Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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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 June 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.)

450 Bedford Street, Lexington, Massachusetts 02420

(Address of principal executive offices) (Zip Code)

(781) 301-6700

(Registrant’s telephone number, including area code)

N/A

(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 August 2, 2024, there were 13,097,031 shares of common stock, par value $0.0001 per share, issued and outstanding.

Table of Contents

iSPECIMEN INC.

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

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	3
	Unaudited Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023	4
	Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2024 and 2023	5
	Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 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	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures	33

PART II – OTHER INFORMATION
ITEM 1.	Legal Proceedings	35
ITEM 1A.	Risk Factors	35
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3.	Defaults Upon Senior Securities	35
ITEM 4.	Mine Safety Disclosures	35
ITEM 5.	Other Information	35
ITEM 6.	Exhibits	36
SIGNATURES		37

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

iSpecimen Inc.

Condensed Balance Sheets



	June 30, 2024		December 31, 2023
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	2,151,243	$	2,343,666
Available-for-sale securities		—		2,661,932
Accounts receivable – unbilled		1,953,632		2,212,538
Accounts receivable, net of allowance for doubtful accounts of $700,862 and $520,897 at June 30, 2024 and December 31, 2023, respectively		892,814		728,388
Prepaid expenses and other current assets		237,564		292,079
Total current assets		5,235,253		8,238,603
Property and equipment, net		104,822		127,787
Internally developed software, net		5,695,166		6,323,034
Other intangible assets, net		812,478		908,255
Operating lease right-of-use asset		26,538		193,857
Security deposits		27,601		27,601
Total assets	$	11,901,858	$	15,819,137
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,205,371	$	3,925,438
Accrued expenses		1,319,201		1,540,607
Operating lease current obligation		29,130		167,114
Deferred revenue		258,872		415,771
Total current liabilities		5,812,574		6,048,930
Operating lease long-term obligation		—		29,130
Total liabilities		5,812,574		6,078,060

Commitments and contingencies (See Note 8)

Stockholders’ equity
Common stock, $0.0001 par value, 200,000,000 shares authorized, 13,126,770 issued and 13,095,770 outstanding at June 30, 2024 and 9,114,371 issued and 9,083,371 outstanding at December 31, 2023		1,309		908
Additional paid-in capital		70,464,100		69,104,313
Treasury stock, 31,000 shares, at cost		(172)		(172)
Accumulated other comprehensive income		—		840
Accumulated deficit		(64,375,953)		(59,364,812)
Total stockholders’ equity		6,089,284		9,741,077
Total liabilities and stockholders’ equity	$	11,901,858	$	15,819,137

See accompanying notes to these unaudited condensed financial statements.

Table of Contents

iSpecimen Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	2,863,679	$	1,625,140	$	5,153,672	$	4,575,339
Operating expenses:
Cost of revenue		1,424,392		853,633		2,424,398		2,000,545
Technology		911,927		843,099		1,823,894		1,677,506
Sales and marketing		1,082,949		977,748		1,748,890		2,025,346
Supply development		137,511		291,360		335,350		614,862
Fulfillment		433,189		462,672		844,043		891,692
General and administrative		1,055,376		1,758,451		3,159,282		3,469,633
Total operating expenses		5,045,344		5,186,963		10,335,857		10,679,584

Loss from operations		(2,181,665)		(3,561,823)		(5,182,185)		(6,104,245)

Other income, net
Interest expense		(4,474)		(3,535)		(8,939)		(7,070)
Interest income		9,163		110,882		39,661		225,144
Other income (expense), net		67,952		(29,138)		140,322		(29,255)
Total other income, net		72,641		78,209		171,044		188,819

Net loss	$	(2,109,024)	$	(3,483,614)	$	(5,011,141)	$	(5,915,426)

Other comprehensive income (loss):
Net loss	$	(2,109,024)	$	(3,483,614)	$	(5,011,141)	$	(5,915,426)
Unrealized gain (loss) on available-for-sale securities		(41)		(18,155)		(840)		688
Total other comprehensive income (loss)		(41)		(18,155)		(840)		688
Comprehensive loss	$	(2,109,065)	$	(3,501,769)	$	(5,011,981)	$	(5,914,738)

Net loss per share - basic and diluted	$	(0.19)	$	(0.39)	$	(0.49)	$	(0.66)

Weighted average shares of common stock outstanding - basic and diluted		11,340,586		9,033,868		10,236,523		9,011,644

See accompanying notes to these unaudited condensed financial statements.

