As filed with the U.S. Securities and Exchange Commission on December 31, 2020.
Registration No. 333-250198
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No.1
to
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
iSpecimen Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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8731
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27-0480143
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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450 Bedford Street
Lexington, MA 02420
Telephone: (781) 301-6700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Christopher Ianelli
Chief Executive Officer
450 Bedford Street
Lexington, MA 02420
Telephone: (781) 301-6700
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Barry I. Grossman
Tamar A. Donikyan
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Telephone: (212) 370-1300
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Brad L. Shiffman
Blank Rome LLP
1271 Avenue of the Americas
New York, NY 10020
Telephone: (212) 885-5000
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
☒
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Emerging growth company
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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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Security Being Registered
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Amount Being
Registered(1)
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Proposed Maximum
Offering Price per
Security(2)
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Proposed Maximum
Aggregate Offering
Price(1)(2)
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Amount of
Registration Fee(3)
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Common Stock, $0.0001 par value
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$
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$
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20,000,000
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$
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2,182
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Common Stock underlying Representative’s Warrants, $0.0001 par value
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$
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$
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1,250,000
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$
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136.38
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Total
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$
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21,250,000
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$
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2,318.38
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1)
Includes shares of common stock, which may be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any.
2)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.
3)
Previously paid.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION
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DATED DECEMBER 31, 2020
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Shares
Common Stock
iSpecimen Inc.
This is a firm commitment initial public offering of common stock of iSpecimen Inc. Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price of our shares will be between $ and $ .
We have applied to list our common stock on the under the symbol “ .”
We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.
Investing in our common stock involves a high degree of risks. See “Risk Factors” beginning on page
13. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial public offering price
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$
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$
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Underwriting discount(1)
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$
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$
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Proceeds, before expenses, to iSpecimen Inc.
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$
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$
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1)
See “Underwriting” for a description of the compensation payable to the underwriters. We refer you to “Underwriting” beginning on page
117 for additional information regarding underwriters’ compensation.
We have granted a 45-day option to the representative to purchase up to an additional shares of common stock solely to cover over-allotment, if any.
The underwriters expect to deliver the shares on or about , 2021.
ThinkEquity
a division of Fordham Financial Management, Inc.
The date of this prospectus is , 2021.
TABLE OF CONTENTS
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Page
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1
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13
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F-1
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Neither we nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover page of this prospectus, or other earlier date stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
TRADEMARKS
This prospectus contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “iSpecimen,” the “Company,” “our Company,” “we,” “us” and “our” in this prospectus refer to iSpecimen Inc.
Our Mission, Vision, and Core Values
iSpecimen’s mission is to accelerate life science research and development, or R&D, with a global marketplace platform that connects researchers to subjects, specimens, and associated data. Our vision is to create an “Amazon-like” global Marketplace of patients, biospecimens, and data for research to improve the quality of human life. We implement employee programs that foster a company culture predicated on the core values of corporate and individual growth; results and accountability; team before self; a can-do positive attitude; and the perseverance to succeed.
General
iSpecimen is 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 the billions of biospecimens available (but not easily accessible) in healthcare provider organizations worldwide. Our ground-breaking iSpecimen Marketplace platform was designed to solve this problem and transform the biospecimen procurement process to accelerate medical discovery.
The iSpecimen Marketplace brings new capabilities to a highly fragmented and inefficient biospecimen procurement market. Our technology consolidates the biospecimen buying experience in a single, online marketplace that brings together healthcare providers who have biospecimens and researchers across industry, academia, and government institutions who need them. We are seeking to transform the world of biospecimen procurement much like the way travel websites changed the consumer buying process for flights, hotels, and rental cars.
![[MISSING IMAGE: TM2035427D3-FC_CONNECT4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2020/12/31/0001104659-20-141041_TM2035427D3-FC_CONNECT4CLR.JPG)
Our iSpecimen Marketplace platform ingests de-identified healthcare data provided by our healthcare supply partners — including more than 11 million patient records, 58 million clinical specimen records, one million banked specimen records, 475 million laboratory test results, and 800,000 medical conditions as of September 30, 2020 — to allow researchers to easily search for and select research subjects, specimens, and associated data they need to drive their research programs. It then orchestrates and manages the biospecimen procurement workflows of both researchers and suppliers to bring efficiencies to the entire buying process. Through the iSpecimen Marketplace, researchers gain instant access to millions of specimens anytime, anywhere, while participating supply organizations gain an opportunity to contribute compliantly to medical research while increasing their revenue and sustainability.
