10-Q 1 ispc-20240331x10q.htm 10-Q
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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 March 31, 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 May 3, 2024, there were 9,978,958 shares of common stock, par value $0.0001 per share, issued and outstanding.

iSPECIMEN INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2024

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION 

ITEM 1.

Financial Statements

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

3

Unaudited Condensed Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

4

Unaudited Condensed Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023

5

Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 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

23

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

32

ITEM 4.

Controls and Procedures

32

PART II – OTHER INFORMATION

ITEM 1.

Legal Proceedings

34

ITEM 1A.

Risk Factors

34

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

ITEM 3.

Defaults Upon Senior Securities

34

ITEM 4.

Mine Safety Disclosures

34

ITEM 5.

Other Information

34

ITEM 6.

Exhibits

35

SIGNATURES

36

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

iSpecimen Inc.

Condensed Balance Sheets

    

    

March 31, 2024

December 31, 2023

ASSETS

(Unaudited)

Current assets:

 

  

 

  

Cash and cash equivalents

$

2,089,891

$

2,343,666

Available-for-sale securities

466,493

2,661,932

Accounts receivable – unbilled

 

1,978,144

 

2,212,538

Accounts receivable, net of allowance for doubtful accounts of $718,821 and $520,897 at March 31, 2024 and December 31, 2023, respectively

 

437,424

 

728,388

Prepaid expenses and other current assets

 

313,999

 

292,079

Total current assets

 

5,285,951

 

8,238,603

Property and equipment, net

 

120,873

 

127,787

Internally developed software, net

 

6,065,770

 

6,323,034

Other intangible assets, net

860,366

908,255

Operating lease right-of-use asset

153,340

193,857

Security deposits

 

27,601

 

27,601

Total assets

$

12,513,901

$

15,819,137

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

3,560,474

$

3,925,438

Accrued expenses

 

1,710,815

 

1,540,607

Operating lease current obligation

156,703

 

167,114

Deferred revenue

 

272,681

 

415,771

Total current liabilities

 

5,700,673

 

6,048,930

Operating lease long-term obligation

 

 

29,130

Total liabilities

 

5,700,673

 

6,078,060

Commitments and contingencies (See Note 8)

 

  

 

  

Stockholders’ equity

 

 

Common stock, $0.0001 par value, 200,000,000 shares authorized, 9,501,112 issued and 9,470,112 outstanding at March 31, 2024 and 9,114,371 issued and 9,083,371 outstanding at December 31, 2023

 

947

 

908

Additional paid-in capital

 

69,079,341

 

69,104,313

Treasury stock, 31,000 shares at March 31, 2024 and December 31, 2023, at cost

 

(172)

 

(172)

Accumulated other comprehensive income

41

840

Accumulated deficit

 

(62,266,929)

 

(59,364,812)

Total stockholders’ equity

 

6,813,228

 

9,741,077

Total liabilities and stockholders’ equity

$

12,513,901

$

15,819,137

See accompanying notes to these unaudited condensed financial statements.

3

iSpecimen Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

Three Months Ended March 31,

    

2024

    

2023

Revenue

$

2,289,993

$

2,950,197

Operating expenses:

Cost of revenue

1,000,006

1,146,912

Technology

911,967

834,407

Sales and marketing

665,941

962,169

Supply development

197,839

275,246

Fulfillment

410,854

455,531

General and administrative

2,103,906

1,818,355

Total operating expenses

5,290,513

5,492,620

Loss from operations

(3,000,520)

(2,542,423)

Other income, net

Interest expense

(4,465)

(3,535)

Interest income

30,498

114,263

Other income (expense), net

72,370

(117)

Total other income, net

98,403

110,611

Net loss

$

(2,902,117)

$

(2,431,812)

Other comprehensive income (loss):

Net loss

$

(2,902,117)

$

(2,431,812)

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

(799)

18,843

Total other comprehensive income (loss)

(799)

18,843

Comprehensive loss

$

(2,902,916)

$

(2,412,969)

Net loss per share - basic and diluted

$

(0.32)

$

(0.27)

Weighted average shares of common stock outstanding - basic and diluted

9,132,460

8,980,898

See accompanying notes to these unaudited condensed financial statements.

