Alpha Teknova Inc

Note 1. Nature of the Business

Alpha Teknova, Inc. (referred to herein as the Company or Teknova), produces critical reagents for the 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.

Private Placement

On July 11, 2024, the Company entered into a securities purchase agreement (the Purchase Agreement) and a registration rights agreement in connection with a private placement (the July 2024 Offering) with certain accredited investors. Pursuant to the Purchase Agreement, the Company agreed to offer and sell in the July 2024 Offering 12,385,883 shares of the Company’s common stock, $0.00001 par value per share, at an offering price of $1.24 per share. The Company’s controlling stockholder, Telegraph Hill Partners Management Company LLC, through its affiliates Telegraph Hill Partners V, L.P. and THP V Affiliates Fund LLC, the Company’s President and Chief Executive Officer and member of its board of directors, Stephen Gunstream, and the Company’s Chief Financial Officer, Matthew Lowell, participated in the July 2024 Offering and, collectively, purchased an aggregate of 12,217,740 shares. The Company received aggregate gross proceeds of approximately $15.4 million from the July 2024 Offering, before deducting offering expenses of $0.2 million. Offering expenses were included as a reduction to additional paid-in capital on the balance sheet. The July 2024 Offering closed on July 12, 2024.

Concurrent Registered Direct Offering and Private Placements

On September 15, 2023, the Company entered into a securities purchase agreement (the Registered Direct Purchase Agreement) in connection with a registered direct offering (the Registered Direct Offering) with certain accredited investors and qualified institutional buyers. On September 15, 2023, the Company also entered into a securities purchase agreement (the PIPE Purchase Agreement) and a registration rights agreement (the Registration Rights Agreement) in connection with a concurrent private placement (the PIPE Private Placement) with certain accredited investors and qualified institutional buyers.

Pursuant to the Registered Direct Purchase Agreement, the Company sold 1,086,485 shares of the Company’s common stock, $0.00001 par value per share, at an offering price of $1.85 per share. Pursuant to the PIPE Purchase Agreement, the Company sold 11,299,993 shares of Common Stock (the PIPE Shares), at the same offering price of $1.85 per share.

The Company’s controlling stockholder, Telegraph Hill Partners Management Company LLC, through its affiliates Telegraph Hill Partners IV, L.P. and THP IV Affiliates Fund, LLC, the Company’s President and Chief Executive Officer and a member of its board of directors, Stephen Gunstream, the Company’s Chief Financial Officer, Matthew Lowell, and the Company’s General Counsel and Chief Compliance Officer, Damon Terrill, and the Mackowski Family Trust, which is affiliated with J. Matthew Mackowski, a member of the Company’s board of directors, participated in the PIPE Private Placement and purchased an aggregate of 9,054,052 shares of common stock on the same terms as the other investors.

The Company received aggregate gross proceeds of $22.915 million from the Registered Direct Offering and PIPE Private Placement (collectively, the September 2023 Offerings), before deducting offering expenses related to the September 2023 Offerings of $0.4 million. Offering expenses were included as a reduction to additional paid-in capital on the balance sheet.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Accounting, Presentation, and Use of Estimates

The accompanying financial statements and related notes are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain amounts of assets and liabilities, and disclosures of assets and liabilities, at the date of each financial statement, and the reported amount of revenues and expenses during the reporting period. Significant items that are subject to such estimates and assumptions include, but are not limited to, revenue recognition, impairment of long-lived assets and intangible assets, valuation of share-based payment awards, 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.

Teknova does not have any material items of other comprehensive income (loss); accordingly, there is no difference between net loss and comprehensive loss and we have not presented a separate Statement of Comprehensive Income (Loss) that would otherwise be required.

Going Concern

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

Previous going concern assessments indicated negative conditions and events related to the Company’s limited capital resources to fund ongoing operations and the Company’s ability to comply with future financial covenants under the terms of the Amended and Restated Credit Agreement (defined in Note 10), both of which raised substantial doubt about the Company’s ability to continue as a going concern as described in our 2023 Annual Report on Form 10-K. However, the Company was in compliance with its financial covenants under the terms of Amendment No. 5 to the Amended and Restated Credit Agreement as of December 31, 2024 and as a result of recent business improvements, including actions taken by management to amend its credit agreement further by entering into the Second Amended and Restated Credit Agreement (as described in Note 17 below), reduce operating costs, and raise additional capital (as described in Note 1 above), management believes that there is no longer substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date on which the accompanying audited financial statements are being issued. Debt service requirements in the future require that the Company continues to execute its plans both in terms of operations and financial results. Additionally, unforeseen events or changes in assumptions may occur and result in material differences between the Company’s future financial results or forecasts and the current financial forecast, and those differences could result in management concluding in the future that there is substantial doubt about the Company’s ability to continue as a going concern based upon the new information.

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 derives revenue primarily in the United States through manufacture and sale of critical reagents. 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.

The CODM assesses performance and decides how to allocate resources and make operating decisions based on net loss that is reported on the statement of operations. Net loss is also used to monitor budget versus actual results. The measure of segment assets is reported on the balance sheet as total assets. Revenues, expenses, and assets requiring disclosure in accordance with ASC 280, Segment Reporting, are also included in the accompanying financial statements. See the statements of operations for the two years ended December 31, 2024 and the balance sheets as of December 31, 2024 and 2023, for details.

Concentrations of Credit Risk

Teknova’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, 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 and 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. Concentrations of Risk.

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.

Short-term Held-to-Maturity Investments

Teknova invests excess cash balances in short-term U.S. Treasuries. Investments are classified based on the facts and circumstances present at the time of purchase. The appropriateness of that classification is subsequently reassessed at each reporting date. As of December 31, 2024, the Company had both the ability and intention to hold these investments until maturity and therefore has classified these investments as held-to-maturity and recorded them at amortized cost which approximates fair value and presented them in “Short-term investments, held -to-maturity” on the balance sheet. The fair value of the Company’s short-term investments was based on quoted prices in active markets for these investments (Level 1). The income recognized for these investments is recorded within interest income on the statement of operations.

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, 2024 and 2023, Teknova had capitalized software implementation costs of $1.3 million and $1.8 million, respectively, which were included within other non-current assets in the accompanying financial statements. Amortization expense related to capitalized implementation costs for the years ended December 31, 2024 and 2023 were $0.5 million and $0.4 million, respectively, which were included within operating expensesin the accompanying financial statements.

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

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

Impairment of Long-Lived Assets

Teknova evaluates its long-lived assets for impairment when events or changes in circumstances indicate a possible inability to recover carrying amounts. Recoverability is assessed by comparing the carrying value of the assets to estimated undiscounted future cash flows expected to be generated by the assets. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated during the life of those assets are less than the assets’ carrying amounts. If an asset is impaired, the loss is measured as the amount by which the asset’s carrying value exceeds its fair value. There were no indicators of impairment during the year ended December 31, 2024, however, during the year-ended December 31, 2023, the Company recorded impairments of its long-lived assets. See Note 6. Property, Plant, and Equipment, Net.

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 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 wasno impairment of intangible assets during the year ended December 31, 2024, however, during the year ended December 31, 2023, the Company impaired its indefinite lived intangible asset. See Note 8. Intangible Assets, Net. No other intangible assets were impaired during the year ended December 31, 2023.

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. Variable lease expense consists of the Company’s proportionate share of common area expenses, property taxes, and insurance and is classified as lease expense due to the Company’s election to not separate lease and non-lease components. 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.

Warrants

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

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

Teknova’s 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, 2024 and 2023 were $1.3 million and $1.2 million, respectively.

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 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 expenses are included in sales and marketing expenses in the accompanying financial statements. Advertising expenses were $0.1 million and $0.1 million in the years ended December 31, 2024 and 2023, respectively.

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.

Reduction in Workforce

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

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

At-the-Market Facility

On March 30, 2023, the Company entered into a sales agreement (the ATM Facility) with Cowen and Company, LLC (Cowen), under which the Company may offer and sell, from time to time, shares of its common stock having aggregate gross proceeds of up to $50.0 million. The issuance and sale of these shares pursuant to the ATM Facility are deemed “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the Securities Act), and are registered under the Securities Act. The Company will pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the ATM Facility. The aggregate market value of shares eligible for sale under the ATM Facility will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. Following the capital raise through offerings described in Note 1. Nature of the Business, costs capitalized related to the ATM Facility of $0.4 million were written off during the quarter ended September 30, 2023, and reflected in general and administrative expenses in the accompanying financial statements.

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, 2024 and 2023 were $0.4 million and $0.7 million, respectively. Contributions payable as of December 31, 2024 and 2023, werenot significant and $0.1 million, respectively, are included within accrued liabilities in the accompanying financial statements.

Income Taxes

Teknova uses the asset and liability method in accounting for its deferred income taxes. Under this method, deferred income taxes are provided for differences between the carrying amounts of 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. 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, 2024 and 2023 were $0.1 million and $0.1 million, respectively.

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

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Additionally, all disclosure requirements under the guidance are also required for public entities with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard during the year ended December 31, 2024 and applied it retrospectively to all prior periods presented in the financial statements. The adoption of this standard did not have a significant impact on the Company’s financial statements.

Accounting Pronouncements Not Yet Adopted

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

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregation of specific expense categories in the notes to the financial statements and a qualitative description of the remaining expense amounts not separately disaggregated. This standard is effective for annual reporting periods beginning after December 15, 2026, andrequires prospective application with the option to apply it retrospectively. The Company is currently evaluating the impact of adopting this standard to determine its impact on the Company’s disclosures.

Note 3. Revenue Recognition

Teknova hastwo primary product categories: Lab Essentials and Clinical Solutions.

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

Teknova is ISO 13485:2016 certified, 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.

Teknova’s revenue, disaggregated by product category, was as follows (in thousands):

Teknova’s revenue, disaggregated by geographic region, which is determined based on customer location, was as follows (in thousands):

Note 4. Concentrations of Risk

Customers

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

• Represents less than 10%.

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 are presented as follows:

• Represents less than 10%.

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

Note 5. Inventories, Net

Inventories consisted of the following (in thousands):

Note 6. Property, Plant, and Equipment, Net

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

Depreciation expense related to property, plant, and equipment recorded for the years ended December 31, 2024 and 2023 was $5.4 million and $4.5 million, respectively.

Teknova capitalizes interest on funds borrowed to finance certain of its capital expenditures. Capitalized interest is recorded as part of an asset’s cost and depreciated over the asset’s useful life. Capitalized interest costs were zero and $0.9 million for the years ended December 31, 2024 and 2023, respectively.

There were no indicators of impairment of long-lived assets during the year ended December 31, 2024. In June 2023, the Company identified circumstances that indicated certain of its machinery and equipment may not be fully recoverable. Specifically, these circumstances included changes in the market price of the asset group, continued losses, and an expectation that, more likely than not, the long-lived assets in question would be sold or otherwise disposed of significantly before the end of their previously estimated useful life. The Company reviewed the recoverability of the carrying value of these assets and determined that their carrying value exceeded their fair value. The fair value of these assets was measured employing cost and market approaches, using Level 3 inputs under ASC 820, Fair Value Measurement(ASC 820). Unobservable inputs included salvage value estimates, replacement or reproduction cost estimates, as well as consideration of physical deterioration, and functional and economic obsolescence, where measurable. As a result of this fair value analysis, an impairment charge of $2.2 million was recorded related to these long-lived assets in the quarter ended June 30, 2023. Subsequently, the Company sold these assets during the quarter ended September 30, 2023 at an amount that approximated carrying value after the impairment charges recorded. No additional impairment of long-lived assets was recorded during the year ended December 31, 2023.

Note 7. Leases

The Company leases office space, warehouse and manufacturing space, and equipment. The Company’s lease agreements have remaining lease terms ofone year to 13 years, and some of these leases have renewal and termination options exercisable at the Company’s election. Terms and conditions to extend or terminate such leases are recognized as part of the right-of-use assets and lease liabilities where reasonably certain to be exercised. All of the Company’s leases are operating leases.

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

Cash paid for amounts included in the measurement of the lease liabilities was $2.8 million in each of the years ended December 31, 2024 and 2023. The weighted-average discount rate was 5.0% and the weighted-average remaining lease term was 8.1 years as of December 31, 2024.

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

Note 8. Intangible Assets, Net

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

(1) During the year ended December 31, 2023, a charge of $2.2 million was recorded on our indefinite lived tradename asset as such to reflect the impairment of the value ascribed to the indefinite lived tradename asset.

For each of the years ended December 31, 2024 and 2023 amortization expense was approximately$1.1 million.

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

There was no impairment of the indefinite lived tradename asset during the year ended December 31, 2024. In connection with the Company’s annual budgeting process, during the fourth quarter of 2023 the Company updated its 2024 budget to lower its financial projections in 2024 and beyond. Given the significance of the downward revisions to the Company’s forecast, primarily resulting from adverse industry and market conditions, an impairment test of Teknova’s indefinite lived tradename asset was performed as of December 31, 2023.

The fair value of the tradename was determined using the relief from royalty method. Significant assumptions under this method include forecasted revenues, royalty rate, discount rate, and terminal value. Fair values were determined using Level 3 inputs under ASC 820. Based on the impairment test performed, the Company determined that the Teknova tradename was impaired as of December 31, 2023. As a result, the Company recognized a $2.2 million non-cash impairment charge for the Teknova tradename during the fourth quarter ended December 31, 2023. The impairment charge represented the difference between the estimated fair value of the Company’s tradename and its carrying value. The carrying value of the indefinite lived tradename asset as of December 31, 2024 and 2023 was $10.8 million.

There wasno impairment of definite lived intangible assets during the years ended December 31, 2024 and 2023.

Note 9. Accrued Liabilities

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

On July 8, 2024, the Company entered into a financing agreement with First Insurance Funding for the financing of the Company’s Director and Officers (D&O) liability insurance and related policies. Under the terms of the financing agreement, the Company will pay a total of $0.6 million in premiums, taxes and fees, plus interest at an annual percentage rate of 8.49% in seven monthly separate installment payments commencing on July 25, 2024. During the year ended December 31, 2024, the Company made a down payment on the policy of $0.2 million to the insurer and six monthly installments for an aggregate of $0.3 million to First Insurance Funding. As of December 31, 2024, the Company owed $0.1 million for insurance premiums and accrued interest.

Note 10. Long-Term Debt, Net

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

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

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

The Credit Facility included minimum net revenue requirements that were measured on a trailing twelve-month basis and a minimum cash requirement. Amendment No. 5 reduced the minimum net revenue requirements for future periods up to and including for the twelve months ending December 31, 2024—for example, the Company’s minimum net revenue requirement was reduced for the twelve months ending December 31, 2024, from $42.0 million to $34.0 million. Amendment No. 5 also removed those requirements for the periods ending January 31, 2025 through December 31, 2025, instead requiring that for each applicable twelve-month period ending after December 31, 2024, the Company’s minimum net revenue requirement would be determined by MidCap in its reasonable discretion in consultation with the Company’s senior management and based on financial statements and projections delivered to MidCap in accordance with the financial reporting requirements in the Credit Facility, so long as the minimum net revenue requirements for those periods shall not be less than the greater of (x) the applicable minimum net revenue requirement for the twelve-month period ending on the last day of the immediately preceding month and (y) $34.0 million. In addition, Amendment No. 5 also removed the advance rate for finished goods inventory in the determination of the borrowing base for the Revolver and increased the minimum cash requirement from $9.0 million to $10.0 million. Under the terms of the Credit Facility, cash and cash equivalents as well as short-term investments in U.S. Treasuries were included in the determination of the minimum cash covenant. Finally, Amendment No. 5 conditioned the next borrowing under the Revolver on the Company achieving net revenue for the preceding twelve-month period of at least $38.0 million down from $45.0 million. As a condition to the effectiveness of Amendment No. 5, the Company also issued an equity-classified warrant with a fair value of $0.1 million as described further in “Note 11. Stockholder’s Equity.” This warrant was recorded as additional debt issuance costs, which was being amortized to interest expense over the term of the Credit Facility using the effective interest method.

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

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

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

As of December 31, 2024, the fair value of the Company’s long-term debt approximated its carrying value. The fair value of the Company’s long-term debt was based on observable market inputs (Level 2).

On March 3, 2025, the Company entered into the Second Amended and Restated Credit Agreement (defined in Note 17 below), which amends and restates the Amended and Restated Credit Agreement referred to above.

Note 11. Stockholders’ Equity

On March 8, 2024, as a condition to the effectiveness of Amendment No. 5, the Company issued to MidCap Funding XXVII a warrant to purchase up to an aggregate of 125,000 shares (the Common Warrant) of common stock with an exercise price of $2.9934 per share, subject to adjustment as provided therein.

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

On October 15, 2024, MidCap exercised the Common Warrant in full and the Company issued 65,036 shares of common stock through a cashless exercise in accordance with the conversion terms.

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, 2024,4,826,871 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 afour-year period, pursuant to two different vesting schedules. For initial equity-based awards granted to employees, the first vest is generally a one-year cliff vest, followed by monthly vesting for the final three years. Thereafter, annual equity-based awards granted to employees typically vest monthly over the four-year vest term, except for restricted stock units which vest annually over a four year period. The initial equity-based awards granted tothe Company’s non-employee, independent directors upon appointment to the board of directors will vest over a three-year period, with the first vest being a one-year cliff, followed by monthly vesting over the remaining two years. Thereafter, annual equity-based awards granted to the Company’s non-employee, independent directors will cliff vest after one year from the date of grant.

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 often 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 1 of a given year to provide that the increase forsuch year willbe a lesser number of shares of common stock. Effective January 1, 2025, an additional 2,136,389 new shares became available for issuance under the 2021 Plan.

Stock Options

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

The total intrinsic value of options exercised during the year ended December 31, 2024 and 2023 was $0.1 million and $0.1 million, respectively. The aggregate grant-date fair value of options vested during the year ended December 31, 2024 and 2023, was$2.5 million and $4.7 million, respectively.

Restricted Stock Units

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

The aggregate grant-date fair value of restricted stock units vested during the year ended December 31, 2024 and 2023, was$0.3 million and $0.2 million, respectively.

Employee Stock Purchase Plan

In June 2021, the Company’s board of directors and the Company’s stockholders, respectively, approved the Company’s 2021 Employee Stock Purchase Plan (the ESPP), which became effective in connection with the IPO. At December 31, 2024,887,119 sharesof the Company’s common stock remain available for issuance under the ESPP. The number of shares of the Company’s common stock that will be reserved for issuance will automatically increase on January 1 of each year for a period often years, beginning on January 1, 2022, and continuing through January 1, 2031, by the lesser of (i)1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii)319,911 shares (subject to adjustments for stock splits, dividends, combinations of shares, exchanges of shares, and other “Capitalization Adjustments,” as defined in the ESPP), except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). Effective January 1, 2025, an additional 319,911 new shares became available for issuance under the ESPP.

Generally, all regular employees, including executive officers, employed by the Company will be eligible to participate in the ESPP and to contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of the Company’s common stock under the ESPP. Unless otherwise determined by the Company’s board of directors, shares of the Company’s common stock will be purchased for the accounts of employees participating in the Company’s ESPP at a price per share equal to the lesser of (i)85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii)85% of the fair market value of a share of the Company’s common stock on the date of purchase. Offering periods are generally six months long. Beginning on May 15, 2023, offering periods begin on June 1 and December 1 of each year. Prior to this time, offering periods began on May 15 and November 15 of each year.

Valuation of Employee Share-Based Awards

Teknova uses the Black-Scholes option-pricing model to determine the fair value of stock options. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term, expected volatility and fair value of the Company’s common stock, and an assumed risk-free interest rate. The assumptions used in the Black-Scholes option-pricing model were as follows:

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

Fair value of underlying common stock. The fair value of the Company’s common stock is determined by the closing price of its common stock as reported on the Nasdaq Global Marketon the date of grant.

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

Expected term. As the Company does 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.

Dividend yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future. Therefore, the Company uses 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 the Company’s common stock, without the prior consent of the lender.

The weighted average assumptions used in the Black-Scholes option-pricing model were as follows:

Repricing of Outstanding and Unexercised Options

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

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

Summary of Stock-Based Compensation Expense

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

Stock-based compensation expense related to stock options was $3.4 million and $3.7 million for the years ended December 31, 2024 and 2023, respectively. Unrecognized compensation expense related to stock options was $3.2 million at December 31, 2024, which is expected to be recognized as expense over the weighted-average period of 2.77 years.

Stock-based compensation expense related to restricted stock units was $0.2 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively. Unrecognized compensation expense related to restricted stock units was $0.3 million at December 31, 2024, which is expected to be recognized as expense over the weighted-average period of 1.37 years.

During the year ended December 31, 2021, the Company’s board of directors approved an amendment to the outstanding performance-based option to acquire 231,719 sharesof the Company’s common stock previously granted under 2020 Plan, to eliminate the performance-based vesting and provide that such option will vest in 48 equal monthly installments. The stock option modification was measured as the excess of the fair value of the modified option over the fair value of the original option immediately before the modification. The incremental stock-based compensation expense for such stock option modification is approximately $3.5 million, of which $0.9 million of incremental stock-based compensation expense was recognized during each of the years ended December 31, 2024 and 2023, ingeneral and administrative expenses in the accompanying financial statements. Additionally, in January 2019, the Company granted 284,682 performance-based options that vest upon a change of control. As of December 31, 2024, these options were not considered probable of vesting. The Company had unrecognized compensation expense of approximately $0.5 million at December 31, 2024, relating to these options.

Total stock-based compensation expense related to the ESPP was not significant and $0.1 million for the years ended December 31, 2024 and 2023, respectively. Total compensation cost related to the ESPP not yet recognized is also not significant. As of December 31, 2024, an insignificant amount has been withheld on behalf of employees for a future purchase under the ESPP. The Company issued 88,926 and 148,102 shares of common stock under the ESPP during the years ended December 31, 2024 and 2023, respectively.

Note 13. Income Taxes

Teknova’s benefit from income taxes consist of the following (in thousands):

A reconciliation of the statutory tax rate to the Company’s effective tax rate was as follows:

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due, plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either deductible or taxable when the assets and liabilitiesare recovered or settled. The Company’s component of net deferred tax liability and assets consist of the following (in thousands):

As of the end of December 31, 2024, Teknova has federal and state net operating loss carryforwards (NOLs) of $75.3 million and $69.2 million, respectively. The federal NOLs will carryforward indefinitely but are subject to an 80% taxable income limitation. The state NOLs begin to expire in 2036. As of December 31, 2024, the Company had federal research and development tax credit carryforwards of $0.6 million, which will begin to expire in 2036 and a state research and development tax credit carryforward of $0.2 million and carry forward indefinitely. NOLs and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs and tax credits that the Company can utilize annually to offset future taxable income or tax liabilities.

For the years ended December 31, 2024 and 2023, the Company recorded a net increase in valuation allo wances of $5.7 million and $9.7 million, respectively, comprised primarily of an increase of valuation allowance on certain NOLs being carried forward which are not expected to be realizable. Valuation allowances are determined based on management’s assessment of its deferred tax assets that are more likely than not to be realized.

The Company had unrecognized tax benefits of $0.1 million and $0.1 million at December 31, 2024 and 2023, respectively. In connection with FASB’s Accounting for Uncertainty in Income Taxes, the Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not expect to recognize any unrecognized tax benefits over the next twelve months. Consequently, the Company hadnot accrued interest or penalties related to uncertain tax positions as of the end of December 31, 2024 or 2023.

Teknova files income tax returns in the U.S. federal jurisdiction and various states. The Company is no longer subject to U.S. federal income tax examinations for tax years prior to 2021. The Company is no longer subject to state income tax examinations for tax years prior to 2020. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state income tax purposes. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.

Note 14. Net Loss Per Share

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

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

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

Note 15. Other Financial Information

The change in the allowance for credit losses was as follows:

The change in the inventory reserve was as follows:

The change in the income tax valuation allowance was as follows:

The change in unrecognized tax benefits were as follows:

Note 16. Contingencies

From time to time, we may become involved in lawsuits and other claims arising from our ordinary course of business. The Company regularly evaluates its exposure to threatened or pending litigation and other business contingencies. Because of the uncertainties related to the amount of loss from litigation and other business contingencies, the recording of losses relating to such exposures requires significant judgment about the potential range of outcomes. We establish loss provisions for matters in which losses are probable and can be reasonably estimated. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, the Company will disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or disclose that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter. As additional information about current or future litigation or other contingencies becomes available, the Company will assess whether adjustments should be made to legal accruals.

In August 2023, a former Teknova employee filed a claim with the California Labor and Workforce Development Agency alleging various causes of action under California’s labor, wage, and hour laws. The plaintiff generally alleged that Teknova did not appropriately calculate and pay meal break premiums and otherwise failed to calculate and pay appropriate overtime wages or bonuses to certain of its California non-exempt employees. As of December 31, 2023, the Company had accrued its best estimate of potential loss related to a possible settlement of the claims of the former employee and other employees who may assert similar claims, in the amount of $0.3 million, which is included within “Accrued liabilities” on the Balance Sheet. On June 6, 2024, a mediation took place, in the course of which Teknova agreed to settle the plaintiff’s claims for $0.4 million (the Settlement), resulting in an incremental accrual of $0.1 million during the year ended December 31, 2024. Because the plaintiff brought his claims on behalf of himself as an individual and as a representative of a purported class of others similarly situated, a court must approve the Settlement before Teknova will pay any amounts pursuant to the Settlement. As of December 31, 2024, the Company had therefore accrued $0.4 million within “Accrued liabilities” on the Balance Sheet.

Note 17. Subsequent Events

On March 3, 2025, the Company entered into the Second Amended and Restated Credit and Security Agreement (Term Loan) as borrower, with MidCap, as agent and lender, and the additional lenders from time to time party thereto (the Second Amended and Restated Term Loan Credit Agreement) and the Second 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 Second Amended and Restated Revolving Loan Credit Agreement, together with the Second Amended and Restated Term Loan Credit Agreement, the Second Amended and Restated Credit Agreement). The Second Amended and Restated Credit Agreement amends and restates that certain Amended and Restated Credit Agreement (defined in Note 10 above).

The Second Amended and Restated Credit Agreement provides for a $28.245 million credit facility consisting of a $23.245 million senior secured term loan (Amended Term Loan) and a $5.0 million working capital facility (Amended Revolver). The Amended Term Loan consists of the $12.135 million balance outstanding under the previous term loan, plus an additional $1.110 million related to the exit fee that would otherwise have been due upon closing of the Second and Amended Restated Term Loan Credit Agreement, as well as an additional tranche of $10.0 million that may become available for use in an acquisition, with MidCap’s consent. The maximum loan amount under the Amended Revolver is $5.0 million, with borrowings limited in accordance with a borrowing base calculation, based solely on eligible accounts receivable.

The interest on the Amended Term Loan is based on the forward-looking one-month term Secured Overnight Financing Rate adjusted upward by 0.10% (Term SOFR), plus an applicable margin of 6.45%, subject to a Term SOFR floor of 3.75%. If any advance under the Amended Term Loan is prepaid at any time, a prepayment fee is charged based on the amount being prepaid and an applicable percentage amount, such as 4%, 3%, or 1%, based on the date the prepayment is made. Interest on an outstanding balance under the Amended Revolver is payable monthly in arrears at an annual rate of Term SOFR plus an applicable margin of 4.00%, subject to a Term SOFR floor of 3.75%.

The Second Amended and Restated Credit Agreement includes minimum net revenue requirements that are measured on a trailing twelve-month basis and a minimum cash requirement throughout the term of the Second Amended and Restated Credit Agreement. For example, the Company’s minimum net revenue requirement for the twelve months ending December 31, 2025, is $39.0 million. The minimum cash requirement is $8.0 million, which includes cash and cash equivalents as well as short-term investments in U.S. Treasuries, under the terms of the Second Amended and Restated Credit Agreement.

The maturity date of the Second Amended and Restated Credit Agreement is March 1, 2030, with principal repayments beginning on April 1, 2028. 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, the Company will pay an exit fee in an amount equal to 5.0% of the total aggregate principal amount of term loans made pursuant to the Second Amended and Restated Term Loan Credit Agreement as of such date.