The Opportunity
The overall demand for human biospecimens and related healthcare data (“annotated biospecimens”) continues to grow dramatically. Global spending on the procurement of annotated biospecimens in 2020 is currently estimated by our management team to be $3 billion to $4 billion annually, with a market growth rate estimated on the order of 10% to 15% annually through 2024. These expenditures are spread across the commercial, academic, and government sectors of the healthcare and life sciences industry, with the commercial sector (biopharmaceutical and in vitro diagnostics companies) representing the majority of the market. Market growth is primarily driven by advances in life science technologies and shifts in R&D spending aimed at identifying and aligning biomarkers with clinical outcomes — a key step towards the development of more targeted disease treatments and diagnostics. Both the precision medicine market (as defined below), estimated to be growing at 10 to 13% per year according to Statista, and the regenerative medicine market (as defined below), with a growth rate of 26% according to a 2019 article on the Fortune Business Insight, rely heavily upon biospecimens for research and development programs.
Precision medicine, sometimes known as “personalized medicine,” is an innovative approach to tailoring disease prevention and treatment that takes into account differences in people’s genes, environments, and lifestyles. The precision medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of novel drugs, diagnostic tests, and technologies that boost the precision medicine workflow.
Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the Public Health Service Act (42 U.S.C. 264) and Title 21 of the Code of Federal Regulations Part 1271 (21 CFR Part 1271). The regenerative medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of cell and immunotherapies, genetically modified cells, therapeutic tissue engineered products, human cell and tissue products, and combination products using any such therapies or products.
Human biospecimens can be very difficult for researchers to acquire and for healthcare providers to distribute. There are over 10 million healthcare providers that possess collections of such human biospecimens or have access to patients and their biospecimens during clinical care, so many specimens exist that could potentially be used in research. However, researchers have little way to know which healthcare organizations are willing to make their specimens available for research and healthcare providers likewise have little access to the research community. Even if these organizations could identify each other, it takes time and money to execute contracts that allow them to then transact. Once organizations are under contract with each other, researchers must then ensure that the specimens have been collected under appropriate compliance frameworks, using collection protocols consistent with their research needs, and accompanied by required data. Our iSpecimen Marketplace compliantly connects each side of this highly fragmented market to reduce the costs, time, and risks for both suppliers and customers in the biospecimen supply chain. We know of no other commercial human biospecimen marketplace that provides instant online searchability of specimens across a network of specimen providers.
The biospecimen procurement market is poised for disruption and has many attractive characteristics of other markets with successful online marketplaces:
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Large and growing. We estimate the biospecimen market to be $3 billion to $4 billion in size and growing rapidly, at an estimated 10 to 15% annually;
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Highly fragmented. This market today is comprised of fragmented landscape of millions of healthcare providers who could potentially offer biospecimens and data for research, and hundreds of thousands of life science researchers who need access to them; and
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Inefficient. Researchers and healthcare providers today largely utilize manual processes such as email, phone calls, and spreadsheets to find each other, request specimens, and manage the specimen procurement process.
We believe our marketplace technology has the potential to disrupt the $3 billion to $4 billion human biospecimen supply chain industry.
Our Customers
Our customer base is primarily comprised of three main segments: biopharmaceutical companies, in vitro diagnostic (“IVD”) companies, and government/academic institutions. As of September 30, 2020, we have distributed our specimens to more than 300 unique customer organizations, comprising of many of the large IVD and biopharma companies along with federal and state government agencies, such as the Centers for Disease Control and Prevention.