4

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)

Three Months Ended March 31, 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

See accompanying notes to these unaudited condensed financial statements.

5

iSpecimen Inc.

Condensed Statements of Changes in Stockholders’ Equity

(Unaudited)

Three Months Ended March 31, 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

See accompanying notes to these unaudited condensed financial statements.

6

iSpecimen Inc.

Condensed Statements of Cash Flows

(Unaudited)

Three Months Ended March 31,

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(2,902,117)

$

(2,431,812)

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

 

 

Stock-based compensation expense

 

93,925

 

120,557

Amortization of internally developed software

 

532,750

 

433,326

Amortization of other intangible assets

47,889

Depreciation of property and equipment

 

16,050

 

38,589

Bad debt expense

 

197,924

 

152,790

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

(27,428)

Change in operating assets and liabilities:

 

 

Accounts receivable – unbilled

 

234,394

 

743,349

Accounts receivable

 

93,040

 

(1,560,707)

Prepaid expenses and other current assets

 

(21,920)

 

(12,466)

Operating lease right-of-use asset

40,517

38,499

Tax credit receivable

106,204

Accounts payable

 

(364,964)

 

242,172

Accrued expenses

 

170,208

 

(622,926)

Operating lease liability

(39,541)

(38,472)

Deferred revenue

 

(143,090)

 

(34,680)

Net cash used in operating activities

 

(2,072,363)

 

(2,825,577)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Capitalization of internally developed software

 

(275,486)

 

(1,539,546)

Purchase of property and equipment

(9,136)

(8,030)

Purchase of available-for-sale securities

(460,932)

(7,240,639)

Proceeds from maturities of available-for-sale securities

2,683,000

Net cash provided by (used in) investing activities

 

1,937,446

 

(8,788,215)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Proceeds from exercise of stock options

67,736

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

138,487

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

(204,845)

Repurchase of common stock purchase warrants exercisable under PIPE warrants

(52,500)

Net cash provided by (used in) financing activities

 

(118,858)

 

67,736

Net decreases in cash and cash equivalents

 

(253,775)

 

(11,546,056)

Cash and cash equivalents at beginning of period

 

2,343,666

 

15,308,710

Cash and cash equivalents at end of period

$

2,089,891

$

3,762,654

Supplemental disclosure of cash flow information:

Cash paid for interest

$

4,465

$

3,535

Supplemental disclosure of non-cash investing and financing activities:

Stock issuance costs included in accounts payable and accrued expenses

$

73,908

$

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 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 March 31, 2024, the Company had negative working capital of $414,722, an accumulated deficit of $62,266,929, cash and cash equivalents and short-term investments of $2,556,384, and accounts payable and accrued expenses of $5,271,289. 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. The Company has initiated efforts to decrease its capital and operational expenditures by cutting costs and right sizing the Company through reductions in workforce. During the year ended December 31, 2023 and the first quarter of 2024, the Company executed reductions in workforce, resulting in an estimated reduction in monthly compensation costs of approximately 41% and technology costs of approximately 66% in the three months ended March 31, 2024, after streamlining operations and rationalizing resources to focus on key market opportunities. In addition, the Company plans to add additional customers and suppliers 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.

On March 5, 2024, the Company put in place an At the Market Offering Agreement (the “ATM Agreement”) which may allow the Company to issue and sell shares of its common stock, having an aggregate offering price of up to $1,500,000 (the “ATM Shares”), from time to time through the Sales Agent (as defined below under Note 9). During the three months ended March 31, 2024, the Company sold 337,970 shares of common stock for gross proceeds of approximately $138,000 under the ATM Agreement. The Company incurred offering costs of approximately $205,000 resulting in a net cost of approximately $67,000.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

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.

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.

