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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.

A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 18, 2022.

Overview

Since our founding in 1996, we have been producing critical reagents for the research, discovery, development, and commercialization of novel therapies, 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. Our Company is built around our knowledge, methods, and know-how in our manufacturing processes, which are highly adaptable and configurable. These proprietary processes enable us to manufacture and deliver high-quality, custom, made-to-order products with short turnaround times and at scale, across all stages of our customers’ product development, including commercialization.

We have two primary product categories: Lab Essentials and Clinical Solutions. Previously, we had a third product category, Sample Transport, which we ceased producing in 2021. Our products cross all stages of development, from early research through commercialization. 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. We offer our liquid cell culture media and supplements and molecular biology reagents in both of our two product categories; pre-poured media plates are available in our Lab Essentials category only.

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 campus. 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 warehouse in Hollister, California to our customers and distributors, generally pursuant to purchase orders. We typically recognize revenue when products are shipped.

We generated revenue of $41.4 million in 2022, which represents an increase of $4.5 million as compared to 2021. In 2022 and 2021, only 3.2% and 2.9%, 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 76% of our

revenue for the year ended December 31, 2022, was generated from sales through direct channels and a small salesforce, with the remainder generated through sales by distributors.

We had an operating loss of $49.7 million in 2022 compared to $12.0 million in 2021. We expect our expenses will continue to increase in future periods, but at a slower rate, 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, including the ongoing buildout of our new, state-of-the-art manufacturing, warehouse and distribution facilities;

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introduce new products and services and create and protect intellectual property;

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

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

Key Developments

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On May 10, 2022, we entered into the Amended and Restated Credit and Security Agreements which provide for loan commitments in an aggregate amount of up to $57.135 million from $27.0 million under the previous credit agreements. Subsequently, on November 8, 2022, we entered into Amendment No. 1 to the Credit Agreements, and on March 28, 2023, we entered into Amendment No. 2 to the Credit Agreements, which reduced the requirements for trailing twelve months net revenue for all future periods, among other things. 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 October 13, 2022, we announced an early access program for novel products to address critical pain points in cell and gene therapy bioproduction.

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On November 9, 2022, we announced a new WFI Quality Water product line for the bioprocessing market.

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On December 7, 2022, our new, state-of-the-art manufacturing facility became operational for research-grade products.

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On February 1, 2023, we carried out a reduction in workforce of approximately 40 positions, aimed at reducing operating expenses. Total annual cost savings are estimated at $4 million.

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On March 30, 2023, we entered into a Sales Agreement with Cowen and Company, LLC, under which the Company may offer and sell, from time to time, shares of common stock having aggregate gross proceeds of up to $50.0 million.

Impact of Broader Economic Trends on Our Business

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

We continue to closely monitor the impact of the ongoing COVID-19 pandemic on all aspects of our business, including how it will continue to impact customers, employees, suppliers, business partners, and distribution channels. We believe that we have successfully navigated the uncertain environment associated with the COVID-19 pandemic and that we will continue to do so, but 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, 2022 and 2021 (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, 2022 and 2021 was as follows (dollars in thousands):

For the Year Ended December 31,

Total revenue was $41.4 million in 2022, an increase of $4.5 million, or 12.3%, compared with $36.9 million in 2021.

Lab Essentials revenue was $31.8 million in 2022, an increase of $4.6 million, or 16.9%, compared with $27.2 million in 2021. The increase in Lab Essentials revenue was primarily attributable to higher average revenue per customer as the average number of customers remained consistent year over year.

Clinical Solutions revenue was $8.4 million in 2022, an increase of $1.7 million, or 24.3%, compared with $6.8 million in 2021. The increase in Clinical Solutions revenue was primarily attributable to higher average revenue per customer as the average number of customers remained consistent year over year.

Sample Transport revenue was not significant in 2022, compared to $1.5 million in 2021. 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. As a result, in 2021, we decided to cease production of sample transport medium and no longer market those products. 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, 2022 and 2021, was as follows (dollars in thousands):

For the Year Ended December 31,

Revenue from sales to customers in the United States was $40.1 million in 2022, and $35.8 million in 2021. Revenue from U.S. sales was consistent year over year, representing 96.8% and 97.1% of our total revenue in 2022 and 2021, respectively.

Revenue from sales to customers in markets outside of the U.S. was $1.3 million in 2022, and $1.1 million in 2021. Revenue from international sales was also consistent year over year, representing 3.2% and 2.9% of our total revenue in 2022 and 2021, respectively.

Gross profit

Our gross profit for the years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

For the Year Ended December 31,

Gross profit percentage was 42.2% in 2022, and 47.8% in 2021. The decrease in gross profit percentage from 2021 was primarily driven by higher labor costs and supplies as a percentage of revenue.

Operating expenses

Our operating expenses for the years ended December 31, 2022 and 2021 were as follows (dollars in thousands):

For the Year Ended December 31,

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

Research and development expenses were $7.7 million in 2022 and $4.3 million in 2021. The increase was primarily driven by increased headcount, professional fees, and supplies to support our new product and process development efforts.

Sales and marketing expenses were $9.2 million in 2022 and $3.8 million in 2021. The increase was primarily driven by increased headcount to develop our commercial capabilities and improve customer support, as well as higher marketing and stock-based compensation expenses.

General and administrative expenses were $28.3 million in 2022 and $20.4 million in 2021. The increase was primarily driven by increased headcount as well as stock-based compensation, insurance, and occupancy expenses incurred to support our growth strategy.

Amortization of intangible assets was consistent in 2022 and 2021, at $1.1 million.

We incurred a $16.6 million goodwill impairment charge in 2022, with no comparable charges in 2021. Refer to “Notes to Financial Statements—Note 8—Goodwill and Intangible Assets, Net,” in our financial statements for details regarding the impairment.

We incurred a $4.2 million impairment charge related to long-lived assets in 2022, with no comparable charges in 2021. Refer to “Notes to Financial Statements—Note 6—Property, Plant, and Equipment, Net,” in our financial statements for details regarding the impairment.

Other income (expenses), net

Other income (expenses), net for the years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

For the Year Ended December 31,

Total other income, net was $0.3 million in 2022, as we capitalized $1.6 million of interest during the year. Total other (expense), net was $0.6 million in 2021, primarily due to interest expense related to our Amended Credit Agreement.

Benefit from income taxes

Our benefit from income taxes for the years ended December 31, 2022 and 2021 was as follows (dollars in thousands):

For the Year Ended December 31,

Effective tax rate 3.9 % 22.4 %

Our benefit from income taxes was $1.9 million in 2022, which was primarily due to a federal deferred tax benefit from losses during such period. Our benefit from income taxes was $2.8 million in 2021. The decrease in our benefit for income taxes was attributable to operating losses not expected to be benefitted and the goodwill impairment charge disallowed for tax purposes.

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, 2022, we had $50.3 million in working capital, which included $42.2 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 have used our sources of liquidity to make investments to expand our operations and increase capacity, and may continue to do so in the future. In particular, we have nearly completed the build out of our new manufacturing, warehouse and distribution facilities in Hollister, California.

As of December 31, 2022, our material cash requirements from known contractual obligations and commitments relate primarily to operating leases for our office, manufacturing, warehouse and distribution facilities. See “Notes to Financial Statements—Note 7—Leases,” for a discussion of our lease obligations reflected on our balance sheet.

Credit Facility

On May 10, 2022, we entered into the Amended and Restated Credit and Security Agreement (Term Loan) as borrower, with MidCap Financial Trust (MidCap), as agent and lender, and the additional lenders from time to time party thereto (the Term Loan Credit Agreement) and the Amended and Restated Credit and Security Agreement (Revolving Loan) as borrower, with MidCap as agent and lender, and the additional lenders from time to time party thereto (the Revolving Loan Credit Agreement, together with the Term Loan Credit Agreement, the Credit Agreement). The Credit Agreement provided for a $57.135 million credit facility (the Credit Facility) consisting of a $52.135 million senior secured term loan (the Term Loan) and a $5.0 million working capital facility (the Revolver). The Term Loan consisted of the $12.0 million balance made available in 2021 under the previous credit facility and an additional $40.135 million, staged such that $5.135 million was funded upon closing of the Credit Agreement, an additional $5.0 million was funded on October 31, 2022, $10.0 million was to be available in the first half of 2023, $10.0 million was to be available in the second half of 2023 and $10.0 million was to be available in the first half of 2024, with the borrowing in the second half of 2023 and in the first half of 2024 being contingent upon achieving trailing twelve months of Clinical Solutions revenue of $15.0 million and $19.0 million, respectively, and liquidity requirements (as defined in the Credit Agreement) of $10.0 million and $15.0 million, respectively. The maximum loan amount under the Revolver was $5.0 million, and we were permitted to request the lenders to increase such amount up to $15.0 million. Borrowings on the Revolver were limited in accordance with a borrowing base calculation.

The interest on the Term Loan was based on the annual rate of one-month London Inter-Bank Offered Rate (LIBOR) plus 6.45%, subject to a LIBOR floor of 1.00%. If any advance under the Term Loan was prepaid at any time, the prepayment fee was based on the amount being prepaid and an applicable percentage amount, such as 3%, 2%, or 1%, based on the date the prepayment was made after the closing date of the Term Loan. Interest on the outstanding balance of the Revolver was payable monthly in arrears at an annual rate of one-month LIBOR plus 3.75%, subject to a LIBOR floor of 1.00%.

The maturity date of the Credit Facility is May 1, 2027. On the date of termination of the Term Loan or the date on which the obligations under the Term Loan become due and payable in full, we would pay an exit fee in an amount equal to 5.00% of the total aggregate principal amount of term loans made pursuant to the Term Loan as of such date. The Credit Agreement contained a financial covenant based upon a trailing twelve months of net revenue, including a requirement of $42.5 million in the twelve months ending December 31, 2022.

On November 8, 2022, we entered into Amendment No. 1 to the Credit Agreement (Amendment No. 1 or, as amended, the Amended Credit Agreement) which (i) replaced the LIBOR-based interest rate with a rate equal to the forward-looking one-month term Secured Overnight Financing Rate adjusted upward by 0.10% (or Term SOFR, as defined in Amendment No. 1) plus an applicable margin (6.45%, for the Term Loan and 3.75% for the Revolver), with a Term SOFR floor of 1.00%, and with such interest rate calculation change taking effect on December 1, 2022, (ii) increased the applicable prepayment fee percentage amounts by one percentage point, (iii) gave lenders discretion regarding the $10.0 million in borrowing that was previously guaranteed to be available under the Term Loan in the first half of 2023, and (iv) reduced our requirements for trailing twelve months of net revenue for all future periods—for example, for the twelve months ending December 31, 2022, our minimum net revenue requirement was reduced from $42.5 million to $38.0 million, where as of December 31, 2022, the Company was in compliance with this requirement. Concurrent with Amendment No. 1, the exit fee due on the date of termination of the Term Loan or the date on which the obligations under the Term Loan become due and payable in full, increased from 5.00% to 7.00% of the total aggregate principal amount of term loans made pursuant to the Term Loan as of such date.

On March 28, 2023, we entered into Amendment No. 2 to the Credit Agreement (Amendment No. 2) which (i) increased the applicable margin from 6.45% to 7.00% for the Amended Term Loan and from 3.75% to 4.00% for the Amended Revolver, and increased the Term SOFR floor from 1.00% to 4.50% on both the Amended Term Loan and Amended Revolver, (ii) gave lenders discretion regarding the $10.0 million in borrowings in the second half of 2023 and the $10.0 million in borrowings in the first half of 2024 by removing the trailing twelve month Clinical Solutions revenue requirement that was previously required under the Amended Term Loan, (iii) removed the increase in the minimum cash covenant from $10.0 million to $15.0 million on the $10.0 million in borrowings in the first half of 2024, and added the $10.0 million minimum cash covenant requirement throughout the remaining term of the Amended Credit Agreement, and (iv) reduced the requirements for trailing twelve months of net revenue for all future periods—for example, for the twelve months ending December 31, 2023, the minimum net revenue requirement was reduced from $45.0 million to $42.0 million. Concurrent with Amendment No. 2, the exit fee due on the date of termination of the Amended Term Loan, or the date on which the obligations under the Amended Term Loan become due and payable in full, increased from 7.0% percent to 8.5% of the total aggregate principal amount of term loans made pursuant to the Term Loan (including amendments thereto) as of such date. Other than the modifications described in this paragraph and in Item 9B below, the Amended Credit Agreement continues unmodified in all other material respects.

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 12 months. Our principal liquidity requirements are to fund our operations and capital expenditures. 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.

To meet the Company’s future working capital needs, the Company may need to raise additional debt or equity financing. While the Company has implemented a plan to control its expenses and to satisfy its obligations under the Amended Credit Agreement throughout the one year period from the date of issuance of these annual

financial statements, the Company cannot guarantee that it will be able to maintain compliance with its loan agreements, raise additional capital, contain expenses, or increase revenue.

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

For the Year Ended December 31,

Net cash used in operating activities $ (27,400 ) $ (9,069 )

Net cash used in investing activities (28,149 ) (17,521 )

Net cash provided by financing activities 10,267 110,793

Net (decrease) increase in cash and cash equivalents $ (45,282 ) $ 84,203

Operating Activities

Net cash used in operating activities consists primarily of net loss 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 $27.4 million in 2022, which primarily consisted of net loss of $47.5 million plus net adjustments for non-cash charges of $27.4 million, offset by net changes in operating assets and liabilities of $7.3 million. The primary non-cash adjustments to net income included a $16.6 million goodwill impairment charge, $4.2 million impairment charge related to long-lived assets, $3.7 million of stock-based compensation, $3.2 million of depreciation and amortization, $0.7 million of inventory reserve, partially offset by $1.9 million in deferred taxes. Net cash used in changes in operating assets and liabilities consisted primarily of a $7.6 million increase in inventories and $2.1 million increase in other non-current assets, partially offset by a $1.2 million decrease in income taxes receivable, $0.6 million increase in accounts payable and $0.4 million decrease in accounts receivable.

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 $2.5 million, offset by net changes in operating assets and liabilities of $1.8 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.

Investing Activities

Net cash used in 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 $28.1 million for the year ended December 31, 2022, which consisted of purchases of property, plant, and equipment.

Net cash used in investing activities was $17.5 million for the year ended December 31, 2021, which primarily consisted of purchases of property, plant, and equipment of $19.9 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.

Financing Activities

Net cash provided by 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 $10.3 million for the year ended December 31, 2022, which was primarily attributable to proceeds from long-term debt of $10.1 million, partially offset by related debt issuance costs of $0.2 million and payment of exit fee costs related to our debt refinancing of $0.1 million. We also received proceeds of $0.1 million from the exercise of stock options and $0.3 million from issuance of common stock under our employee stock purchase plan.

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 our previous credit agreement of $11.9 million, partially offset by payment of costs related to our IPO of $3.6 million and debt issuance costs of $0.2 million.

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 is 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 occur rarely. We record rebates, discounts, and returns at the time 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 incurred a $16.6 million goodwill impairment charge in 2022, with no comparable charges in 2021. Refer to “Notes to Financial Statements—Note 8—Goodwill and Intangible Assets, Net,” in our financial statements for details regarding the impairment.

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.

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 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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Fair value of underlying common stock. The fair value of our common stock is determined by the closing price as reported on the Nasdaq Global Market on the date of grant.

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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 are used to determine the expected term under this method.

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Dividend yield.We have never declared or paid any cash dividends and does 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 Amended Credit Agreement prohibit us from paying dividends, other than dividends payable in our common stock, without the prior consent of the lender.

Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board 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 became effective for Teknova’s annual and interim periods beginning January 1, 2023. 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.

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:

▪

the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more;

▪

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

▪

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

▪

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).

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, 2022. 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, 2022, the CEO and the CFO concluded that the disclosure controls were not effective, due to the material weakness 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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2022.

Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or 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 and corrected on a timely basis. During the audit of our financial statements, for the fiscal year ended December 31, 2022, we and our independent registered public accounting firm identified a material weakness in our accounting for income taxes. Specifically, the Company did not have the appropriate complement of tax resources commensurate with the nature and complexity associated with the Company’s income tax accounting process. Our audited financial statements present income taxes in accordance with GAAP, however, such adjustments amounted to a material weakness. The material weakness remained un-remediated as of December 31, 2022.

Attestation of Independent Registered Public Accounting Firm

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act.

Changes in Internal Control Over Financial Reporting

Except for the material weakness described above, 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, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation of the Prior Year Material Weakness

During the audit of our financial statements, for the fiscal years ended December 31, 2019 and 2020, we and our independent registered public accounting firm identified a material weakness in our financial close and reporting process. Specifically, that 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 our entry into a stock purchase agreement with Telegraph Hill Partners Management Company LLC (Telegraph Hill Partners), through its affiliates Telegraph Hill Partners IV, L.P. (THP LP) and THP IV Affiliates Fund, LLC (THP LLC, and collectively with THP LP, THP) on January 14, 2019, pursuant to which THP acquired majority control of Teknova (the THP Transaction), including

as to certain tax benefits and the allocation of transaction costs across periods. Our audited financial statements presented the THP Transaction in accordance with GAAP, however, such adjustments amounted to a material weakness. The material weakness remained un-remediated as of December 31, 2021. As a result of this material weakness, we hired accounting employees and engaged consultants with specific technical accounting experience necessary to assist with complex, non-routine transactions. We also designed and implemented additional controls and procedures both as they relate to our financial close and reporting process as well as complex, non-routine transactions. These changes and the remediation of this material weaknesses identified, were completed during the quarter ended March 31, 2022.

Remediation of the Current Year Material Weakness

As described above, a material weakness was identified during the audit of our financial statements for the fiscal year ended December 31, 2022 related to our accounting for income taxes. We have begun taking measures, and plan to continue to take measures, to remediate this material weakness. These measures include engaging accounting personnel and/or consultants with specific income tax accounting experience necessary to assist with our accounting for income taxes as well as 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. We believe that the remediation plan’s design and implementation will effectively remediate the material weakness, however, until the remediation activities are fully implemented and the operational effectiveness of related internal controls is validated through testing, the material weakness described above will continue to exist.

Item 9B. Other Information.

Amendment to Lease Agreement

In January 2023, we entered into a First Amendment to Lease Agreement (which we refer to as the Lease Amendment) with Ken & Jill Gimelli, LLC (to whom we refer as Gimelli LLC), which modifies our Commercial Lease Agreement with Gimelli LLC dated October 7, 2020, pursuant to which we lease premises located at 2451 Bert Drive and 2320 Technology Parkway in Hollister, California. Effective December 1, 2022, the Lease Amendment modified the Commercial Lease Agreement by, among other things, extending the base term of the lease of 2320 Technology Parkway from five (5) years to twelve (12) years, providing us with an option to extend the lease of 2320 Technology Parkway for an additional five (5) years, and establishing the amount of rent that shall be payable to Gimelli LLC during each of years six (6) to twelve (12) and during the extension period. 2320 Technology Parkway is the location of our new, state-of-the-art manufacturing facility.

Other than the modifications described in this Item 9B, the Commercial Lease Agreement with Gimelli LLC continues unmodified in all other material respects. This summary of the Lease Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Lease Amendment, which is filed as Exhibit 10.22 to this Annual Report on Form 10-K.

Amendment to the Credit Agreement

On March 28, 2023, we entered into amendments (which we refer to collectively as Amendment No. 2) to (i) our May 10, 2022, Amended and Restated Credit and Security Agreement (Term Loan), as amended on November 8, 2022 (which we refer to as the Amended Term Loan Credit Agreement) and (ii) our May 10, 2022, Amended and Restated Credit and Security Agreement (Revolving Loan) as amended on November 8, 2022 (which we refer to as the Amended Revolving Loan Credit Agreement and, together with the Amended Term Loan Credit Agreement, the Amended Credit Agreement), in each case with us as borrower and with MidCap Financial Trust (to whom we refer as MidCap) as agent and lender, and the additional lenders from time to time party thereto. Amendment No. 2 modifies the credit facility established under the Credit Agreement (which we refer to as the Credit Facility or, as amended by Amendment No. 1, the Amended Credit Facility), consisting of a $52.135 million senior secured term loan (which we refer to as the Term Loan or, as amended by Amendment No. 1, the Amended Term Loan) and a $5.0 million working capital facility (which we refer to as the Revolver or, as amended by Amendment No. 1, the Amended Revolver).

Amendment No. 2 gave lenders discretion regarding the $10.0 million in borrowings in the second half of 2023 and the $10.0 million in borrowings in the first half of 2024 by removing the trailing twelve month Clinical Solutions revenue requirement that was previously required under the Amended Term Loan, removed the increase in the minimum cash covenant from $10.0 million to $15.0 million on the $10.0 million in borrowings in the first half of 2024, and added the $10.0 million minimum cash covenant requirement throughout the remaining term of the Amended Credit Agreement.

The Credit Agreement includes minimum net revenue requirements which are measured on a trailing twelve-month basis. Amendment No. 2 reduced these requirements for all future periods—for example, for the twelve months ending December 31, 2023, our minimum net revenue requirement was reduced from $45.0 million to $42.0 million.

Amendment No. 2 increased the applicable margin from 6.45% to 7.00% for the Amended Term Loan and from 3.75% to 4.00% for the Amended Revolver, and increased the Term SOFR floor from 1.00% to 4.50% on both the Amended Term Loan and Amended Revolver. In addition, at the end of the Amended Term Loan, the Company will pay an exit fee of 8.50%, an increase from the previous 7.00%, of the total aggregate principal amount of loans made under the Term Loan Credit Agreement (including amendments thereto).

Other than the modifications described in this Item 9B, the Amended Credit Agreement continues unmodified in all other material respects. This summary of Amendment No. 2 does not purport to be complete and is subject to, and qualified in its entirety by, the full text of Amendment No. 2 to the Term Loan and Amendment No. 2 to the Revolver, which are filed as Exhibit 10.26 and Exhibit 10.29, respectively, to this Annual Report on Form 10-K.

ATM Sales Agreement

On March 30, 2023, we entered into a Sales Agreement (the Sales Agreement) with Cowen and Company, LLC (Cowen) with respect to an at-the-market offering program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.00001 per share (the Common Stock), having an aggregate offering price of up to $50,000,000 (the Shares) through Cowen as its sales agent.

Pursuant to the terms of the Sales Agreement, the Company will set the parameters for the sale of Shares, including the number of Shares to be issued, the time period during which sales are requested to be made, limitations on the number of Shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms of the Sales Agreement, Cowen may sell the Shares by any method that is deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made through The Nasdaq Stock Market LLC (Nasdaq) or any other trading market for the Common Stock. The Company will pay Cowen a commission equal to up to three percent (3.0%) of the gross sales proceeds of any Shares sold through Cowen under the Sales Agreement, and has provided Cowen with customary indemnification and contribution rights. The Company will also reimburse Cowen for certain expenses incurred in connection with the Sales Agreement. The Sales Agreement will terminate upon the earlier of (i) the sale of all Shares subject to the Sales Agreement or (ii) the termination of the Sales Agreement in accordance with the terms and conditions set forth therein. Cowen has agreed to act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of Nasdaq.

Any Shares to be offered and sold under the Sales Agreement will be issued and sold pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-265987), which was filed with the Securities and Exchange Commission (SEC) on July 1, 2022 and which became effective on July 12, 2022 (the Registration Statement). The Company filed a prospectus supplement with the SEC on March 30, 2023 in connection with the offer and sale of the Shares pursuant to the Sales Agreement.

The aggregate market value of Shares eligible for sale in the offering and under the Sales Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. The prospectus supplement filed with the SEC on March 30, 2023 is only offering Shares having an aggregate offering price of $14,500,000. The Company will be required to file another prospectus supplement in the event it determines to offer more than $14,500,000 of Shares in accordance with the terms of the Sales Agreement, to the extent then permitted under General Instruction I.B.6 of Form S-3.

The foregoing description of the Sales Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Sales Agreement, a copy of which is attached as Exhibit 1.1 to this Annual Report on Form 10-K and is incorporated herein by reference.

The representations, warranties and covenants contained in the Sales Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Sales Agreement, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Sales Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Sales Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the SEC.

Paul Hastings LLP, counsel to the Company, has issued an opinion to the Company, dated March 30, 2023, relating to the validity of the Shares to be issued and sold pursuant to the Sales Agreement, a copy of which is filed as Exhibit 5.1 to this Annual Report on Form 10-K.

This Annual Report on Form 10-K shall not constitute an offer to sell or the solicitation of an offer to buy any Shares, nor shall there be any offer, solicitation or sale of the Shares in any state or country in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or country.

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 2023 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, 2022, and is incorporated in this Annual Report on Form 10-K 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, 2022, 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 are 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 Annual Report on Form 10-K, 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.

5.1 * Opinion of Paul Hastings LLP

10.30 * Summary of Teknova's Non-Employee Director Compensation Policy.

23.2 * Consent of Paul Hastings LLP (contained in Exhibit 5.1)

24.1 * Power of Attorney (see page 85 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 or her 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 30, 2023 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

Stephen Gunstream

Matt Lowell

/s/ Paul Grossman Chairman of the Board March 30, 2023

Paul Grossman

/s/ Irene Davis Director March 30, 2023

Irene Davis

/s/ Ted Davis Director March 30, 2023

Ted Davis

/s/ Alexander Herzick Director March 30, 2023

Alexander Herzick

/s/ J. Matthew Mackowski Director March 30, 2023

J. Matthew Mackowski

/s/ Robert E. McNamara Director March 30, 2023

Robert E. McNamara

/s/ Brett Robertson Director March 30, 2023

Brett Robertson

/s/ Alexander Vos Director March 30, 2023

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, 2022 and 2021 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, 2022 and December 31, 2021, the related statements of operations and comprehensive loss, convertible and redeemable preferred stock and stockholders' equity and cash flows for the two years in the period ended December 31, 2022, 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, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 30, 2023

F-2

ALPHA TEKNOVA, INC.

Statements of Operations and Comprehensive 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

Goodwill impairment 16,613 —

Long-lived assets impairment 4,188 —

Other income (expenses), net

Interest income (expense), net 213 (589 )

Other income (expense), net 55 (40 )

Total other income (expenses), net 268 (629 )

Benefit from income taxes (1,923 ) (2,834 )

Change in unrealized loss on available-for-sale securities, net of tax (7 )

Net loss per share—basic and diluted $ (1.69 ) $ (0.61 )

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:

Income taxes receivable 22 1,188

Prepaid expenses and other current assets 2,374 2,438

Operating right-of-use lease assets 19,736 —

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of operating lease liabilities 2,223 —

Other accrued liabilities 191 273

Deferred rent — 269

Long-term operating lease liabilities 18,111 —

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 152,261 $ 166,511

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 — — — — 1,551 — — 1,551

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

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

Stock-based compensation — — — — 3,711 — — 3,711

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:

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

Depreciation and amortization 3,165 2,883

Amortization of debt financing costs 278 134

Non-cash lease expense 329 65

Loss on disposal of property, plant, and equipment 326 41

Goodwill impairment 16,613 -

Long-lived assets impairment 4,188 -

Other - (10 )

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 64 (1,301 )

Other non-current assets (2,072 ) (156 )

Cash used in operating activities (27,400 ) (9,069 )

Investing activities:

Purchase of property, plant, and equipment (28,149 ) (19,877 )

Proceeds from loan to related party - 529

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

Proceeds from maturities of short-term marketable securities - 695

Cash used in investing activities (28,149 ) (17,521 )

Financing activities:

Payment of debt issuance costs (172 ) (153 )

Payment of exit fee costs (135 ) —

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

Proceeds from exercise of stock options 145 —

Proceeds from issuance of common stock under employee stock purchase plan 294 —

Change in cash and cash equivalents (45,282 ) 84,203

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

Cash and cash equivalents at end of period $ 42,236 $ 87,518

Supplemental cash flow disclosures:

Income taxes paid $ - $ 8

Interest paid, net of amounts capitalized $ 101 $ 414

Recognition of operating right-of-use lease asset $ 22,094 $ -

Recognition of operating lease liabilities $ 22,363 $ -

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), produces critical reagents for the research, discovery, development, and commercialization of novel therapies, 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 warehouse in Hollister, California.

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 effectuated 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.

Note 2. Summary of Significant Accounting Policies

Basis of 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

F-7

limited to, the valuation of share-based payment awards, impairment of long-lived assets, impairment of 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.

Going Concern

These financial statements and accompanying notes have been prepared in accordance with the provisions of Accounting Standards Codification (ASC) 205-40, Presentation of Financial Statements—Going Concern, on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

The Company has incurred operating losses in the past and expects to incur operating losses in the near to medium-term. We have incurred net losses of $47.5 million and $9.8 million in the years ended December 31, 2022 and 2021, respectively, and have an accumulated deficit of $55.0 million as of December 31, 2022.

As of December 31, 2022, we had $50.3 million in working capital, which included $42.2 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 Note 10. Long-term Debt, Net. We believe that our existing cash and cash equivalents as of December 31, 2022, together with our credit facility under the Amended Credit Agreement, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.

Our principal liquidity requirements are to fund our operations and capital expenditures. 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.

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 Credit Risk

Teknova’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash with high-quality banking institutions. At times, the Company’s cash balances may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit. Teknova's cash equivalents consist primarily of money market funds invested in U.S. Treasuries. Teknova extends credit to customers based on its evaluation of the customer's financial condition and routinely communicates with its customers regarding payments. The Company has a history of limited write-offs, and therefore believes that its accounts receivable credit risk exposure is low. For information regarding the Company’s significant customers and suppliers, see Note 4.

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 amortized cost, plus accrued interest, which approximates fair value.

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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 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.

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, 2022 and 2021, Teknova had capitalized software implementation costs of $2.2 million and $0.1 million, respectively. Amortization expense related to capitalized implementation costs for the year ended December 31, 2022 was $0.1 million. No amortization expense related to capitalized implementation costs was recorded for the year ended December 31, 2021 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

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

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

Estimated Useful Lives

Machinery and equipment 5 – 15 years

Office furniture and equipment 3 – 7 years

Vehicles 5 years

Leasehold improvements 3 – 15 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. For the fiscal year ended December 31, 2022, the Company recorded impairments of its long-lived assets, see Note 6. Property, Plant, and Equipment, Net. There were no indicators of impairment during the year ended December 31, 2021.

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.

For the fiscal year ended December 31, 2022, the Company fully impaired its goodwill, see Note 8. Goodwill and Intangible Assets, Net. There was no impairment of goodwill during the year ended December 31, 2021.

Intangible Assets

Teknova’s intangible assets consist of the Teknova trade name and the Company's 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

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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.

There was no impairment of intangible assets during the years ended December 31, 2022 and 2021.

Leases

The Company determines if an arrangement is an operating lease at a lease's inception. Leases with an initial term of 12 months or fewer are not recorded on the balance sheet. All other operating leases are recorded on the balance sheet with a corresponding operating lease asset, net, representing the right to use the underlying asset for the lease term and the operating lease liabilities representing the obligation to make lease payments arising from the lease. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

Operating lease assets and operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when such options are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate, adjusted for the lease term, based on the information available at the lease commencement or modification date as required. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term.

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 ASC 606, Revenue From Contracts With Customers. 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 is 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 costs for the years ended December 31, 2022 and 2021 were $1.4million and $1.1 million, respectively.

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Occasionally, Teknova offers rebates, discounts, and returns on its products, however returns and refunds occur rarely. The Company records rebates, discounts, and returns at the time 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.

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 and processes.

Sales and Marketing Expenses

The Company’s sales and marketing expenses primarily consist of employee-related expenses, including salaries, benefits, and stock-based compensation expense for sales and marketing employees, expenses related to occupancy costs, brand strategy, website, content and collateral. The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2022 and 2021 were not significant and $0.4 million, respectively, and are 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 measures and recognizes compensation expense for all stock-based awards, including stock options, restricted stock units, and stock purchase rights granted under the Employee Stock Purchase Plan (ESPP) to employees, based on the estimated fair value of the awards on the date of grant. The fair value of each stock option granted and employee stock purchase rights are estimated 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. The fair value of each restricted stock unit is based on the fair value of the Company’s common stock on the date of grant. 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, 2022 and 2021 were $0.6 million and $0.6 million, respectively. Contributions payable as of December 31, 2022 and 2021, of $0.1 million and $0.3 million, respectively, are included within accrued liabilities in the accompanying financial statements.

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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.

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. Unrecognized tax benefits as of December 31, 2022 and 2021, were not significant.

Net 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 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) 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.

Recently Adopted Accounting Pronouncements

Effective January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective approach, applied at the beginning of the period of adoption, and elected the package of transitional practical expedients. The adoption of this standard resulted in recording operating right-of-use lease assets of $20.3 million, which included reclassifying approximately $0.2 million of deferred rent as a component of the operating lease asset as of January 1, 2022. The adoption also resulted in recording operating lease liabilities of $20.5 million as of January 1, 2022. The standard did not have an impact on the statements of operations and cash flows. Refer to Note 7. Leases herein for additional information pertaining to the adoption of the new standard.

Effective January 1, 2022, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removed certain exceptions to the general principles in ASC 740 and clarified and amended certain guidance to promote consistent application. The adoption of this standard did not have a significant impact on the Company's financial statements.

Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (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.

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Note 3. Revenue Recognition

Teknova has two primary product categories: Lab Essentials and Clinical Solutions. Previously, the Company had a third product category, Sample Transport, which it ceased producing in 2021.

Lab Essentials

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, catalog 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 Lab Essentials 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 of products for use as components in diagnostic and therapeutic products manufactured by the Company's customers. Teknova believes that its Clinical Solutions products are used in the production of protein therapies, gene therapies, mRNA vaccines, and diagnostic kits. The Clinical Solutions portion of our business includes: liquid cell culture media and supplements for cellular expansion and molecular biology reagents for sample manipulation, resuspension, and purification.

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 market 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, 2022 and 2021 was follows (in thousands):

For the Year Ended December 31,

Teknova’s revenue, disaggregated by geographic region, for the years ended December 31, 2022 and 2021 was follows (in thousands):

For the Year Ended December 31,

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Note 4. Concentrations of Risk

Customers

Customers who accounted for 10% or more of the Company's revenues and outstanding balance of accounts receivable were:

For the Year Ended December 31, As of December 31,

Distributor customer B * * 15% 16%

Direct customer A * * * 12%

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

Suppliers

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

For the Year Ended December 31, As of December 31,

Direct supplier A 14% 11% * *

Direct supplier B 12% 10% * *

Note 5. Inventories, Net

Inventories consist of the following (in thousands):

As of December 31,

Note 6. Property, Plant, and Equipment, Net

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

As of December 31,

Office furniture and equipment 628 649

Less—Accumulated depreciation (4,520 ) (2,473 )

Total property, plant, and equipment, net $ 51,577 $ 29,810

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Depreciation expense related to property, plant, and equipment recorded for the years ended December 31, 2022 and 2021 was $2.0 million and $1.7 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 $1.6 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively.

In December 2022, the Company decided to cease further use and development of certain manufacturing machinery and equipment. The Company reviewed the recoverability of the carrying value of these assets and determined that their carrying value exceeded their fair value. Fair value of these assets was measured employing cost and market approaches, using Level 3 inputs under ASC 820, Fair Value Measurement. Unobservable inputs include salvage value estimates, replacement or reproduction cost estimates as well as consideration of physical deterioration, functional and economic obsolescence, where measurable. As a result of this fair value analysis, an impairment charge of $4.2 million was recorded related to these long-lived assets. Carrying value after the impairment charges approximates fair value.

Note 7. Leases

The Company leases office space, warehouse and manufacturing space, and equipment. The Company's lease agreements have remaining lease terms of one year to 15 years, and some of these leases have renewal and termination options. Such termination options are exercisable at the Company’s option. Terms and conditions to extend or terminate such leases are recognized as part of the right-of-use assets and lease liabilities where reasonably certain to be exercised. All of the Company's leases are operating leases.

Operating lease expense was $3.2 million for the year ended December 31, 2022. Rent expense for the year ended December 31, 2021, was $1.7 million. Cash paid for amounts included in the measurement of the lease liabilities was $2.8 million for the year ended December 31, 2022. The weighted-average discount rate was 4.9% and the weighted-average remaining lease term was 9.2 years as of December 31, 2022.

Maturities of operating lease liabilities at December 31, 2022, is as follows (in thousands):

Amount

Total lease payments 25,797

Less: imputed interest (5,463 )

Present value of lease liabilities $ 20,334

Note 8. Goodwill and Intangible Assets, Net

The following is a summary of the changes in the carrying amount of goodwill (in thousands):

Gross Accumulated Impairment Net Gross Accumulated Impairment Net

During the three months ended September 30, 2022, the market price of Teknova’s common stock and market capitalization declined significantly. Given the significance of this decline, the Company performed interim goodwill impairment testing.

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The fair value of the Company was determined using a combination of an income approach and market approach. The income approach was based on the present value of future cash flows, which were derived from financial forecasts, and requires significant assumptions and judgement including, among others, a discount rate and a terminal value. Fair values were based on expected future cash flows using Level 3 inputs under ASC 820, Fair Value Measurement. The cash flows are those expected to be generated by the Company, discounted at the weighted average cost of capital. The present value of future cash flows was determined by discounting estimated future cash flows at an 18.0% weighted average cost of capital, which considers the risk of achieving the projected cash flows, long-term growth rate, the risk applicable to the Company, industry, and to the market as a whole.

The guideline public company method, a market approach method, was also used to estimate the fair value of the Company. The guideline public company method utilizes the trading multiples of similarly traded public companies. The unobservable inputs used to measure the fair value primarily included projected revenue growth rates and the determination of appropriate market comparison companies. Selected multiples were considered and applied to the trailing-twelve-month and next-twelve-month enterprise value-to-revenue multiples.

The resulting estimated fair value was reconciled to the Company’s market capitalization. The reconciliation included an estimated implied control premium above the Company's market capitalization on September 30, 2022, of approximately 25%. Based on the results of the impairment test, the Company determined goodwill was fully impaired and recorded an impairment charge of $16.6 million during the three months ended September 30, 2022. There was no impairment of goodwill during the year ended December 31, 2021.

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:

For the years ended December 31, 2022 and 2021 amortization expense was approximately $1.1 million and $1.1 million, respectively.

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

Amount

There was no impairment of intangible assets during the years ended December 31, 2022 and 2021.

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Note 9. Accrued Liabilities

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

As of December 31,

Property, plant, and equipment 1,966 1,446

Total current accrued liabilities $ 6,203 $ 5,495

Note 10. Long-Term Debt, Net

On May 10, 2022, the Company entered into the Amended and Restated Credit and Security Agreement (Term Loan) as borrower, with MidCap Financial Trust (MidCap), as agent and lender, and the additional lenders from time to time party thereto (the Term Loan Credit Agreement) and the Amended and Restated Credit and Security Agreement (Revolving Loan) as borrower, with MidCap as agent and lender, and the additional lenders from time to time party thereto (the Revolving Loan Credit Agreement, together with the Term Loan Credit Agreement, the Credit Agreement).

The Credit Agreement provided for a $57.135 million credit facility (the Credit Facility) consisting of a $52.135 million senior secured term loan (the Term Loan) and a $5.0 million working capital facility (the Revolver). The Term Loan consisted of the $12.0 million balance made available in 2021 under the previous credit facility and an additional $40.135 million, staged such that $5.135 million was funded upon closing of the Credit Agreement, an additional $5.0 million was funded on October 31, 2022, $10.0 million was to be available in the first half of 2023, $10.0 million was to be available in the second half of 2023 and $10.0 million was to be available in the first half of 2024, with the borrowing in the second half of 2023 and in the first half of 2024 being contingent upon achieving trailing twelve months of Clinical Solutions revenue of $15.0 million and $19.0 million, respectively, and liquidity requirements (as defined in the Credit Agreement) of $10.0 million and $15.0 million, respectively. The maximum loan amount under the Revolver was $5.0 million, and the Company was permitted to request the lenders to increase such amount up to $15.0 million. Borrowings on the Revolver were limited in accordance with a borrowing base calculation.

The interest on the Term Loan was based on the annual rate of one-month London Inter-Bank Offered Rate (LIBOR) plus 6.45%, subject to a LIBOR floor of 1.00%. If any advance under the Term Loan was prepaid at any time, the prepayment fee was 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. Interest on the outstanding balance of the Revolver was payable monthly in arrears at an annual rate of one-month LIBOR plus 3.75%, subject to a LIBOR floor of 1.00%.

The maturity date of the Credit Facility is May 1, 2027. On the date of termination of the Term Loan or the date on which the obligations under the Term Loan become due and payable in full, the Company would pay an exit fee in an amount equal to 5.00% of the total aggregate principal amount of term loans made pursuant to the Term Loan as of such date. The Credit Agreement contained a financial covenant based upon a trailing twelve months of net revenue, including a requirement of $42.5 million in the twelve months ending December 31, 2022.

On November 8, 2022, the Company entered into Amendment No. 1 to the Credit Agreement (Amendment No. 1 or, as amended, the Amended Credit Agreement) which (i) replaced the LIBOR-based interest rate with a rate equal to the forward-looking one-month term Secured Overnight Financing Rate adjusted upward by 0.10% (or Term SOFR, as defined in Amendment No. 1) plus an applicable margin (6.45% for the Term Loan and 3.75% for the Revolver), with a Term SOFR floor of 1.00%, and with such interest rate calculation change taking effect on December 1, 2022, (ii) increased the applicable prepayment fee percentage amounts by one percentage point, (iii) gave lenders discretion regarding the $10.0 million in borrowing that was previously guaranteed to be available under the Term Loan in the first half of 2023, and (iv) reduced the requirements for trailing twelve months of net revenue for all future periods—for example, for the twelve months ending December 31, 2022, the minimum net

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revenue requirement was reduced from $42.5 million to $38.0 million, where as of December 31, 2022, the Company was in compliance with this requirement. Concurrent with Amendment No. 1, the exit fee due on the date of termination of the Term Loan, or the date on which the obligations under the Term Loan become due and payable in full, increased from 5.00% to 7.00% of the total aggregate principal amount of term loans made pursuant to the Term Loan as of such date. Subsequent to December 31, 2022, the Company further amended the Credit Agreement. Refer to Note 17. Subsequent Events, below for a description of the amendment.

Previously, on March 26, 2021, the Company entered into the following agreements (together, the Previous Credit Agreement): (i) that certain credit and security agreement (Previous 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 (Previous 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 Previous Credit Agreement provided for a $27.0 million credit facility (the Previous Facility) consisting of a $22.0 million senior, secured term loan (the Previous Term Loan), and a $5.0 million working capital facility (the Previous Revolver). The Previous Term Loan was staged such that $12.0 million was available immediately, an additional $5.0 million was available on September 30, 2021, and $5.0 million was to be made available in 2022, but the final borrowing in 2022 was contingent upon achieving trailing twelve months net revenue of $37.0 million if the proposed funding date was to be on or after January 1, 2022, and before July 1, 2022 or $38.5 million if the proposed funding date was to be 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 Previous Term Loan tranche available on September 30, 2021. Borrowings on the Previous Revolver were limited to those derived from a borrowing base calculation; however, as of December 31, 2021, there was no drawdown on the Revolver. The interest on the Previous Term Loan was 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 Previous Term Loan was prepaid at any time, the prepayment fee was based on the amount being prepaid and an applicable percentage amount, such as 3%, 2%, or 1%, based on the date the prepayment was made after the closing date of the Term Loan. The Previous Credit Agreement contained 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 Previous Facility would have been due in full on March 1, 2026. At the end of the Previous Term Loan, the Company was to pay an exit fee of $0.6 million, which represented 5% of the $12.0 million in borrowings made available immediately on March 26, 2021. Such fee was being accreted to interest expense over the life of the Term Loan. The Company incurred $0.3 million of debt issuance costs, which were recorded in long-term debt in the balance sheet.

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

As of December 31,

Cumulative accretion of exit fee 161 90

Unamortized debt discount and debt issuance costs (320 ) (220 )

At December 31, 2022, the scheduled maturities of the Company's debt obligations were as follows (in thousands):

Amount

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As of December 31, 2022, 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 11. 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 effectuated 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, 2022 and 2021, there were no shares of convertible and redeemable preferred stock issued and outstanding.

Note 12. Stock-Based Compensation

Equity 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, 2022, 2,469,164 shares of the Company's common stock remain available for future grants under the 2021 Plan.

The types of equity-based awards that may be granted under the 2021 Plan include: incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other stock-based awards. The equity-based awards for employees will vest over a four-year period, pursuant to two different vesting schedules. For initial equity-based awards granted to employees, the first vest is generally a one-year cliff vest, followed by monthly vesting for the final three years. Thereafter, annual equity-based awards granted to employees typically vest on a monthly basis over the four-year vest term. The initial equity-based awards granted to the Company’s non-employee, independent directors upon appointment to the board of directors will vest over a three-year period and the annual equity-based awards granted to the Company’s non-employee, independent directors granted thereafter will cliff vest after one year from the date of grant.

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, 2023, an additional 1,127,176 new shares became available for issuance under the 2021 Plan.

F-20

Alpha Teknova, Inc. TKNO US Equity

TKNO · 10-K · period ended 2022-12-31

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 2022-12-31

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