What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-10 compared with 2025-03-11 · 108 added, 81 removed, 186 unchanged (50% of the section changed)

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Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and financial performance, includes forward-looking statements that are based on current beliefs, plans and expectations and involve risks, uncertainties and assumptions.

You should read the "Special note regarding forward-looking statements" and "Risk Factors" section of this Annual Report for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

You should read the "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors" section of this Annual Report for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a medical technology company primarily focused on the design, development and commercialization of a next-generation portfolio of innovative testing products under our AVISE ® brand, which allow for the differential diagnosis, prognosis and monitoring of complex rheumatic, autoimmune and autoimmune-related disease including, among others, SLE and RA.

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With significant increases in autoimmune incidence in recent years, AVISE ® CTD provides unique biomarkers that empower clinicians to confidently and quickly diagnose various CTDs.

Beginning in late 2022, w e revitalized our organization with the addition of key members to our senior leadership team, including our Chief Executive Officer, Chief Financial Officer, Vice President of Sales, Chief Medical Officer, and Medical and Laboratory Director.

Beginning in late 2022, w e revitalized our organization with the addition of key members to our senior leadership team, each with successful industry track records in diagnostics, medical device and medical technology, including our Chief Executive Officer, Chief Financial Officer, Chief Scientific Officer, Vice President of Sales, Vice President of Commercial Strategy, and Medical and Laboratory Director.

By leveraging our team’s extensive experience to create clinically distinct solutions that improve patient lives, we have created a strong foundation for growth and believe that we are well-positioned to positively impact patient care and address unmet clinical needs in autoimmune disease .

We strive to become a partner of choice for doctors, hospitals, healthcare systems, and payors.

Under the leadership of our Chief Executive Officer, John Aballi, who joined Exagen in October 2022, we are executing an operational turnaround of the business, resulting in a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn.

Under the leadership of our Chief Executive Officer, John Aballi, who joined Exagen in October 2022, we have executed an operational turnaround of the business, resulting in a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn.

All of our AVISE ® tests are performed in our approximately 13,000 square foot laboratory located in Vista, California, which is certified under the CLIA and accredited by CAP.

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Since launching AVISE ® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE ® CTD in patient care.

Revenue from this product comprised 91% and 88% of our revenue for the years ended December 31, 2024 and 2023, respectively.

Revenue from this product comprised 91% of our revenue for each of the years ended December 31, 2025 and 2024.

In addition to providing diagnostic testing, we are leveraging our clinical laboratory to enter into agreements in the normal course of business with leading pharmaceutical companies and contract research organizations for the use of our testing products and/or the de-identified data generated from such tests.

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Many diagnostic sales forces are trained only to understand the comparative benefits of the tests they promote.

In contrast, the specialized backgrounds of our sales personnel, coupled with our comprehensive training, enables our sales representatives to interpret results from our de-identified patient test reports and provide unique

insights in a highly tailored discussion with rheumatologists.

We believe our focus on and experience in the field of rheumatology, combined with our commitment to excellent customer service and support, position us very well to respond to the needs of rheumatologists and the patients they serve.

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▪ Commercial Launch of AVISE ® CTD Enhancements .

Our flagship product, AVISE ® CTD, enables clinicians to more effectively diagnose complex autoimmune conditions such as lupus, rheumatoid arthritis, and Sjögren’s syndrome earlier and with greater accuracy, as compared to the current standard of care.

Our flagship product, AVISE ® CTD, enables clinicians to more effectively diagnose complex autoimmune conditions such as SLE, RA, and Sjögren’s syndrome earlier and with greater accuracy, in each case, as compared to the current standard of care.

Our laboratory specializes in the testing of rheumatic diseases, delivering precise and timely results, supported by a full suite of AVISE ® -branded tests for disease diagnosis, prognosis, and monitoring.

