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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2024

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File No. 001-40501

iSpecimen Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

27-0480143

(State or other jurisdiction of incorporation
or organization)

(I.R.S. Employer Identification No.)

8 Cabot Road, Suite 1800, Woburn, Massachusetts 01801

(Address of principal executive offices) (Zip Code)

(781) 301-6700

(Registrant’s telephone number, including area code)

450 Bedford Street, Lexington, Massachusetts 02420

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common Stock, par value $0.0001 per share

ISPC

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 4, 2024, there were 962,637 shares of common stock, par value $0.0001 per share, issued and outstanding.

iSPECIMEN INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION 

ITEM 1.

Financial Statements

Condensed Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023

3

Unaudited Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2024 and 2023

4

Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2024 and 2023

5

Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023

7

Notes to Unaudited Condensed Financial Statements

8

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

39

ITEM 4.

Controls and Procedures

39

PART II – OTHER INFORMATION

ITEM 1.

Legal Proceedings

41

ITEM 1A.

Risk Factors

41

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

ITEM 3.

Defaults Upon Senior Securities

41

ITEM 4.

Mine Safety Disclosures

41

ITEM 5.

Other Information

42

ITEM 6.

Exhibits

43

SIGNATURES

44

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

iSpecimen Inc.

Condensed Balance Sheets

    

    

September 30, 2024

December 31, 2023

ASSETS

(Unaudited)

Current assets:

 

  

 

  

Cash and cash equivalents

$

1,751,854

$

2,343,666

Available-for-sale securities

2,661,932

Accounts receivable – unbilled

 

1,654,019

 

2,212,538

Accounts receivable, net of allowance for doubtful accounts of $639,116 and $520,897 at September 30, 2024 and December 31, 2023, respectively

 

974,383

 

728,388

Prepaid expenses and other current assets

 

277,579

 

292,079

Total current assets

 

4,657,835

 

8,238,603

Property and equipment, net

 

102,803

 

127,787

Internally developed software, net

 

5,357,188

 

6,323,034

Other intangible assets, net

764,589

908,255

Operating lease right-of-use asset

342,107

193,857

Security deposits

 

39,701

 

27,601

Total assets

$

11,264,223

$

15,819,137

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

4,055,332

$

3,925,438

Accrued expenses

 

1,022,373

 

1,540,607

Senior note payable, net of debt discount

864,425

Operating lease current obligation

42,513

 

167,114

Deferred revenue

 

283,571

 

415,771

Total current liabilities

 

6,268,214

 

6,048,930

Operating lease long-term obligation

 

281,437

 

29,130

Total liabilities

 

6,549,651

 

6,078,060

Commitments and contingencies (See Note 9)

 

  

 

  

Stockholders’ equity

 

 

Common stock, $0.0001 par value, 200,000,000 shares authorized, 831,373 issued and 829,823 outstanding at September 30, 2024 and 455,719 issued and 454,169 outstanding at December 31, 2023

 

83

 

45

Additional paid-in capital

 

70,530,467

 

69,105,176

Treasury stock, 1,550 shares, at cost

 

(172)

 

(172)

Accumulated other comprehensive income

840

Accumulated deficit

 

(65,815,806)

 

(59,364,812)

Total stockholders’ equity

 

4,714,572

 

9,741,077

Total liabilities and stockholders’ equity

$

11,264,223

$

15,819,137

See accompanying notes to these unaudited condensed financial statements.

Reflects retroactive effect of a 1-for-20 reverse stock split on September 13, 2024.