Table of Contents

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)


	Six Months Ended June 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	9,083,371	$	908	31,000	$	(172)	$	69,104,313	$	840	$	(59,364,812)	$	9,741,077
Stock-based compensation expense	—		—	—		—		45,871		—		—		45,871
Vesting of restricted stock	8,771		1	—		—		48,053		—		—		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	377,970		38	—		—		138,449		—		—		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	9,470,112	$	947	31,000	$	(172)	$	69,079,341	$	41	$	(62,266,929)	$	6,813,228
Stock-based compensation expense	—		—	—		—		34,834		—		—		34,834
Vesting of restricted stock	23,553		2	—		—		44,801		—		—		44,803
Issuance of common stock in connection with At The Market Offering Agreement	3,602,105		360	—		—		1,355,567		—		—		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	13,095,770	$	1,309	31,000	$	(172)	$	70,464,100	$	—	$	(64,375,953)	$	6,089,284

See accompanying notes to these unaudited condensed financial statements.

Table of Contents

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)


	Six Months Ended June 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	8,925,808	$	892	31,000	$	(172)	$	68,573,774	$	—	$	(48,265,324)	$	20,309,170
Stock-based compensation expense	—		—	—		—		54,608		—		—		54,608
Vesting of restricted stock	28,776		3	—		—		65,946		—		—		65,949
Issuance of common stock through exercise of stock options	67,736		7	—		—		67,729		—		—		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	9,022,320	$	902	31,000	$	(172)	$	68,762,057	$	18,843	$	(50,697,136)	$	18,084,494
Stock-based compensation expense	—		—	—		—		29,829		—		—		29,829
Vesting of restricted stock	37,801		4	—		—		94,864		—		—		94,868
Issuance of common stock through exercise of stock options	3,153		—	—		—		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	9,063,274	$	906	31,000	$	(172)	$	68,889,903	$	688	$	(54,180,750)	$	14,710,575

See accompanying notes to these unaudited condensed financial statements.

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iSpecimen Inc.

Condensed Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,011,141)	$	(5,915,426)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		173,562		245,254
Amortization of internally developed software		1,075,555		934,829
Amortization of other intangible assets		95,777		—
Depreciation of property and equipment		32,101		75,726
Bad debt expense		204,510		261,610
Non-cash interest income related to accretion of discount on available-for-sale securities		(28,976)		(97,874)
Loss from sales of available-for-sale securities		680		—
Change in operating assets and liabilities:
Accounts receivable – unbilled		258,906		1,229,433
Accounts receivable		(368,936)		(122,540)
Prepaid expenses and other current assets		54,515		112,665
Operating lease right-of-use asset		81,640		77,577
Tax credit receivable		—		128,541
Accounts payable		279,933		(679,143)
Accrued expenses		(221,406)		(648,964)
Operating lease liability		(81,435)		(77,872)
Deferred revenue		(156,899)		(42,734)
Net cash used in operating activities		(3,611,614)		(4,518,918)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of internally developed software		(447,687)		(2,731,507)
Purchase of property and equipment		(9,136)		(13,745)
Purchase of available-for-sale securities		(460,932)		(7,642,929)
Proceeds from sales and maturities of available-for-sale securities		3,150,320		1,532,000
Net cash provided by (used in) investing activities		2,232,565		(8,856,181)

CASH FLOWS FROM FINANCING ACTIVITIES:
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 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		1,186,626		70,889

Net decreases in cash and cash equivalents		(192,423)		(13,304,210)
Cash and cash equivalents at beginning of period		2,343,666		15,308,710
Cash and cash equivalents at end of period	$	2,151,243	$	2,004,500

Supplemental disclosure of cash flow information:
Cash paid for interest	$	8,939	$	7,070
Supplemental disclosure of non-cash investing and financing activities:
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.

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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 Lexington, 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.

Going Concern Uncertainty and Management’s Plan

The Company has recognized recurring losses since inception. As of June 30, 2024, the Company had negative working capital of $577,321, an accumulated deficit of $64,375,953, cash and cash equivalents and short-term investments of $2,151,243, and accounts payable and accrued expenses of $5,524,572. 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 expenditures by cutting costs and right sizing the Company through reductions in workforce while streamlining operations and rationalizing resources to focus on key market opportunities. The reductions in workforce since January 1, 2023 through June 30, 2024, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 45% and technology costs of approximately 66% by the end of June 30, 2024 when compared to January 1, 2023. In addition, the Company plans to add additional customers to increase and add additional revenues through its new revenue enhancement projects as well as to reduce and manage expenditures to improve its financial position and ensure continued funding of operations. However, as certain elements of the Company’s operating plan are not within the Company’s control, the Company is unable to assess their probability of success. The Company may also seek to fund its operations through public equity or debt financing, as well as other sources but it has not currently identified any other specific source of funding except for the ATM Agreement that is defined and discussed in Note 9.

The Company may be unsuccessful in increasing its revenues from its new enhancement projects or contain its operating expenses, or it may be unable to raise additional capital on commercially favorable terms. The Company’s failure to generate additional revenues or contain operating costs would have a negative impact on the Company’s business, results of operations and financial condition and the Company’s ability to continue as a going concern. If the Company does not generate enough revenue to provide an adequate level of working capital, its business plan will be scaled down further.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year from the date these unaudited condensed financial statements are issued. Management’s plan to mitigate the conditions that raise substantial doubt includes generating additional revenues through its revenue enhancement projects, deferring certain projects and capital expenditures and eliminating certain future operating expenses for the Company to continue as a going concern. However, there can be no assurance that the Company will be successful in completing any of these options. As a result, management’s plans cannot be considered probable and thus do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies and recent accounting standards are summarized in Note 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There were no significant changes to these accounting policies during the six months ended June 30, 2024.

Use of Estimates

The preparation of the Company’s unaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company utilizes certain estimates in the determination of the deferred tax valuation allowances, revenue recognition, stock-based compensation, allowance for doubtful accounts, accrued expenses, and the useful lives of internally developed software and sequenced data. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from such estimates.

Investments

The Company’s investments are considered to be available-for-sale and are recorded at fair value. Unrealized gains and losses are included in accumulated other comprehensive income. Purchases and sales of securities are reflected on a trade-date basis. Realized gains or losses are released from accumulated other comprehensive income and into earnings on the statement of operations, and amortization of premiums and accretion of discounts on the U.S treasury bills are recorded in interest expense or income, respectively.

The Company continually monitors the difference between its cost basis and the estimated fair value of its investments. The Company’s accounting policy for impairment recognition requires other-than-temporary impairment charges to be recorded when it determines that it is more likely than not that it will be unable to collect all amounts due according to the contractual terms of the fixed maturity security or that the anticipated recovery in fair value of the equity security will not occur in a reasonable amount of time. Impairment charges on investments are recorded based on the fair value of the investments at the measurement date or based on the value calculated using a discounted cash flow model. Credit-related impairments on fixed maturity securities that the Company does not plan to sell, and for which it is not more likely than not to be required to sell, are recognized in net income. Any non-credit related impairment is recognized as a component of other comprehensive income. Factors considered in evaluating whether there is a decline in value include: the length of time and the extent to which the fair value has been less than cost; the financial condition and near-term prospects of the issuer; and the likelihood that it will be required to sell the investment.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

●

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

●

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

●

Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

For certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate their fair values as of June 30, 2024 and December 31, 2023, respectively, because of their short-term nature. Available-for-sale securities are recorded at fair value and as level 1 investments.

Revenue Recognition and Accounts Receivable

The Company recognizes revenue using the five-step approach as follows: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the Company satisfies the performance obligations.

The Company generates revenue by procuring various specimens from hospitals, laboratories, and other supply sites, for the Company’s customers using the Company’s proprietary software, the iSpecimen Marketplace, to identify, locate, and ultimately validate the required specimens to the Company’s customers’ requested specifications. The Company’s performance obligation is to procure a specimen meeting the customer’s specification(s) from a supplier, on a “best efforts” basis, for the Company’s customer at the agreed price per specimen as indicated in the customer’s contract with the Company. The Company does not currently charge suppliers or customers for the use of the Company’s proprietary software. Each customer will execute a material and data use agreement with the Company or agree to online purchase terms, each of which includes terms such as specimen and data use, shipment terms, payment, and cancellation terms. These are then supplemented by purchase orders that specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent the Company’s contracts with its customers. Generally, contracts have fixed unit pricing. For certain specimen orders, a refundable customer deposit may be required prior to order fulfillment depending on project set-up requirements, which is presented as deferred revenue. The Company expects to recognize the deferred revenue as revenue within the next twelve months.

Specimen collections occur at supply sites within the Company’s network. “Collection” is when the specimen has been removed, or “collected” from the patient or donor. A specimen is often collected specifically for a particular Company order. Once collected, the specimen is assigned by the supplier to the Company and control of the specimen passes to the Company. “Accession” is the process whereby a collected specimen and associated data are registered and assigned in the iSpecimen Marketplace to a particular customer order, which can occur while a specimen is at the supplier site or while at the Company site and it is when control of the specimen passes to the customer. Suppliers may ship specimens to the Company or directly to the customer if specimens must be delivered within a short time period (less than 24 hours after collection) or shipping to the Company is not practical.

The Company has evaluated principal versus agent considerations as part of the Company’s revenue recognition policy. The Company has concluded that it acts as principal in the arrangement as it manages the procurement process from beginning to end and determines which suppliers will be used to fulfill an order, usually takes physical possession of the specimens, sets prices for the specimens, and bears the responsibility for customer credit risk.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

The Company recognizes revenue over time, as the Company has created an asset with no alternative use to the Company, which has an enforceable right to payment for performance completed to date. At contract inception, the Company reviews a contract and related order upon receipt to determine if the specimen ordered has an alternative use by the Company. Generally, specimens ordered do not have an alternative future use to the Company and the performance obligation is satisfied when the related specimens are accessioned. The Company uses an output method to recognize revenue for specimens with no alternative future use. The output is measured based on the number of specimens accessioned. In the rare circumstances where specimens do have an alternative future use, the Company's performance obligation is satisfied at the time of shipment.

Customers are generally invoiced upon shipment. Depending on the quantity of specimens ordered, it may take several accounting periods to completely fulfill a purchase order. In other words, there can be multiple invoices issued for a single purchase order, reflecting the specimens being accessioned over time. However, specimens are generally shipped as soon as possible after they have been accessioned.

Once a specimen that has no alternative future use and for which the Company has an enforceable right to payment has been accessioned, the Company records the offset to revenue in accounts receivable – unbilled. Once the specimen has been shipped and invoiced, a reclassification is made from accounts receivable - unbilled to accounts receivable.

Customers are generally given fourteen days from the receipt of specimens to inspect the specimens to ensure compliance with specifications set forth in the purchase order documentation. Customers are entitled to either receive replacement specimens or receive reimbursement of payments made for such specimens. The Company has a nominal history of returns for nonacceptance of specimens delivered. When this occurs, the Company gives the customer a credit for the returns. The Company has not recorded a returns allowance.

The following table summarizes the Company’s revenue for the three and six months ended June 30:


	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Specimens - contracts with customers	$	2,835,449	$	1,522,108	$	5,127,432	$	4,234,485
Shipping and other		28,230		103,032		26,240		340,854
Revenue	$	2,863,679	$	1,625,140	$	5,153,672	$	4,575,339

The Company carries its accounts receivable at the invoiced amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable to determine if an allowance for doubtful accounts is necessary based on the current expected credit loss model. Receivables are written off when deemed uncollectible, with any future recoveries recorded as income when received. As of June 30, 2024 and December 31, 2023, the Company had an allowance for doubtful accounts of $700,862 and $520,897, respectively.

The Company applies the practical expedient to account for shipping and handling activities as fulfillment cost rather than as a separate performance obligation. Shipping and handling costs incurred are included in cost of revenue.

Internally Developed Software, Net

The Company capitalizes certain internal and external costs incurred during the application development stage of internal-use software projects until the software is ready for its intended use. Amortization of the asset commences when the software is complete and placed into service and is recorded in operating expenses. The Company amortizes completed internal-use software over its estimated useful life of five years on a straight-line basis. Costs incurred during the planning, training and post-implementation stages of the software development life cycle are classified as technology costs and are expensed to operations as incurred.

Other Intangible Assets, Net

The Company procures data generated from sequencing of Formalin-Fixed Paraffin-Embedded (“FFPE”) blocks from a third-party sequencer which the Company licenses to its customers with the sale of FFPE blocks at an additional cost. The sequenced data is also organized to form a database of research content that is available for sale through a subscription model. The Company has determined

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

that the sequenced data is an intangible asset and capitalizes the cost to procure the sequenced data. The sequenced data is amortized to cost of revenue over an estimated useful life of five years on a straight-line basis. The costs paid to the third-party sequencer are the only costs capitalized and all other related costs are expensed to operations as incurred.

Impairment of Long-Lived Assets

Management reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable. An impairment loss is recognized when expected cash flows are less than the asset’s carrying value. Long-lived assets consist of property and equipment, internal-use software and other intangible assets. No impairment charges were recorded for the six months ended June 30, 2024 and 2023.

Stock-Based Compensation

The Company records stock-based compensation for options granted to employees, non-employees, and to members of the board of directors for their services to the Company based on the grant date fair value of awards issued, and the expense is recorded on a straight-line basis over the requisite service period. Forfeitures are recognized when they occur.

The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. The use of the Black-Scholes-Merton option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. The Company has concluded that its historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. Therefore, the expected term was determined according to the simplified method, which is the average of the vesting tranche dates and the contractual term. Due to the lack of Company-specific historical and implied volatility data, the estimate of expected volatility is primarily based on the historical volatility of a group of similar companies that are publicly traded. For these analyses, companies with comparable characteristics are selected, including enterprise value and position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its stock-based awards.

The risk-free interest rate is determined by reference to U.S. Treasury zero-coupon issues with remaining maturities similar to the expected term of the options. The Company has not paid, and does not anticipate paying, cash dividends on shares of its common stock.

The fair value of the Company’s common stock is equal to the closing price on the specified grant date.

Restricted Stock Units (“RSUs”)

The Company recognizes stock-based compensation expense from RSUs ratably over the specified vesting period. The fair value of RSUs is determined to be the closing share price of the Company’s common stock on the grant date.

Common Stock Warrants

The Company accounts for common stock warrants as either equity instruments or liabilities, depending on the specific terms of the warrant agreement. The warrants shall be classified as a liability if 1) the underlying shares are classified as liabilities or 2) the entity can be required under any circumstances to settle the warrant by transferring cash or other assets. The measurement of equity-classified non-employee stock-based payments is generally fixed on the grant date and are considered compensatory. For additional discussion on warrants, see Note 9.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average number of shares outstanding for the dilutive effect of common stock equivalents

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

outstanding for the period, determined using the treasury-stock method. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.

The table below provides information on shares of the Company’s common stock issuable upon vesting and exercise, as of June 30:


	2024	2023
Shares issuable upon vesting of RSUs	56,558	168,641
Shares issuable upon exercise of stock options	351,670	345,987
Shares issuable upon exercise of PIPE Warrant (defined below) to purchase common stock	—	1,312,500
Shares issuable upon exercise of Lender Warrant (defined below) to purchase common stock	12,500	12,500
Shares issuable upon exercise of Underwriter Warrant (defined below) to purchase common stock	90,000	90,000

Recently Adopted Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company adopted this new standard as of January 1, 2024. ASU 2020-06 did not have a material impact on the Company’s unaudited condensed financial statements.

3.AVAILABLE-FOR-SALE SECURITIES

The Company’s U.S. Treasury bills that were classified as available-for-sale securities fully matured during the six months ended June 30, 2024. There were no available-for-sale securities as of June 30, 2024. The balance of amortized cost, gross unrealized gains and losses, and fair value for available-for-sale securities as of December 31, 2023 is as follows:


	December 31, 2023
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses		Fair value
Available-for-sale securities:
U.S. Treasury Bills	$	2,661,092	$	36,138	$	(35,298)	$	2,661,932
Total Available-for-sale securities	$	2,661,092	$	36,138	$	(35,298)	$	2,661,932

The Company recorded $680 of realized losses in the six months ended June 30, 2024. The Company did not have any realized gains or losses in the six months ended June 30, 2023.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

4.PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following at the dates indicated:


	June 30,		December 31,
	2024		2023
Website	$	285,377	$	285,377
Computer equipment and purchased software		105,173		96,037
Equipment		35,449		35,449
Furniture and fixtures		87,184		87,184
Leasehold improvements		68,471		68,471
Total property and equipment		581,654		572,518
Accumulated depreciation		(476,832)		(444,731)
Total property and equipment, net

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