Additionally, in 2019, we entered the new and rapidly growing regenerative medicine segment, which according to a market research report published by Fortune Business Insight, the global regenerative medicine market was valued at $23.8 billion in 2018 and is expected to reach $152 billion by the end of 2026 thereby exhibiting an estimated CAGR of 26%. Moreover, according to the Alliance for Regenerative Medicine, global financing for the regenerative medicine sector set an annual record of $15.9 billion in the first three quarters of 2020. This “rapid growth” of the regenerative medicine market is characterized by the double-digit annual revenue growth rate combined with record global financing levels. We continue to have and maintain site participation agreements with several provider partners which enable us to offer through our iSpecimen Marketplace, various types of annotated hematologic products that are used in the research and development of regenerative medicine therapies. Such products include for example, whole bone marrow aspirate, mononuclear cell fractions, and isolated immune cell products that have been collected from both healthy and diagnosed (diseased) human donors. Some of the aforementioned products are offered in both fresh and cryopreserved formats depending on the customer’s preference. Since entering the regenerative medicine market late 2019, we have acquired 17 active customers representing 1.8% of our total revenue in 2019 and 2.6% in 2020.
Our Supply Partners
Critical to the success of the iSpecimen Marketplace is the network of healthcare providers who make their patients, samples, and data available to researchers. This supply network was built over a nine-year period and as of September 30, 2020, our supply network consisted of more than 160 unique healthcare organizations and biospecimen providers, including healthcare systems, community hospitals, clinics, private practice groups, commercial laboratories, blood centers, commercial biobanks, and cadaveric donation centers. Our suppliers are located in 12 countries across the Americas, Europe, and Asia.
Each supplier organization may give us access to one or more of the following environments within their organization where specimens may be obtained:
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Clinical labs — This environment provides access to remnant biofluids and is typically found in hospitals, commercial laboratories, clinics, and private practice groups;
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Pathology labs — This environment provides access to remnant tissue and remnant hematopoietic stem and immune cells and typically exists within hospitals or commercial laboratories;
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Biorepositories — These organizations typically reside within larger healthcare systems or commercial organizations. Generally, they collect and store specimens for unspecified future research purposes;
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Blood donor centers — These organizations typically collect large volumes of blood and derivatives for therapeutic or research purposes. They own and operate donor centers and may manufacture a broad selection of isolated cell types (fresh or cryopreserved) from consented donors for research use;
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Cadaveric donation centers — These organizations receive whole cadavers and provide access to cadaveric tissues, biofluids, and stem cells, specifically for research purposes; and
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Clinical research centers — These organizations within healthcare facilities or operating as standalone entities provide access to subjects for research programs. Patients may be approached
and consented to provide specimens when they are in for healthcare appointments (i.e. patient encounters) or may be called in to specifically participate in research projects.
The iSpecimen Marketplace Solution
The iSpecimen Marketplace offers single-source access to millions of human biospecimens and patients across a diverse network of specimen providers quickly and compliantly, saving researchers time and money in their specimen procurement process while making it easier and more efficient for providers to get their specimens in the hands of researchers who need them. Our iSpecimen Marketplace technology makes it as easy to find specimens for research as it is to find flights on a travel website. We have adopted many of the same ease-of-use characteristics of these business-to-consumer, or B2C, marketplaces, from simple guided searches, to the ability to refine search criteria with sliders and checkboxes, to the ability to add chosen items to a cart in order to purchase them, to online order management. Our two-sided marketplace platform makes it easy for researchers and healthcare providers to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process
Our iSpecimen Marketplace technology is groundbreaking in the human biospecimen procurement space. In a world where there are thousands of biospecimen providers who typically rely upon e-mail and spreadsheets to communicate with customers to manage the bioprocurement process, our iSpecimen Marketplace offers a more efficient user experience to life science researchers who are looking for better ways to access research subjects, specimens, and data, and to healthcare provider organizations, who are looking to realize their missions of supporting research while augmenting their bottom line. Our two-sided marketplace platform makes it easy for both sides to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process.
The iSpecimen Marketplace instantly shows researchers the available
specimens that meet their specific inclusion and exclusion criteria.
As of September 30, 2020, we had more than 3,500 external registered users on the iSpecimen Marketplace platform, representing more than 2,700 unique organizations. Collectively, these users logged into the
iSpecimen Marketplace more than 800,000 times and performed more than 9,000 specimen searches yielding more than 900 quote requests since the launch of the marketplace in June 2017.