3

iSpecimen Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

Three Months Ended September 30, 

Nine Months Ended September 30,

    

2024

    

2023

    

2024

    

2023

Revenue

$

2,661,936

$

2,777,751

$

7,815,608

$

7,353,090

Operating expenses:

Cost of revenue

 

1,554,159

 

1,392,534

3,978,557

3,393,079

Technology

 

754,730

 

921,580

2,578,624

2,599,086

Sales and marketing

 

631,625

 

897,433

2,380,515

2,972,757

Supply development

 

84,972

 

186,176

420,322

801,038

Fulfillment

 

449,142

 

471,735

1,293,185

1,363,427

General and administrative

 

892,712

 

1,102,373

4,051,994

4,522,028

Total operating expenses

 

4,367,340

 

4,971,831

14,703,197

15,651,415

Loss from operations

 

(1,705,404)

 

(2,194,080)

(6,887,589)

(8,298,325)

Other income, net

Interest expense

 

(7,364)

(4,465)

(16,303)

(11,535)

Interest income

 

1,235

67,362

40,896

292,506

Other income (expense), net

 

271,680

20,082

412,002

(9,173)

Total other income, net

 

265,551

 

82,979

436,595

271,798

Net loss

$

(1,439,853)

$

(2,111,101)

$

(6,450,994)

$

(8,026,527)

Other comprehensive income (loss):

Net loss

$

(1,439,853)

$

(2,111,101)

$

(6,450,994)

$

(8,026,527)

Unrealized gain (loss) on available-for-sale securities

(47)

(840)

641

Total other comprehensive income (loss)

(47)

(840)

641

Comprehensive loss

$

(1,439,853)

$

(2,111,148)

$

(6,451,834)

$

(8,025,886)

Net loss per share - basic and diluted

$

(2.10)

$

(4.66)

$

(11.30)

$

(17.78)

Weighted average shares of common stock outstanding - basic and diluted

 

687,141

453,267

570,693

451,487

See accompanying notes to these unaudited condensed financial statements.

Reflects retroactive effect of a 1-for-20 reverse stock split on September 13, 2024.

4

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)

Nine Months Ended September 30, 2024

Accumulated 

Additional

Other

Total

Common Stock

Treasury Stock

 Paid-In 

Comprehensive

Accumulated 

Stockholders'

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income

    

Deficit

    

Equity

Balance at December 31, 2023

 

454,169

$

45

1,550

$

(172)

$

69,105,176

$

840

$

(59,364,812)

$

9,741,077

Stock-based compensation expense

 

 

 

45,871

 

 

 

45,871

Vesting of restricted stock

438

 

 

48,054

48,054

Repurchase of common stock purchase warrants exercisable under PIPE Warrants

 

 

(52,500)

(52,500)

Issuance of common stock in connection with At the Market Offering Agreement

18,899

 

2

 

138,485

138,487

Offering costs in connection with At the Market Offering Agreement

 

 

(204,845)

(204,845)

Unrealized loss on available-for-sale securities

(799)

(799)

Net loss

 

 

 

 

 

 

(2,902,117)

 

(2,902,117)

Balance at March 31, 2024

473,506

$

47

1,550

$

(172)

$

69,080,241

$

41

$

(62,266,929)

$

6,813,228

Stock-based compensation expense

 

 

34,834

 

 

 

34,834

Vesting of restricted stock

1,178

 

 

44,803

44,803

Issuance of common stock in connection with At The Market Offering Agreement

180,105

 

18

 

1,355,909

1,355,927

Offering costs in connection with At The Market Offering Agreement

 

 

(50,443)

(50,443)

Unrealized loss on available-for-sale securities

(41)

(41)

Net loss

 

 

 

 

 

(2,109,024)

 

(2,109,024)

Balance at June 30, 2024

 

654,789

$

65

1,550

$

(172)

$

70,465,344

$

$

(64,375,953)

$

6,089,284

Stock-based compensation expense

 

 

20,302

 

 

 

20,302

Vesting of restricted stock

296

 

 

44,839

44,839

Reverse stock split adjustment

174,738

18

(18)

Net loss

 

 

 

 

 

(1,439,853)

 

(1,439,853)

Balance at September 30, 2024

 

829,823

$

83

1,550

$

(172)

$

70,530,467

$

$

(65,815,806)

$

4,714,572

See accompanying notes to these unaudited condensed financial statements.

Reflects retroactive effect of a 1-for-20 reverse stock split on September 13, 2024.