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Collectively, we believe these new biomarkers will further improve the clinical utility of AVISE ® CTD, providing clinicians with the information they need to definitively diagnose patients and shorten their autoimmune diagnostic journeys.

We expect the addition of these new biomarkers will drive gains in our AVISE ® CTD average selling price, gross margin expansion and increase demand while positioning us for profitability.

We expect the addition of these new biomarkers will continue to drive gains in our AVISE ® CTD average selling price, gross margin expansion and increase demand while positioning us for profitability.

▪ PAD4 Biomarkers.

During the third quarter of 2025, we received conditional approval from the New York State Department of Health and commercially launched our new PAD4 biomarker assays on the AVISE® CTD platform.

Anti-PAD4 antibodies have been found to be 35% sensitive and 95% specific for RA in a peer-reviewed validation study.

Additionally, anti-PAD4 antibodies have been found in 19% of anti-CCP negative RA patients, helping to address a critical seronegative diagnostic gap.

Beyond the diagnostic utility, anti-PAD4 antibodies have been shown to associate with increased risk for radiographic progression, a sign of permanent joint changes.

▪ Reimbursement for Our Testing Products .

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Additionally, changes in our estimated reimbursements for tests performed in prior periods can positively or negatively impact our revenue in the current period and cause our financial results to fluctuate.

In addition, in connection with our revenue cycle management initiatives, we held claims in the first half of the year which resulted in increases in our accounts receivable and an accelerated decrease in our cash in the first half of the year.

As expected, this trend reversed in the second half of the year, as cash was collected on billed tests.

In addition, in connection with our revenue cycle management initiatives, we have in the past and continue to hold claims in the first half of the fiscal year, which typically results in increases in our accounts receivable and an accelerated decrease in our cash in the same period, with the trend subsequently reversed in the second half of the fiscal year as cash is collected on billed tests.

▪ Expanding Adoption of AVISE ® CTD .

Since the launch of AVISE ® CTD in 2012 and through December 31, 2024, we have delivered approximately 1,009,812 of these tests.

122,883 AVISE ® CTD tests were delivered in the year ended December 31, 2024, representing approximately 11% decline over the same period in 2023.

The number of ordering healthcare providers in the quarter ended December 31, 2024 was 2,370, representing an approximate 1% decrease over the same period in 2023.

Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers.

Since the launch of AVISE ® CTD in 2012 and through December 31, 2025, we have delivered over one million of these tests.

During the year ended December 31, 2025, the number of AVISE ® CTD tests delivered increased by approximately 11% over the same period in 2024.

success of the T-Cell Biomarkers and RA Sub-Profile Biomarkers, which we added to our AVISE ® CTD tests in January 2025.

▪ Development of Innovative Testing Products .

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▪ Deliver Sustainable Profitable Growth .

We seek to establish a solid foundation for growth and path to sustained profitability through continued gross margin enhancements and improved operating expense efficiencies through the implementation of certain internal initiatives, such as leveraging validation, utility

and reimbursement-oriented clinical studies to facilitate payor coverage of our testing products.

We seek to establish a solid foundation for growth and a path to sustained profitability through continued gross margin enhancements and improved operating expense efficiencies through the implementation of certain internal initiatives, such as leveraging validation, utility and reimbursement-oriented clinical studies to facilitate payor coverage of our testing products.

We center our efforts around long-term reimbursement and ASP growth.

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While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address.

We discuss many of these risks, uncertainties and other factors in the section entitled "Risk Factors."

We discuss many of these risks, uncertainties and other factors that may affect our performance in the section entitled "Risk Factors."

Based on our experience to date, we expect some seasonal variations in our financial results due to a variety of factors, such as:

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The severity and duration of the current inflationary environment remains uncertain and may continue to impact our financial condition and results of operations.

Changes in U.S.

Our business, results of operations and financial condition may be adversely affected by uncertainty and changes in U.S.

trade policies, including tariffs, quotas, trade agreements or other trade restrictions imposed by the U.S.

or other governments.

