Exagen Inc.

03/10/2026 | Press release | Distributed by Public on 03/10/2026 07:23

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report. 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 "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.
Overview
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. We believe our strong focus and extensive background in the field of rheumatology, combined with our commitment to exceptional customer service and support, position us well to respond to the needs of rheumatologists, primary care physicians, other specialists, and the patients they serve.
Our tests are used in a variety of clinical settings to provide clarity in autoimmune disease decision-making with the goal of improving patients' clinical outcomes. We commercially launched our flagship testing product, AVISE®CTD, in 2012. AVISE®CTD enables differential diagnosis for patients presenting with symptoms indicative of a wide variety of CDTs and other related diseases with overlapping symptoms. Traditional screening methods often lack accuracy, resulting in repeat testing and delayed diagnosis. 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, we 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 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. Our laboratory is certified for performance of high-complexity testing by CMS in accordance with CLIA and is licensed by all states requiring out-of-state licensure. Our clinical laboratory typically reports all AVISE® testing product results within five business days.
Reimbursement for our testing services comes from several sources, including commercial payors (such as insurance companies and health maintenance organizations), government payors (such as Medicare and Medicaid), client payors (such as hospitals, other laboratories, etc.) and patients. Reimbursement rates vary by product and payor.
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% 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. We believe the quality of our testing, proprietary offerings and specialized knowledge give us an advantage in this space. We plan to continue to pursue additional partnerships with leading pharmaceutical companies and academic research centers that are synergistic with our evolving portfolio of testing products, as more of these organizations realize the extent of the service we can provide.
We market our AVISE®testing products using our specialized sales force covering 45 territories in the United States. 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.
Factors Affecting Our Performance
We believe there are several important factors that have impacted, and that we expect will impact, our operating performance and results of operations, including:
▪Commercial Launch of AVISE®CTD Enhancements. 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. With a focus on research, innovation, education, and patient-centered care, we are dedicated to addressing the ongoing challenges of autoimmune disease management.
In January 2025, we announced conditional approval by NYSDOH and commercial launch of our new SLE and RA biomarker assays on the AVISE®CTD platform. 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 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. Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors. Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often reimburse non-participating providers at a lower amount than participating providers, if at all. We have received a substantial portion of our revenue from a limited number of commercial payors, most of which have not contracted with us to be a participating provider. Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payors, we may not be able to effectively increase our testing volume and revenue as expected. 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 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, 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. 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 and on the
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. We expect to continue to invest in research and development in order to develop additional testing products. Our success in developing new testing products will be important in our efforts to grow our business by expanding the potential market for our products and diversifying our sources of revenue. We intend to leverage our protein and molecular assay development capabilities, bioinformatic team and proprietary technologies to pursue the development of additional testing products designed to have superior clinical utility for rheumatic conditions.
▪Deliver Sustainable Profitable Growth. 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. This strategy includes optimizing revenue cycle practices, focusing managed care efforts on medical policy expansion and continuing to educate insurance payors on the published, real-world evidence of the clinical utility of our testing products, demonstrating healthcare cost savings and reductions in time to diagnosis.
▪Timing of Our Research and Development Expenses. We conduct clinical studies to validate our new testing products, as well as ongoing clinical and outcome studies to further expand the published evidence that supports our commercialized AVISE®testing products. We also expend funds to secure clinical samples that can be used in discovery, product development, clinical validation, utility and outcome studies. Our spending on experiments and clinical studies may vary substantially from quarter to quarter, and the timing of these research and development activities is difficult to predict. If a substantial number of clinical samples are obtained in a given quarter or if a high-cost experiment is conducted in one quarter versus the next, the timing of these expenses will affect our financial results.
▪How We Recognize Revenue. We record revenue on an accrual basis, using an estimate of the amount that we will ultimately realize, as determined based on a historical analysis of amounts collected by test and by payor, among other factors. Changes to such estimates may increase or decrease revenue recognized in future periods.
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 that may affect our performance in the section entitled "Risk Factors."
Seasonality
Based on our experience to date, we expect some seasonal variations in our financial results due to a variety of factors, such as: the year-end holiday period and other major holidays, vacation patterns of both patients and healthcare providers (including medical conferences), climate and weather conditions in our markets (for example, excess sun exposure can cause flares in SLE), seasonal conditions that may affect medical practices and provider activity (for example, influenza outbreaks that may reduce the percentage of patients that can be seen) and other factors relating to the timing of patient benefit changes, as well as patient deductibles and co-insurance limits.
Inflationary Environment
The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs. 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. Trade Policy
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
Revenue
We recognize revenue in accordance with the provisions of ASC Topic 606, Revenue from Contracts with Customers.We record revenue on an accrual basis, using an estimate of the amount we will ultimately receive, as determined based on a historical analysis of amounts collected by test and by payor, among other factors. These assessments require significant judgment by management.
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. We primarily market our testing products to rheumatologists and their physician assistants in the United States. The healthcare professionals who order our testing products, and to whom results are reported, are generally not responsible for payment for these products. The parties that pay for these services (payors) consist of commercial payors (insurance companies, health maintenance organizations, etc.), government payors (primarily Medicare and Medicaid), client payors (hospitals, other laboratories, etc.), and patient self-pay. 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 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. 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. A pricing determination is not synonymous with a coverage determination. Having a price associated with the PLA code for any particular test does not secure coverage or reimbursement for that PLA code from Medicare or any other third-party payor.
We submitted a formal request to Noridian for coverage of our AVISE®Lupus test under the new PLA Code and on September 27, 2022, we received notice that Noridian deemed our application for an LCD to be valid, but our application is still pending. 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. On January 31, 2024, CMS released a coverage article under which all multi-analyte proteomic testing will be considered within the scope of MolDX and reviewed through their technology assessment process. The article listed several such tests, including the AVISE®Lupus test, and requires all laboratories furnishing multi-analyte proteomics testing in MolDX jurisdictions to register with the DEX®Diagnostics Exchange Registry and obtain a Z-Code®identifier. We were issued a Z-Code®identifier in May 2024. 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. While collectability has improved with certain plans year-over-year, we continue to experience denials due to unfavorable medical policy with certain plans, and we expect this situation to persist.
During the year ended December 31, 2023, we implemented several revenue cycle management initiatives, including among others, withholding the submission of commercial payor claims for reimbursement until subsequent quarters, increasing appeals efforts, adjusting the documentation required of physicians when ordering our tests and implementing increases to our patient payment rates. 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. 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 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
Selling, General and Administrative Expenses
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).
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). We expense all research and development costs in the periods in which they are incurred.
Interest Expense
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
Interest income consists of interest income earned on our cash and cash equivalents.
Income Tax Expense
Income taxes include federal and state income taxes in the United States.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024:
Year Ended December 31, Change
2025 2024
(in thousands)
Revenue $ 66,575 $ 55,641 $ 10,934
Cost of revenue 27,776 22,529 5,247
Gross profit 38,799 33,112 5,687
Operating expenses:
Selling, general and administrative expenses 46,615 41,373 5,242
Research and development expenses 6,254 5,375 879
Total operating expenses 52,869 46,748 6,121
Loss from operations (14,070) (13,636) (434)
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)
Loss before income taxes (19,900) (15,103) (4,797)
Income tax expense (51) (12) (39)
Net loss $ (19,951) $ (15,115) $ (4,836)
Revenue
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
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 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 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 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 $0.5 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
Income tax expense remained substantially consistent for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Liquidity and Capital Resources
We have incurred net losses since our inception. For the years ended December 31, 2025 and 2024, we incurred a net loss of $20.0 million and $15.1 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and despite any estimates we may make regarding our ability to become profitable, we may never achieve revenue sufficient to offset our expenses. As of December 31, 2025, we had an accumulated deficit of $314.3 million and cash and cash equivalents of $32.2 million. 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. 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
Our primary use of cash is to fund our operations as we continue to grow our business. We expect to continue to incur operating losses in the near term. 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. We expect research and development expenses to remain relatively consistent in the short-term. We believe we have sufficient laboratory capacity to support increased test volume. 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 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.
Our estimate of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Actual results could vary as a result of a number of factors, including:
•our ability to improve AVISE® CTD ASP as a result of the launch of the T-Cell Biomarkers and RA Sub-Profile Biomarkers, in addition to our ability to achieve adequate reimbursement for these additions to our AVISE®CTD test offering;
•our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for our testing products;
•our ability to maintain and grow sales of our AVISE®testing products, as well as the costs associated with conducting clinical studies to demonstrate the utility of our products and support reimbursement efforts;
▪fluctuations in working capital;
▪the costs of developing our product pipeline, including the costs associated with conducting our ongoing and future validation, utility and outcome studies as well as the success of our development and commercialization efforts; and
▪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 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. If additional funding is required or desired, there can be no assurance that additional funds will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund our operating needs or achieve or sustain profitability. If we are unable to raise additional capital or generate sufficient cash from operations to adequately fund our operations, we will need to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion plans or commercialization efforts. Doing so will likely have an unfavorable effect on our ability to execute on our business plan and could have a negative impact on our commercial and strategic relationships. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition, and results of operations could be adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2025 2024
(in thousands)
Net cash provided by (used in):
Operating activities $ (13,625) $ (13,279)
Investing activities (626) (515)
Financing activities 24,435 (663)
Net change in cash, cash equivalents and restricted cash $ 10,184 $ (14,457)
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.
Cash Flows from Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 and 2024 was $0.6 million and $0.5 million, respectively, and was primarily due to net purchases of property and equipment.
Cash Flows from Financing Activities
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.
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 ESPP purchases.
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 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. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. 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.
Revenue Recognition
To date, substantially all of our revenue has been derived from sales of our testing products. We primarily market our testing products to rheumatologists and their physician assistants in the United States. The healthcare professionals who order our services and to whom test results are reported are generally not responsible for payment for these services. The parties that pay for these services consist of commercial payors, government payors (primarily Medicare and Medicaid), client payors (hospitals, other laboratories, etc.) and patient self-pays.
Payors are billed at our list price. Net revenues recognized consist of amounts billed net of allowances for differences between amounts billed and the estimated consideration we expect to receive from such payors. We follow 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. Further adjustments to the allowances, based on actual receipts, are recorded upon settlement. 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 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.
The process for estimating revenues and the ultimate collection of accounts receivable involves significant judgment and estimation by management. 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 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," to the audited financial statements included in this Annual Report for a summary of recent accounting pronouncements.
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