5

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)

Nine Months Ended September 30, 2023

Accumulated 

Additional 

Other

Total

Common Stock

Treasury Stock

Paid-In 

Comprehensive

Accumulated 

Stockholders’

  

Shares

    

Amount  

    

Shares

    

 Amount  

    

 Capital 

    

Income

Deficit

    

Equity

Balance at December 31, 2022

446,290

$

45

1,550

$

(172)

$

68,574,621

$

$

(48,265,324)

$

20,309,170

Stock-based compensation expense

54,608

54,608

Vesting of restricted stock

1,439

65,949

65,949

Issuance of common stock through exercise of stock options

3,387

67,736

67,736

Unrealized gain on available-for-sale securities

 

 

 

 

18,843

18,843

Net loss

 

 

 

 

(2,431,812)

(2,431,812)

Balance at March 31, 2023

 

451,116

$

45

1,550

$

(172)

$

68,762,914

$

18,843

$

(50,697,136)

$

18,084,494

Stock-based compensation expense

 

 

 

 

29,829

 

29,829

Vesting of restricted stock

1,890

94,868

94,868

Issuance of common stock through exercise of stock options

158

3,153

3,153

Unrealized loss on available-for-sale securities

(18,155)

(18,155)

Net loss

 

 

 

 

(3,483,614)

 

(3,483,614)

Balance at June 30, 2023

453,164

$

45

1,550

$

(172)

$

68,890,764

$

688

$

(54,180,750)

$

14,710,575

Stock-based compensation expense

 

 

 

 

49,394

 

49,394

Vesting of restricted stock

539

56,899

56,899

Unrealized loss on available-for-sale securities

(47)

(47)

Net loss

 

 

 

 

(2,111,101)

 

(2,111,101)

Balance at September 30, 2023

453,703

$

45

1,550

$

(172)

$

68,997,057

$

641

$

(56,291,851)

$

12,705,720

See accompanying notes to these unaudited condensed financial statements

Reflects retroactive effect of a 1-for-20 reverse stock split on September 13, 2024.

6

iSpecimen Inc.

Condensed Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(6,450,994)

$

(8,026,527)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Stock-based compensation expense

 

238,703

 

351,547

Amortization of internally developed software

 

1,553,939

 

1,429,182

Amortization of other intangible assets

143,666

6,383

Depreciation of property and equipment

 

48,607

 

99,125

Bad debt expense

 

205,764

 

243,053

Amortization of discount and debt issuance costs on senior note payable

4,445

Non-cash interest income related to accretion of discount on available-for-sale securities

(28,976)

(147,170)

Loss from sales of available-for-sale securities

680

Loss on disposal of property and equipment

58

Change in operating assets and liabilities:

 

 

Accounts receivable – unbilled

 

558,519

 

902,355

Accounts receivable

 

(451,759)

 

(350,781)

Prepaid expenses and other current assets

 

14,500

 

(20,179)

Operating lease right-of-use asset

112,876

(49,113)

Security deposits

(12,100)

Tax credit receivable

128,541

Accounts payable

 

129,894

 

(178,899)

Accrued expenses

 

(518,234)

 

(503,278)

Operating lease liability

(108,420)

48,495

Deferred revenue

 

(132,200)

 

(85,425)

Net cash used in operating activities

 

(4,691,032)

 

(6,152,691)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Capitalization of internally developed software

 

(588,093)

 

(3,501,206)

Capitalization of other intangible assets

(191,500)

Purchase of property and equipment

(23,681)

(19,478)

Purchase of leasehold improvements included in operating lease right-of-use asset

(25,000)

Purchase of available-for-sale securities

(460,932)

(10,143,156)

Proceeds from sales and maturities of available-for-sale securities

3,150,320

7,350,000

Net cash provided by (used in) investing activities

 

2,052,614

 

(6,505,340)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Proceeds from issuance of senior note payable

1,000,000

Proceeds from exercise of stock options

70,889

Proceeds from issuance of common stock in connection with At the Market Offering Agreement

1,494,414

Payment of debt issuance costs in connection with senior note payable

(140,020)

Payment of offering costs in connection with the issuance of common stock in connection with At the Market Offering Agreement

(255,288)