Impact of the Current Economy

The Company’s financial performance is subject to global economic conditions and their impact on the levels of spending by its customer research organizations, particularly discretionary spending for procurement of specimens used for research. Economic recessions may have adverse consequences across industries, including the health and biospecimen industries, which may adversely affect the Company’s business and financial condition. The Company increased its allowance for doubtful accounts in accounts receivables by $197,924 during the three months ended March 31, 2024 due to certain boutique life sciences customers either lacking liquidity or having filed for bankruptcy. The Company has enhanced procedures related to its credit check process for new and existing customers to mitigate the risk to future collectability of receivables.

Changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy and inflation, as are being currently experienced, may result in a reduction in researchers’ demand for specimens due to the research organization’s inability to obtain funding.

To further address the current market conditions, the Company has taken steps, that include, but are not limited to, reevaluating its pricing in order to be more competitive, creating campaigns to highlight and fast-track high demand items, enhancing internal team communications to accelerate the sales cycle, moving to a new line of business structure organized by its internal categorization of biospecimen suppliers’ capabilities to increase efficiency in operations, implementation of next day quotes to increase conversion ratios of quotes to purchase orders, and initiation of efforts to decrease expenditures through reductions in workforce.  

The Company believes that its business will continue to be resilient through a continued industry-wide economic slowdown in life science research, and that the Company has and will continue to work on improving liquidity to address its financial obligations and alleviate possible adverse effects on its business, financial condition, results of operations or prospects.

Impact of the Russian-Ukrainian War on the Company’s Operations

The Company’s business was negatively impacted during the first half of 2022 by the ongoing war between Russia and Ukraine. At the start of the war, the Company had approximately $1 million of purchase orders that were slated to be fulfilled by the Company’s supply network in Ukraine and Russia. This supply network was shut down at the start of the war. Ukrainian suppliers were disabled due to war conditions and evacuations and some of the Company’s Russian suppliers were disabled by sanctions. While the Company mobilized to shift these purchase orders to other suppliers in the network, the process of specimen collections from other supply sites took time, which caused a delay in the fulfillment of such purchase orders. Alternate suppliers do not have the same favorable unit

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

economics or specimen collection rates, and this also impacted the Company’s margins. Additionally, key resources were diverted from operations to resolving the re-fulfillment issues caused by the conflict.

As of March 31, 2024, the Company’s supply sites in Russia that had not been under sanctions were accessible and the Company’s supply sites in Ukraine were mostly reopened. However, logistics and transportation of specimens out of the country of Ukraine remains challenging and not as economically feasible as they were prior to the beginning of the war. Due to the uncertainty caused by the ongoing war, Ukrainian and Russian suppliers may again become inaccessible to the Company. Therefore, as long as the uncertainty continues, the Company’s policy is to ensure at a purchase order level that an order is not solely sourced from the two countries. The short and long-term implications of the war are difficult to predict as of the filing date of the Company’s Quarterly Report on Form 10-Q in which these unaudited condensed financial statements are included (the “Quarterly Report”). The imposition of more sanctions and countersanctions may have an adverse effect on the economic markets generally and could impact the Company’s business and the businesses of the Company’s supply partners, especially those in Ukraine and Russia. Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on the Company’s business and the companies from which the Company obtains supplies and distributes specimens.

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 three months ended March 31, 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 as defined under ASC 320, Investments – Debt Securities, 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 March 31, 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 medical research 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 customer. 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 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 months ended March 31:

    

2024

    

2023

    

Specimens - contracts with customers

$

2,136,100

$

2,712,376

Shipping and other

 

153,893

 

237,821

Revenue

$

2,289,993

$

2,950,197

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 economic conditions and each customer’s payment history. Receivables are written off when deemed uncollectible, with any future recoveries recorded as income when received. As of March 31, 2024 and December 31, 2023, the Company had an allowance for doubtful accounts of $718,821 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 that the sequenced data is an intangible asset and capitalizes the cost to procure the sequenced data. The sequenced data is amortized to

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

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 three months ended March 31, 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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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 March 31:

2024

    

2023

Shares issuable upon vesting of RSUs

96,788

216,058

Shares issuable upon exercise of stock options

350,062

330,788

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 June 2016, the FASB issued Accounting Standards Updates (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. In addition, an entity will have to disclose significantly more information about allowances and credit quality indicators. The new standard is effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted this new standard as of January 1, 2023. ASU 2016-13 did not have a material impact on the Company’s unaudited condensed financial statements.

