What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-18 compared with 2023-03-20 · 252 added, 297 removed, 730 unchanged (43% of the section changed)

7 unchanged sentences

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2022, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, due to the material weakness in our internal control over financial reporting described below.

Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

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

Management's Report on Internal Control over Financial Reporting

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Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

On November 13, 2022, management and the audit committee of our board of directors determined that we made certain errors in revenue resulting from erroneous and duplicate billings related to changes in billing practices.

errors were due to the inadequate design and implementation and precision of internal controls and procedures to evaluate and monitor the accounting for revenue recognition.

As of December 31, 2023, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in

Internal Control-Integrated Framework (2013 framework) .

Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Remediation of Previously Disclosed Material Weaknesses

On November 13, 2022, management and the Audit Committee determined that we made certain errors in revenue resulting from erroneous and duplicate billings related to changes in billing practices.

The errors were due to the inadequate design, implementation and precision of internal controls and procedures to evaluate and monitor the accounting for revenue recognition.

As a result, revenue and accounts receivable were overstated and other liabilities was understated for the quarter and year to date periods ended June 30, 2022.

We concluded that these were material errors in the financial statements requiring a restatement of the Form 10-Q for the three and six months ended June 30, 2022.

Accordingly, management has determined that this control deficiency constituted a material weakness and, as a result, management has concluded that, as of December 31, 2022, our internal control over financial reporting was not effective based on the criteria in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Remediation Plan to Address the Material Weaknesses

Management is actively engaged in the implementation of, remediation efforts to address the material weakness.

The remediation plan includes:

(i) evaluating the staffing level, skills and qualification of accounting department personnel, (ii) enhancement of our existing control structure and processes for revenue recognition and (iii) improving the detailed review process of our revenue recognition models.

The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Accordingly, management determined that this control deficiency constituted a material weakness as of December 31, 2022.

In response to the material weaknesses, and as previously disclosed in Item 9A of our annual report on Form 10-K for the year ended December 31, 2022, we implemented a remediation plan which included, but was not limited to, evaluating the staffing level, skills and qualification of accounting department personnel, enhancement of our existing control structure and processes for revenue recognition and improving the detailed review process of our revenue recognition models.

The enhancements made to our control environment were in place as of December 31, 2023, and based on the evaluation of relevant internal controls, management has concluded that the material weaknesses previously identified have been remediated as of December 31, 2023.

Attestation Report of the Registered Public Accounting Firm

1 unchanged sentence

Changes in Internal Control Over Financial Reporting

Other than the material weakness discussed above, there have been no changes in our internal control over financial reporting during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the remediation of the material weakness discussed above, there have been no changes in our internal control over financial reporting during the three months ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls and Procedures

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Principal Accountant Fees and Services.

Our independent public accounting firm is BDO USA, LLP, San Diego, California, PCAOB ID # 243 .

Our independent registered public accounting firm is BDO USA, P.C., San Diego, California, PCAOB ID # 243 .

The information required by this item is incorporated herein by reference to our Proxy Statement with respect to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

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(2) All financial statements

The financial statements of Exagen Inc., together with the report thereon of BDO USA, LLP, an independent registered public accounting firm, are included in this Annual Report on Form 10-K beginning on page F-2.

The financial statements of Exagen Inc., together with the report thereon of BDO USA, P.C., an independent registered public accounting firm, are included in this Annual Report on Form 10-K beginning on page F-2.

(3) Financial statement schedules

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8-K 001-39049 3.1 3/22/2021

3.3 Amended and Restated Bylaws, dated January 19, 2023.

3.3 A mendment to A mended and Restated Bylaws, dated January 19, 2023.

8-K 001-39049 3.1 1/23/2023

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10-Q 001-39049 4.5 8/9/2021

4.8 Description of Securities .

10.1# Exagen Corporation 2002 Stock Option Plan, as amended, and form of option agreement thereunder.

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S-1/A 333-233446 10.5 9/9/2019

10.7† License Agreement, dated September 13, 2007, by and between Prometheus Laboratories Inc.

and the Company (as successor in interest to Proprius, Inc.).

S-1/A 333-233446 10.6 9/9/2019

10.8† First Amendment to License Agreement, dated October 23, 2013, by and between Prometheus Laboratories Inc.

and the Company (as successor in interest to Cypress Bioscience, Inc.).

S-1/A 333-233446 10.7 9/9/2019

10.9 Letter Agreement, dated September 28, 2021, by and between the Company and Prometheus Laboratories Inc.

10-Q 001-39049 10.6 11/10/2021

10.7 † Asset Purchase Agreement, dated October 8, 2010, by and between Cypress Bioscience, Inc., Proprius, Inc.

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S-1/A 333-233446 10.23 9/9/2019

10.23† Co-Promotion Agreement, dated December 10, 2018, by and between Janssen Biotech, Inc.

and the Company.

S-1/A 333-233446 10.24 9/9/2019

10.24† Amendment #1 to Co-Promotion Agreement, dated January 1, 2019 by and between Janssen Biotech, Inc.

and the Company.

10-Q 001-39049 10.1 7/28/2020

10.25† Amendment #2 to Co-Promotion Agreement, dated June 18, 2020 by and between Janssen Biotech, Inc.

and the Company.

10-Q 001-39049 10.2 7/28/2020

10.26† Amendment #3 to Co-Promotion Agreement, dated December 23, 2020 by and between Janssen Biotech, Inc.

and the Company.

10-K 001-39049 10.25 3/16/2021

10.27† Amendment #4 to Co-Promotion Agreement, dated June 30, 2021 by and between Janssen Biotech, Inc.

and the Company.

10-Q 001-39049 10.1 8/9/2021

10.20 Standard Industrial/Commercial Multi-Tenant Lease, dated January 13, 2012, by and between RGS Properties and the Company.

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8-K 001-39049 10.1 12/5/2022

Third Amendment to Loan and Security Agreement dated April 28, 2023, by and among Innovatus Life Sciences Lending I, LP, other lenders and the Company.

8-K 001-39049 10.1 5/4/2023

10.51 Assignment and Assumption Agreement, by and among Liberty Vista, L.P., Mindera Corporation and the Company.

10-Q 001-39049 10.1 11/13/2023

10.52 Consulting Agreement, dated as of December 6, 2023, by and between the Company and Mark Hazeltine.

8-K 001-39049 10.1 12/11/2023

23.1 Consent of Independent Registered Public Accounting Firm.

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Section 1350, As Adopted Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.

97.1# Exagen Inc.

Clawback Policy.

10-Q 001-39049 10.2 11/13/2023

101.SCH XBRL Taxonomy Extension Schema Document.

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† Portions of this exhibit (indicated by asterisks) have been omitted for confidentiality purposes.

Certain schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

Copies of the omitted schedules will be furnished to the SEC upon request.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Kamal Adawi (Principal Financial and Accounting Officer)

Executive Chairperson of the Board March 20, 2023

Executive Chairman of the Board March 18, 2024

/s/ Brian Birk Director March 18, 2024

1 unchanged sentence

Johnson Director March 18, 2024

/s/ Paul Kim Director March 18, 2024

/s/ Ebetuel Pallares, Ph.D.

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/s/ Frank Stokes Director March 18, 2024

/s/ James L.L.

Tullis Director March 20, 2023

Index to Financial Statements

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 5 to the financial statements, effective January 1, 2022, the Company adopted Accounting Standards Codification Topic 842, Leases .

Basis for Opinion

12 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2017.