Repurchase of common stock purchase warrants exercisable under PIPE warrants

(52,500)

Net cash provided by financing activities

 

2,046,606

 

70,889

Net decreases in cash and cash equivalents

 

(591,812)

 

(12,587,142)

Cash and cash equivalents at beginning of period

 

2,343,666

 

15,308,710

Cash and cash equivalents at end of period

$

1,751,854

$

2,721,568

Supplemental disclosure of cash flow information:

Cash paid for interest

$

14,358

$

11,535

Supplemental disclosure of non-cash investing and financing activities:

Non-cash amounts of lease liabilities arising from obtaining right-of-use assets

$

321,805

$

166,357

Non-cash adjustment to reduce lease liabilities and right-of-use assets due to lease termination

$

85,679

$

Stock issuance costs included in accounts payable and accrued expenses

$

7,023

$

See accompanying notes to these unaudited condensed financial statements.

7

Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

1.NATURE OF BUSINESS AND BASIS OF PRESENTATION

Business

iSpecimen Inc. (“iSpecimen” or the “Company”) was incorporated in 2009 under the laws of the state of Delaware. The Company has developed and launched a proprietary online marketplace platform that connects medical researchers who need access to subjects, samples, and data, with hospitals, laboratories, and other organizations who have access to them. iSpecimen is a technology-driven company founded to address a critical challenge: how to connect life science researchers who need human biofluids, tissues, and living cells (“biospecimens”) for their research, with biospecimens available (but not easily accessible) in healthcare provider organizations worldwide. The Company’s proprietary platform, the iSpecimen Marketplace platform, was designed to solve this problem and transform the biospecimen procurement process to accelerate medical discovery. The Company is headquartered in Woburn, Massachusetts and its principal market is North America. The Company operates as one operating and reporting segment.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information, and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”), published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results of operations for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Reclassifications

Certain reclassifications have been made to the Company’s prior year amounts to conform to the current year presentation.

Reverse Stock Split

On October 9, 2023, the Company received a notification from Nasdaq that its Common Stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required by the Listing Rules of The Nasdaq Stock Market.

On July 19, 2024, the Company’s stockholders approved a proposal to amend the Company’s Fourth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to effect a reverse stock split of the Company’s issued and outstanding shares of common stock, as well as any shares of common stock held by the Company in treasury, at a ratio in the range from 1-for-10 to 1-for-20.

On August 19, 2024, the Company’s board of directors approved a one-for-twenty (1:20) reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On September 13, 2024, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Company’s Certificate of Incorporation to effect the Reverse Stock Split. The Reverse Stock Split became effective on September 13, 2024, and the Company’s common stock began trading on a split-adjusted basis on Nasdaq on September 16, 2024.

On October 1, 2024, the Company received a notification from Nasdaq that the Staff has determined that for the last 11 consecutive business days, from September 16, 2024 to September 30, 2024, the closing bid price of the Company’s Common Stock was $1.00 per share or greater. Accordingly, the Company has regained compliance with Listing Rule 5559(a)(2).

8

Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Except as otherwise indicated, all references to the Company’s common stock, share data, per share data and related information has been adjusted for the Reverse Stock Split ratio of 1-for-20 as if they had occurred at the beginning of the earliest period presented. The Reverse Stock Split combined each 20 shares of our outstanding common stock and treasury shares into one share of common stock without any change in the par value per share, and the Reverse Stock Split correspondingly adjusted, among other things, the exercise rate of our warrants and options into the Company’s common stock. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share.

Going Concern Uncertainty and Management’s Plan

The Company has recognized recurring losses since inception. As of September 30, 2024, the Company had negative working capital of $1,610,379, an accumulated deficit of $65,815,806, cash and cash equivalents and short-term investments of $1,751,854, and accounts payable and accrued expenses of $5,077,705. Since inception, the Company has relied upon raising capital and its revenues to finance operations.

The future success of the Company is dependent on its ability to successfully obtain additional working capital and/or to ultimately attain profitable operations. During the year ended December 31, 2023, the Company began initiating efforts to decrease its capital and operational