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 purchased U.S. Treasury bills during the three months ended March 31, 2024 and has classified them as available-for-sale securities. The amortized cost, gross unrealized gains and losses, and fair value for available-for-sale securities as of March 31, 2024 and December 31, 2023 are as follows:

March 31, 2024

Gross

Gross

Amortized

unrealized

unrealized

    

cost

    

gains

losses

Fair value

Available-for-sale securities:

U.S. Treasury Bills

$

466,452

$

37,249

$

(37,208)

$

466,493

Total Available-for-sale securities

$

466,452

$

37,249

$

(37,208)

$

466,493

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

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 three months ended March 31, 2024. The Company did not have any realized gains or losses in the three months ended March 31, 2023. Maturities of the U.S. Treasury bills are all due within the current fiscal year. Marketable securities in an unrealized loss position as of March 31, 2024 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. The Company believes that it is more likely than not that it will receive a full recovery of par value on the securities, although there can be no assurance that such recovery will occur.

4.PROPERTY AND EQUIPMENT, NET

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

March 31, 

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

 

(460,781)

 

(444,731)

Total property and equipment, net

$

120,873

$

127,787

Depreciation expense for property and equipment was $16,050 and $38,589 for the three months ended March 31, 2024 and 2023, respectively.

5.INTERNALLY DEVELOPED SOFTWARE, NET

During the three months ended March 31, 2024 and 2023, the Company capitalized $275,486 and $1,539,546, respectively, of internally developed software costs in connection with the development and continued enhancement of the technology platform and web interfaces. Capitalized costs primarily consist of payroll and payroll-related costs for the Company’s employees. The Company recognized $532,750 and $433,326 of amortization expense associated with capitalized internally developed software costs during the three months ended March 31, 2024 and 2023, respectively. Accumulated amortization associated with capitalized internally developed software costs as of March 31, 2024 and December 31, 2023 was $7,497,505 and $6,964,755, respectively.

6. OTHER INTANGIBLE ASSETS, NET

During the three months ended March 31, 2024, the Company did not sequence any FFPE blocks and therefore did not capitalize any sequenced data as other intangible assets. The Company licenses to its customers, at an additional cost, the sequenced data associated with the sequenced FFPE blocks with the sale of said FFPE blocks. The sequenced data is also organized to form a database of research content that is available for sale to the Company’s customers through a subscription model. The Company recognized $47,889 of amortization expense associated with the capitalized sequenced data during the three months ended March 31, 2024. No amortization

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Notes to Unaudited Condensed Financial Statements

expense was recognized during the three months ended March 31, 2023 as the Company had not commenced the sequencing of FFPE blocks at this time.

7. FAIR VALUE MEASUREMENTS

The following table sets forth the Company’s assets to be measured at fair value on a recurring basis and their respective classification within the fair value hierarchy as of March 31, 2024 and December 31, 2023:

Fair Value at March 31, 2024

Total

Level 1

Level 2

Level 3

Assets:

Available-for-sale securities

$

466,493

$

466,493

$

$

Total Assets

$

466,493

$

466,493

$

$

Fair Value at December 31, 2023

Total

Level 1

Level 2

Level 3

Assets:

Available-for-sale securities

$

2,661,932

$

2,661,932

$

$

Total Assets

$

2,661,932

$

2,661,932

$

$

As of March 31, 2024 and December 31, 2023, the Company did not have any liabilities measured at fair value on a recurring basis.

8.COMMITMENTS AND CONTINGENCIES

Leases

The Company has one operating lease of office space in Lexington, Massachusetts, which was initially set to expire on February 28, 2024. The lease was renewed on September 27, 2023 to extend the lease term for a period of 12 months from February 29, 2024 through February 28, 2025. The lease renewal includes an option to terminate the lease before its expiration date if notice is provided to the lessor by June 30, 2024.