Our business requires access to reagents and other materials to run our tests, some of which we source from suppliers located outside the United States, including Germany.

Any imposition of or increase in tariffs or other restrictions on imports of reagents or other materials, as well as corresponding price increases for such materials available domestically, if any, could increase our costs.

We would likely be unable to pass all or any

such cost increases on to our customers and such cost increases could materially and adversely affect our business, results of operations and financial condition, including our gross margin.

Financial Overview

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To date, we have derived nearly all of our revenue from the sale of our testing products, most of which is attributable to our AVISE ® CTD test.

Revenue from the sale of our AVISE ® CTD test comprised 91% and 88% of our revenue for the years ended December 31, 2024 and 2023, respectively.

We primarily market our testing products to rheumatologists and their physician assistants in the United States.

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Our service is completed upon the delivery of test results to the prescribing rheumatologists which triggers billing for the service.

Our ability to increase our revenue will depend on the success of the commercial launch of the T-Cell Biomarker and RA Sub-Profile Biomarkers enhancements to our AVISE ® CTD test, in addition to our ability to further penetrate the market for our current and future testing products and increase our ASP for tests delivered.

Our ability to increase our revenue may depend, in part, on the success of the T-Cell Biomarker and RA and PAD4 Sub-Profile Biomarkers enhancements to our AVISE ® CTD test, in addition to our ability to further penetrate the market for our current and future testing products and increase our reimbursement and collection rates (ASP) for tests delivered.

In April 2022, we were granted a PLA code for our protein-based test, AVISE ® Lupus, which is offered standalone or as part of our AVISE ® CTD test.

Noridian, our MAC, has set the current pricing for this PLA code at $840.65 per test through December 31, 2025.

Noridian, our MAC, has set the current pricing for this PLA code at $840.65 per test.

CMS will align local MAC pricing with national payment rates for the PLA code on the 2026 CLFS through their annual payment determination process to provide a standardized, nationally determined payment rate.

The process for obtaining and maintaining consistent reimbursement for new tests can be uncertain, lengthy and time consuming.

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Ultimately receiving a favorable LCD is uncertain and may be time-consuming, resource intensive and require multiple quarterly or annual periods to complete and is subject to risks and uncertainties described in the section entitled "Risk Factors" in this Annual Report.

Further, on January 20, 2025, President Trump issued an Executive Order entitled Regulatory Freeze Pending Review, which halted all federal level regulatory rules and guidance not yet in effect.

Because the Executive Order extends to LCDs not yet in effect, it leaves the fate and timing of our LCD application uncertain.

In the meantime, we have continued to submit Medicare claims for AVISE ® Lupus, appeal denials and respond to requests for additional information.

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To determine if the submitted tests are compliant with relevant policy requirements, these tests will undergo technical assessment by Palmetto GBA as part of the MolDX program.

That technical assessment is on hold until such time as an LCD is issued by CMS.

In the interim, we expect our current status with CMS to remain unchanged.

We face consistent challenges relating to commercial payor claim processing and revenue.

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Additionally, in November 2023, we increased the list price billed for our tests.

These ongoing revenue cycle management initiatives aim to optimize our appeals process and the potential for cash collections.

We've experienced moderate declines in test volume since the second half of 2023, as rheumatologists and patients adjust to these changes.

We delivered 122,883 tests for our flagship product, AVISE ® CTD, in the year ended December 31, 2024 as compared to 137,650 tests for the year ended December 31, 2023 resulting from the expected impacts of revenue cycle management initiatives and the reduction of sales territories which began in 2022.

Costs of Revenue

Costs of revenue represents the expenses associated with obtaining and testing patient specimens.

The components of our costs of revenue include materials costs, direct labor, equipment, infrastructure expenses, shipping charges to transport specimens, blood specimen collections fees, royalties, depreciation and allocated overhead (including rent and utilities).