10 unchanged sentences

Operating lease right-of-use assets 3,286 4,885

Goodwill — 5,506

Other assets 616 528

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Non-current operating lease liabilities 2,760 4,493

Deferred tax liabilities — 306

Other non-current liabilities 357 867

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Stockholders' equity:

Preferred stock, $ 0.001 par value;

Preferred stock, $ 0.001 par value per share;

10,000,000 shares authorized, no shares issued or outstanding at December 31, 2023 and December 31, 2022

Common stock, $ 0.001 par value;

Common stock, $ 0.001 par value per share;

200,000,000 shares authorized at December 31, 2023 and December 31, 2022;

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Loss before income taxes ( 23,656 ) ( 47,669 )

Income tax expense 282 ( 175 )

Income tax (expense) benefit ( 33 ) 282

Net loss $ ( 23,689 ) $ ( 47,387 )

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Balances at December 31, 2021 16,164,994 $ 16 $ 293,060 $ ( 208,140 ) $ 84,936

Issuance of stock in public offering, net of issuance costs of $ 4,435

4,255,000 4 64,705 — 64,709

Retirement of common stock in exchange for common stock warrant ( 804,951 ) ( 1 ) ( 12,774 ) — ( 12,775 )

Issuance of common stock warrant in exchange for retirement of common stock — — 12,775 — 12,775

Issuance of stock from vested restricted stock units and payment of employees' taxes 64,064 — ( 239 ) — ( 239 )

Exercise of stock options 245,186 1 60 — 61

1 unchanged sentence

Stock-based compensation — — 4,704 — 4,704

Exercise of common stock warrants 17,719 — 32 — 32

Net loss — — — ( 47,387 ) ( 47,387 )

Balances at December 31, 2022 16,549,984 17 297,970 ( 255,527 ) 42,460

Issuance of stock from vested restricted stock units and payment of employees' taxes 64,064 — ( 239 ) — ( 239 )

Issuance of stock from vested restricted stock units 273,042 — — — —

Exercise of stock options 93,335 — 27 — 27

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Deferred income taxes — ( 306 )

Loss on disposal of assets 189 —

Loss on lease assignment 1,470 —

Non-cash lease expense 939 967

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Purchases of property and equipment ( 828 ) ( 4,318 )

Purchase of other assets — ( 50 )

Proceeds from disposal of property and equipment 24 —

Net cash used in investing activities ( 804 ) ( 4,318 )

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Proceeds from common stock issued under Employee Stock Purchase Plan 279 385

Proceeds from exercise of common stock warrants — 32

Principal payment on finance lease obligations ( 697 ) ( 667 )

Principal payment on note payable obligations ( 241 ) ( 29 )

Proceeds from the issuance of common stock in public offering, gross — 69,144

Payment of issuance costs related to public offering — ( 4,407 )

Payments of deferred offering costs — ( 40 )

Net cash (used in) provided by financing activities ( 489 ) 64,683

Principal payment on long-term debt ( 10,000 ) —

Net cash used in financing activities ( 10,632 ) ( 489 )

Net change in cash, cash equivalents and restricted cash ( 25,898 ) ( 36,951 )

7 unchanged sentences

Costs incurred, but not paid, in connection with capital expenditures $ 66 $ 182

Deferred offering costs reclassified to equity $ — $ 28

The accompanying notes are an integral part of these financial statements

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Description of Business

(the Company) is a commercial-stage diagnostics company dedicated to helping patients suffering from debilitating and chronic autoimmune diseases by enabling timely differential diagnosis and optimizing therapeutic intervention.

(the Company) is a commercial-stage diagnostics company which exists to provide clarity in autoimmune disease decision making with the goal of improving patients' clinical outcomes.

The Company has incurred recurring losses and negative cash flows from operating activities since inception.

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Actual results could materially differ from those estimates.

Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to revenue recognition, the estimated incremental borrowing rate for the determination of the Company's operating lease right-of-use (ROU) assets, the recoverability of its long-lived assets and the goodwill impairment test.

Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to revenue recognition, the estimated incremental borrowing rate for the determination of the Company's operating lease right-of-use (ROU) assets and the recoverability of its long-lived assets and net deferred tax assets (and related valuation allowance).

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

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Such deposits may, at times, exceed federally insured limits.

We have not experienced any losses on our cash or cash equivalents.

The Company has not experienced any losses on its cash or cash equivalents.

Significant payors and customers are those which represent more than 10% of the Company's total revenue or accounts receivable balance at each respective balance sheet date.

For each significant payor and customer,

revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable are as follows:

For each significant payor and customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable are as follows:

Year Ended December 31,

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Medicare Advantage 17 % 15 %

Blue Shield * 12 %

* Less than 10%.

Accounts Receivable

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Medicare Advantage 16 % 13 %

Blue Shield * 19 %

United Healthcare * 18 %

* Less than 10%.

For the years ended December 31, 2022 and 2021, approximately 84 % and 81 % of the Company's revenue was related to the AVISE ® CTD test, respectively.

For the years ended December 31, 2023 and 2022, approximately 88 % and 84 %, respectively, of the Company's revenue was related to the AVISE ® CTD test.

The Company is dependent on key suppliers for certain laboratory materials.

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Other(2) 612 973

Janssen (SIMPONI ® )

Total revenue $ 52,548 $ 45,563

2 unchanged sentences

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly-liquid investments purchased with a remaining maturity date upon acquisition of three months or less to be cash equivalents and are stated at cost, which approximates fair value.

The Company has an arrangement with a financial institution with which it has an existing banking relationship whereby in exchange for the issuance of corporate credit cards, the Company agreed to obtain a certificate of

deposit with this financial institution as collateral for the balances borrowed on these credit cards ($ 0.2 million and $ 0.1 million at December 31, 2022 and 2021, respectively).

The Company considers all highly-liquid investments purchased with a remaining maturity date of three months or less upon acquisition to be cash equivalents.

These investments are stated at cost, which approximates fair value.

The Company has an arrangement with a financial institution with which it has an existing banking relationship, whereby in exchange for the issuance of corporate credit cards, the Company agreed to obtain a certificate of deposit with this financial institution in the amount of $ 0.2 million as collateral for the balances borrowed on these cards.

The Company has classified the value of this certificate of deposit (including all interest earned thereon) within other assets in the accompanying balance sheets.

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Long-lived Assets

The Company’s long-lived assets are comprised principally of its property and equipment and operating lease assets (see Note 5).

We amortize all finite lived intangible assets over their respective estimated useful lives.

The Company’s long-lived assets are comprised principally of its property and equipment and operating lease assets.

The Company amortizes all finite lived intangible assets over their respective estimated useful lives.

Operating lease assets are amortized over the term of the leases.

In considering whether long-lived assets are impaired, we combine our intangible assets and other long-lived assets (excluding goodwill), into groupings, a determination which we principally make on the basis of whether the assets are specific to a particular test offered by us or technology we are developing.

If the Company identifies a change in the circumstances related to its long-lived assets, such as property and equipment and intangible assets (other than goodwill), that indicates the carrying value of any such asset may not be recoverable, the Company will perform an impairment analysis.

A long-lived asset (other than goodwill) is deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount.

In considering whether long-lived assets are impaired, the Company combines its intangible assets and other long-lived assets into groupings, a determination which is made principally on the basis of whether the assets are specific to a particular test offered or technology being developed.

If the Company identifies a change in the circumstances related to its long-lived assets that indicates the carrying value of any such asset may not be recoverable, the Company will perform an impairment analysis.

A long-lived asset is deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount.

Management’s estimates of future cash flows are impacted by projected test volume and levels of reimbursement, as well as expectations related to the future cost structure of the entity.

Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense.

During the year ended December 31, 2022, the Company recorded an impairment charge to fixed assets totaling $ 0.4 million (see Note 3).

The impairment charge was classified within research and development expenses in the accompanying statements of operations.

Goodwill is reviewed for impairment annually (during the fourth quarter) or more frequently if indicators of impairment exist.

As the Company operates in a single operating segment and reporting unit, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative assessment.

If, after assessing qualitative factors, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative assessment is unnecessary.

If deemed necessary, a quantitative assessment compares the fair value of the reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired;

otherwise, an impairment loss is recorded.

During the year ended December 31, 2022, the Company recorded an impairment charge to goodwill totaling $ 5.5 million (see Note 3).

The Company operates in a single operating segment and reporting unit for the measurement of goodwill.

Goodwill was reviewed for impairment annually (during the fourth quarter) or more frequently if indicators of impairment existed.

The Company would first assess qualitative factors to determine whether it was more likely than not that the fair value of the reporting unit was less than its carrying amount as a basis for determining whether it was necessary to perform a quantitative assessment.

If, after assessing qualitative factors, the Company determined it was not more likely than not that the fair value of a reporting unit was less than its carrying amount, then performing a quantitative assessment was unnecessary.

If deemed necessary, a quantitative assessment compared the fair value of the reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeded its carrying amount, goodwill was not considered impaired;

otherwise, an impairment loss was recorded.

The Company categorizes leases at their commencement as either operating or finance leases.

Effective January 1, 2022 upon the adoption of Accounting Standards Codification (ASC) 842, the Company recognizes operating lease ROU assets and operating lease liabilities for each lease arrangement identified.

The Company recognizes operating lease ROU assets and operating lease liabilities for each lease arrangement identified.

Lease liabilities are recorded at the present value of future lease payments discounted using the Company's incremental borrowing rate for the lease established at the commencement date.

The incremental borrowing rate is the rate of interest the Company would have to pay to borrow, on a collateralized basis over a similar term and in a similar economic environment, an amount equal to the total lease payments.

The Company primarily considers industry data, its credit rating and the lease term to determine its incremental borrowing rate.

ROU assets are measured at the amount of the lease liability plus any initial direct costs, less any lease incentives received before commencement.

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Payments made prior to the completion of clinical study services are capitalized as a prepaid expense.

The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.

The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the

services rendered.

Expenses associated with clinical study activities are recorded in research and development expenses in the accompanying statement of operations.

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The parties that pay for these services (each, a payor) consist of commercial payors (healthcare insurers), government payors (primarily Medicare and Medicaid), client payors (i.e., hospitals, other laboratories, etc.) and patient self-pay.

The Company recognizes revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606) and follows a five-step process to determine the amount and timing of revenue recognized:

(1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligation is satisfied.

The Company's service is a single performance obligation that is completed upon the delivery of test results to the prescribing physician which triggers revenue recognition.

Payors are billed at the Company's list price.

Payors are generally billed at the Company's list price, unless a separate pricing contract is in place.

Net revenues recognized consist of amounts billed net of allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payors.

The process for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation.

The Company follows a standard process, which considers historical denial and collection experience, insurance reimbursement policies and other factors, to estimate allowances and implicit price concessions, recording adjustments in the current period as changes in estimates occur.

Adjustments are recorded in the current period as changes in estimates occur.

Further adjustments to the allowances, based on actual receipts, are recorded upon settlement.

Included in revenues for the years ended December 31, 2022 and 2021 was a net revenue decrease of $ 2.4 million and a net revenue increase of $ 0.7 million, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.

Included in revenues for the years ended December 31, 2023 and 2022 was a net revenue increase of $ 3.4 million and a net revenue decrease of $ 2.4 million, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.

The transaction price is estimated using an expected value method on a portfolio basis.

7 unchanged sentences

The estimated expected refunds are accrued as a liability on the Company’s balance sheet.

Collection of the Company's net revenues from payors is normally a function of providing complete and correct billing information to the healthcare insurers and generally occurs within 30 to 90 days of billing.

Collection of the Company's net revenues from payors is normally a function of providing complete and correct billing information, along with any requested medical or other claims-related information to the healthcare insurers.

This generally occurs within 30 to 90 days of billing, however, the amount and timing of any reimbursements or collections for our billed tests may vary by payor and other circumstances.

Contracts do not contain significant financing components based on the typical period of time between performance of services and collection of consideration.

Janssen Promotion Agreement

In December 2018, the Company entered into a co-promotion agreement (as amended from time to time, the Janssen Agreement) with Janssen Biotech, Inc.

(Janssen) to co-promote SIMPONI ® in the United States.

In August 2021, the Company and Janssen mutually agreed to terminate the Janssen Agreement, effective August 31, 2021.

Pursuant to the Janssen Agreement, as amended, the Company was responsible for the costs associated with its sales force over the course of such co-promotion.

Janssen was responsible for all other aspects of the commercialization of SIMPONI ® under the Janssen Agreement.

In exchange for the Company's sales and co-promotional services, the Company was entitled to a quarterly tiered promotion fee based on the incremental increase in total prescribed units of SIMPONI ® for that quarter over a predetermined baseline.

The Company's obligations relating to sales and co-promotion services for SIMPONI ® were a series of single performance obligations since Janssen simultaneously received and consumed benefits provided by the Company's sales and co-promotional services.

The method for measuring progress towards satisfying the performance obligations was based on prescribed units in excess of the contractual baseline at the contractual rate earned per unit.

The Company recognized no co-promotion revenue and $ 1.2 million in co-promotion revenue during the years ended December 31, 2022 and December 31, 2021, respectively.

The related expenses for marketing SIMPONI ® were included in selling, general and administrative expenses and were expensed as incurred.

Pursuant to the terms of the termination, the Company received $ 0.6 million in consideration (which was earned in the year ended December 31, 2021) and the Company was restricted until May 31, 2022 from promoting any other biologic or Janus kinase inhibitor used for the treatment of indications covered by the Janssen Agreement without first obtaining Janssen's written consent.

The restriction no longer applies.

Accounts Receivable and Allowance for Credit Losses

We accrue an allowance for credit losses against our accounts receivable based on management’s current estimate of amounts that will not be collected.

Management’s estimates are typically based on historical loss information adjusted for current conditions.

We generally do not perform evaluations of the financial condition of our customers and generally do not require collateral.

The allowance for credit losses was zero as of December 31, 2023.

There was no allowance for credit losses recognized as of December 31, 2022.

Adjustments for implicit price concessions attributable to variable consideration, as discussed above, are incorporated into the measurement of the accounts receivable balances and are not part of the allowance for credit losses.

Accounts receivable was $ 6.6 million, $ 6.1 million, $ 9.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Research and Development

Costs associated with research and development activities are expensed as incurred and include, but are not limited to, personnel-related expenses, including stock-based compensation expense, materials, laboratory supplies, consulting costs, costs associated with setting up and conducting clinical studies and allocated overhead including rent and utilities.

Costs associated with research and development activities are expensed as incurred and include, but are not limited to, personnel-related expenses, including stock-based compensation expense;

laboratory supplies;

consulting costs;

costs associated with setting up and conducting clinical studies;

depreciation;

amortization and allocated overhead, including rent and utilities.

Advertising and Marketing Costs

2 unchanged sentences

Shipping and Handling Costs

Costs incurred for shipping and handling are included in costs of revenue in the accompanying statements of operations and totaled approximately $ 2.7 million and $ 2.1 million, for the years ended December 31, 2022 and 2021, respectively.

Costs incurred for shipping and handling are included in costs of revenue in the accompanying statements of operations and were approximately $ 2.5 million and $ 2.7 million for the years ended December 31, 2023 and 2022, respectively.

Stock-Based Compensation

4 unchanged sentences

Volatility is based on the Company's historical calculated volatility since being publicly traded.

The weighted-average expected term of options was calculated using the simplified method.

The risk-free interest rate for periods within the contractual term of the option is based

The weighted-average expected term of options was calculated using the simplified method, as we have concluded that our stock option exercise history does not provide a reasonable basis upon which to estimate the expected term.

The risk-free interest rate for periods within the contractual term of the option is based on the U.S.

Treasury yield in effect at the time of grant.

The dividend yield is zero , as the Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

The fair value of each restricted stock unit is determined on the grant date using the closing price of the Company's common stock on that date.

The Company's restricted stock units generally vest in equal annual installments over four years from the date of grant or, for grants to new hires, date of hire.

Vesting of restricted stock units is subject to the holder's continued service with the Company.

The Company issues new shares to satisfy restricted stock units upon vesting.

The fair value of each restricted stock unit (RSU) is determined on the grant date using the closing price of the Company's common stock on that date.

The Company's RSUs generally vest in equal annual installments over four years from the date of grant or, for grants to new hires, date of hire.

Vesting of RSUs is subject to the holder's continued service with the Company.

The Company issues new shares to satisfy RSUs upon vesting.

Comprehensive Loss

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Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized as an expense in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized.

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Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

The weighted-average number of shares used to compute basic and diluted shares includes shares issuable upon the exercise of pre-funded warrants at a nominal price.

Potentially dilutive common stock equivalents are comprised of warrants for the purchase of common stock, options and restricted stock units outstanding under the Company's 2019 Incentive Award Plan (the 2019 Plan) and shares of the Company's common stock pursuant to the ESPP.

For the years ended December 31, 2022 and 2021, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as the inclusion of the potentially dilutive securities would be antidilutive.

Potentially dilutive common stock equivalents are comprised of warrants for the purchase of common stock, stock options, RSUs outstanding under the Company's 2019 Incentive Award Plan (the 2019 Plan) and shares of the Company's common stock pursuant to the ESPP.

For each of the years ended December 31, 2023 and 2022, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as the inclusion of the potentially dilutive securities would be antidilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares):

Years Ended December 31,

Year Ended December 31,

Warrants to purchase common stock 409,108 409,108

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The Company has elected to use the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company's financial position or results of operations upon adoption.

Unless otherwise discussed, Accounting Standards Updates (ASU) not included in the Company’s disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on the Company’s financial statements or disclosures.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires public entities to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and details of how the CODM uses financial reporting to assess the performance of a segment.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

This ASU will likely result in additional required disclosure when adopted.

The Company is currently evaluating the provisions of this ASU and the impact on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which requires additional income tax disclosures in the rate reconciliation table for federal, state and foreign income taxes, in addition to more details about the reconciling items in some categories

when items meet a certain quantitative threshold.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact of this standard, but does not expect that it will have a material impact on its financial statements.

Recently Adopted Accounting Standards

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842).

The new topic supersedes Topic 840, Leases , and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements.

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 , which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU 2018-11, Leases:

Targeted Improvements , which was issued to provide relief to companies from restating comparative periods.

On January 1, 2022, the Company adopted ASU 2016-12, using the modified retrospective transition method.

Periods prior to January 1, 2022 have not been restated for the adoption of ASC 842 and continue to reflect the accounting treatment of leases in accordance with the prior lease accounting guidance, ASC 840, Leases .

The Company adopted the new lease standard using a cumulative effect to accumulated deficit and there was no impact to accumulated deficit upon adoption.

The Company elected the package of practical expedients, which among other things allowed the Company to carry forward its historical lease classification.

As part of the adoption, the Company recorded operating lease liabilities of $ 6.4 million, operating lease ROU assets of $ 5.9 million, adjusted for deferred rent and lease incentive obligations of $ 0.5 million previously included in other non-current liabilities and accrued and other current liabilities, pertaining to its office and laboratory space operating leases.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which requires the measurement of expected credit losses for financial instruments carried at amortized cost, such as accounts receivable, held at the reporting date based on historical experience, current conditions and reasonable forecasts.

Measurement of Credit Losses on Financial Instruments , which requires the measurement of expected credit losses (based on historical experience, current conditions and reasonable forecasts) for financial instruments (such as accounts receivable) held at the reporting date which are carried at amortized cost.

The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financing Instruments-Credit Losses , which included an amendment of the effective date for nonpublic entities.

For non-emerging growth companies, ASU 2016-13 is effective for fiscal years beginning after December 15, 2019.

For emerging growth companies, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company adopted this pronouncement on January 1, 2023 and the impact of the provisions of this standard on its Consolidated Financial Statements is expected to be immaterial.

The Company adopted this pronouncement on January 1, 2023.

The adoption did not have material impact on its financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) .

Accounting for Convertible

Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

Specifically, ASU 2020-06 simplifies accounting for the issuance of convertible instruments by removing major separation models required under current GAAP.

In addition, the ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share (EPS) calculation in certain areas.

ASU 2020-06 will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted, beginning in fiscal years which begin after December 15, 2020, including interim periods within those fiscal years.

The FASB has specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.

The amendment is to be adopted through either a modified retrospective or fully retrospective method of transition.

The Company is currently evaluating the potential impact that the adoption of ASU 2020-06 may have on its consolidated financial statements and related disclosures.

ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.

It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions.

In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation.

The amendments in ASU 2020-06 are effective for smaller reporting companies as defined by the SEC for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Company early adopted ASU 2020-06 as of January 1, 2023.

The adoption did not have an impact on its financial statements.

Other Financial Information

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Prepaid maintenance and insurance contracts 1,860 2,072

Other prepaid and other current assets 236 490

Prepaid and other current assets $ 4,143 $ 3,638

Other prepaid expenses and other current assets 31 236

Prepaid expenses and other current assets $ 4,797 $ 4,143

Property and Equipment

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At December 31, 2023 and 2022, the gross book value of assets under finance leases was $ 2.5 million and $ 2.8 million, respectively, and is classified in "Laboratory equipment" in the table above.

Loss on Lease Assignment

On October 24, 2023, the Company entered into an assignment and assumption (the Assignment and Assumption Agreement) of the Company’s previously executed lease agreement with Liberty Vista, LP (formerly known as Geiger Court, LLC) and Mindera Corporation (Mindera), pursuant to which the Company assigned to Mindera the lease of a building located adjacent to the Company's headquarters in Vista, CA.

Under the terms of the Assignment and Assumption Agreement, Mindera assumed all obligations under the lease, effective October 31, 2023.

As a result of the lease assignment, the Company derecognized the remaining balances related to the associated operating lease ROU asset of $ 0.7 million, operating lease liability of $ 0.8 million and leasehold improvements of $ 1.6 million, resulting in a $ 1.5 million loss on lease assignment.

The loss was classified within selling, general and administrative expenses in the accompanying statements of operations.

Impairment of Long-Lived Assets and Goodwill

During the year ended December 31, 2022, the Company recorded an impairment charge of $ 0.4 million related to previously capitalized equipment used in research and development activities that were halted in the fourth quarter of 2022.

The Company based the fair values of these assets on their anticipated disposal values, which is considered a Level 3 measurement.

The impairment charge was classified within research and development expenses in the accompanying statements of operations.

The Company determined that the sustained decrease in its market capitalization constituted an indicator of impairment and as a result, instead of performing a qualitative test, the Company chose to proceed directly to performing a quantitative test during the fourth quarter.

During the year ended December 31, 2022, the Company also determined that a sustained decrease in its market capitalization constituted an indicator of impairment of goodwill and as a result, instead of performing a qualitative test, the Company chose to proceed directly to performing a quantitative test during the fourth quarter.

The Company determined the fair value of the reporting unit using the discounted cash flow (DCF) method, which is considered a Level 3 measurement.

In applying the DCF

method, cash flows are estimated for a five-year financial forecast developed by management.

In applying the DCF method, cash flows are estimated for a five-year financial forecast developed by management.

A terminal value, which represents the value of additional cash flows into perpetuity, is also calculated.

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Based on this analysis, the carrying value of the reporting unit was in excess of the fair value and the goodwill was fully impaired.

During the year ended December 31, 2022, the Company recorded an impairment charge of $ 5.5 million.

During the year ended December 31, 2022, the Company recorded a goodwill impairment charge of $ 5.5 million.

The following table presents details of the Company's goodwill for the year ended December 31, 2022 (in thousands):

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2017 Term Loan

In September 2017, the Company executed a term loan agreement (the 2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), as amended, pursuant to which the Company has borrowed $ 25 million.

At December 31, 2022, no additional amounts remain available to borrow under the 2017 Term Loan.

In November 2021, the Company executed the Second Amendment to the Loan and Security Agreement (the 2017 Loan Amendment).

The interest rate on all borrowings under the 2017 Loan Amendment is 8.0 %, of which 2.0 % is paid in-kind in the form of additional term loans (PIK Loans) until December of 2024, after which interest accrues at an annual rate of 8.0 %.

The Company has estimated the effective interest rate of this loan to be approximately 8.5 %.

In September 2017, the Company executed a term loan agreement (the 2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), as amended (the Amended Loan Agreement), pursuant to which the Company borrowed $ 25.0 million.

At December 31, 2023, no additional amounts remained available to borrow under the Amended Loan Agreement.

On April 28, 2023, the Company entered into the Amended Loan Agreement.

The Amended Loan Agreement was treated as a modification.

In connection with the Amended Loan Agreement, the Company repaid $ 10.0 million of the principal balance outstanding, for which the prepayment premium was waived.

Pursuant to the Amended Loan Agreement, the interest rate on all borrowings under the Amended Loan Agreement is the sum (the Basic Rate) of (a) the greater of 8.0 % or The Wall Street Journal prime rate (the Prime Rate), plus (b) 2.0 %, which is paid-in-kind in the form of additional term loans (PIK Loans).

Under the Amended Loan Agreement, an amount equal to 1.5 % of the Basic Rate will be payable in-kind and capitalized to the principal amount of the outstanding term loan on a monthly basis until April 1, 2026, after which interest is scheduled to accrue at the Basic Rate.

The maturity date of the loan was extended to December 31, 2026.

The Company estimated the effective interest rate of this loan to be approximately 11.0 % and 8.5 % as of December 31, 2023 and 2022, respectively.

Accrued interest is due and payable monthly, unless the Company elects to pay paid-in-kind interest.

The outstanding principal and accrued interest on the 2017 Loan Amendment will be repaid in twenty-four equal monthly installments commencing in December 2024.

Upon repayment of the final installment under the 2017 Loan Amendment, the Company is required to pay an additional fee of $ 1.0 million.

This obligation is being accreted into interest expense over the term of Loan Amendment using the effective interest method.

The outstanding principal and accrued interest under the Amended Loan Agreement is to be repaid in ten equal monthly installments commencing in April 2026.

Upon repayment of the final installment under the Amended Loan Agreement, the Company is required to pay an additional fee of $ 1.0 million.

This obligation is being accreted into interest expense over the term of the loan using the effective interest method.

For the years ended December 31, 2023 and 2022, the Company issued PIK Loans totaling $ 0.4 million and $ 0.6 million, respectively.

The 2017 Loan Amendment requires a prepayment premium of 2 % of the aggregate outstanding principal.

The prepayment premium decreases by 1 % on each of November 1, 2023 and 2024.

The 2017 Loan Amendment is collateralized by a first priority security interest in substantially all of the Company's assets, including intellectual property.

The affirmative covenants of the 2017 Loan Amendment require that the Company timely file taxes, maintain good standing and government compliance, maintain liability and other insurance, provide prompt notification of significant corporate events, and furnish audited financial statements within 150 days of fiscal year end without qualification as to the scope of the audit or as to going concern and without any other similar qualification.

The affirmative covenants require that the Company achieve a specified level of revenue, as measured quarterly on a rolling twelve-month basis, commencing with the quarter ending December 31, 2022.

The consequences of failing to achieve the performance covenant may be cured if, within sixty days of failing to achieve the performance covenant, the Company issues additional equity securities or subordinated debt with net proceeds sufficient to fund any cash flow deficiency generated from operations, as defined.

The 2017 Loan Amendment requires that the Company maintain certain levels of minimum liquidity and maintains an unrestricted cash balance of $ 2.0 million.

At December 31, 2023, $ 18.2 million in principal and PIK loans are outstanding, all of which is included in borrowings-non-current portion on the accompanying balance sheet.

The Amended Loan Agreement currently requires a prepayment premium of 1 % of the aggregate outstanding principal for any prepayments made prior to November 1, 2024.

The Amended Loan Agreement is collateralized by a first priority security interest in substantially all of the Company's assets, including intellectual property.

The affirmative covenants of the Amended Loan Agreement require that the Company timely file taxes, maintain good standing and government compliance, maintain liability and other insurance, provide prompt notification of significant corporate events, and furnish audited financial statements within 150 days of fiscal year end without qualification as to the scope of the audit or as to going concern and without any other similar qualification.

The affirmative covenants require that the Company achieve a specified level of revenue, as measured quarterly on a rolling twelve-month basis, however the Company is not required to comply with the revenue covenant for any quarter during which it maintains a minimum aggregate cash balance equal to fifty percent of the aggregate principal amount of the Amended Loan Agreement (excluding any capitalized interest paid-in-kind) at all times during such quarter.

The consequences of failing to achieve the performance covenants, when applicable, will be cured if, (i) within thirty days of failing to achieve the performance covenant, the Company submits a new Board approved financial plan to Innovatus under which the Company is expected to break even on a cash flow basis prior to the maturity date, and (ii) within thirty days of the submission of such financial plan, the Company issues additional equity securities or subordinated debt with net proceeds sufficient to fund any cash flow deficiency generated from operations, as defined in the Amended Loan Agreement.

The Amended Loan Agreement requires that the Company maintain certain levels of minimum liquidity and maintains an unrestricted cash balance of $ 2.0 million.

The negative covenants provide, among other things, that without the prior consent of Innovatus, subject to certain exceptions, the Company may not dispose of certain assets, engage in certain business combinations or acquisitions, incur additional indebtedness or encumber any of the Company's property, pay dividends on the Company's capital stock or make prohibited investments.

The Loan Amendment agreement provides that an event of default will occur if, among other triggers, (i) the Company defaults in the payment of any amount payable under the agreement when due, (ii) there occurs any circumstance(s) that could reasonably be expected to result in a material adverse effect on the Company's business, operations or condition, or on the Company's ability to perform its obligations under the agreement, (iii) the Company becomes insolvent, (iv) the Company undergoes a change in control or (v) the Company breaches any negative covenants or certain affirmative covenants in the agreement or, subject to a cure period, otherwise neglects to perform or observe any material item in the agreement.

At December 31, 2022, the Company was in compliance with all covenants of the 2017 Loan Amendment.

Upon an event of default in any of the 2017 Loan Amendment covenants, the repayment of the 2017 Loan Amendment may be accelerated, and the applicable interest rate will be increased by 4.0 % until the default is cured.

Although repayment of the 2017 Loan Amendment can be accelerated under certain circumstances, the Company believes acceleration of this loan is not probable as of the date of these financial statements.

Accordingly, the Company has reflected the amounts of the 2017 Loan Amendment due beyond twelve months of the balance sheet date as non-current.

The Amended Loan Agreement provides that an event of default will occur if, among other triggers, (i) the Company defaults in the payment of any amount payable under the agreement when due, (ii) there occurs any circumstance(s) that could reasonably be expected to result in a material adverse effect on the Company's business, operations or condition, or on the Company's ability to perform its obligations under the agreement, (iii) the Company becomes insolvent, (iv) the Company undergoes a change in control or (v) the Company breaches any negative covenants or certain affirmative covenants in the agreement or, subject to a cure period, otherwise neglects to perform or observe any material item in the agreement.

At December 31, 2023, the Company was in compliance with all covenants of the Amended Loan Agreement.

Upon an event of default in any of the Amended Loan Agreement covenants, the repayment of the 2017 Term Loan may be accelerated, and the applicable interest rate will be increased by 4.0 % until the default is cured.

Although repayment of the 2017 Term Loan can be accelerated under certain circumstances, the Company believes acceleration of this loan is not probable as of the date of these financial statements.

Accordingly, the Company has reflected the amounts of the Third Loan Amendment due beyond twelve months of the balance sheet date as non-current.

2022 Equipment Notes Payable

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At December 31, 2023, the total notes payable balance related to this financed equipment was $ 0.8 million, with $ 0.3 million classified within borrowings-current portion and $ 0.5 million within borrowings-non-current portion, net of discounts and debt issuance costs in the accompanying balance sheets.

At December 31, 2022, the total notes payable balance related to this financed equipment was $ 0.8 million, with $ 0.2 million classified within borrowings-current portion and $ 0.6 million within borrowings-non-current portion, net of discounts and debt issuance costs in the accompanying balance sheets.

The financed equipment is subject to a 5.28 % effective interest rate and will mature on October 1, 2026.

Future Minimum Payments on the Outstanding Borrowings

Future Minimum Payments on Outstanding Borrowings

As of December 31, 2023, future minimum aggregate payments, including interest, for outstanding borrowings are as follows (in thousands):

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Borrowings-non-current portion, net of discounts and debt issuance costs $ 19,231

Commitments and Contingencies

The Company adopted ASC 842, Leases , as of January 1, 2022.

Prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under ASC 840, Leases .

Operating Leases

The Company leases office and laboratory spaces in Vista, California, under leases that expire in April 2027, with an option to extend portions of the leases for additional 5-year periods.

The Company has not included the optional renewal periods in the measurement of the lease liabilities because it is not reasonably certain that the Company will exercise these renewal options.

The Company's lease payments under each of these leases are subject to escalation clauses.

Effective on August 23, 2021, the Company entered into a sub-lease agreement for an additional office space in Carlsbad, California.

The sub-lease commenced in October 2021 and expires in April 2027.

The sub-lease agreement provides for monthly base rent of $ 66,021 which began on October 1, 2021, and such amount increases by approximately 3 % annually beginning October 1, 2022.

The Company determines if a contract contains a lease at inception or modification of a contract.

The Company discounts their lease obligations using its incremental borrowing rate at the commencement date.

The incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

The Company primarily considers industry data, its credit rating and the lease term to determine its incremental borrowing rate.

The Company leases office and laboratory space located in Vista, California.

The lease expires in April 2027, with an option to extend portions of the lease for additional 5-year periods.

The Company has not included the optional renewal periods in the measurement of the lease liability, because it is not reasonably certain that the Company will exercise these renewal options.

The Company's payments under the lease are subject to escalation clauses.

The Company leases additional office space in Carlsbad, California, under a sub-lease which commenced in October 2021 and expires in April 2027.

Monthly base rent under the sub-lease agreement is $ 70,042 .

The monthly base rent increases by approximately 3 % annually, each October 1, through the remainder of the lease term.

Finance Leases

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Operating and finance leases consist of the following (in thousands):

Lease Balance Classification December 31, 2022

Lease Balance Classification 2023 2022

Operating Operating lease right-of-use assets $ 3,286 $ 4,885

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Costs associated with the Company's leases were included in the statements of operations as follows (in thousands):

Lease Cost Year Ended December 31, 2022

Year Ended December 31,

Lease Cost 2023 2022

Operating leases

Operating lease cost (1)

$ 1,463 $ 1,540

Finance lease cost

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Total lease cost $ 2,147 $ 2,299

(1) Includes variable lease cost of $ 165,000 for the year ended December 31, 2022.

(1) Includes variable lease cost of $ 129,000 and $ 165,000 for the years ended December 31, 2023 and 2022, respectively.

Supplemental cash flow information on leases is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities Year Ended December 31, 2022

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities 2023 2022

Operating cash out flows from operating leases $ 1,405 $ 1,262

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Information regarding the weighted-average lease term and weighted average discount rate are as follows:

December 31, 2022

Year Ended December 31,

Weighted-average remaining lease term (years)

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2026 1,315 147

2026 1,584 147

Thereafter 539 29

Total minimum lease payments 4,277 997

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Lease obligations, net of current portion $ 2,760 $ 358

Disclosures Under ASC 840

Minimum annual lease payments under non-cancelable operating lease arrangements as of December 31, 2021 are as follows (in thousands):

Years Ending December 31,

Operating Leases

Thereafter 539

Total minimum lease payments $ 7,927

For the year ended December 31, 2021, rent expense was $ 0.9 million.

Commitments and Contingencies

Acquisition-related liabilities

In connection with the acquisition of the medical diagnostics division of Royalty Pharma Collection Trust (Royalty Pharma) (formerly known as Cypress Bioscience, Inc.) in 2010, the Company was required to pay certain amounts in the event that certain revenue milestones were achieved and upon the first commercial sale of a product associated with this acquisition, for which the obligations no longer exist at December 31, 2022.

In addition, the Company has ongoing royalty payment obligations with Royalty Pharma of 2.5 % on net sales of products which incorporate certain acquired technologies.

Future royalties payable under these arrangements are limited to the lesser of (i) an aggregate of $ 1.2 million (including an upfront payment of $ 0.1 million) and (ii) the total royalties earned through January 1, 2024.

In connection with the acquisition of the medical diagnostics division of Royalty Pharma Collection Trust (Royalty Pharma) (formerly known as Cypress Bioscience, Inc.) in 2010, the Company had royalty payment obligations of 2.5 % on net sales of products which incorporate certain acquired technologies through December 31, 2023.

These obligations no longer exist for products sold after December 31, 2023.

Licensing Agreements

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In addition to the milestone payments required by these agreements, individual license agreements generally provide for ongoing royalty payments ranging from 1.5 % to 7.0 % on net sales of products which incorporate licensed technology, as defined in such agreements.

Royalties are accrued when earned and recorded in costs of revenue in the accompanying statement of operations.

In May 2021, the Company entered into an exclusive license agreement with Allegheny Health Network Research Institute (AHN) to obtain an exclusive license to AHN's patent rights in certain inventions, pursuant to which the Company paid AHN an initial license fee of $ 0.4 million.

In addition, under the terms of the exclusive license agreement, the Company is required to pay the greater of royalties in the low single digits on net sales of diagnostic tests using the assigned patents or a flat annual minimum royalty amount, pending approvals and commercialization.

In November 2021, the Company entered into an exclusive license agreement with Queen Mary University of London (QMUL) to obtain an exclusive license to QMUL's patent rights in certain inventions, pursuant to which the Company paid QMUL an initial license fee of $ 0.4 million.

The Company is obligated to make a one-time payment of $ 0.1 million relating to the first commercial sale of the licensed products.

In addition, after the first 18 months of commercial sales under the terms of the exclusive license agreement, the Company is required to pay royalties in the high single-digits on net sales of testing products using the assigned patents, pending approvals and commercialization.

Supply Agreement

In December 2021, the Company entered into an amended supply agreement with one supplier for reagents which includes minimum annual purchase commitments of $ 6.0 million and $ 6.9 million for the years ended December 31, 2022 and 2023, respectively, with a 15 % annual increase thereafter for unconditional minimum purchase commitments through the year ending December 31, 2025.

Royalties are accrued when incurred and recorded in costs of revenue in the accompanying statements of operations.

Supply Agreements

In December 2021, the Company amended a supply agreement with one supplier for reagents which includes minimum annual purchase commitments of $ 8.0 million and $ 9.2 million for the years ended December 31, 2024 and 2025, respectively.

Collaboration Obligations

In May 2021, the Company entered into a master research collaboration agreement with AHN, pursuant to which the Company is required to pay AHN a collaboration fee of $ 0.4 million for each year during the initial term of the agreement.

Collaboration expenses under the master research collaboration agreement were $ 0.4 million for the year ended December 31, 2022.

Collaboration expenses under the AHN collaboration are included in research and development expenses.

In May 2021, the Company entered into a master research collaboration agreement with Allegheny Health Network Research Institute (AHN), pursuant to which the Company is required to pay AHN a collaboration fee of $ 0.4 million per year.

Collaboration expenses under the master research collaboration agreement were $ 0.3 million for each of the years ended December 31, 2023 and 2022.

Collaboration expenses under the AHN collaboration are included in research and development expenses in the accompanying statements of operations.

Contingencies

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From time to time, the Company may be subject to various legal proceedings that arise in the ordinary course of business activities.

The Company does not believe the outcome of any such matters will have a material effect on its financial position or results of operations.

The Company does not believe the outcome of any such matters as of December 31, 2023 will have a material effect on its financial position or results of operations.

In October 2023, the Company resolved an investigation with the U.S.

Attorney’s Office for the District of Massachusetts that was initiated by a qui tam lawsuit.

Pursuant to a Settlement Agreement, the Company made a single lump-sum remittance to the government in the amount of $ 0.7 million in connection with specimen processing arrangements that Exagen historically had with physicians.

Attorney’s Office dismissed this “covered conduct” in the qui tam lawsuit with prejudice, while non-covered conduct was dismissed without prejudice.

In November 2023 the complaint was unsealed and served on Exagen.

Exagen filed a motion to dismiss the complaint.

In December 2023, the Company's insurance carrier provided reimbursement for certain defense costs the Company incurred in the October 2023 qui tam lawsuit.

In February 2024, the relator filed a motion for leave to amend the complaint.

Exagen opposed this motion, and all motions are still pending.

The Company intends to vigorously defend against the claims being asserted in the complaint.

The Company's participation in federal healthcare programs is not affected by the Settlement Agreement.

Fair Value Measurements

The carrying value of the Company's cash, cash equivalents and restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued and other current liabilities approximate their fair values due to their short-term nature, which are determined to be a Level 1 measurement.

The estimated fair values of the Company's long-term borrowings are determined by Level 2 inputs and are based primarily on quoted market prices for the same or similar issues.

The carrying values of the Company's cash, cash equivalents and restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued and other current liabilities approximate their fair values due to their short-term nature and are considered to be Level 1 measurements.

The estimated fair value of the Company's long-term borrowings is determined by Level 2 inputs and based primarily on quoted market prices for the same or similar issues.

As of December 31, 2023, the Amended Loan Agreement had a carrying value of $ 18.7 million and a fair value of $ 19.7 million.

As of December 31, 2022, the 2017 Term Loan had a carrying value of $ 28.3 million and a fair value of $ 26.9 million.

The estimated fair value of the 2017 Term Loan, which uses Level 2 fair value inputs, was determined based on a discounted cash flow approach using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings.

The recorded value of the Company's long-term borrowings as of December 31, 2021 approximated their fair values as the interest rate and other terms were that which were available to the Company at the time.

See footnote 3 for discussion of recorded impairment charges related to long-lived assets and goodwill.

The estimated fair value of the Amended Loan Agreement was determined based on a discounted cash flow approach using available market information on discount and borrowing rates with similar terms, maturities, and credit ratings.

The carrying value of the Company's other long-term borrowing as of December 31, 2023 was $ 0.8 million, which approximated its fair value.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The three-levels of the valuation hierarchy for disclosure of fair value measurements are defined as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

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Money market funds, included in cash and cash equivalents $ 14,386 $ 14,386 $ — $ —

Certificate of deposit, included in cash and cash equivalents 30,100 30,100 — —

Total $ 59,538 $ 59,538 $ — $ —

December 31, 2022

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Money market funds, included in cash and cash equivalents $ 29,438 $ 29,438 $ — $ —

Certificate of deposit, included in cash and cash equivalents 30,100 30,100 — —

Total $ 59,538 $ 59,538 $ — $ —

The fair value of the Company's money market funds is based on quoted market prices.

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Shelf Registration Statement

On November 10, 2020, the Company filed a registration statement on Form S-3 (the Shelf Registration Statement), covering the offering, from time to time, of up to $ 150.0 million of common stock, preferred stock, debt securities, warrants and units, which Shelf Registration Statement became effective on November 19, 2020.

On March 25, 2021, the Company completed a public offering of 4,255,000 shares of its common stock at a public offering price of $ 16.25 per share.

Net proceeds from the offering were approximately $ 64.7 million, after deducting underwriting discounts, commissions and other offering expenses of $ 4.4 million.

The shares were registered pursuant to the Company's Shelf Registration Statement discussed above.

On November 17, 2023, the Company filed a registration statement on Form S-3, as amended (the 2023 Shelf Registration Statement), covering the offering, from time to time, of up to $ 150.0 million of common stock, preferred stock, debt securities, warrants and units.

The 2023 Shelf Registration Statement became effective on November 29, 2023, and all $ 150.0 million remain available for sale as of December 31, 2023.

At The Market Sales Agreement

On September 15, 2022, the Company entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC, as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of Company common stock having an aggregate offering price of up to $ 50.0 million.

On September 15, 2022, the Company entered into a sales agreement, as amended on November 17, 2023 (the Sales Agreement) with Cowen and Company, LLC as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of Company common stock having an aggregate offering price of up to $ 50.0 million.

The Company is not obligated to sell any shares of Company common stock in the offering.

As of December 31, 2023, the Company has not sold any shares of its common stock pursuant to the Sales Agreement .

Exchange Agreement

On June 22, 2021, the Company entered into an exchange agreement (the Exchange Agreement) with an investor and its affiliates (the Exchanging Stockholders), pursuant to which the Company exchanged an aggregate of 804,951 shares of the Company's common stock owned by the Exchanging Stockholders for pre-funded warrants (the Exchange Warrants) to purchase an aggregate of 804,951 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $ 0.001 per share.

The Exchange Warrants do not expire and are exercisable at any time except that the Exchange Warrants cannot be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 4.99 % of the Company's common stock, which percentage may change at the Exchanging Stockholder's election to any other percentage upon 61 days' notice to the Company.

The Company recorded the retirement of common stock exchanged as a reduction of common shares outstanding and additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants are classified as equity and the fair value of the Exchange Warrants was recorded as an increase to additional paid-in-capital and is not subject to remeasurement.

The Company determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

As of December 31, 2022, none of the Exchange Warrants have been exercised.

Outstanding Warrants

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Common stock warrants (Exchange Warrants) 804,951 0.001 June 22, 2021 None

During the year ended December 31, 2022, no warrants to purchase common stock were exercised.

No warrants to purchase common stock were exercised during the years ended December 31, 2023 and 2022.

Stock Option Plan

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In September 2019, the Company's board of directors adopted, and the Company's stockholders approved, the 2019 Plan.

Under the 2019 Plan, which expires in September 2029, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then employees, officers, non-employee directors or consultants of the Company or its subsidiaries.

The options generally expire ten

years after the date of grant and are exercisable to the extent vested.

Vesting is established by the Board of Directors and is generally four years from the date of grant or, for grants to new hires, date of hire.

Under the 2019 Plan, which expires in September 2029, the Company may grant stock options, stock appreciation rights, restricted stock, RSUs and other awards to individuals who are then employees, officers, non-employee directors or consultants of the Company or its subsidiaries.

The options generally expire ten years after the date of grant and are exercisable to the extent vested.

Vesting is established by the Company's board of directors and is generally four years from the date of grant or, for grants to new hires, date of hire.

The 2019 Plan contains an "evergreen provision" that allows annual increases in the number of shares available for issuance on the first day of each calendar year through January 1, 2029 in an amount equal to the lesser of:

(i) 4 % of the outstanding capital stock on each December 31st, or (ii) such lesser amount determined by the Board of Directors.

As of December 31, 2022, 1,452,435 shares remained available for future awards.

Under the evergreen provision, on January 1, 2023, an additional 661,999 shares became available for issuance under the 2019 Plan.

2019 Employee Stock Purchase Plan

In September 2019, the Board of Directors adopted, and the Company's stockholders approved, the ESPP.

The ESPP became effective on the day the ESPP was adopted by the Company's Board of Directors.

The ESPP permits participants to purchase common stock through payroll deductions of up to 20 % of their eligible compensation.

The number of shares of common stock available for issuance under the ESPP will be annually increased on the first day of each calendar year during the term of the ESPP through January 1, 2029 in an amount equal to the lesser of (i) 1 % of the outstanding capital stock on each December 31st, or (ii) such lesser amount determined by the Board of Directors.

As of December 31, 2022, 413,425 shares of common stock remained available for issuance under the ESPP.

Under the evergreen provision, on January 1, 2023, an additional 165,500 shares became available for issuances under the ESPP.

(i) 4 % of the outstanding capital stock on each December 31st, or (ii) such lesser amount determined by the Company's board of directors.

As of December 31, 2023, 1,831,107 shares of common stock remained available for future awards.

Pursuant to the evergreen provision, on January 1, 2024, an additional 681,838 shares of common stock became available for issuance under the 2019 Plan.

Restricted Stock Units

RSU activity under the Company's 2019 Plan is set forth below:

Shares Weighted-

Grant Date Fair Value Aggregate

Outstanding, December 31, 2022

1,036,208 $ 7.28 $ 2,487

Awards granted 857,300 $ 2.39

Awards released ( 273,319 ) $ 7.80

Awards canceled ( 232,730 ) $ 6.80

Outstanding, December 31, 2023

1,387,459 $ 4.24 $ 2,761

As of December 31, 2023, all of the outstanding RSUs are unvested.

The fair value of RSUs vested in the years ended December 31, 2023 and 2022 was $ 0.6 million and $ 0.7 million, respectively.

The weighted average grant date fair value for RSUs granted during the years ended December 31, 2023 and 2022 was $ 2.39 and $ 5.89 , respectively.

As of December 31, 2023, total unrecognized compensation cost related to RSUs was $ 4.4 million, which is expected to be recognized over a remaining weighted-average vesting period of 2.8 years.

Stock Options

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877,937 $ 12.46 6.18 $ 228

The weighted-average grant date fair value per share of employee options granted to employees during the years ended December 31, 2022 and 2021 was $ 2.74 and $ 8.83 , respectively.

The weighted-average grant date fair value per share of options granted during the years ended December 31, 2023 and 2022 was $ 2.17 and $ 2.74 , respectively.

The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 0.2 million and $ 0.6 million, respectively.

The intrinsic value is calculated as the difference between the fair value of the Company's common stock and the exercise price of the stock options.

The fair value of the Company's common stock was $ 1.99 and $ 2.40 per share at December 31, 2023 and 2022, respectively.

The intrinsic value of options exercised for the years ended December 31, 2022 and 2021 was $ 0.6 million and $ 0.1 million, respectively.

As of December 31, 2023, total unrecognized compensation cost related to option awards was $ 0.3 million, which is expected to be recognized over a remaining weighted-average vesting period of 0.8 years.

Restricted Stock Units

Restricted stock unit activity under the Company's 2019 Plan is set forth below:

Shares Weighted-

Grant Date Fair Value Aggregate

Outstanding, December 31, 2021

415,325 $ 16.54 $ 4,830

Awards granted 1,076,725 $ 5.89

Awards released ( 100,586 ) $ 16.55

Awards canceled ( 355,256 ) $ 11.29

Outstanding, December 31, 2022

1,036,208 $ 7.28 $ 2,487

As of December 31, 2022, all of the outstanding restricted stock units are unvested.

The fair value of restricted stock units vested in the year ended December 31, 2022 was $ 0.7 million.

No restricted stock units vested in the year ended December 31, 2021.

The weighted average grant date fair value for restricted stock units granted during the years ended December 31, 2022 and 2021 was $ 5.89 and $ 16.53 , respectively.

As of December 31, 2022, total unrecognized compensation cost related to restricted stock units was $ 6.0 million, which is expected to be recognized over a remaining weighted-average vesting period of 3.3 years.

Stock-Based Compensation Expense

Stock Options

The fair value of employee stock options was estimated using the following assumptions in the Black-Scholes options pricing model to determine the fair value of stock options granted:

Year Ended December 31,

Expected volatility 54 %

Risk-free interest rate 3.4 %

Dividend yield — —

Expected term (in years) 5.5

2019 Employee Stock Purchase Plan

The following assumptions were used to calculate the stock-based compensation for each stock purchase right granted under the ESPP:

Year Ended December 31,

Expected volatility 45 %- 57 %

Risk-free interest rate 0.6 %- 3.3 %

Dividend yield — —

Expected term (in years) 0.5 0.5

Stock-based compensation expense related to the ESPP for the years ended December 31, 2022 and 2021 was less than $ 0.1 million and $ 0.2 million, respectively.

In September 2019, the Company's board of directors adopted, and the Company's stockholders approved, the ESPP.

The ESPP became effective on the day the ESPP was adopted by the Company's board of directors.

The ESPP permits participants to purchase common stock through payroll deductions of up to 20 % of their eligible compensation.

During the year ended December 31, 2023, the Company issued 129,593 shares of common stock pursuant to scheduled purchases under the ESPP.

As of December 31, 2023, 449,332 shares of common stock remained available for issuance.

Pursuant to the evergreen provision, on January 1, 2024, an additional 170,460 shares became available for issuance under the ESPP.

Stock-based compensation expense related to the ESPP for each of the years ended December 31, 2023 and 2022 was less than $ 0.1 million.

As of December 31, 2023, total unrecognized compensation cost related to stock purchase rights granted under the ESPP was less than $ 0.1 million, which is expected to be recognized over a remaining weighted-average vesting period of 0.2 years.

Total non-cash stock-based compensation expense recorded related to options granted, restricted stock units granted and stock purchase rights granted under the ESPP in the statement of operations is as follows (in thousands):

Stock-Based Compensation Expense

Total non-cash stock-based compensation expense recorded related to options, RSUs and stock purchase rights granted under the ESPP in the statement of operations is as follows (in thousands):

Year Ended December 31,

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Federal $ — $ —

State ( 33 ) ( 24 )

Total current ( 33 ) ( 24 )

Federal — 137

State ( 169 ) 11

Total deferred — 306

Provision (benefit) for income tax $ ( 282 ) $ 175

Income tax (expense) benefit $ ( 33 ) $ 282

The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:

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Change in valuation allowance ( 18.5 ) % ( 23.9 ) %

Other ( 0.1 ) % — %

Effective tax rate ( 0.1 ) % 0.6 %

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Deferred tax liabilities:

Financing and acquisition-related liabilities — ( 335 )

Indefinite lived assets — ( 521 )

Right of use assets ( 814 ) ( 1,206 )

Basis differences in fixed and intangible assets ( 287 ) ( 206 )

Deferred tax liabilities, net ( 1,412 ) ( 1,031 )

Net deferred tax liabilities $ — $ ( 307 )

Deferred tax liabilities ( 1,101 ) ( 1,412 )

Net deferred tax assets $ — $ —

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2023 and 2022, which related primarily to increases in net operating loss (NOL) carryforwards, research and development tax credits, capitalization of research and experimentation costs, and impairment of goodwill were as follows (in thousands):

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Approximately $ 43.5 million of the federal tax loss carryforwards will begin to expire in 2024, unless previously utilized.

The federal NOL carryforwards generated in after December 31, 2017 of $ 74.9 million will carryforward indefinitely.

The Company’s state tax loss carryforwards will expire in 2030, unless previously utilized.

The federal NOL carryforwards generated after December 31, 2017 of $ 86.3 million will carryforward indefinitely.

The Company’s state tax loss carryforwards will begin to expire in 2030, unless previously utilized.

At December 31, 2023, the Company's deferred tax assets are primarily comprised of federal and state tax NOL carryforwards.

The Company completed a formal study through the year ended December 31, 2019 and determined ownership changes within the meaning of Internal Revenue Code (IRC), Section 382 had occurred in 2003, 2008, 2012, 2017 and 2019.

The Company is subject to taxation in the United States and in various state jurisdictions.

Based on the analysis, $ 61.1 million of the Company's tax attribute carryforwards through December 31, 2017 cannot be utilized under IRC Section 382.

The Company's ability to utilize NOL carryforwards generated after December 31, 2017 will not expire under the Tax Cuts and Jobs Act of 2017.

The Company adjusted tax attribute carry forwards and deferred tax assets accordingly.

As the deferred tax assets associated with the tax attribute carry forwards were fully offset by a valuation allowance, a corresponding reduction in the Company's valuation allowance was also recorded, resulting in no income tax impact.

The Company is subject to taxation in the U.S.

and in various state jurisdictions.

The Company’s tax years for 2004 and forward are subject to examination by the U.S.

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Additionally, the Company may elect to make contributions into the savings plan at its sole discretion.

For the years ended December 31, 2022 and 2021, the Company made contributions to the Plan at 4 % and 3 % of qualified employee compensation, respectively.

For each of the years ended December 31, 2023 and 2022, the Company made contributions to the 401(k) Plan at 4 % of qualified employee compensation.

For the years ended December 31, 2023 and 2022, these contributions totaled approximately $ 0.8 million and $ 0.9 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures