PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Alpha Teknova produces critical reagents for life sciences, specializing in custom, high-quality products for pharmaceutical, biotech, and research sectors, with key offerings in Lab Essentials and Clinical Solutions - Alpha Teknova is a leading producer of critical reagents for research, discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics, serving over **3,000 active customers**[20](index=20&type=chunk) - The company's proprietary manufacturing processes enable the production and delivery of high-quality, custom, made-to-order products with **short turnaround times** and at scale[20](index=20&type=chunk)[21](index=21&type=chunk) - Achieved an annual customer retention rate of approximately **96%** for customers purchasing over **$10,000 annually** in 2022, representing about **90% of average annual revenue**[24](index=24&type=chunk) [Overview](index=7&type=section&id=Overview) The company excels in rapid custom formulation manufacturing, offering diverse product types across high-growth market segments like cell and gene therapy - Alpha Teknova specializes in manufacturing customer-specified formulations, capable of moving new custom products into production within weeks, significantly faster than traditional suppliers[21](index=21&type=chunk) - The company offers three primary product types: pre-poured media plates, liquid cell culture media and supplements, and molecular biology reagents, supporting customers from discovery to commercialization[22](index=22&type=chunk) - The company participates in high-growth market segments such as cell and gene therapy, mRNA vaccines, synthetic biology, and molecular diagnostics and genomics[25](index=25&type=chunk)[26](index=26&type=chunk) [Our Portfolio](index=8&type=section&id=Our%20Portfolio) The portfolio includes Lab Essentials and Clinical Solutions, offering pre-poured media, cell culture media, and molecular biology reagents [Product Categories](index=8&type=section&id=Product%20Categories) Product categories include Lab Essentials and Clinical Solutions, with Sample Transport production ceased due to market changes Product Categories Revenue Contribution | Product Category | 2022 Revenue Contribution | Description | | :--------------- | :------------------------ | :---------- | | Lab Essentials | ~77% of total revenue | Highly complex chemical formulations for biological research and drug discovery, including catalog and customer-specified solutions | | Clinical Solutions | ~20% of total revenue | Custom products used in the production of protein therapies, gene therapies, mRNA vaccines, and diagnostic kits, enabled by ISO 13485:2016 certification | | Sample Transport | Insignificant | Ceased production in 2021 due to declining COVID-19 testing demand and increased market supply | [Product Types](index=9&type=section&id=Product%20Types) Primary product types are pre-poured media plates, liquid cell culture media, and molecular biology reagents, crucial for biopharmaceutical development - The three primary product types are pre-poured media plates (Lab Essentials only), liquid cell culture media and supplements, and molecular biology reagents, all used across biopharmaceutical and diagnostic development[33](index=33&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - Cell culture media and supplements are critical for expanding cells in controlled conditions and are key inputs for mRNA vaccine and cell/gene therapy production[37](index=37&type=chunk) - Molecular biology reagents simplify biological protocols and are crucial subcomponents in diagnostic kits and manufacturing processes for various life science applications[39](index=39&type=chunk) [Competitive Strengths](index=12&type=section&id=Competitive%20Strengths) The company's strengths include custom chemical formulation expertise, high quality, rapid delivery, and strong positioning in the cell and gene therapy market - Expertise in complex, custom chemical formulation manufacturing, supported by a proprietary production system and a product database of thousands of formulations, enables rapid customization[40](index=40&type=chunk) - Quality and regulatory expertise (**ISO 13485:2016 certification**) drives deep customer relationships, as custom and GMP-grade components are often validated into customers' long-lifecycle products[42](index=42&type=chunk) - Industry-leading delivery time for custom products, with approximately **75% of custom RUO products shipped within three weeks**, and the ability to scale production volumes significantly[43](index=43&type=chunk) - Well-positioned in the evolving cell and gene therapy market as a leading provider of research and GMP-grade bacterial cell culture media and specialized chromatography solutions[46](index=46&type=chunk) [Our Markets](index=15&type=section&id=Our%20Markets) The company benefits from demand for customized products in high-growth markets like cell and gene therapy, molecular diagnostics, and genomics - The company benefits from favorable industry preferences for customized products, high quality, and short turnaround times in high-growth areas like cell and gene therapy, mRNA vaccines, and molecular diagnostics/genomics[49](index=49&type=chunk) Investment Capital in Cell and Gene Therapies | Year | Investment Capital (Billions USD) | | :--- | :------------------------------- | | 2019 | $9.8 | | 2020 | $19.9 | | 2021 | $23.1 | - The global molecular diagnostics market is estimated to grow from **$14.1 billion in 2020 to $18.0 billion by 2024**, and the global genomics market from **$23.5 billion in 2021 to $62.9 billion by 2028**, driving demand for the company's reagents[54](index=54&type=chunk) [Our Strategy](index=16&type=section&id=Our%20Strategy) Strategy focuses on increasing product integration, superior customer service, expanding R&D in high-growth segments, and selective international expansion - Strategy focuses on increasing product integration into customer workflows, providing superior customer service through operational excellence, expanding R&D and commercial scale in high-growth segments, and selectively expanding geographically[55](index=55&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk) Average Customer Spend by Product Type (2022) | Product Type | Average Spend (vs. Catalog) | | :----------- | :-------------------------- | | Custom Products | 18 times more | | GMP-grade Products | 156 times more | - The company aims to increase the proportion of customers purchasing custom and GMP-grade products by building lasting relationships as product development matures[55](index=55&type=chunk) - In 2022, over **96% of total revenue** was generated within the U.S., indicating substantial opportunity for international expansion, particularly in Europe[60](index=60&type=chunk) [Competition](index=17&type=section&id=Competition) The company operates in a highly competitive market against large and niche players, differentiated by custom formulations and rapid delivery - Operates in a highly competitive environment against large, well-capitalized life science companies (e.g., Thermo Fisher, Millipore, Cytiva, Lonza) and smaller niche competitors[61](index=61&type=chunk)[62](index=62&type=chunk) - Differentiated by its ability to offer customer-specified RUO and GMP formulations with short turnaround times, flexible volumes, and a strong brand reputation[62](index=62&type=chunk) [Government Regulation](index=18&type=section&id=Government%20Regulation) Products are marketed as ancillary reagents, maintaining ISO 13485:2016 certification and complying with environmental, health, and safety regulations - Products are marketed as ancillary reagents for research or further manufacturing, exempt from U.S. Federal Food, Drug and Cosmetic Act (FDCA) regulation[64](index=64&type=chunk) - Voluntarily maintains a quality system compliant with **ISO 13485:2016** standards to meet rigorous customer quality requirements, especially for 'Clinical Solutions' or 'GMP-grade' products[65](index=65&type=chunk)[66](index=66&type=chunk) - Compliance with environmental, health, and safety laws is maintained, but changes in regulations could increase costs or liabilities[68](index=68&type=chunk)[71](index=71&type=chunk) [Intellectual Property](index=19&type=section&id=Intellectual%20Property) The company primarily relies on trade secrets and contractual protections for intellectual property, not currently owning issued patents - Relies primarily on trade secrets, know-how, confidential information, and contractual protections (confidentiality and non-disclosure agreements) to safeguard intellectual property[72](index=72&type=chunk)[73](index=73&type=chunk) - Does not currently own issued patents but may pursue additional intellectual property protection in the future[74](index=74&type=chunk) [Human Capital](index=19&type=section&id=Human%20Capital) As of December 31, 2022, the company had 290 employees, none unionized, with objectives focused on recruitment, retention, and incentivization Employee Count by Organization (as of Dec 31, 2022) | Organization | Number of Employees | | :----------- | :------------------ | | Operations | 159 | | Administrative | 72 | | Sales and Marketing | 32 | | Engineering and R&D | 27 | | **Total** | **290** | - None of the employees are represented by a labor union or subject to a collective bargaining agreement[75](index=75&type=chunk) - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, with equity incentive plans used for motivation[77](index=77&type=chunk) [Facilities](index=20&type=section&id=Facilities) Headquarters and primary manufacturing are in Hollister, California, with 235,600 sq ft including clean rooms, and a warehouse in Mansfield, Massachusetts - Headquarters and primary manufacturing operations are located in Hollister, California, encompassing approximately **235,600 square feet** across eight locations[78](index=78&type=chunk) - The Hollister campus includes dedicated space for product formulation, dispensing, manufacturing, packaging, quality control, and **12,500 square feet of clean room space**[78](index=78&type=chunk) - Also leases approximately **23,400 square feet of warehouse space** in Mansfield, Massachusetts, from a company controlled by its founders[79](index=79&type=chunk) [Corporate Information](index=20&type=section&id=Corporate%20Information) Incorporated in Delaware in 2019, the company completed its IPO in June 2021, with Telegraph Hill Partners remaining the controlling stockholder - Incorporated in Delaware in **2019** as Alpha Teknova, Inc., following its founding in **1996**[81](index=81&type=chunk) - Completed its initial public offering (IPO) in **June 2021**, with common stock trading on the Nasdaq Global Market under the symbol 'TKNO'[81](index=81&type=chunk) - Telegraph Hill Partners Management Company LLC (THP) remains the controlling stockholder post-IPO[81](index=81&type=chunk) [Item 1A. Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including historical losses, fluctuating results, manufacturing challenges, customer dependence, intense competition, regulatory scrutiny, supply chain disruptions, and intellectual property concerns - The company has incurred net losses of **$47.5 million in 2022** and **$9.8 million in 2021**, and may incur future losses, impacting profitability[85](index=85&type=chunk) - Operating results may fluctuate significantly due to factors like changes in funding, customer demand, competition, and global economic conditions, making them difficult to predict[86](index=86&type=chunk)[87](index=87&type=chunk) - Dependence on a limited number of customers, with the largest distributor accounting for **15% and 18% of total revenue in 2022 and 2021**, respectively, poses a risk if these relationships are not maintained[113](index=113&type=chunk) - The company faces intense competition from larger, well-capitalized life science, pharmaceutical, and biotechnology companies, some of whom are also customers[115](index=115&type=chunk) [Risk Factor Summary](index=5&type=section&id=Risk%20Factor%20Summary) Investment in common stock is speculative due to operating losses, manufacturing challenges, customer dependence, competition, IP, debt, THP control, and internal control weaknesses - Summary of principal factors making an investment in common stock speculative or risky, including past and potential future operating losses, fluctuating operating results, and challenges in manufacturing capacity and efficiency[17](index=17&type=chunk)[18](index=18&type=chunk) - Highlights dependence on a limited number of customers, intense competition, and risks associated with future strategic investments, acquisitions, and marketing effectiveness[18](index=18&type=chunk) - Mentions risks related to intellectual property protection, credit agreement restrictions, control by Telegraph Hill Partners, and material weaknesses in internal control over financial reporting[19](index=19&type=chunk) [Risks Related to Our Business and Strategy](index=19&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) Business risks include potential operating losses, manufacturing scaling challenges, customer and supplier dependence, data privacy compliance, and asset impairment charges - Past operating losses and potential future losses are expected due to increased operating expenses for business growth and public company costs[85](index=85&type=chunk) - Efforts to increase manufacturing capacity and efficiency, including automation and facility expansion, could be disruptive and may not yield anticipated benefits in the expected timeframe[89](index=89&type=chunk)[90](index=90&type=chunk) - The business is highly dependent on customer spending and demand, which can be adversely affected by economic conditions, funding changes, and customer product success[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - Reliance on a stable and adequate supply of quality raw materials from a limited number of suppliers (**63% of purchases from three suppliers in 2022**) creates supply chain risk[125](index=125&type=chunk) - Subject to stringent and evolving data privacy and information security laws (e.g., CCPA, CPRA), with non-compliance potentially leading to enforcement actions, fines, and reputational damage[154](index=154&type=chunk)[157](index=157&type=chunk)[160](index=160&type=chunk) - The company recorded a **$16.6 million goodwill impairment charge** and a **$4.2 million long-lived assets impairment charge** in 2022 due to market price decline and cessation of certain machinery use[188](index=188&type=chunk)[190](index=190&type=chunk) [Risks Related to Our Intellectual Property](index=43&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Intellectual property risks include reliance on trade secrets without patents, potential infringement claims, and challenges in enforcing confidentiality agreements - Success depends on protecting intellectual property, primarily through trade secrets and confidentiality agreements, as the company does not currently own issued patents[203](index=203&type=chunk)[206](index=206&type=chunk) - Risk of third-party claims of infringement or misappropriation of intellectual property, which could lead to costly litigation, substantial damages, or inability to commercialize products[210](index=210&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Confidentiality agreements may be difficult to enforce, and trade secrets could be unintentionally or willfully disclosed, harming competitive position[207](index=207&type=chunk)[209](index=209&type=chunk)[220](index=220&type=chunk) [Risks Related to Our Indebtedness](index=48&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) Indebtedness under the Amended Credit Agreement could impair liquidity, impose operating restrictions, and lead to accelerated repayment upon covenant non-compliance - Existing indebtedness under the Amended Credit Agreement (up to **$57.135 million**) could divert funds, impair liquidity, and necessitate refinancing or asset disposal if cash flow is insufficient[229](index=229&type=chunk) - Covenants in the Amended Credit Agreement impose significant operating and financial restrictions, limiting actions like incurring additional debt, making acquisitions, or paying dividends[235](index=235&type=chunk) - Failure to comply with debt covenants could lead to acceleration of repayment and foreclosure on assets[236](index=236&type=chunk) [Risks Related to Our Common Stock](index=49&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Risks include Telegraph Hill Partners' control, 'controlled company' status reducing stockholder protections, no dividend plans, and a material weakness in income tax accounting - Telegraph Hill Partners (THP) controls approximately **62.1% of voting power**, enabling control over corporate decisions and potentially conflicting interests with other stockholders[237](index=237&type=chunk) - As a 'controlled company' under Nasdaq rules, the company relies on exemptions from certain corporate governance requirements, reducing protections for stockholders[241](index=241&type=chunk)[242](index=242&type=chunk) - The company has no current plans to pay regular cash dividends and is prohibited from doing so under the Amended Credit Agreement, meaning investment return depends solely on stock price appreciation[277](index=277&type=chunk) - The company identified a material weakness in internal control over financial reporting for income taxes in 2022, which remained unremediated as of December 31, 2022[250](index=250&type=chunk) [General Risk Factors](index=59&type=section&id=General%20Risk%20Factors) General risks include U.S. export controls, fluctuating effective tax rates, and cash balances exceeding FDIC insurance limits - Subject to U.S. export controls and sanctions regulations, with violations potentially leading to substantial fines, penalties, and reputational harm[286](index=286&type=chunk) - Fluctuations in effective tax rates and adverse outcomes from tax return examinations could negatively impact operating results and financial condition[287](index=287&type=chunk)[288](index=288&type=chunk)[289](index=289&type=chunk) - The company's cash balances at third-party financial institutions may exceed FDIC insurance limits, posing a risk if these institutions fail[297](index=297&type=chunk) [Item 1B. Unresolved Staff Comments](index=62&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[304](index=304&type=chunk) [Item 2. Properties](index=62&type=section&id=Item%202.%20Properties) Information regarding the company's commercial, office, manufacturing, and warehouse space is incorporated by reference from Item 1. Business – Facilities - Details on commercial, office, manufacturing, and warehouse space are provided in Item 1. Business – Facilities[305](index=305&type=chunk) [Item 3. Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in material legal proceedings, but future litigation could be costly and impact operations or reputation - The company is not a party to any material legal proceedings at this time[306](index=306&type=chunk) - Future legal proceedings, regardless of merit, could result in costly litigation, damage to reputation, diversion of management time, and potential monetary damages or operational limits[306](index=306&type=chunk) [Item 4. Mine Safety Disclosures](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[307](index=307&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Common stock trades on Nasdaq under 'TKNO', with 5 record holders as of March 28, 2023; no dividends have been paid or are planned due to debt restrictions - Common stock is listed on the Nasdaq Global Market under the symbol '**TKNO**'[310](index=310&type=chunk) - As of **March 28, 2023**, there were **5 holders of record** of the company's common stock[311](index=311&type=chunk) - The company has not paid any dividends since its inception and does not intend to declare or pay cash dividends in the foreseeable future, with current credit agreements prohibiting cash dividends without prior written consent from the lender[312](index=312&type=chunk) [Item 6. [Reserved]](index=62&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew **12.3% to $41.4 million** in 2022, but operating loss significantly increased to **$49.7 million** due to higher expenses and impairment charges, while liquidity is managed through cash and credit facilities amid economic uncertainties Key Financial Highlights (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change | % Change | | :----------------------- | :------------------ | :------------------ | :------- | :------- | | Revenue | $41,420 | $36,893 | $4,527 | 12.3% | | Gross profit | $17,476 | $17,621 | $(145) | (0.8)% | | Loss from operations | $(49,659) | $(12,008) | $(37,651) | 313.5% | | Net loss | $(47,468) | $(9,803) | $(37,665) | 384.2% | - Operating expenses significantly increased by **126.6% to $67.1 million** in 2022, primarily due to goodwill impairment (**$16.6 million**), long-lived assets impairment (**$4.2 million**), and higher R&D, sales & marketing, and G&A costs[327](index=327&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk) - The company is closely monitoring increased economic uncertainty, including inflation and rising interest rates, which negatively impact cost of sales and operating expenses and may reduce customer demand[325](index=325&type=chunk) [Overview](index=64&type=section&id=Overview) Alpha Teknova produces critical reagents for life sciences, with **$41.4 million revenue in 2022**, driven by Lab Essentials and Clinical Solutions, supported by ISO 13485:2016 certification - Alpha Teknova produces critical reagents for life sciences, serving over **3,000 customers** in biopharmaceutical, diagnostics, and research sectors[319](index=319&type=chunk) - Primary product categories are Lab Essentials and Clinical Solutions, with Sample Transport production ceased in 2021[320](index=320&type=chunk) - Achieved **ISO 13485:2016 certification in 2017**, enabling manufacturing for diagnostic and therapeutic applications[321](index=321&type=chunk) - Revenue in 2022 was **$41.4 million**, a **12.3% increase from 2021**, with over **96% from U.S. customers**[323](index=323&type=chunk) [Key Developments](index=65&type=section&id=Key%20Developments) Key developments include amended credit agreements, new product launches, a new manufacturing facility, workforce reduction, and an at-the-market stock offering - Entered into Amended and Restated Credit and Security Agreements in **May 2022**, providing up to **$57.135 million** in loan commitments, with subsequent amendments in **November 2022 and March 2023**[325](index=325&type=chunk) - Launched a new WFI Quality Water product line and an early access program for novel gene therapy bioprocessing products in late 2022[325](index=325&type=chunk) - New state-of-the-art manufacturing facility became operational for research-grade products in **December 2022**[325](index=325&type=chunk) - Reduced workforce by approximately **40 positions in February 2023**, estimating **$4 million in annual cost savings**[325](index=325&type=chunk) - Entered into a Sales Agreement with Cowen and Company, LLC in **March 2023** for an at-the-market offering program of up to **$50.0 million in common stock**[325](index=325&type=chunk) [Impact of Broader Economic Trends on Our Business](index=65&type=section&id=Impact%20of%20Broader%20Economic%20Trends%20on%20Our%20Business) Inflation, rising raw material prices, and increased interest rates negatively impact costs and customer demand, while COVID-19 effects are continuously monitored - General inflation, rising raw material prices, and increased salaries negatively impact cost of sales and operating expenses[325](index=325&type=chunk) - Rising interest rates may cause customers to reduce, delay, or cancel orders, impacting sales[325](index=325&type=chunk) - The company continues to monitor and manage its response to the ongoing COVID-19 pandemic's impact on its business, employees, suppliers, and distribution channels[326](index=326&type=chunk) [Results of Operations](index=66&type=section&id=Results%20of%20Operations) Analysis of revenue, gross profit, operating expenses, other income/expenses, and income tax benefit for the reporting periods [Revenue](index=66&type=section&id=Revenue) Revenue increased by **12.3% to $41.4 million** in 2022, driven by Lab Essentials and Clinical Solutions, primarily from U.S. customers Revenue by Product Category (in thousands) | Product Category | 2022 | 2021 | $ Change | % Change | | :--------------- | :-------- | :-------- | :-------- | :------- | | Lab Essentials | $31,772 | $27,184 | $4,588 | 16.9% | | Clinical Solutions | $8,445 | $6,793 | $1,652 | 24.3% | | Sample Transport | $6 | $1,530 | $(1,524) | (99.6)% | | Other | $1,197 | $1,386 | $(189) | (13.6)% | | **Total Revenue** | **$41,420** | **$36,893** | **$4,527** | **12.3%** | - Increase in Lab Essentials and Clinical Solutions revenue was primarily due to higher average revenue per customer, with the average number of customers remaining consistent[329](index=329&type=chunk)[330](index=330&type=chunk) - Sample Transport revenue became insignificant in 2022 due to declining COVID-19 testing demand and increased market supply[331](index=331&type=chunk) Revenue by Geographic Region (in thousands) | Geographic Region | 2022 | 2021 | $ Change | % Change | | :---------------- | :-------- | :-------- | :------- | :------- | | United States | $40,103 | $35,808 | $4,295 | 12.0% | | International | $1,317 | $1,085 | $232 | 21.4% | | **Total Revenue** | **$41,420** | **$36,893** | **$4,527** | **12.3%** | [Gross profit](index=67&type=section&id=Gross%20profit) Gross profit decreased slightly to **$17.5 million** in 2022, with the gross profit percentage declining to **42.2%** due to higher labor and supply costs Gross Profit (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--------------- | :-------- | :-------- | :------- | :------- | | Cost of sales | $23,944 | $19,272 | $4,672 | 24.2% | | Gross profit | $17,476 | $17,621 | $(145) | (0.8)% | | Gross profit % | 42.2% | 47.8% | | | - Gross profit percentage decreased from **47.8% in 2021 to 42.2% in 2022**, primarily due to higher labor costs and supplies as a percentage of revenue[334](index=334&type=chunk) [Operating expenses](index=68&type=section&id=Operating%20expenses) Total operating expenses surged by **126.6% to $67.1 million** in 2022, driven by increased headcount, professional fees, and significant goodwill and long-lived asset impairment charges Operating Expenses (in thousands) | Expense Category | 2022 | 2021 | $ Change | % Change | | :------------------------- | :-------- | :-------- | :-------- | :------- | | Research and development | $7,737 | $4,312 | $3,425 | 79.4% | | Sales and marketing | $9,151 | $3,777 | $5,374 | 142.3% | | General and administrative | $28,298 | $20,392 | $7,906 | 38.8% | | Amortization of intangible assets | $1,148 | $1,148 | $0 | 0.0% | | Goodwill impairment | $16,613 | $0 | $16,613 | 100.0% | | Long-lived assets impairment | $4,188 | $0 | $4,188 | 100.0% | | **Total Operating Expenses** | **$67,135** | **$29,629** | **$37,506** | **126.6%** | - Significant increases in R&D, sales & marketing, and G&A expenses were driven by increased headcount, professional fees, supplies, and stock-based compensation to support growth strategy[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Goodwill impairment of **$16.6 million** and long-lived assets impairment of **$4.2 million** were recorded in 2022, with no comparable charges in 2021[339](index=339&type=chunk)[340](index=340&type=chunk) [Other income (expenses), net](index=68&type=section&id=Other%20income%20(expenses),%20net) Total other income, net, was **$0.3 million** in 2022, a significant improvement from a net expense in 2021, primarily due to capitalized interest Other Income (Expenses), Net (in thousands) | Category | 2022 | 2021 | $ Change | % Change | | :------------------------- | :------ | :------ | :------- | :--------- | | Interest income (expense), net | $213 | $(589) | $802 | (136.2)% | | Other income (expense), net | $55 | $(40) | $95 | (237.5)% | | **Total** | **$268** | **$(629)** | **$897** | **(142.6)%** | - Total other income, net, was **$0.3 million** in 2022, primarily due to capitalized interest of **$1.6 million**, compared to a net expense of **$0.6 million** in 2021[341](index=341&type=chunk)[532](index=532&type=chunk) [Benefit from income taxes](index=69&type=section&id=Benefit%20from%20income%20taxes) The income tax benefit decreased in 2022 due to operating losses not expected to be benefited and the goodwill impairment charge Benefit from Income Taxes (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :---------------------- | :-------- | :-------- | :------- | :------- | | Benefit from income taxes | $(1,923) | $(2,834) | $911 | (32.1)% |\ | Effective tax rate | 3.9% | 22.4% | | | - The decrease in income tax benefit in 2022 was attributable to operating losses not expected to be benefited and the goodwill impairment charge disallowed for tax purposes[343](index=343&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by **$50.3 million** in working capital and a **$57.135 million** credit facility, with cash flows from operating, investing, and financing activities detailed [Credit Facility](index=69&type=section&id=Credit%20Facility) As of December 31, 2022, the company had **$50.3 million** in working capital and a **$57.135 million** credit facility with Term SOFR-based interest rates and amended revenue requirements - As of **December 31, 2022**, the company had **$50.3 million in working capital**, including **$42.2 million in cash and cash equivalents**[345](index=345&type=chunk) - Entered into an Amended and Restated Credit and Security Agreement in **May 2022**, providing a **$57.135 million credit facility**, including a **$52.135 million term loan** and a **$5.0 million revolving loan**[348](index=348&type=chunk) - The credit facility's interest rates are based on Term SOFR plus an applicable margin, with a Term SOFR floor of **4.50% as of March 28, 2023**, and an exit fee of **8.50% of the total principal amount**[352](index=352&type=chunk)[353](index=353&type=chunk) - Amendment No. 2 (**March 2023**) reduced minimum net revenue requirements for future periods (e.g., **$42.0 million for 2023**) and removed Clinical Solutions revenue contingencies for future borrowings[353](index=353&type=chunk) [Operating Activities](index=71&type=section&id=Operating%20Activities) Net cash used in operating activities significantly increased in 2022 to **$(27.4) million**, primarily due to a higher net loss and increased inventories Net Cash Used in Operating Activities (in thousands) | Year | Net Cash Used in Operating Activities | | :--- | :------------------------------------ | | 2022 | $(27,400) | | 2021 | $(9,069) | - Net cash used in operating activities increased significantly in 2022, primarily due to a higher net loss (**$47.5 million**) and an increase in inventories (**$7.6 million**), partially offset by non-cash adjustments like goodwill and long-lived asset impairments[358](index=358&type=chunk) [Investing Activities](index=71&type=section&id=Investing%20Activities) Net cash used in investing activities increased to **$(28.1) million** in 2022, primarily driven by **$28.1 million** in purchases of property, plant, and equipment Net Cash Used in Investing Activities (in thousands) | Year | Net Cash Used in Investing Activities | | :--- | :------------------------------------ | | 2022 | $(28,149) | | 2021 | $(17,521) | - Net cash used in investing activities increased in 2022, primarily driven by purchases of property, plant, and equipment totaling **$28.1 million**[360](index=360&type=chunk) [Financing Activities](index=71&type=section&id=Financing%20Activities) Net cash provided by financing activities was **$10.3 million** in 2022, mainly from long-term debt, significantly lower than **$110.8 million** in 2021 from IPO proceeds Net Cash Provided by Financing Activities (in thousands) | Year | Net Cash Provided by Financing Activities | | :--- | :---------------------------------------- | | 2022 | $10,267 | | 2021 | $110,793 | - Net cash provided by financing activities in 2022 was **$10.3 million**, mainly from long-term debt proceeds (**$10.1 million**), stock option exercises, and ESPP issuances[363](index=363&type=chunk) - In 2021, financing activities provided **$110.8 million**, primarily from IPO net proceeds (**$102.7 million**) and previous long-term debt proceeds[364](index=364&type=chunk) [Critical Accounting Policies and Estimates](index=72&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies and estimates cover revenue recognition, goodwill, intangible assets, income taxes, stock-based compensation, and the impact of new accounting pronouncements, considering the company's emerging growth status [Revenue Recognition](index=72&type=section&id=Revenue%20Recognition) Revenue is recognized under ASC 606 upon transfer of control, typically at shipment, with estimates and assumptions impacting financial results - Revenue is recognized in accordance with **ASC 606** when control of promised goods or services is transferred to customers, typically at a point in time upon shipment[367](index=367&type=chunk)[368](index=368&type=chunk) - Estimates and assumptions are made for revenue recognition, and changes in these could impact financial results[196](index=196&type=chunk) [Goodwill](index=72&type=section&id=Goodwill) Goodwill is tested annually for impairment, with a **$16.6 million** impairment charge recorded in 2022 based on fair value assessments - Goodwill is tested for impairment annually (**October 1**) or more frequently if indicators arise, using qualitative and quantitative assessments[370](index=370&type=chunk)[371](index=371&type=chunk) - A **$16.6 million goodwill impairment charge** was recorded in 2022, based on fair value determined by income and market approaches using Level 3 inputs[373](index=373&type=chunk)[374](index=374&type=chunk) [Intangible Assets and Other Long-Lived Assets](index=73&type=section&id=Intangible%20Assets%20and%20Other%20Long-Lived%20Assets) Definite-lived intangible and other long-lived assets are reviewed for impairment, with a **$4.2 million** impairment charge recorded in 2022 for certain manufacturing machinery - Definite-lived intangible assets and other long-lived assets are reviewed for impairment when circumstances indicate carrying amounts may not be recoverable, comparing carrying value to undiscounted future cash flows[376](index=376&type=chunk) - Indefinite-lived intangible assets are tested for impairment annually; no impairment was found for these in 2022 or 2021[377](index=377&type=chunk)[500](index=500&type=chunk) - A **$4.2 million impairment charge** was recorded for long-lived assets in 2022 due to ceasing use of certain manufacturing machinery and equipment[190](index=190&type=chunk)[533](index=533&type=chunk) [Income Taxes](index=73&type=section&id=Income%20Taxes) Deferred income taxes are accounted for using the asset and liability method, requiring significant judgments and estimates that could impact financial results - Deferred income taxes are accounted for using the asset and liability method, based on differences between financial reporting and tax purposes[379](index=379&type=chunk) - Significant judgments and estimates are required in determining the provision for income taxes, and changes in tax laws or estimates could impact deferred tax assets and liabilities[380](index=380&type=chunk) [Stock-Based Compensation](index=74&type=section&id=Stock-Based%20Compensation) Stock-based compensation expense is recognized at fair value using the Black-Scholes model, totaling **$3.7 million** in 2022, with **$10.1 million** unrecognized as of December 31, 2022 - Stock-based compensation expense is recognized based on the fair value of awards using the Black-Scholes option-pricing model, requiring assumptions for volatility, risk-free interest rate, expected term, and dividend yield[382](index=382&type=chunk)[385](index=385&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | 2022 | 2021 | | :------------------------- | :------ | :------ | | Cost of sales | $147 | $7 | | Research and development | $187 | $157 | | Sales and marketing | $504 | $66 | | General and administrative | $2,873 | $1,321 | | **Total** | **$3,711** | **$1,551** | - Unrecognized compensation expense for stock options was **$10.1 million** at December 31, 2022, to be recognized over a weighted-average period of **3.11 years**[568](index=568&type=chunk) [Accounting Pronouncements Not Yet Adopted](index=74&type=section&id=Accounting%20Pronouncements%20Not%20Yet%20Adopted) The company is evaluating ASU No. 2016-13, effective January 1, 2023, but does not anticipate a significant impact on its financial statements - The company is evaluating the impact of **ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)**, effective **January 1, 2023**, but does not anticipate a significant impact[384](index=384&type=chunk)[521](index=521&type=chunk) [Emerging Growth Company and a Smaller Reporting Company](index=74&type=section&id=Emerging%20Growth%20Company%20and%20a%20Smaller%20Reporting%20Company) Qualifies as an 'emerging growth company' and 'smaller reporting company', allowing for reduced disclosure and delayed adoption of new accounting standards - Qualifies as an 'emerging growth company' and 'smaller reporting company', allowing for reduced disclosure requirements and delayed adoption of new accounting standards[385](index=385&type=chunk)[386](index=386&type=chunk)[388](index=388&type=chunk) - Has elected to take advantage of the extended transition period for complying with new or revised accounting standards[387](index=387&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Alpha Teknova is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information on market risk[388](index=388&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=73&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The required financial statements and supplementary data are presented in Part IV, Item 15(a)(1) and 15(a)(2) of this Annual Report on Form 10-K - Financial statements and supplementary data are located in Part IV, Item 15(a)(1) and 15(a)(2)[389](index=389&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=73&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[390](index=390&type=chunk) [Item 9A. Controls and Procedures](index=73&type=section&id=Item%209A.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of December 31, 2022, due to a material weakness in income tax accounting, though financial statements are fairly stated; remediation efforts are underway, building on prior successful remediation - Management, with CEO and CFO participation, evaluated disclosure controls and procedures as of **December 31, 2022**, and concluded they were not effective[391](index=391&type=chunk)[394](index=394&type=chunk) - A material weakness was identified in internal control over financial reporting for income taxes, specifically lacking appropriate tax resources[397](index=397&type=chunk) - Despite the material weakness, management concluded that the audited financial statements are fairly stated in all material respects[395](index=395&type=chunk) - The company is implementing a remediation plan for the current material weakness, including engaging accounting personnel/consultants with income tax experience and adopting additional control procedures[403](index=403&type=chunk) - A prior year material weakness related to the financial close and reporting process for complex, non-routine transactions was remediated during **Q1 2022**[400](index=400&type=chunk)[402](index=402&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=75&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) CEO and CFO evaluated disclosure controls as of December 31, 2022, concluding they were not effective due to a material weakness - CEO and CFO evaluated disclosure controls and procedures as of **December 31, 2022**, and found them not effective due to a material weakness in internal control over financial reporting[391](index=391&type=chunk)[394](index=394&type=chunk) [Internal Control Over Financial Reporting](index=76&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) Internal control over financial reporting was ineffective as of December 31, 2022, due to a material weakness in income tax accounting; auditor attestation is not required - Management concluded that internal control over financial reporting was not effective as of **December 31, 2022**[396](index=396&type=chunk) - A material weakness was identified in the accounting for income taxes due to a lack of appropriate tax resources[397](index=397&type=chunk) - The independent registered public accounting firm is not required to attest to the effectiveness of internal control over financial reporting as the company is an 'emerging growth company'[398](index=398&type=chunk) [Remediation of the Prior Year Material Weakness](index=76&type=section&id=Remediation%20of%20the%20Prior%20Year%20Material%20Weakness) A prior material weakness in financial close and reporting for complex transactions was remediated in Q1 2022 through hiring expertise and implementing controls - A material weakness in the financial close and reporting process for complex, non-routine transactions (specifically the THP Transaction in **2019**) was identified in prior years[400](index=400&type=chunk) - Remediation involved hiring accounting employees and consultants with technical experience and implementing additional controls, completed during **Q1 2022**[402](index=402&type=chunk) [Remediation of the Current Year Material Weakness](index=77&type=section&id=Remediation%20of%20the%20Current%20Year%20Material%20Weakness) The 2022 material weakness in income tax accounting is being remediated by engaging specialized personnel and implementing new control procedures - The material weakness identified in 2022 related to income tax accounting is currently being remediated through engaging specialized personnel and implementing new control procedures[403](index=403&type=chunk) [Item 9B. Other Information](index=75&type=section&id=Item%209B.%20Other%20Information) Recent developments include a lease extension, an amended credit agreement with adjusted terms, and an at-the-market sales agreement for up to **$50.0 million** in common stock - Entered into a First Amendment to Lease Agreement in **January 2023**, extending the lease for 2320 Technology Parkway (new manufacturing facility) from **5 to 12 years**, with an option for an additional **5 years**[404](index=404&type=chunk) - Executed Amendment No. 2 to the Credit Agreement on **March 28, 2023**, increasing the applicable margin for Term Loan and Revolver, raising the Term SOFR floor to **4.50%**, and increasing the exit fee to **8.50%**[406](index=406&type=chunk)[410](index=410&type=chunk) - Amendment No. 2 also removed Clinical Solutions revenue requirements for future borrowings and reduced trailing twelve-month net revenue requirements (e.g., **$42.0 million for 2023**)[408](index=408&type=chunk)[409](index=409&type=chunk) - Entered into an ATM Sales Agreement with Cowen and Company, LLC on **March 30, 2023**, to sell up to **$50.0 million of common stock**, with a commission of up to **3% of gross sales proceeds**[412](index=412&type=chunk)[413](index=413&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=77&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - This item is not applicable[421](index=421&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2023 Annual Meeting of Stockholders**[424](index=424&type=chunk) [Item 11. Executive Compensation](index=78&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2023 Annual Meeting of Stockholders**[425](index=425&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2023 Annual Meeting of Stockholders**[426](index=426&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=78&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2023 Annual Meeting of Stockholders**[427](index=427&type=chunk) [Item 14. Principal Accounting Fees and Services](index=78&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the **2023 Annual Meeting of Stockholders**[428](index=428&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=79&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section details financial statements, schedules, and a comprehensive exhibit index, with financial statements beginning on page F-1 and schedules omitted or included elsewhere - Financial Statements are listed in the 'Index to Financial Statements' starting on page **F-1**[430](index=430&type=chunk) - All financial statement schedules are omitted as not applicable or included in the Financial Statements or Notes[431](index=431&type=chunk) - A detailed Exhibit Index is provided, incorporating by reference or filing various documents such as the Common Stock Sales Agreement, corporate governance documents, equity incentive plans, and credit agreements[432](index=432&type=chunk)[435](index=435&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[438](index=438&type=chunk) [Item 16. Form 10-K Summary](index=82&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[441](index=441&type=chunk)

Alpha Teknova, Inc. (NASDAQ:TKNO) Q4 2022 Results Conference Call March 15, 2023 5:00 PM ET Company Participants Jen Henry - Senior Vice President of Marketing Stephen Gunstream - President & Chief Executive Officer Matt Lowell - Chief Financial Officer Conference Call Participants Joseph Flanagan - Cowen Matt Larew - William Blair Hannah Hefley - Stephens Operator Thank you for standing by, and welcome to Teknova's Fourth Quarter and Full Year 2022 Financial Results Call. At this time, all participants are ...

PART I. FINANCIAL INFORMATION [Condensed Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20(Unaudited)) Net loss significantly increased in Q3 and nine months 2022 due to a **$16.6 million** goodwill impairment, with cash and assets declining and liabilities rising Condensed Statements of Operations Highlights (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $10,692 | $9,392 | $33,529 | $26,783 | | **Gross Profit** | $4,770 | $4,263 | $15,366 | $12,642 | | **Goodwill Impairment** | $16,613 | $0 | $16,613 | $0 | | **Loss from Operations** | $(22,954) | $(3,888) | $(35,423) | $(7,241) | | **Net Loss** | $(22,474) | $(3,251) | $(34,174) | $(6,156) | | **Net Loss Per Share** | $(0.80) | $(0.12) | $(1.22) | $(0.51) | Condensed Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $49,855 | $87,518 | | **Total Current Assets** | $70,067 | $101,204 | | **Goodwill** | $0 | $16,613 | | **Total Assets** | $160,272 | $166,511 | | **Total Liabilities** | $48,276 | $23,308 | | **Total Stockholders' Equity** | $111,996 | $143,203 | - Net cash used in operating activities increased to **$19.4 million** for the nine months ended Sep 30, 2022, from **$6.0 million** in the prior year period, primarily due to a higher net loss[129](index=129&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Net cash used in investing activities increased to **$23.4 million** from **$10.1 million** year-over-year, driven by purchases of property, plant and equipment[129](index=129&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Net cash from financing activities was **$5.1 million**, primarily from long-term debt proceeds, a significant decrease from **$110.8 million** in the prior year which included IPO proceeds[129](index=129&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) [Note 1. Nature of the Business](index=10&type=section&id=Note%201.%20Nature%20of%20the%20Business) Alpha Teknova provides critical reagents for biopharmaceutical products, manufacturing under Research Use Only (RUO) and Good Manufacturing Practice (GMP) standards - The company provides critical reagents for biopharmaceutical products, including drug therapies, vaccines, and molecular diagnostics[27](index=27&type=chunk) - Teknova manufactures products in both Research Use Only (RUO) and the more stringent Good Manufacturing Practice (GMP) categories, holding an ISO 13485:2016 certification since 2017[29](index=29&type=chunk) [Note 3. Revenue Recognition](index=11&type=section&id=Note%203.%20Revenue%20Recognition) Revenue is recognized upon goods transfer, with total revenue for the nine months ended September 30, 2022, reaching **$33.5 million**, primarily from Lab Essentials and Clinical Solutions in the United States Revenue by Business Line (in thousands) | Business Line | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Lab Essentials | $24,838 | $20,440 | | Clinical Solutions | $7,673 | $4,354 | | Sample Transport | $6 | $1,035 | | Other | $1,012 | $954 | | **Total Revenue** | **$33,529** | **$26,783** | Revenue by Geographic Region (in thousands) | Geographic Region | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | United States | $32,489 | $25,890 | | International | $1,040 | $893 | | **Total Revenue** | **$33,529** | **$26,783** | [Note 8. Goodwill and Intangible Assets, Net](index=13&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) An interim goodwill impairment test in Q3 2022, triggered by stock price decline, resulted in a full **$16.6 million** impairment charge, reducing goodwill to zero - A significant decline in the company's common stock price and market capitalization triggered an interim goodwill impairment test in Q3 2022[51](index=51&type=chunk) - The company determined that its goodwill was fully impaired and recorded an impairment charge of **$16.6 million** during the three months ended September 30, 2022[55](index=55&type=chunk) - As of September 30, 2022, the carrying amount of goodwill was reduced to zero from **$16.6 million** at the end of 2021[51](index=51&type=chunk) [Note 10. Long-Term Debt, Net](index=15&type=section&id=Note%2010.%20Long-Term%20Debt%2C%20Net) As of September 30, 2022, net long-term debt increased to **$16.9 million** from **$11.9 million** at year-end 2021, under a credit facility with MidCap Financial Trust - In May 2022, the company entered into an Amended and Restated Credit and Security Agreement with MidCap for a **$57.135 million** credit facility[59](index=59&type=chunk)[60](index=60&type=chunk) Long-Term Debt, Net (in thousands) | Component | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Long-term debt | $17,135 | $12,000 | | **Long-term debt, net** | **$16,878** | **$11,870** | [Note 15. Subsequent Events](index=18&type=section&id=Note%2015.%20Subsequent%20Events) On November 8, 2022, the credit agreement was amended to replace LIBOR with SOFR, increase the exit fee to **7%**, and reduce the TTM net revenue covenant for December 31, 2022, to **$38.0 million** - On November 8, 2022, the credit agreement was amended, replacing the LIBOR-based interest rate with a SOFR-based rate effective December 1, 2022[77](index=77&type=chunk) - The amendment reduced the trailing twelve-month net revenue covenant for the period ending December 31, 2022, from **$42.5 million** to **$38.0 million**[77](index=77&type=chunk) - The exit fee on the term loan was increased from **5% to 7%** of the total aggregate principal amount[77](index=77&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew in Q3 and nine months 2022, but operating losses widened significantly due to a **$16.6 million** goodwill impairment and increased expenses, impacting liquidity [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Q3 and nine-month 2022 revenue increased, but operating losses significantly widened due to a **$16.6 million** goodwill impairment and surging operating expenses Q3 2022 vs Q3 2021 Revenue by Product (in thousands) | Product Category | Q3 2022 | Q3 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Lab Essentials | $9,470 | $7,195 | $2,275 | 31.6% | | Clinical Solutions | $919 | $1,690 | $(771) | (45.6)% | | Sample Transport | $0 | $73 | $(73) | (100.0)% | | **Total Revenue** | **$10,692** | **$9,392** | **$1,300** | **13.8%** | Nine Months 2022 vs 2021 Revenue by Product (in thousands) | Product Category | Nine Months 2022 | Nine Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Lab Essentials | $24,838 | $20,440 | $4,398 | 21.5% | | Clinical Solutions | $7,673 | $4,354 | $3,319 | 76.2% | | Sample Transport | $6 | $1,035 | $(1,029) | (99.4)% | | **Total Revenue** | **$33,529** | **$26,783** | **$6,746** | **25.2%** | - The company ceased production of Sample Transport medium in 2021 due to a decline in market demand for COVID-19 testing and an increase in market supply[92](index=92&type=chunk)[107](index=107&type=chunk) - A goodwill impairment charge of **$16.6 million** was the primary driver of the significant increase in operating loss for both the three and nine-month periods ended September 30, 2022[99](index=99&type=chunk)[103](index=103&type=chunk)[116](index=116&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents significantly decreased to **$49.9 million** by September 30, 2022, due to operating activities and capital expenditures, requiring potential future financing - As of September 30, 2022, the company had **$49.9 million** in cash and cash equivalents and **$57.7 million** in net working capital[120](index=120&type=chunk) - A significant use of cash is the construction of a new manufacturing, warehouse, and distribution facility in Hollister, California[120](index=120&type=chunk)[121](index=121&type=chunk) - In November 2022, the company amended its credit agreement, replacing LIBOR with SOFR, increasing the exit fee to **7%**, and reducing the TTM net revenue covenant for Dec 31, 2022, to **$38.0 million**[126](index=126&type=chunk) - Management believes existing liquidity sources are sufficient to fund requirements for at least the next 24 months, but acknowledges that additional financing may be needed to execute its business strategy[127](index=127&type=chunk)[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Alpha Teknova is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Alpha Teknova is not required to provide quantitative and qualitative disclosures about market risk[143](index=143&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2022, having remediated a prior material weakness and implemented a new ERP system - Management concluded that disclosure controls and procedures were effective as of September 30, 2022[146](index=146&type=chunk) - A previously identified material weakness in the financial close and reporting process for complex transactions was remediated as of March 31, 2022[147](index=147&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk) - During the quarter ended September 30, 2022, the company implemented a new enterprise resource planning (ERP) system to enhance internal controls and support business scaling[149](index=149&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though it may become involved in ordinary course legal matters - As of the report date, the company is not a party to any material legal proceedings[154](index=154&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of operating losses, a **$16.6 million** goodwill impairment, customer and supplier dependence, restrictive debt covenants, and 'controlled company' governance - The company has a history of operating losses, including a net loss of **$22.5 million** in Q3 2022 and **$34.2 million** for the first nine months of 2022, and may not achieve or maintain profitability[156](index=156&type=chunk) - A significant goodwill impairment charge of **$16.6 million** was recorded in Q3 2022 due to a decline in market capitalization, and future impairments of intangible assets are possible[252](index=252&type=chunk) - The business is dependent on a limited number of customers, with those accounting for over **10%** of revenue representing **42%** of total revenue in Q3 2022[179](index=179&type=chunk) - The company is a 'controlled company' under Nasdaq rules due to THP's majority ownership, which exempts it from certain corporate governance requirements, such as having a majority-independent board[300](index=300&type=chunk) - The Amended Credit Agreement contains restrictive covenants that could limit operational flexibility, and failure to comply could lead to acceleration of debt[297](index=297&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities in the reported period, and the planned use of IPO proceeds has not materially changed - There were no unregistered sales of equity securities in the reported period[352](index=352&type=chunk) - The planned use of proceeds from the IPO has not materially changed from what was disclosed in the final prospectus[353](index=353&type=chunk) [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) On November 8, 2022, the company amended its credit agreement, replacing LIBOR with SOFR, increasing the exit fee to **7%**, and reducing the TTM net revenue covenant to **$38.0 million** - On November 8, 2022, the company amended its Credit Agreement with MidCap[357](index=357&type=chunk) - The amendment replaced the LIBOR-based interest rate with a SOFR-based rate, increased the exit fee to **7%**, and gave lenders discretion over a **$10.0 million** borrowing tranche for H1 2023[358](index=358&type=chunk)[359](index=359&type=chunk) - The minimum net revenue requirement for the twelve months ending December 31, 2022, was reduced from **$42.5 million** to **$38.0 million**[360](index=360&type=chunk)

Q3:2022 Financial Results Slide Supplement Nasdaq: TKNO November 9, 2022 TEKNOVA Today's Agenda 2 1. Welcome 2. Business Highlights & Updates — Stephen Gunstream, President and CEO 3. Financial Results — Matt Lowell, CFO 4. Q&A Forward-looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute "forwardlooking statements." These stateme ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40538 ALPHA TEKNOVA, INC. (Exact name of registrant as specified in its charter) Delaware 94-3368109 ( State or other jurisdiction of incorporation or organization) 2451 Bert Dr. ...

Financial Performance - Revenue for the three months ended March 31, 2022, was $11.1 million, an increase of $2.1 million or 22.8% compared to $9.1 million for the same period in 2021[79]. - Operating loss for the three months ended March 31, 2022, was $5.8 million, compared to an operating loss of $0.8 million for the same period in 2021, representing a 605.7% increase in loss[80]. - Gross profit for the three months ended March 31, 2022, was $5.3 million, with a gross profit margin of 48.0%, down from 55.4% in the same period in 2021[89]. - Clinical Solutions revenue surged to $3.8 million for the three months ended March 31, 2022, a 255.9% increase from $1.1 million in the same period in 2021[85]. - Revenue from U.S. customers was $10.8 million for the three months ended March 31, 2022, representing 97.1% of total revenue, up from 96.0% in the same period in 2021[87]. - Revenue from international sales was $0.3 million for the three months ended March 31, 2022, down from $0.4 million in the same period in 2021, representing 2.9% of total revenue[88]. Expenses - Total operating expenses for the three months ended March 31, 2022, were $11.2 million, a significant increase of 91.2% from $5.9 million in the same period in 2021[90]. - Research and development expenses increased to $2.0 million for the three months ended March 31, 2022, a rise of 187.6% compared to $0.7 million for the same period in 2021[90]. - General and administrative expenses rose to $7.3 million for the three months ended March 31, 2022, a 75.3% increase from $4.2 million in the same period in 2021[92]. - The company ceased production of sample transport medium due to declining market demand, resulting in revenue of only $6, compared to $0.9 million in the same period in 2021[86]. Cash Flow and Financing - Net cash used in operating activities for Q1 2022 was $5.2 million, compared to a net cash provided of $2.4 million in Q1 2021[108][110]. - Net cash used in investing activities was $5.9 million for Q1 2022, primarily for purchases of property, plant, and equipment[112]. - The company entered into a credit facility of $27.0 million, consisting of a $22.0 million term loan and a $5.0 million working capital facility[98]. - As of March 31, 2022, the outstanding balance on the term loan was $12.0 million, with no drawdown on the revolving loan[99][101]. - The company expects to maintain sufficient liquidity to fund operations for at least the next 24 months, but may seek additional financing[107]. Regulatory and Compliance - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions until it no longer qualifies[118]. - The company is also classified as a "smaller reporting company," which permits it to utilize scaled disclosures until specific market value or revenue thresholds are met, such as a market value of $250 million or annual revenues exceeding $100 million[119]. - The company can present only two years of audited financial statements due to its smaller reporting company status, reducing its financial data obligations[119]. - The company is exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which simplifies compliance[119]. - The company will remain an emerging growth company until it reaches total annual gross revenues of $1.07 billion or more, among other criteria[120]. - The company has not disclosed any recent accounting pronouncements that may impact its financial position in the current report[121]. - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk for this reporting period[122]. Taxation - The benefit from income taxes for Q1 2022 was $0.4 million, an increase of 117.6% compared to $0.2 million in Q1 2021, primarily due to an increase in operating loss[94]. Capital Expenditures - The company is constructing a new manufacturing facility in Hollister, California, which is expected to be a significant use of cash over the next 6 to 12 months[97]. Working Capital - As of March 31, 2022, the company had $79.3 million in net working capital, including $76.5 million in cash and cash equivalents[95]. - The credit agreement requires a minimum revenue of $37.5 million by December 31, 2022, increasing to $51.5 million by December 31, 2025[102].

Q1 2022 Financial Results Slide Supplement Nasdaq: TKNO May 11, 2022 Today's Agenda 2 1. Welcome 2. Business Highlights & Updates — Stephen Gunstream, President and CEO 3. Financial Results — Matt Lowell, CFO 4. Q&A Forward-Looking Statements and Use of Non-GAAP Financial Measures Statements in this presentation about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute "forwardlooking statements." These statements include, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-40538 ALPHA TEKNOVA, INC. (Exact name of registrant as specified in its charter) Delaware 94-3368109 (State or other jurisdiction of ...

Alpha Teknova, Inc. (NASDAQ:TKNO) Q4 2021 Earnings Conference Call March 15, 2022 4:30 PM ET Company Participants Sarah Mitchell – Investor Relations Stephen Gunstream – President and Chief Executive Officer Matt Lowell – Chief Financial Officer Conference Call Participants Sung Ji Nam – BTIG Jacob Johnson – Stephen Max Masucci – Cowen Matt Larew – William Blair Operator Ladies and gentlemen thank you for standing by. And welcome to the Alpha Teknova Fourth Quarter 2021 Financial Results Conference Call. At ...

Company Overview - Teknova is a leading provider of research and clinical-grade reagents, supporting drug discovery, development, and production[6] - The company has a strong competitive position with expertise in custom reagent manufacturing and short turnaround times[6] - Teknova produces bioprocessing tools for cell & gene therapy, creating a breakthrough growth opportunity[6] - The company has over 3,000 active customers[7,27] Financial Performance - Trailing Twelve Months (TTM) core revenue was $33.4 million[7] - TTM core growth was 37%[7] - Clinical (GMP) TTM growth was 71%[7] - Total revenue increased by 41% year-over-year[53] - Q3 2021 total revenue was up 5% year-over-year, or 26% excluding Sample Transport[71] Cell & Gene Therapy Market - The global cell & gene therapy market is expected to grow from $2.3 billion in 2020 to $45.4 billion in 2026, a 64% CAGR[29] - Teknova is a supplier to more than 65 leading cell & gene therapy organizations[40] - 62% of Teknova's accounts are in the research & discovery phase[42] Investments and Future Targets - The company is investing to support rapid growth to revenue of $100 million+[45] - Teknova is expanding production capacity five-fold[49] - The target model includes sustainable 25%+ revenue growth, 65%+ gross margin, and 25-30% adjusted EBITDA margin[66]