These ongoing revenue cycle management initiatives aim to optimize our appeals process

and the potential for cash collections.

During the fiscal year ended December 31, 2024, we experienced moderate declines in test volume since the second half of the fiscal year ended December 31, 2023, as rheumatologists and patients adjusted to these changes.

During the fiscal year ended December 31, 2025, we saw a return to volume growth.

The number of AVISE® CTD tests delivered during the year ended December 31, 2025 improved by approximately 11% as compared to the number of AVISE® CTD tests delivered during the year ended December 31, 2024 due to continuing physician demand and adoption, early traction from our new biomarkers, and salesforce expansion.

Additionally, the trailing-twelve-month ASP of our AVISE® CTD tests increased by approximately 7% during the year ended December 31, 2025 compared to the same period in 2024.

Cost of Revenue

Cost of revenue represents the expenses associated with obtaining and testing patient specimens.

The components of our cost of revenue include materials costs, direct labor, equipment, infrastructure expenses, shipping charges to transport specimens, blood specimen collections fees, royalties, depreciation and allocated overhead (including rent and utilities).

Each payor, whether commercial, government, or individual, reimburses us at different amounts.

These differences can be significant.

As a result, our costs of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each period's billings.

We expect that our costs of revenue will increase year-over-year in the near-term as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE ® CTD test.

As a result, our cost of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each period's billings.

Our cost per AVISE ® CTD test has increased year-over-year as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE ® CTD test.

Operating Expenses

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Selling, general and administrative expenses consist of personnel costs (including stock-based compensation expense), direct marketing expenses, accounting and legal expenses, consulting costs and allocated overhead (including rent, information technology, depreciation and utilities).

We expect that our selling, general and administrative expenses will increase year-over-year in the near-term as a result of increased headcount.

Research and Development Expenses

Research and development expenses include costs incurred to develop our technology, test products and product candidates, in addition to costs incurred to collect clinical specimens and conduct clinical studies to develop and support those products and product candidates.

These costs consist of 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).

These costs consist of 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).

We expense all research and development costs in the periods in which they are incurred.

We expect that our research and development expenses will remain relatively consistent year-over-year in the near-term.

Interest Expense

Interest expense consists of cash and non-cash interest expense associated with our financing arrangements, including the borrowings under our Amended Loan Agreement with Innovatus.

We expect interest expense to remain relatively consistent in the year ending December 31, 2025 as compared to the year ended December 31, 2024.

Interest expense consists of cash and non-cash interest expense associated with borrowings under the Perceptive Term Loan Facility as well as our other financing arrangements.

Loss on Extinguishment of Debt

Loss on extinguishment of debt consists of the unamortized debt issuance costs and final payment fee due under the terms of our prior loan agreement, as amended, with Innovatus Life Sciences Lending Fund I, LP (the Amended Loan Agreement).

The Amended Loan Agreement was fully repaid and terminated on April 25, 2025.

Change in Fair Value of Warrant Liability

Changes in the fair value of the warrant liability relates to the warrant certificate issued in connection with the Credit Agreement with Perceptive (the Warrant Certificate).

Interest Income

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Revenue $ 66,575 $ 55,641 $ 10,934

Costs of revenue 22,529 23,092 (563)

Gross margin 33,112 29,456 3,656

Cost of revenue 27,776 22,529 5,247

Gross profit 38,799 33,112 5,687

Operating expenses:

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Interest expense (4,318) (2,234) (2,084)

Loss on extinguishment of debt (295) — (295)

Change in fair value of warrant liability (1,506) — (1,506)

Interest income 289 767 (478)

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Net loss $ (19,951) $ (15,115) $ (4,836)

Revenue increased $3.1 million, or 5.9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to improved ASP (including cash collected related to tests performed in prior periods), partially offset by decreased AVISE ® CTD year-over-year volume resulting from the expected impacts of revenue cycle management initiatives and the reduction of sales territories which began in 2022.