Leases with an initial term of twelve months or less are not recorded on the balance sheet date, and the Company does not separate lease and non-lease components of contracts. There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements.

The Company’s lease agreement does not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate imputed discount rate. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived an imputed rate, which was used to discount its real estate lease liabilities.

There was no sublease rental income for the three months ended March 31, 2024, and the Company is not the lessor in any lease arrangement, and there were no related-party lease agreements.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Lease Costs

The table below presents certain information related to the lease costs for the Company’s operating lease for the three months ended March 31, 2024:

Operating lease expense

$

43,251

Short-term lease expense

 

Total lease cost

$

43,251

Lease Position as of March 31, 2024

Right-of-use lease assets and lease liabilities for the Company’s operating lease as of March 31, 2024 were recorded in the balance sheet as follows:

Assets

Operating lease right-of-use assets

$

153,340

Total lease assets

$

153,340

Liabilities

Current liabilities:

Operating lease liability – current portion

$

156,703

Non-current liabilities:

Operating lease liability – net of current portion

Total lease liability

$

156,703

Lease Terms and Discount Rate

The table below presents certain information related to the weighted average remaining lease term and the weighted average discount rate for the Company’s operating lease as of March 31, 2024:

Weighted average remaining lease term (in years) – operating lease

0.92

Weighted average discount rate – operating lease

 

5.96%

Undiscounted Cash Flows

Future lease payments included in the measurement of lease liabilities on the balance sheet are as follows:

2024 (excluding the three months ended March 31, 2024)

$

132,064

2025

29,348

Total future minimum lease payments

161,412

Less effect of discounting

(4,709)

Present value of future minimum lease payments

$

156,703

Rent expense for the three months ended March 31, 2024 and 2023 amounted to $43,251 and $42,578, respectively.

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Notes to Unaudited Condensed Financial Statements

Cash Flows

Supplemental cash flow information related to the operating lease for the three months ended March 31, 2024 was as follows:

Non-cash operating lease expense (operating cash flow)

$

40,517

Change in operating lease liabilities (operating cash flow)

$

(39,541)

Sales Tax Payable

The majority of the Company’s customers are researchers, universities, hospitals, and not-for-profit entities that were believed by the Company to have a sales and use tax exemption that generally excludes them from paying sales taxes. The main types of specimens the Company sells are blood, blood plasma, human tissue, human parts, and human bodily fluids and only a few of these products are typically not taxable in some states regardless of the buyer’s tax exemption status. The Company historically has not collected sales tax in states where it had sales. Had the Company contemporaneously collected and remitted sales tax for all customers and in all jurisdictions where it would have been required, there would have been no material impact on the Company’s unaudited condensed financial statements.

As a result of an entity-wide risk assessment process that commenced in the second quarter of 2023, the Company engaged external tax consultant advisors to complement internal resources and efforts to provide support in assessing the appropriate sales tax treatment associated with the Company’s products for all prior years in which the Company had generated revenue, to assist with the facilitation and tracking of Voluntary Disclosure Agreements (“VDAs”) in jurisdictions where a potential tax liability may exist and to assist with the implementation of a sales tax software platform solution for the calculation, communication, collection, and remittance of sales tax for all non-exempt future sales.

From the Company’s inception through the filing date of this Quarterly Report, the Company now believes that an obligation to collect and remit sales tax existed for certain of its sales of products to certain of its customers. The Company has analyzed its product sales, on an invoice-by-invoice and customer-by-customer basis, to determine which products are subject to sales tax in each jurisdiction, and determining which of its customers are exempt from sales tax, and which customers who were not exempt from sales tax have already paid compensating use tax to the appropriate jurisdiction. Part of this process includes requesting and obtaining exemption letters or representations from its customers or proof of payment of their compensating use tax. As the Company continues to make progress on this project, certain customers have notified the Company that they are not exempt from the payment of sales tax and have not remitted use tax and the Company has started to invoice such customers for past sales tax due.  

As of March 31, 2024, the Company had accrued a sales tax liability of approximately $710,000 and the related interests and penalties of approximately $208,000 in accrued expenses on the balance sheet. The estimated liability represents the estimated tax liability for sales made to customers who have notified the Company that they are not exempt from sales taxes and customers who have not responded to the Company’s request to provide a sales exemption letter. As of March 31, 2024, the Company had recovered approximately $412,000 of prior taxes from certain customers who do not have a sales tax exemption. The Company continues to pursue those non-responsive customers and expects over time that further exemption letters or representations will be received that will reduce the liability. The Company did not recognize any additional loss in its statement of operations and comprehensive loss related to the sales tax liability during the three months ended March 31, 2024. The Company is in the process of commencing its VDA filings with relevant taxing jurisdictions regarding its noncompliance, during which it will remit its sales tax obligations.

Legal Proceedings

From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Such litigation and other proceedings may include, but are not limited to, actions relating to employment law and misclassification, intellectual property, commercial or contractual claims, or other consumer protection statutes. Litigation and other disputes are inherently

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Notes to Unaudited Condensed Financial Statements

unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. As of March 31, 2024, there was no material litigation against the Company.

9.STOCKHOLDERS’ EQUITY

The Company’s authorized capital is 250,000,000 shares, of which (1) 200,000,000 shares are common stock, par value $0.0001 per share and (2) 50,000,000 shares are preferred stock, par value $0.0001 per share, which may, at the sole discretion of the Company’s board of directors, be issued in one or more series.

Common Stock

On March 5, 2024, the Company entered into the ATM Agreement with Rodman & Renshaw LLC as agent (the “Sales Agent”) pursuant to which the Company may issue and sell shares of its common stock, having an aggregate offering price of up to $1,500,000 (the “ATM Shares”), from time to time through the Sales Agent (the “ATM Offering”). The ATM Shares when issued will be registered pursuant to the Company’s “shelf” registration statement on Form S-3 (File No 333-265976), which became effective on July 12, 2022. The Company intends to sell the ATM Shares, from time to time, pursuant to the ATM Agreement, in transactions that are “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act. During the three months ended March 31, 2024, the Company issued 337,970 shares of common stock for gross proceeds of approximately $138,000, under the ATM Agreement. The Company paid expenses of approximately $205,000 in connection with the ATM Offering, resulting in a net cost of approximately $67,000.

During the three months ended March 31, 2023, the Company issued 67,736 shares of common stock for cash exercises of options of $67,736. There were no options exercises during the three months ended March 31, 2024.

Warrants

Underwriter Warrants

In connection with the Company's underwriting agreement with ThinkEquity, a division of Fordham Financial Management, Inc. (“ThinkEquity”) and the representative of the Company’s IPO underwriters, the Company entered into a warrant agreement to purchase up to 90,000 shares of common stock to several affiliates of ThinkEquity (the “Underwriter Warrants”). The Underwriter Warrants are exercisable at a per share exercise price of $10.00 and are exercisable at any time and from time to time, in whole or in part, during the four- and one-half year period commencing 180 days from the effective date of the IPO registration statement. The Underwriter Warrants became exercisable on or after December 16, 2021 (six months from the effective date of the offering) and expire on June 15, 2026. Upon issuance of the Underwriter Warrants, as partial compensation for its services as an underwriter, the fair value of approximately $0.4 million was recorded as equity issuance costs in the year ended December 31, 2021. As of March 31, 2024, the Underwriter Warrants had not been exercised, and had a weighted average exercise price of $10 per share and a remaining weighted average time to expiration of 2.21 years.

Lender Warrant

In connection with the loan agreement entered into with Western Alliance Bank (the “Lender”) on August 13, 2021, the Company issued a warrant (the “Lender Warrant”) to the Lender to purchase 12,500 shares of common stock of the Company. The Lender Warrant is exercisable at a per share exercise price of $8.00 and is exercisable at any time on or after August 13, 2021 through August 12, 2031. The Company determined that the Lender Warrant was equity-classified. As of March 31, 2024, the Lender Warrant had not been exercised, and had a weighted average exercise price of $8 per share and a remaining weighted average time to expiration of 7.37 years.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

PIPE Warrants

On December 1, 2021, the Company completed a private placement (the “PIPE”) in which the Company issued warrants (the “PIPE Warrants”) to purchase up to an aggregate of 1,312,500 shares of common stock. These PIPE Warrants have an exercise price of $13.00 per share and are immediately exercisable upon issuance and will expire on the five and one-half-year anniversary of the issuance date.

On February 13, 2024, the Company entered into certain warrant repurchase and termination agreements with the holders of the PIPE Warrants to repurchase the PIPE Warrants for a purchase price equal to $0.04 multiplied by the number of shares of common stock issuable pursuant to such PIPE Warrants. In connection with such repurchases, all past, current and future obligations of the Company relating to the PIPE Warrants were released, discharged and are of no further force or effect.

A summary of total warrant activity during the three months ended March 31, 2024 is as follows:

Weighted 

 Average

Weighted

Remaining

Warrants

 Average

Contractual Term

    

Outstanding

    

Exercise Price

    

in Years

Balance at December 31, 2023

 

1,415,000

$

12.77

 

3.47

Granted

 

 

Exercised

 

 

Repurchased

 

(1,312,500)

 

Balance at March 31, 2024

 

102,500

$

9.76

 

2.84

10.STOCK-BASED COMPENSATION

Stock Incentive Plans

2021 Plan

In March 2021, the Company adopted the iSpecimen Inc. 2021 Stock Incentive Plan, which was subsequently amended in June 2021 and then on May 25, 2022 (the “2021 Plan”). The 2021 Plan was adopted to enhance the Company’s ability to attract, retain and motivate employees, officers, directors, consultants, and advisors by providing such persons with equity ownership opportunities and performance-based incentives. The 2021 Plan authorizes options, restricted stock, RSUs and other stock-based awards. The Company's board of directors, or any committee to which the board of directors delegates such authority, has the sole discretion in administering, interpreting, amending, or accelerating the 2021 Plan. Awards may be made under the 2021 Plan for up to 608,000 shares of the Company's common stock, and the 2021 Plan was made effective with the completion of the IPO.

On May 24, 2023, at the Company’s annual meeting of stockholders, the stockholders approved an amendment to the 2021 Plan to increase the number of shares under the 2021 Plan from 608,000 shares of common stock to 1,869,500 shares of common stock.

During the three months ended March 31, 2024 and 2023, 80,340 and 118,247 equity awards were granted under the 2021 Plan, respectively. As of March 31, 2024, there were 1,320,028 shares of common stock available for future grants under the 2021 Plan.

2013 Plan

The iSpecimen Inc. 2013 Stock Incentive Plan (the “2013 Plan”) was adopted on April 12, 2013 and subsequently amended on July 29, 2015. The aggregate number of shares of common stock that may be issued pursuant to the 2013 Plan was 1,713,570.

No equity awards were granted under the 2013 Plan during the three months ended March 31, 2024 and 2023. According to the 2013 Plan, which was adopted by the Company’s board of directors on April 12, 2013, no awards shall be granted under the 2013 Plan after

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the completion of ten years from the date on which the 2013 Plan was adopted by the Company’s board of directors. Therefore, as of April 13, 2023, no further shares had been granted under the 2013 Plan.

Stock Options

During the three months ended March 31, 2024 and 2023, the Company granted 80,340 and 117,500 stock options, respectively. The following assumptions were used to estimate the fair value of stock options granted using the Black-Scholes-Merton option pricing model during the three months ended March 31:

2024

2023

Assumptions:

 

  

 

  

Risk-free interest rate

 

3.93% – 4.26%

3.85% – 3.94%

Expected term (in years)

 

0.784.00

0.994.00

Expected volatility

 

58.24% –58.71%

59.95% – 59.95%

Expected dividend yield

 

A summary of stock option activity under the 2021 Plan and 2013 Plan is as follows: