all outstanding shares of convertible and redeemable preferred stock were converted into 17,512,685 shares of the Company’s common stock. Prior to the conversion of preferred stock to the Company’s common stock, total accretion of $0.3 million related to costs associated with the issuance of the convertible and redeemable preferred stock was recognized as an increase to the carrying value from $35.6 million to $35.9 million. Subsequent to the closing of the IPO, there were no shares of convertible and redeemable preferred stock outstanding.

Prior to the IPO, deferred offering costs, which consist primarily of direct incremental legal, accounting, and consulting fees relating to the Company’s IPO, were capitalized within prepaid expenses and other current assets in the balance sheets. Upon the closing of the IPO, these costs were reclassified into additional paid-in capital, as an offset against IPO proceeds. As of December 31, 2021, $3.6 million of these IPO-related costs were included as a reduction to additional paid-in capital on the balance sheet. There were no material deferred offering costs recorded as of December 31, 2020.

F-7

Note 2. Summary of Significant Accounting Policies

Basis of Accounting, Presentation and Use of Estimates

The accompanying financial statements and related notes are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts of assets and liabilities, and disclosures of assets and liabilities, at the date of each financial statement, and the reported amount of revenues and expenses during the reporting period. Significant items that are subject to such estimates and assumptions include, but are not limited to, the valuation of share-based payment awards, goodwill and intangible assets, and income taxes. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Certain prior period amounts have been reclassified to conform to presentation for the current year.

Impact of COVID-19

The COVID-19 pandemic continues to impact worldwide economic activity. Teknova continues to closely monitor the impact of the COVID-19 pandemic on all aspects of the Company's business, including how the pandemic will impact customers, employees, suppliers, vendors, business partners and distribution channels. It is not possible to predict the total impact of the COVID-19 pandemic on the Company’s future revenue or profitability, which will depend on future developments that remain uncertain and cannot be predicted with confidence at this time.

Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. Teknova’s CODM is its Chief Executive Officer, currently Stephen Gunstream. Teknova has determined that it operates in one reporting unit, one operating segment and one reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Concentrations of Risk

Financial Instruments

Teknova’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high quality banking institutions. At times, the Company’s cash and cash equivalent balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit. Teknova has never experienced any losses related to its cash and cash equivalent balances. Teknova routinely communicates with its customers regarding payments and has a history of limited write-offs so, as a consequence, the Company believes that its accounts receivable credit risk exposure is limited.

Customers

For the year ended December 31, 2021, the Company's largest customer was a distributor that accounted for 18% of total revenue. No other customer accounted for more than 10% of total revenue for the year ended December 31, 2021. As of December 31, 2021, the Company's two largest customers, both distributors, made up 16% and 10% of total gross accounts receivable and one direct customer made up 12% of total gross accounts receivable. No other customer accounted for more than 10% of total gross accounts receivable at December, 31, 2021.

For the year ended December 31, 2020, the Company's largest customer was a distributor that accounted for 15% of total revenue and the second largest customer accounted for 10% of total revenue. No other customer accounted for more than 10% of total revenue for the year ended December 31, 2020. As of December 31, 2020, two direct customers made up 18% and 16% of total gross accounts receivable and the Company's largest distributors

F-8

each made up 10% of total gross accounts receivable. No other customer accounted for more than 10% of total gross accounts receivable at December 31, 2020.

Suppliers

For the year ended December 31, 2021, the Company had three suppliers that accounted for greater than 10% of total inventory purchases, the highest of which accounted for 40% of total inventory purchases followed by suppliers which accounted for 11% and 10% of total inventory purchases, respectively. The amounts due to the Company's largest supplier comprised approximately 20% of total accounts payable as of December 31, 2021. No other supplier accounted for more than 10% of total accounts payable at December 31, 2021.

For the year ended December 31, 2020, the Company had four suppliers that accounted for greater than 10% of total inventory purchases, the highest of which accounted for 29% of total inventory purchases followed by suppliers which accounted for 25%, 21% and 11% of total inventory purchases, respectively. The amounts due to the Company's largest supplier comprised approximately 14% of total accounts payable as of December 31, 2020. No other supplier accounted for more than 10% of total accounts payable at December 31, 2020.

Cash and Cash Equivalents

Teknova’s cash and cash equivalents include cash on hand, cash held in banks, and highly-liquid investments with maturities of three months or less at the date of acquisition. Teknova maintains its cash in bank deposit accounts in financial institutions that are insured by the FDIC up to a balance of $250.0 thousand. Cash equivalents are stated at carrying value, which approximates fair value.

Marketable Investments

Teknova’s short-term marketable investments consist of corporate debt securities, U.S. treasury bills, and government agency obligations. Teknova believes its short-term debt securities are available for use in its current operations and that the Company has the ability, if necessary, to liquidate any of its short-term debt securities to meet its liquidity needs in the next twelve months. Accordingly, those investments with contractual maturities greater than one-year from the date of purchase are classified as short-term investments on the accompanying balance sheets. Teknova classifies its short-term debt investments as available-for-sale at the time of purchase and evaluates such classification as of each balance sheet date. All short-term debt investments are recorded at estimated fair value. Unrealized gains and losses are reported as a component of other comprehensive income, net of any related tax effect. Unrealized losses are charged against income when a decline in the fair value of an individual security is determined to be other-than-temporary. Realized gains and losses and other-than-temporary impairments on investments are included in interest income (expense), net in the statements of operations and comprehensive income (loss).

Fair Value of Financial Instruments

The carrying amounts of certain of Teknova’s financial instruments, including cash equivalents, accounts receivable, inventories, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.

Accounts Receivable

Accounts receivable are stated at invoice value, less estimated allowances for doubtful accounts. Teknova uses the allowance method to account for uncollectible accounts receivable, calculated by management using the historical average of uncollectible accounts. The Company continually monitors its customer payments and maintains an allowance for estimated losses resulting from its customers’ inability to make required payments. Accounts receivable are considered past due once customer payment terms have been exceeded. Receivables are

F-9

written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

Inventories

Inventory, consisting of raw materials, work in process and finished goods, is stated at the lower of cost or net realizable value, on a first-in, first-out basis. Teknova writes down its inventory for estimated obsolescence or inventory in excess of reasonably expected near-term sales or unmarketable inventory, in an amount equal to the difference between the cost of inventory and the estimated net realizable value, based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by Teknova, additional inventory write-downs may be required. Inventory impairment charges establish a new cost basis for inventory, and charges are not reversed subsequently to income, even if circumstances later suggest that increased carrying amounts are recoverable.

Notes Receivable from Related Parties

In 2016, Teknova’s founder and former Chief Executive Officer, a current director and stockholder of the Company, executed a promissory note in favor of the Company which was recorded as a note receivable. Teknova recognizes interest income on notes receivable on the accrual method. Teknova evaluates the collectability of both interest and principal on its notes receivable to determine whether the notes receivable are impaired. A note is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, according to the existing contractual terms. When a note is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the fair value of the underlying collateral, less costs to sell. During the years ended December 31, 2021 and 2020, there was no significant uncertainty of collection; therefore, interest income was recognized. As of December 31, 2020, the Company determined that no allowance for collectability was necessary. The note receivable was repaid during the year ended December 31, 2021 and prior to the closing of the IPO. See “Note 14—Related Parties” for further information regarding the Company’s note receivable with its founder and former Chief Executive Officer, a current director and stockholder of the Company.

Capitalized Software Implementation Costs

Teknova capitalizes certain implementation costs incurred under a cloud computing hosting arrangement. Costs incurred during the application development stage related to the implementation of the hosting arrangement are capitalized and included within other assets on the accompanying balance sheets. Amortization of capitalized implementation costs is recognized on a straight-line basis over the expected term of the associated hosting arrangement when it is ready for its intended use. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. As of December 31, 2021, Teknova had capitalized software implementation costs of $0.1 million. Teknova did not have any capitalized implementation software costs as of December 31, 2020. No amortization expense related to capitalized implementation costs has been recorded as the underlying implementation activities were not complete.

Property, Plant and Equipment

Teknova records property, plant and equipment at fair value when it is acquired in a business combination or at cost for all other purchases of property, plant and equipment. Property, plant and equipment is depreciated over the estimated useful lives of the assets, using the straight-line method. Any leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the estimated remaining life of the lease. Costs for repairs and maintenance that do not significantly increase the value or estimated lives of property, plant and equipment are expensed as incurred. Upon retirement or sale, the cost and related accumulated

F-10

depreciation are removed from the balance sheets, and the resulting gain or loss is reflected in the statements of operations and comprehensive income (loss).

The estimated useful lives of the major classes of property and equipment are as follows:

Estimated Useful Lives

Machinery and equipment 7 years

Office furniture and equipment 3 –7 years

Vehicles 5 years

Leasehold improvements 4 –7 years

Impairment of Long-Lived Assets

Teknova evaluates its long-lived assets for impairment when events or changes in circumstances indicate a possible inability to recover carrying amounts. Recoverability is assessed by comparing the carrying value of the assets to estimated undiscounted future cash flows expected to be generated by the assets. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated during the life of those assets are less than the assets’ carrying amounts. If an asset is impaired, the loss is measured as the amount by which the asset’s carrying value exceeds its fair value. There were no indicators of impairment during the years ended December 31, 2021 and 2020.

Goodwill

Goodwill is the excess of the Company’s fair value over the Company’s fair value accounting basis of the Company’s net assets and liabilities. Goodwill is not amortized, but is tested for impairment annually as of October 1, or more frequently if events or circumstances indicate that the carrying value may no longer be recoverable and that an impairment may have occurred.

Teknova first considers qualitative factors that indicate whether impairment may have occurred. Such indicators may include, macro-economic conditions, such as adverse industry or market conditions and entity-specific events, such as increasing costs, declining financial performance, or loss of key personnel. If the Company’s assessment of such qualitative factors indicates that a reduction in the carrying value is more likely than not to have occurred, Teknova performs a quantitative assessment, comparing the fair value of the Company (in this capacity, the Reporting Unit) to the carrying value, including goodwill, of the Reporting Unit. If the carrying value of the Reporting Unit exceeds its fair value, an impairment has occurred, and an impairment charge is recognized for the difference up to the carrying value of the Reporting Unit’s goodwill. The fair value of the Reporting Unit is a Level 3 measure and is determined using a market and income approach. There was no impairment of goodwill during the years ended December 31, 2021 and 2020.

Intangible Assets

Teknova’s intangible assets consist of the Teknova trade name and customer relationships.

Indefinite-lived intangible assets are not amortized but are tested for impairment at least annually as of October 1, or more frequently if events or circumstances indicate that it is more likely than not that an asset is impaired. If the fair value of the asset is less than its carrying amount, an impairment charge would be recognized in an amount equal to the difference between the carrying amount and the fair value.

Finite-lived intangible assets are amortized over the estimated economic useful lives of the assets, which is the period during which expected cash flows support the fair value of such intangible assets. Teknova reviews finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or an asset group may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related assets’ or asset group’s carrying value.

F-11

There was no impairment of intangible assets during the years ended December 31, 2021 and 2020.

Leases

The Company’s leases are reviewed and classified as either capital or operating leases at their inception. Teknova may receive renewals or expansion options, rent holidays, and other incentives in certain of its lease agreements. For operating leases, Teknova recognizes lease costs, once control of the leased space is achieved, on a straight-line basis, without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, incentives received are treated as reductions of costs over the term of the lease agreements.

Debt Issuance Costs

Debt issuance costs represent legal, consulting, and other financial costs associated with debt financing and are presented on the balance sheets as a direct reduction from the carrying amount of the related debt instrument. Debt issuance costs on the term debt are amortized to interest expense over the term of the applicable debt agreement using the effective interest rate method.

Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue From Contracts With Customers (ASC 606). Teknova recognizes revenue for sales of goods through the following steps:

▪

Identification of the contract, or contracts, with a customer, typically a purchase order

▪

Identification of the performance obligations in the contract

▪

Determination of the transaction price

▪

Allocation of the transaction price to the performance obligations in the contract

▪

Recognition of revenue when, or as, the company satisfies a performance obligation

Teknova recognizes revenue from the sale of manufactured products and services when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer.

Teknova’s sales are made directly to customers or through distributors, generally under agreements with payment terms typically shorter than 90 days and, in no case, exceeding one year. Therefore, Teknova’s contracts do not contain a significant financing component. Sales, value add, and other taxes collected concurrent with revenue are excluded from sales. The Company records amounts billed to customers for shipping and handling in a sales transaction as revenue. Shipping and handling costs are included in general and administrative expenses as revenue is recognized. Shipping and handling charges for the years ended December 31, 2021 and 2020 were $1.1 million and $0.8 million, respectively.

Occasionally, Teknova offers rebates, discounts, and returns on its products, however returns and refunds are an extremely rare occurrence and are not explicitly or implicitly part of the purchase order. The Company records rebates, discounts, and returns at the time in which they occur. The difference between recording these as they occur and estimating the amount of consideration in exchange for the transfer of promised goods would not have a material impact on the financial statements.

Costs incurred to obtain contracts with customers are expensed immediately, because the amortization period for such costs is one year or less. Teknova does not offer warranties on products.

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Cost of Sales

Cost of sales includes salaries, wages and benefits, raw materials consumption (including direct and indirect material), depreciation, utilities, rent, manufacturing supplies and other production overhead.

Research and Development Expenses

The Company’s research and development expenses primarily consist of employee-related expenses, including salaries, benefits and stock-based compensation expense for personnel in process engineering and product development functions; expenses related to occupancy costs, laboratory supplies, consulting fees and depreciation associated with various assets used in the research and development of the Company’s products.

Sales and Marketing Costs

The Company’s sales and marketing expenses primarily consist of employee-related expenses, including salaries and benefits, commissions, advertising, occupancy costs and stock-based compensation expense for sales and marketing employees. The Company expenses advertising and marketing costs as incurred. Advertising and marketing expense for the years ended December 31, 2021 and 2020 was $0.4 million and $0.3 million, respectively, and is included in sales and marketing expenses.

General and Administrative Expenses

The Company’s general and administrative expenses primarily consist of costs associated with executive and administrative staff, and other expenses such as shipping charges, professional service fees, occupancy costs, IT systems, insurance, depreciation and stock-based compensation expense for executive and administrative staff.

Stock-Based Compensation

Teknova follows the fair value recognition provisions of ASC 718, Compensation—Stock Compensation. The Company accounts for stock-based compensation expense based on the estimated grant date fair value, using the Black-Scholes option-pricing model, which requires the Company to make a number of assumptions, including expected volatility, the expected risk-free interest rate, the expected term and the expected dividend. Stock-based compensation expense is recognized over the requisite service period of the award, which generally represents the scheduled vesting period. Forfeitures are recognized as they occur.

Employee Benefit Plans

Teknova has a salary deferral 401(k) plan (the 401(k) Plan) covering substantially all employees. Contributions by the Company to the 401(k) Plan for the years ended December 31, 2021 and 2020 were $0.6 million and $0.4 million, respectively. Contributions payable as of December 31, 2021 and 2020, of $0.3 million and $0.2 million, respectively, are included within accrued liabilities in the accompanying financial statements.

Income Taxes

Teknova uses the asset and liability method in accounting for its deferred income taxes. Under this method, deferred income taxes are provided for differences between the carrying amounts of assetsand liabilities for financial reporting and tax purposes, using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized.

F-13

Teknova accounts for unrecognized tax benefits based upon its assessment of whether tax benefits are more likely than not to be sustained upon examination by tax authorities. The Company reports a liability for unrecognized tax benefits taken, or expected to be taken, in a tax return and recognizes associated interest and penalties, if any, in income tax expense. As of December 31, 2021 and 2020, the Company had no liabilities recorded for unrecognized tax benefits.

Net Income (Loss) Per Share of Common Stock

Basic net income (loss) per share is computed using the two-class method. Diluted net income (loss) per share is computed using the more dilutive of (i) the treasury stock method or if-converted method, or (ii) the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. The treasury stock method uses the number of new shares that may be created by unexercised in-the-money warrants and options, where the exercise price is less than the current share price. The if-converted method calculates the value of convertible securities as if they were converted into new shares. Per share amounts are computed by dividing net income (loss) attributable to common stockholders by the weighted average shares outstanding during each period. The diluted net income (loss) per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock and convertible and redeemable preferred stock are considered common stock equivalents.

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases and its related interpretations, codified as ASC 842 (ASC 842). The new standard requires lessees to generally recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. The new standard is effective with respect to Teknova beginning January 1, 2022 on a modified retrospective basis, and early adoption is permitted. Teknova expects that most of the operating lease commitments will be subject to the new standard and will be recognized as operating lease liabilities and right-of-use assets of approximately $20 million upon adoption of ASC 842, which will increase the Company’s total assets and total liabilities.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and clarifies and amends certain guidance to promote consistent application. ASU 2019-02 is effective for the Company’s annual and interim periods beginning after December 15, 2021, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. Teknova is currently evaluating the impact of the adoption of the standard on the financial statements and does not anticipate the standard to have a significant impact.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The standard introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses and will apply to accounts receivable. The new guidance will be effective for Teknova’s annual and interim periods beginning after December 15, 2022. Teknova is currently evaluating the impact of the adoption of the standard on the financial statements and does not anticipate the standard to have a significant impact.

Note 3. Revenue

Teknova has two primary business lines: Lab Essentials and Clinical Solutions. Previously, the Company had a third business line, Sample Transport, which it ceased producing in 2021. Teknova's products cross all stages of development, from early research through commercialization.

Lab Essentials

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Teknova is a leader in providing highly complex chemical formulations for use in biological research and drug discovery. The Company's core research products consist of commonly used made-to-stock solutions and customer-specified formulations. During discovery, the Company's products are used regularly in small, bench-scale experiments. As customers optimize their processes and begin to scale up in volume, they tend to order more custom products. The Lab Essentials portion of Teknova's business includes: 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's research products include essential formulations for common research applications and highly customized formulations for customer-specific applications in genomics and bioproduction.

Clinical Solutions

In 2017, Teknova achieved ISO 13485:2016 certification, enabling the Company to meet the quality system regulation (QSR) of products for use in diagnostic and therapeutic applications. Teknova believes that its Clinical Solutions products are used in the production of mRNA vaccines, protein therapies, gene therapies and diagnostic kits. Since offering GMP-grade products, Teknova has achieved substantial growth in the number of customers seeking these products annually.

Sample Transport

In 2020, Teknova developed and commercialized a suite of sample collection and transport reagents to aid in sample processing for COVID-19 testing. Subsequently, demand for COVID-19 testing declined significantly while the supply of sample transport medium grew. As a result, in 2021, the Company decided to cease production of transport medium and no longer markets those reagents.

Teknova’s revenue, disaggregated by product category, for the years ended December 31, 2021 and 2020 were as follows (in thousands):

For the Year Ended December 31,

Teknova’s revenue, disaggregated by geographic region, for the years ended December 31, 2021 and 2020 were as follows (in thousands):

For the Year Ended December 31,

Note 4. Goodwill and Intangible Assets, Net

There were no changes in the carrying amount of goodwill during the years ended December 31, 2021 and 2020.

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

Gross AccumulatedAmortization Net Gross AccumulatedAmortization Net

Definite Lived:

Indefinite Lived:

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For the years ended December 31, 2021 and 2020 amortization expense was approximately $1.1 million and $1.1 million, respectively.

The remaining weighted-average useful life of definite lived intangible assets is five years. The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands):

Amount

Thereafter 45

Note 5. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

▪

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.

▪

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

▪

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

There were no financial assets measured at fair value as of December 31, 2021. Financial assets carried at fair value and measured on a recurring basis as of December 31, 2020 are classified in the hierarchy as follows (in thousands):

Total Level 1 Level 2 Level 3

Cash equivalents:

Money market funds $ 286 $ 286 $ — $ —

Total cash equivalents 286 286 — —

Available-for-sale investments

U.S. corporate debt securities 858 — 858 —

Foreign corporate debt securities 953 — 953 —

Total available-for-sale investments 1,811 — 1,811 —

Total financial assets carried at fair value $ 2,097 $ 286 $ 1,811 $ —

Teknova has not transferred any investment securities between the three levels of the fair value hierarchy. Money market funds are included in cash and cash equivalents in the balance sheets. Available-for-sale investments are included in short-term investments—marketable securities in the balance sheets.

Teknova classifies investments in money market funds and U.S. treasury bills and government agency obligations within Level 1 as the prices are available from quoted prices in active markets. The Company’s investments in debt securities are classified as Level 2. Investments in U.S. corporate debt securities are valued based on observable inputs such as the U.S. Treasury yield curve, market indicated spreads, and quoted prices for identical assets in markets that are not active and/or similar assets in markets that are active. Investments in foreign corporate securities are valued based on observable inputs such as the applicable, country-specific market yield

F-16

curve, market indicated spreads by security rating and quoted prices for identical assets in markets that are not active and/or similar assets in markets that are active.

As of December 31, 2021 and 2020, short-term investments included zero and $1.8 million of available-for-sale securities with contractual maturities less than one year, respectively.

Unrealized gains and losses associated with the investments are reported in accumulated other comprehensive income. The Company had no unrealized gains and losses for the year ended December 31, 2021. For the year ended December 31, 2020, the Company recorded an insignificant amount in net unrealized gains associated with the short-term investments though other comprehensive income on the accompanying financial statements.

Realized gains and losses associated with investments, if any, are reported in other expense, net. The Company did not recognize any realized gains or losses during the year ended December 31, 2021. Teknova recognized an insignificant amount in realized losses for the year ended December 31, 2020.

Note 6. Inventories, Net

Inventories consist of the following (in thousands):

As of December 31,

Note 7. Property, Plant and Equipment, Net

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

As of December 31,

Office furniture and equipment 649 315

Less—Accumulated depreciation (2,473 ) (995 )

Total property, plant and equipment, net $ 29,810 $ 10,008

Depreciation expense related to property, plant and equipment recorded during the years ended December 31, 2021 and 2020 was $1.7 million and $0.9 million, respectively.

Teknova capitalizes a portion of the interest on funds borrowed to finance its capital expenditures. Capitalized interest is recorded as part of an asset’s cost and depreciated over the asset’s useful life. Capitalized interest costs were $0.3 million and zero for the years ended December 31, 2021 and 2020, respectively.

F-17

Note 8. Accrued Liabilities

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

As of December 31,

Property, plant and equipment 1,446 88

Total current accrued liabilities $ 5,495 $ 2,327

Note 9. Long-Term Debt

On March 26, 2021, the Company entered into the following agreements (together, the Credit Agreement): (i) that certain credit and security agreement (Term Loan), dated as of March 26, 2021, by and among the Company and MidCap Financial Trust, as agent and lender, and the additional lenders from time to time party thereto, and (ii) that certain credit and security agreement (Revolving Loan), dated as of March 26, 2021, by and among the Company and MidCap Financial Trust, as agent and lender, and the additional lenders from time to time party thereto. The Credit Agreement provides for a $27.0 million credit facility (the Facility) consisting of a $22.0 million senior, secured term loan (the Term Loan), and a $5.0 million working capital facility (the Revolver). The Term Loan is staged such that $12.0 million was available immediately, an additional $5.0 million was available on September 30, 2021, and $5.0 million is available in 2022, but the final borrowing in 2022 is contingent upon achieving trailing twelve months of net revenue of $37.0 million if the proposed funding date is on or after January 1, 2022 and before July 1, 2022 or $38.5 million if the proposed funding date is on or after July 1, 2022 and on or before September 30, 2022 and earnings before interest, taxes, depreciation and amortization (EBITDA) targets (as defined in the Credit Agreement). The Company opted not to draw down the $5.0 million Term Loan tranche available on September 30, 2021. Borrowings on the Revolver are limited to a borrowing base calculation; however, as of December 31, 2021, there was no drawdown on the Revolver. The interest on the Term Loan is based on the annual rate of one-month London Inter-Bank Offered Rate (LIBOR) plus 6.45%, subject to a LIBOR floor of 1.50%. If any advance under the Term Loan is prepaid at any time, the prepayment fee is based on the amount being prepaid and an applicable percentage amount, such as 3%, 2%, or 1%, based on the date the prepayment is made after the closing date of the Term Loan. The Credit Agreement contains a financial covenant based upon a trailing twelve months of net revenue, including a requirement of $32.0 million in the twelve months ended December 31, 2021. As of December 31, 2021, the Company was in compliance with this requirement. The outstanding balance on the Facility will be due in full on March 1, 2026. At the end of the Term Loan, the Company will pay an exit fee of $0.6 million, which represents 5% of the $12.0 million in borrowings made available immediately on March 26, 2021. Such fee is being accreted to interest expense over the life of the Term Loan. The Company incurred $0.3 million of debt issuance costs which was recorded in long-term debt in the balance sheet.

On March 26, 2021, the Company drew the full $12.0 million of the Term Loan available. As of December 31, 2021, the gross outstanding long-term debt is $12.0 million ($11.9 million net of debt issuance costs) and is presented as long-term debt on the balance sheets (in thousands). The components of the carrying value of long-term debt as of December 31, 2021 and December 31, 2020, are detailed below:

As of December 31,

Long-term debt $ 12,000 $ —

Cumulative accretion of exit fee 90 —

Unamortized debt discount and debt issuance costs (220 ) —

Long-term debt, net $ 11,870 $ —

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At December 31, 2021, the scheduled maturities, of the Term Loan were as follows (in thousands):

Amount

As of December 31, 2021, the fair value of Teknova's long-term debt approximates its carrying value. The fair value of Teknova's long-term debt was based on observable market inputs (Level 2).

Note 10. Convertible and Redeemable Preferred Stock

In June 2021, the Company’s board of directors and stockholders, respectively approved a 1.8746 for-one forward stock split, which was effected on June 17, 2021. On June 28, 2021, all outstanding shares of the Company’s Series A preferred stock were converted into 17,512,685 shares of the Company’s common stock on a one-to-one basis and their carrying value of $35.9 million was reclassified into stockholders’ equity. As of December 31, 2021, there were no shares of convertible and redeemable preferred stock issued and outstanding.

As of December 31, 2020, Series A preferred stock consisted of the following (in thousands, except share data):

As of December 31, 2020, the Series A preferred stock had the followings rights and privileges:

Voting

Each holder of shares of Series A preferred stock was entitled to the number of votes equal to the number of shares of common stock into which the shares of Series A preferred stock held by such holder were convertible. The holders of shares of Series A preferred stock were entitled to vote on all matters on which the common stockholders were entitled to vote.

The holders of shares of Series A preferred stock were also entitled to elect three directors to the board. Additionally, there were certain matters that required approval of a majority of the holders of shares of Series A preferred stock.

Redemption and Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Teknova’s shares of Series A preferred stock then outstanding were entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the holders of shares of Series A preferred stock then-outstanding were entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, before any payment were to be made to the holders of shares of common stock, an amount per share equal to the greater of (i) the applicable original issue price per share, plus any declared but unpaid dividends, or (ii) an amount per share as would have been payable had all the shares of Series A preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the Series A Liquidation Amount). In the event the Company had insufficient assets to pay the holders of shares of Series A preferred stock the full liquidation preference, the holders of shares of Series A preferred stock were to be paid ratably in proportion to the full amounts to which they would otherwise be entitled.

F-19

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment in full of all Series A Liquidation Amounts required to be paid to the holders of shares of Series A preferred stock, the remaining assets of the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Series A preferred stock or the remaining Available Proceeds, as the case may be, would be distributed among the holders of shares of common stock, pro rata based on the number of shares held by each such holder.

Each of the following events would be considered a “Deemed Liquidation Event” unless the holders of shares of at least a majority of the outstanding shares of Series A preferred stock voting as a single class on an as-converted basis (the Requisite Holders) elect otherwise: (i) a merger or consolidation in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation did not continue to represent immediately following such merger or consolidation at least a majority, by voting power, of the outstanding capital stock of the surviving or resulting corporation or the parent corporation that wholly owned the surviving or resulting corporation, or (ii) a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company and its subsidiaries (other than to a wholly-owned subsidiary of the Company).

“Available Proceeds” refers to consideration received by the Company for a Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the board of directors), together with any other assets of the Company available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders.

Dividend

The holders of shares of Series A preferred stock were entitled to receive cumulative dividends (the Series A Accruing Dividends) at a rate of 8% per annum based on the Series A preferred stock issuance price of $3.8469196 per share of Series A preferred stock issued and outstanding, subject to appropriate adjustments for any stock dividends, stock splits, combinations, recapitalizations, or the like. Dividends were due and payable only upon a Deemed Liquidation Event. In the event of a dividend declared on undistributed earnings, the preferred stockholders would participate in the dividend equally along with common stockholders. The preferred shares participated equally with common stockholders on earnings, but did not participate in losses.

After payment of dividends under a deemed liquidation event to the holders of shares of the Series A preferred stock, any additional dividends would be distributed among all holders of shares of the Company’s common stock and Series A preferred stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of Series A preferred stock were converted to common stock.

In the event any shares of Series A preferred stock were converted into common stock prior to a Deemed Liquidation Transaction, then such shares will not be entitled to receive any Series A Accruing Dividends.

Optional Conversion

Each share of Series A preferred stock was convertible at any time at the option of the holder into such number of fully paid and non-assessable shares of common stock as determined by dividing the original issue price for Series A preferred stock by the conversion price in effect at the time of conversion. The Series A conversion price was initially set at $3.8469196.

Mandatory Conversion

All outstanding shares of Series A preferred stock would automatically be converted into shares of common stock, at the then-effective conversion rate upon either (i) the closing of the sale of shares of common stock to the public at a price of at least $11.5407588 per share (as adjusted for any stock dividends, stock splits, combinations, recapitalizations, or the like), in a firm-commitment underwritten public offering pursuant to an effective registration statement resulting in proceeds to the Company of at least $50.0 million, net of the underwriting discount and commissions, and in connection with such offering the common stock was listed for trading on a stock exchange or marketplace approved the board of directors, including the approval of at least one Series A Director, as

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defined in the Series A Stock Purchase Agreement, dated January 14, 2019, or (ii) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of shares of at least a majority of the outstanding shares of Series A preferred stock voting as a single class on an as-converted basis.

Conversion Price Adjustments

The conversion price per share of Series A preferred stock would be reduced if the Company issues any additional shares of common stock without consideration or for consideration per share less than the Series A preferred stock conversion price in effect.

Classification

As a Deemed Liquidation Event could result in repurchase of the Series A preferred stock, and the board of directors of Teknova was controlled by the Series A holders, the Series A preferred stock was redeemable contingent upon the occurrence of an event that was not probable. Accordingly, the Company presented the Series A preferred stock outside of permanent equity as mezzanine equity. The Series A preferred stock was recorded at its issuance date fair value of the net proceeds raised through the issuance of Series A preferred stock. The Series A preferred stock did not require subsequent measurement until the Series A preferred stock was probable to become redeemable.

Note 11. Stockholders’ Equity

Preferred stock

On June 28, 2021, in connection with the IPO, the Company’s amended and restated certificate of incorporation became effective. The amended and restated certificate of incorporation authorizes the issuance of 10,000,000 shares of preferred stock, par value $0.00001 per share, with rights and preferences, including voting rights, designated from time to time by the Company’s board of directors.As of December 31, 2021 and December 31, 2020, the Company had 10,000,000 and zero authorized shares of the Company’s preferred stock, par value $0.00001 per share, respectively. As of December 31, 2021 and December 31, 2020, there were zero shares of the Company’s preferred stock issued and outstanding.

Common stock

As of December 31, 2021 and December 31, 2020, the Company had 490,000,000 and 30,000,000 authorized shares of the Company’s common stock, par value $0.00001 per share, respectively. As of December 31, 2021 and December 31, 2020, there were 28,012,017 and 3,599,232 shares of the Company’s common stock issued and outstanding, respectively.

Note 12. Stock-Based Compensation

Employee Stock Incentive Plans

Teknova maintains stock incentive plans for the benefit of certain of Teknova's officers, directors, consultants and employees. The Company granted time-based and performance-based options to purchase common shares under both its 2016 Stock Plan, as amended (2016 Plan) and 2020 Equity Incentive Plan, as amended (2020 Plan). At the time the 2020 Plan became effective, no additional stock awards were granted or are able to be granted in the future under the 2016 Plan. In June 2021, the Company’s board of directors and the Company’s stockholders approved the 2021 Equity Incentive Plan (2021 Plan), which became effective in connection with the IPO. From and after the date on which the 2021 Plan became effective, no further grants were made or will be made under the 2020 Plan. At December 31, 2021, 2,578,075 shares remain available for future grants under the 2021 Plan.

The types of equity-based awards that may be granted under the 2021 Plan include: options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other stock-based awards. The maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan is 5,020,113 shares of the Company’s common stock, which is the sum of (i) 2,908,283 new shares, plus (ii) an additional

F-21

number of shares not to exceed 2,111,830shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the 2020 Plan that, on or after the 2021 Plan became effective, terminate or expire prior to exercise or settlement. The equity-based awards will vest over a four-year period for all employees and will vest over a three-year period for the Company’s board of directors. Generally, the number of shares of the Company’s common stock that will be reserved for issuance under the 2021 Plan will automatically increase on January 1 of each year for a period of ten years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to 4% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding year; provided, however, that the Company’s board of directors may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. Effective January 1, 2022 an additional 1,120,480 new shares became available for issuance under the 2021 Plan.

The following table summarizes the stock option activity under the stock incentive plans (in thousands, except share and per share data):

Alpha Teknova, Inc. TKNO US Equity

TKNO · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

Alpha Teknova, Inc. TKNO US Equity☆

TKNO · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary

Alpha Teknova, Inc. TKNO US Equity