The number of AVISE ® CTD tests delivered decreased to 122,883 in the year ended December 31, 2024 compared to 137,650 tests delivered in the same 2023 period.

The AVISE ® CTD test accounted for 91% and 88% of revenue for the years ended December 31, 2024 and 2023, respectively.

The number of ordering healthcare providers decreased to 2,370 for the three months ended December 31, 2024 compared to 2,383 in the same 2023 period.

Costs of Revenue

Costs of revenue decreased $0.6 million, or 2.4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This decrease was primarily due to decreases of $1.0 million in materials and supplies expenses and additional decreases in facilities and allocated overhead expenses, royalties expenses and phlebotomy expenses.

These decreases were partially offset by an increase of $0.7 million in shipping and handling

costs resulting from increased cost-per-shipment, offset in-part by reduced shipping volume;

and an increase of $0.7 million in direct labor.

Gross margin as a percentage of revenue increased to 59.5% for the year ended December 31, 2024 compared to 56.1% for the year ended December 31, 2023, primarily due to improved ASP (including cash collected related to tests performed in prior periods) and decreases in materials and supplies expenses, facilities and allocated overhead expenses, royalties expenses and phlebotomy expenses;

partially offset by increases in shipping and handling costs resulting from increased cost-per shipment, and increases in direct labor.

Revenue increased $10.9 million, or 19.7%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, due to an increase in test volume and continued ASP expansion.

The number of AVISE ® CTD tests delivered in the year ended December 31, 2025 increased by approximately 11% compared to the same period in 2024.

In addition, our AVISE ® CTD trailing twelve-month ASP increased by $30 per test to $441 per test in the fourth quarter of 2025 from $411 per test in the fourth quarter of 2024.

Cost of Revenue

Cost of revenue increased $5.2 million, or 23.3%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This increase was primarily due to increases of $3.7 million in materials and supplies expenses, $1.4 million in payroll and stock-based compensation expense, and $0.3 million in facilities and allocated overhead expenses.

These increases were partially offset by a decrease of $0.2 million in shipping and handling costs.

Gross margin as a percentage of revenue decreased slightly to 58.3% for the year ended December 31, 2025 compared to 59.5% for the year ended December 31, 2024, primarily due to the changes to revenue and cost of revenue described above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $6.1 million, or 12.8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This decrease was primarily due to a decrease of $1.8 million in stock-based compensation expense and a decrease of $1.5 million in asset disposal costs related to the assignment of a lease in 2023;

in addition to decreases in professional service expenses, legal expenses, insurance expenses, facilities and allocated overhead expenses, personnel costs and audit and tax services.

These decreases were partially offset by an increase in commissions.

Selling, general and administrative expenses increased $5.2 million, or 12.7%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This increase was primarily due to increases of $2.2 million in salaries, $1.6 million in commissions, $0.7 million in travel and entertainment, $0.5 million in outside services, $0.2 million in stock-based compensation expense, and $0.1 million in other expenses, partially offset by a decrease of $0.1 million in bonuses.

Research and Development Expenses

Research and development expenses increased $0.9 million, or 16.4%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

This increase was primarily due to increases of $0.7 million of personnel costs (including salaries, benefits and stock-based compensation) resulting from increased allocation of labor to research and development for laboratory personnel working on the validation of the T-Cell Biomarkers and RA Sub-Profile Biomarkers;

and increases in professional service fees and laboratory expenses.

These increases were partially offset by decreases of $0.3 million of clinical trial expenses and decreases in facilities and allocated overhead expenses.

This increase was primarily due to an increase of $0.6 million of

personnel costs (including salaries, benefits and stock-based compensation) resulting from increased allocation of labor to research and development for laboratory personnel working on the validation of the T-Cell Biomarkers and RA Sub-Profile Biomarkers, and an increase of $0.3 million in clinical and facility-related expenses.

Interest Expense

Interest expense remained substantially consistent for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Interest expense increased by $2.1 million, including an increase of $0.8 million in non-cash interest expense, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to the Perceptive Term Loan Facility that we entered into in April 2025 and the embedded finance lease related to the supply agreement, as amended, with one of our suppliers for certain reagents.

We expect to continue to incur this interest expense under the Perceptive Term Loan Facility.

Loss on Extinguishment of Debt

Loss on extinguishment of debt increased by $0.3 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, as a result of our early payoff of all outstanding indebtedness under the Amended Loan Agreement in April 2025.

Change in Fair Value of Warrant Liability

The fair value of the warrant liability increased by $1.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to increases in the fair value of the underlying common stock.

Interest Income

Interest income decreased $0.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to lower cash and cash equivalents balances of interest-earning accounts.

Interest income decreased $0.5 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to a decrease in cash and cash equivalents held in money market funds.

Income Tax Expense

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Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation.

Currently, our funds are held in cash and money market funds.

Since becoming a public company, our primary sources of capital have been cash inflows from product sales, sales of our common stock and, to a lesser extent, borrowings under our 2017 Term Loan.

Our obligations under the Amended Loan Agreement are secured by a security interest in substantially all of our assets, including our intellectual property.

The Amended Loan Agreement contains customary conditions to borrowing, events of default, and covenants, including covenants requiring us to maintain minimum liquidity of $2.0 million, covenants to achieve certain minimum amounts of revenue, and covenants limiting our ability to dispose of assets, undergo a change in control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of our capital stock, repurchase stock and make investments, in each case subject to certain exceptions.

Amended Loan Agreement, we are not required to comply with the revenue covenant for any quarter during which we maintain a minimum aggregate cash balance equal to fifty percent of the aggregate principal amount of the 2017 Term Loan funded (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, we submit a new financial plan approved by our board of directors to Innovatus under which we are 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, we issue 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.

In addition, upon the occurrence of an event of default, Innovatus, among other things, can declare all indebtedness due and payable immediately, which would adversely impact our liquidity and reduce the availability of our cash flows to fund working capital needs, capital expenditures and other general corporate purposes.

As of December 31, 2024, we were in compliance with all covenants of the Amended Loan Agreement with Innovatus.

On November 17, 2023, we filed a registration statement on Form S-3 (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, all of which remain available for sale at December 31, 2023.

On September 15, 2022, we entered into a sales agreement, as amended on November 17, 2023 (the Sales Agreement) with TD Securities (USA) 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 and, as of December 31, 2024, the Company has not sold any shares of its common stock pursuant to the Sales Agreement.

Currently, our funds are held in cash.

A total of an additional $40.0 million is available at our option under the Perceptive Term Loan Facility as amended in March 2026 should we attain specified revenue levels and satisfy other conditions.

Since becoming a public company, our primary sources of capital have been cash inflows from product sales, sales of our common stock and, to a lesser extent, borrowings under term loan facilities.

Our obligations under the Perceptive Term Loan Facility are secured by a first-priority lien on substantially all of our existing and future assets.

In connection with the Credit Agreement, we issued the Warrant Certificate to Perceptive.

The Warrant Certificate has a ten-year term from the applicable issuance date and includes protection for certain dilutive issuances and registration rights provisions.

The Perceptive Term Loan Facility includes customary affirmative, negative, and financial covenants.

These include, among others, restrictions on additional indebtedness, liens, dividends, mergers and acquisitions, and affiliate transactions.

The Perceptive Term Loan Facility also requires that we maintain a minimum unrestricted cash balance of $3.0 million and achieve specified net revenue levels on a quarterly basis beginning with the quarter ending June 30, 2025.

In addition, upon the occurrence of an event of default, Perceptive, among other things, can declare all indebtedness due and payable immediately, which would adversely impact our liquidity and reduce the availability of our cash flows to fund working capital needs, capital expenditures and other general corporate purposes.

As of December 31, 2025, we were in compliance with all covenants of the Perceptive Term Loan Facility.

On May 9, 2025, we issued and sold an aggregate of 3,852,500 shares of our common stock (inclusive of 502,500 shares pursuant to the exercise in full of the Underwriters’ option to purchase additional shares) at a public offering price of $5.25 per share, for aggregate net proceeds of $18.6 million after deducting underwriting discounts and commissions and other offering expenses.

On November 17, 2023, we filed a registration statement on Form S-3 (Shelf Registration Statement) covering the offering, from time to time, of up to $150.0 million shares of our common stock, preferred stock, debt securities, warrants and units, of which $126.2 million remained available for sale at December 31, 2025.

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

We are not obligated to sell any shares of our common stock under the Amended Sales Agreement.

During the year ended December 31, 2025, we sold 360,554 shares of common stock under the Amended Sales Agreement at an average per share price of $9.82, for gross proceeds of approximately $3.5 million and net proceeds of approximately $3.4 million after deducting $0.1 million in commissions paid to TD Cowen and other offering expenses payable by us.

Funding Requirements

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We expect to continue to incur operating losses in the near term.

In the short-term, we expect increases in costs of revenue as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE ® CTD test.

In the short-term, we expect increases in cost of revenue as a result of costs associated with the addition of the T-Cell Biomarkers and RA Sub-Profile Biomarkers to our AVISE ® CTD test.

We also anticipate increases in our selling, general and administrative expenses due to increased headcount.

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Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We expect that our near- and longer-term liquidity requirements will continue to consist of working capital and general corporate expenses associated with the growth of our business, including payments we may be required to make upon the achievement of previously negotiated milestones associated with intellectual property we have licensed, payments related to non-cancelable purchase obligations for reagents, payments related to our principal and interest under our long term borrowing arrangements, payments for operating leases related to our office and laboratory space in Vista, CA and our office space in Carlsbad, CA, and payments for finance leases related to our laboratory equipment (see Note 4, "Borrowings," and Note 6, "Commitments and Contingencies," to our audited financial statements included in this Annual Report).

We expect that our near- and longer-term liquidity requirements will continue to consist of working capital and general corporate expenses associated with the growth of our business, including payments we may be required to make upon the achievement of previously negotiated milestones associated with intellectual property we have licensed, payments related to non-cancelable purchase obligations for reagents, payments related to our principal and interest under our long term borrowing arrangements, payments for operating leases related to our office and laboratory space in Vista, CA and our office space in Carlsbad, CA, and payments for operating and finance leases related to our laboratory equipment (see "Note 4.

Borrowings ," "Note 5.

Leases, " and "Note 6.

Commitments and Contingencies ," to our audited financial statements included in this Annual Report).

Based on our current business plan, we believe that our existing cash and cash equivalents and our anticipated future revenue, will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the date of this filing.

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▪ the extent to which we establish additional partnerships or in-license, acquire or invest in complementary businesses or products as well as the success of our existing partnerships and/or in-licenses.

Until such time, if ever, as we can generate revenue to support our costs structure, we expect to finance our operations as needed through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Until such time, if ever, as we can generate revenue to support our costs structure, we may be required to finance our operations as needed through equity offerings, debt financings or other capital sources, including potential

collaborations, licenses and other similar arrangements.

The Perceptive Term Loan Facility involves, and any additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

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Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2025 was $13.6 million and primarily resulted from (i) our net loss of $20.0 million adjusted for non-cash charges of $8.3 million primarily related to stock-based compensation, depreciation, amortization, change in fair value of warrant liability, loss on extinguishment of debt, non-cash lease expense and non-cash interest and (ii) changes in our net operating assets of $2.0 million primarily related to net increases in accounts receivable and net decreases in operating lease liabilities, partially offset by net decreases in prepaid expenses and other current assets and other assets and increases in accrued and other current liabilities.

Net cash used in operating activities for the year ended December 31, 2024 was $13.3 million and primarily resulted from (i) our net loss of $15.1 million adjusted for non-cash charges of $4.9 million primarily related to stock-based compensation, depreciation, amortization, non-cash lease expenses and non-cash interest and (ii) changes in our net operating assets of $3.1 million primarily related to net increases in prepaid expenses and other current assets and accounts receivable, and net decreases in operating lease liabilities, partially offset by net increases in accounts payable.

Net cash used in operating activities for the year ended December 31, 2023 was $14.5 million and primarily resulted from (i) our net loss of $23.7 million adjusted for non-cash charges of $8.9 million primarily related to stock-based compensation, depreciation, amortization, loss on disposal of assets primarily related to the assignment of a lease, non-cash lease expenses and non-cash interest and (ii) changes in our net operating assets of $0.3 million primarily related to net increases in prepaid expenses and other current assets and accounts receivable, and net decreases in operating lease liabilities, partially offset by net increases in accrued and other current liabilities.

Cash Flows from Investing Activities

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Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2024 was $0.7 million, primarily consisting of principal payments on finance lease obligations and notes payable, partially offset by the proceeds from the Exagen Inc.

2019 Employee Stock Purchase Plan (the ESPP) purchases.

Net cash used in financing activities for the year ended December 31, 2023 was $10.6 million, primarily consisting of principal payments on the Amended Loan Agreement, finance lease obligations and notes payable, partially offset by the proceeds from the ESPP purchases.

Net cash provided by financing activities for the year ended December 31, 2025 was $24.4 million, primarily resulting from $23.7 million in proceeds from the issuance of debt and warrants, net of discounts, $18.6 million in proceeds from common stock issued in public offering, net of issuance costs, $3.4 million in proceeds from common stock issued under the Amended Sales Agreement with TD Cowen, net of issuance costs, and $0.4 million in proceeds from common stock issued under our 2019 Employee Stock Purchase Plan (the ESPP), partially offset by a $19.7 million payment to early extinguish debt, $0.9 million in payments of debt issuance costs, $0.6 million in principal payments on notes payable obligations, and $0.5 million in principal payments on finance lease obligations.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited financial statements, which have been prepared in accordance with accounting principles generally accepted in United States of America (GAAP).

Our management’s discussion and analysis of our financial condition and results of operations is based on our audited financial statements, which have been prepared in accordance with GAAP.

The preparation of these audited financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

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We believe the following accounting estimates are the most critical to us, in that they require our most difficult, subjective or complex judgments in the preparation of our financial statements.

For further information, see Note 2, "Summary of Significant Accounting Policies," to our Financial Statements, which outlines our application of significant accounting policies.

For further information, see "Note 2.

Summary of Significant Accounting Policies ," to our Financial Statements, which outlines our application of significant accounting policies.

Revenue Recognition

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

Our portfolios are grouped per payor (each individual third-party insurance, Medicare, Medicaid, client payors, patient self-pay, etc.) and per test basis.

Our portfolios are grouped per payor (each individual third-party insurance, Medicare, Medicaid, client payors, patient self-pay, etc.) and on a per test basis.

Collection of our 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.

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We continually assess the state of our cash collections in order to identify areas of risk and opportunity that allow us to appropriately estimate receivables and revenue.

Should we later determine the judgements underlying estimated collections change, our financial results could be impacted in future periods.

Should we later determine the judgments underlying estimated collections change, our financial results could be impacted in future periods.

Included in revenues for the years ended December 31, 2025 and 2024 were net revenue increases of $0.9 million and $6.6 million, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.

Recent Accounting Pronouncements

See Note 2, "Recent Accounting Pronouncements, of our annual financial statements."

Recent Accounting Pronouncements, " to the audited financial statements included in this Annual Report for a summary of recent accounting pronouncements.

Quantitative and Qualitative Disclosures About Market Risk.

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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 7. Management’s Discussion and Analysis