Planned Developments of our iSpecimen Marketplace
While the iSpecimen Marketplace currently supports our business model of providing access to search, find, and acquire human biospecimens and associated data from “inquiry to invoice” and positions us for future expanded business model exploration, there are a number of areas in which the iSpecimen Marketplace functionality could be enhanced to better support our stakeholders, including our prospects and customers, iSpecimen sales and operations staff, and our supply partners. We believe with additional investment in technology development resources, we could make significant progress in scaling our iSpecimen Marketplace and, by the end of 2022, we expect to have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform.
We plan to continue technology investment to better connect healthcare researchers with our network of suppliers to enable the acquisition of human biospecimens and data to help accelerate research and expanding the impact of our iSpecimen Marketplace platform from “inquiry to invoice” through the following key approaches:
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Enhance the customer experience. By working with our prospects and customers to understand their needs, we strive to provide a platform that more easily enables them to specify and find human biospecimens and data that meet the requirements of their research.
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Improve operational efficiency. By measuring the results of our operational workflows, we endeavor to reduce the friction and manual efforts in our processes and systems.
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Increase our supplier engagement. By continuing to engage with our supply partners to deliver solutions that make their interactions with us more fulfilling, we become more seamlessly integrated into their workflows and daily operations.
We continue to prioritize and release updated versions of the iSpecimen Marketplace platform in alignment with these approaches and believe that continuing to focus on these approaches will enable us to scale our business model more effectively.
Our Technology
Technology Components
The iSpecimen Marketplace technology is comprised of four major functional areas: search; workflow; data; and administration and reporting. We continue to invest in the evolution of these areas to improve customer and supplier engagement with the platform; provide operational efficiencies for our suppliers, our customers, and our internal operations; and increase the liquidity of products and services obtained through the platform. Our core business objective is to retain and grow both researcher and supplier usage of our platform to support biospecimen procurement, as well as to position our company to explore other adjacent business opportunities that can benefit from the use of the iSpecimen Marketplace.
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Search. The primary purpose of the iSpecimen Marketplace is to matchmake between those with access to subjects, specimens, and data, and those with a need for them to power their research. By entering subject and sample selection requests through the iSpecimen Marketplace, researchers can instantly search across the available medical records of large populations within iSpecimen’s healthcare provider network to create customized patient and specimen cohorts. Researchers can specify their criteria and either refine and review results to select specific specimens instantly, or they can request that iSpecimen find patients, specimens, and associated data to satisfy their needs when specimens do not currently exist in our network. Using our own proprietary algorithms, we enable researchers to explore both biospecimens that are currently available and view projections of those that are likely to become available in the future based on historic statistical analysis of data. This allows researchers to quickly and easily determine how we can fulfill their requirements, which is especially useful for project planning and budgeting.
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Workflow. Our workflow engine supports the unique bioprocurement workflows of our suppliers, customers, and internal iSpecimen operations users. For our suppliers, our ability to easily integrate into their environments and automate key parts of their bioprocurement workflow enables us to maintain a level of engagement and responsiveness necessary to successfully deliver on specimen requests from our research customers. We make it easy for suppliers to list their specimens in our iSpecimen Marketplace by receiving their data in the most commonly used data transmission formats for healthcare data, such as HL7 feeds (a healthcare data interchange standard), JSON files (a standard data interchange format), and CSV files (a comma separated values file used for tabular data), and then by harmonizing this data into standard terminology sets that allows their specimens to be searchable by our research customers. We provide these onboarding services at no charge to our supply partners. Additionally, our iSpecimen Marketplace technology enables suppliers to track and manage all of their specimen requests from feasibility assessment through the ordering and fulfillment process in a single web application, thereby streamlining their bioprocurement workflow. Because the work that we do with our suppliers is often a secondary concern to their primary mission of providing patient care, we believe that seamlessly integrating into their workflow is critical to its use and ongoing success.
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Data. We power search and orchestrate the procurement workflow through our ability to acquire, ingest, generate, and use big data from our healthcare provider partners. Working with a global, centralized set of healthcare providers, we receive this data in a variety of different formats and quality levels. We de-identify, normalize, and harmonize our supplier network’s data for usage in our iSpecimen Marketplace, ensuring the highest level of patient privacy and compliance with HIPAA and other applicable regulations that govern the research use of patient specimens and data. As of September 30, 2020, the iSpecimen Marketplace had ingested and harmonized data on more than 11 million patients, 58 million clinical specimens, one million banked specimens, 475 million laboratory test results, and 800.000 medical conditions.
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Administrative, Compliance, and Reporting. Administration, compliance, and reporting functions are critical components to enable users to properly evaluate and manage the bioprocurement process. Our administrative capabilities include functions such as user management to assign users and roles and password management to ensure passwords are updated regularly, among other capabilities. Compliance management includes manual and technology-based processes that allow iSpecimen to track and manage unique regulatory and legal requirements across customers and suppliers (such as consent requirements versus consents granted, required specimen and data uses versus allowable specimen and data uses, resale or distribution requirements versus resale or distribution rights) to make sure that customer requirements and supplier requirements match before transferring specimens and data. Additionally, we conduct regular audits of supply sites capabilities and confirm that supply sites have Institutional Review Board (“IRB”) (or equivalent) protocols in place where required by law. Our reporting tools turn operational data into useful information by enabling users to view operational data in tables and other visualizations. Together, they help manage and streamline administration, compliance, and operational functions.
Technology Development
The iSpecimen Marketplace software was developed over nine years with more than 80 staff-years invested in research and development. It comprises an orchestration of SaaS solutions, commercial and open source components, and custom developed software deployed in the cloud on a third-party hosting platform built and maintained through a combination of full-time staff and outsourced partners. The team uses agile practices to develop and improve the platform. We continue to enhance and improve the performance, functionality, and reliability of the iSpecimen Marketplace platform based on a user-informed roadmap that is actively updated based on internal and external feedback aligned with our goals.
The iSpecimen Marketplace relies on third parties for certain technology to support development, delivery, and operations of the platform including product management, software development, cloud hosting, data processing, content mapping, and security services. iSpecimen uses software (including source code) and other materials that are distributed under a “free,” “open source,” or similar licensing model, including software distributed under the Apache License, Version 2.0, The MIT License, Mozilla Public License 2.0
(MPL-2.0), GNU General Public License version 2, GNU Lesser General Public License version 2.1, Eclipse Public License 1.0 (EPL-1.0), Common Development and Distribution License 1.0. In addition, iSpecimen uses software and services from commercial providers. We do not believe any of them are not generally commercially available to us from other parties. iSpecimen does not have any technology licensing contracts signed within the last two years upon which our business is substantially dependent. We continue to evaluate partners whose capabilities can help us deliver our iSpecimen Marketplace solution in areas such as functionality, efficiency, and security and expect to continue to leverage and consider additional third-party capabilities in our ongoing Marketplace development.
Our Competitive Advantages
When successfully implemented, online marketplaces are a highly efficient supply chain that offer many advantages to both suppliers and customers, including lower costs, reduced procurement timeframes, increased revenue (for suppliers), increased access to a large and growing supply network (for customers), and reduced risks. While our iSpecimen Marketplace is driving these benefits now, we believe they will become even more apparent when the iSpecimen Marketplace achieves scale by the end of 2022, when we expect to have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform. To date, we have been unable to operate the marketplace profitably. For the nine month period ended September 30, 2020 and for the years ended December 31, 2019 and 2018, we reported net losses of $1,471,930, $3,880,089, and $3,356,301, respectively.
As a result of these advantages, as of September 30, 2020, we have delivered more than 130,000 specimens in support of more than 1,700 unique customer projects since shipping our first specimens in 2012. We have also provided our healthcare provider partners with more than $7.5 million in revenue during that time.
The Regulatory Environment
iSpecimen works with the healthcare industry and with clinical researchers, both highly regulated environments in the United States and other countries. Government departments and agencies, at the federal, state, and local levels have regulations related to research activities that involve human subjects as well as regulations that govern the privacy and security of personal and healthcare data about individuals, including the collection, storage, and dissemination of that data. To support compliance with regulations, we have both internal personnel and external resources who provide us with expertise in various areas of compliance including a Chief Information Security Officer, Chief Privacy Officer, contracts manager, biospecimen counsel (external), general counsel (external), IRB (external), and other employees with expertise and oversight of site compliance, lab compliance, and operational compliance.
Our Growth Strategy
We believe we will continue to accelerate our revenue growth by improving and expanding our iSpecimen Marketplace platform to become the most convenient, efficient, and trusted resource for researchers to acquire, and suppliers to share research subjects, biological samples, and data for life science research. We plan to continue to build value by pursuing strategic objectives in five key areas:
➢
Marketplace technology innovation — We continue to innovate our proprietary iSpecimen Marketplace technology with search and workflow automation features that dramatically improve the buyer’s journey of searching for and compliantly acquiring annotated biospecimens from “inquiry to invoice”, and the supplier’s journey of sharing patient and specimen data, confirming project feasibility, and fulfilling orders.
➢
Increased patient data — Healthcare data is an important underlying asset of our marketplace business model. Gaining access to increasing levels of healthcare data at our supply partner organizations will allow us to increase the efficiency of our operations from inquiry-to-invoicing while also accelerating the overall biospecimen procurement process. Additionally, our ability to use increasing volumes of patient data to identify and engage with patients for biospecimen research also provides additional opportunities to move into adjacent spaces — including recurring revenue business models — such as premium search subscriptions, patient data subscriptions, the patient recruitment for clinical trials, and software licensing;
➢
Supply chain expansion — In order to better support worldwide research, we continue to increase access to global patient populations, inventories of banked specimens, patient data, and prospective collection capabilities by expanding our network of high-value suppliers combined with a direct-to-patient specimen collection capability. We are agile in identifying and onboarding new global supply partners who can provide specimens and related services to meet rapidly emerging market needs such as our recent expansion into COVID-19 biomaterials for SARs-CoV-2 research, and into diagnostic, vaccine, and therapeutic development;
➢
High growth markets — We are focusing on servicing high growth market sectors such as COVID-19 research, precision medicine, regenerative medicine, biopharma/vaccine development, diagnostics development (e.g. oncology liquid biopsy and infectious disease), and specialized areas of life science research (e.g. cancer and autoimmune disease); and
➢
Organizational capacity — We continue to strengthen our organizational capacity with the right experience, training, skill sets, and resources for developing our iSpecimen Marketplace platform, expanding our marketplace of high-value suppliers and customers located in key geographies, ensuring regulatory compliance, and tracking key performance indicators while fostering a data-driven mindset.
Additionally, we have deployed a multi-faceted go-to-market strategy to support our customer and supplier growth initiatives. This strategy includes a focus on:
➢
Sales and marketing capabilities — Our sales organization will continue to grow and evolve to better focus on targeted market sectors and key stages of sales development to increase sales funnel conversion rates;
➢
High value customers and suppliers — We will continue to grow and retain high-value customers and suppliers by delivering excellent service and pursuing deeper relationships. For example, we are developing preferred supplier contracts to increase purchase volume, customer retention/loyalty, and growth in the number of researchers served within a parent account. We are also investing more resources in customer service personnel, site management personnel, and related processes; and
➢
Channel partners — We will continue to collaborate with channel partners located in key non-U.S. markets to reach more end-users of biospecimens and data, strengthen our brand visibility, increase market share, and drive iSpecimen Marketplace utilization. These partnerships also help mitigate our risk of sales volatility in the case of an economic downturn or other factors that negatively impact sales and market demand in the U.S.
We have articulated our growth plan using a strategy map balanced scorecard approach which identifies strategic objectives and connects internal processes with desired outcomes that align with our mission and vision.
COVID-19 Impact
On January 30, 2020, the WHO announced a global health emergency because of a new strain of coronavirus (COVID-19) originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The pandemic had and still has both positive and negative effects on iSpecimen’s business.
On the downside, starting in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully-disabled; more than 40% was partially-disabled; and less than 15% was fully-operational. Consequently, during the three months beginning April 2020, while our purchase order value increased by more than 300% compared to same period in 2019, our ability to fulfill these orders was negatively impacted by COVID-19 and resulted in our revenue only increasing year-over-year by 30% compared to the same period in 2019. However, over the course of the pandemic, many supply chain sites began to recover and became operational by August and even more so by November 2020.
On the positive side, a new market for COVID-19 samples emerged as a result of the pandemic and we responded to the demand and matched requests for COVID-19 specimens to supply sites in areas of outbreak. As a result, COVID-19 specimens accounted for more than 30% of our purchase orders in the first nine months of 2020. We also employed a mobile phlebotomy service provider to allow us to collect specimens from research subjects in their homes should this pandemic or other circumstances in the future drive more social distancing that limits our supply sites’ ability to collect specimens.
These actions helped us to grow revenue by more than 80% in the nine months ended September 30, 2020 when compared to the nine months ended September 30, 2019.
In addition, in May 2020, we applied for and received a loan in the amount of $783,008 from the Paycheck Protection Program under the CARES Act.
Risks Associated with Our Business
Our business is subject to numerous risks described in “Risk Factors” immediately following this prospectus summary and elsewhere in this prospectus. Some of the more significant risks are:
➢
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability;
➢
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern;
➢
We may need additional capital in the future and an inability to meet future capital needs could adversely impact our ability to operate;
➢
We have a relatively short operating history which can lead to difficulty in accurately forecasting future results;
➢
Our growth strategy may not prove viable and we may not realize expected results;
➢
The continued COVID-19 pandemic could continue to adversely affect our business;
➢
Sustainable future revenue growth is dependent upon the development of technology solutions that enable scale and address new markets;
➢
Failure to comply with applicable federal and state laws around data protection, of research subjects, import/export regulations, occupational health and safety biohazards and dangerous goods, environmental, and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business; and
➢
Failure to comply with applicable international laws around data protection (such as the EU General Data Protection Regulation), protection of research subjects, import/export regulations, occupational health and safety, biohazards and dangerous goods, environmental and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
Our Management Team
We have assembled a highly experienced management team to execute on our mission to accelerate life science research and development via a global marketplace platform that connects researchers to subjects, specimens, and associated data. The following are our executive officers as of September 30, 2020.
➢
Christopher Ianelli, PhD, MD, our Founder, President, Director, and Chief Executive Officer, has over 20 years of experience in medicine, healthcare investment banking, and startups.
➢
Jill Mullan, our Treasurer, Secretary, Director, and Chief Operating Officer, is a member of the founding team and has been with us since 2010. She has over 30 years of experience in the high-tech industry including numerous startups, with a focus on strategy, business development, operations, and marketing.
➢
Benjamin Bielak, Chief Information Officer, has been with us since 2018. He has over 25 years of executive and senior information technology experience with a focus on the healthcare space.
➢
Tracy Curley, Chief Financial Officer, joined our company in 2020. She has over 30 years of experience in public accounting and corporate finance, with expertise in initial public offerings, public company financial compliance, business combinations, capital transactions, technical accounting, internal controls, budgeting, forecasting, business process and reporting.
Scientific Advisory Board
Our scientific advisory board is composed of six physicians, data scientists, and entrepreneurs known for their work in the area of biospecimens or in the area of online marketplaces. Our scientific advisory board provides us with advice and guidance on scientific and industry matters.
We believe our team, with its deep technical and scientific background, biospecimen industry experience, and business capabilities, has allowed us to become a leading online marketplace for biospecimen procurement.
Corporate Information
Our corporate headquarters are located at 450 Bedford Street, Lexington, MA 02420. Our telephone number is (781) 301-6700. Our website address is www.ispecimen.com. The information on or accessed through our website is not incorporated in this prospectus or the registration statement of which this prospectus forms a part. You should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
JOBS Act
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an “emerging growth company” until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.
We are also a “smaller reporting company” as defined in the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the value of our voting and non-voting common stock held by non-affiliates on the last business day of our second fiscal quarter is less than $250.0 million, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the value of our voting and nonvoting common stock held by non-affiliates on the last business day of our second fiscal quarter in that fiscal year is less than $700.0 million.
THE OFFERING
Common stock offered by us
shares of our common stock
The underwriters have an option for a period of 45 days to purchase up to additional shares of our common stock to cover over-allotments, if any.
Common stock to be outstanding after this offering
shares (or shares if the underwriters exercise their option to purchase additional shares in full).
We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $ (or approximately $ if the underwriters’ option to purchase additional shares of our common stock is exercised in full), based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We intend to use the net proceeds from this offering to further develop our technology, grow our supply network, increase our marketing and sales presence, scale our operations, for working capital and general corporate purposes, and to repay the accrued and unpaid interest of the Bridge Notes. See the section titled “Use of Proceeds” for additional information.
See “Risk Factors” beginning on page
13 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
We have applied to list our common stock on the under the symbol “ ”.
The number of shares of common stock to be outstanding after this offering is based on 5,363,365 shares of our common stock outstanding as of September 30, 2020, and includes an additional shares of our common stock issuable upon (i) the conversion of all outstanding shares of our Series A, Series A-1 and Series B convertible preferred stock immediately prior to the closing of this offering into an aggregate of 7,158,774 shares of common stock, (ii) the conversion of the outstanding Convertible Notes (as defined below) and the outstanding principal of the Bridge Notes (as defined below) into an aggregate of shares of common stock and (iii) 129,254 shares issuable upon the cancellation of the warrants, and excludes:
➢
an aggregate of 1,424,041 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and the 2013 Stock Incentive Plan (the “2013 Plan”), at a weighted average exercise price of $0.18 per share as of September 30, 2020;
➢
591,180 shares of common stock available for future issuance under the 2013 Plan as of September 30, 2020;
➢
shares of common stock available for future issuance under our 2020 Stock Incentive Plan (the “2020 Plan”); and
➢
shares of common stock underlying warrants to be issued to the representative of the underwriters upon the consummation of this offering.
SUMMARY FINANCIAL DATA
The following tables present our summary financial data. We have derived the summary statements of operations data for the year ended December 31, 2018 and 2019 and the summary balance sheet data as of December 31, 2018 and 2019 from our audited financial statements included elsewhere in this prospectus.
The following summary financial data as of September 30, 2020 and for the nine months ended September 30, 2019 and 2020 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited financial statements.
You should read this data together with our consolidated financial statements and related notes included elsewhere in this prospectus and the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results for any prior periods are not necessarily indicative of our future results.
|
|
|
|
Years Ended
December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Statement of Operations Data:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
|
4,298,350
|
|
|
|
|
$
|
4,394,818
|
|
|
|
|
$
|
5,466,375
|
|
|
|
|
$
|
3,007,911
|
|
|
|
Total operating expenses
|
|
|
|
|
8,178,439
|
|
|
|
|
|
7,751,119
|
|
|
|
|
|
6,938,305
|
|
|
|
|
|
6,170,707
|
|
|
|
Loss from operations
|
|
|
|
|
(3,880,089)
|
|
|
|
|
|
(3,356,301)
|
|
|
|
|
|
(1,471,930)
|
|
|
|
|
|
(3,162,796)
|
|
|
|
Other expense, net
|
|
|
|
|
(1,003,961)
|
|
|
|
|
|
(2,117,751)
|
|
|
|
|
|
(1,586,610)
|
|
|
|
|
|
(333,175)
|
|
|
|
Net loss
|
|
|
|
|
(4,727,050)
|
|
|
|
|
|
(5,347,052)
|
|
|
|
|
|
(3,058,540)
|
|
|
|
|
|
(3,378,221)
|
|
|
|
Net loss per common share – basic and diluted(1)
|
|
|
|
$
|
(0.91)
|
|
|
|
|
$
|
(1.03)
|
|
|
|
|
$
|
(0.59)
|
|
|
|
|
$
|
(0.65)
|
|
|
|
Weighted average common shares outstanding – basic and diluted(1)
|
|
|
|
|
5,190,810
|
|
|
|
|
|
5,196,485
|
|
|
|
|
|
5,191,457
|
|
|
|
|
|
5,190,583
|
|
|
1)
See Note 2 to our audited financial statements and unaudited interim financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per common share.
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|
|
|
As of December 31,
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|
|
As of
September 30,
2020
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
$
|
1,580,662
|
|
|
|
|
$
|
2,303,502
|
|
|
|
|
$
|
3,359,897
|
|
|
|
Total assets
|
|
|
|
|
4,214,588
|
|
|
|
|
|
4,044,626
|
|
|
|
|
|
6,047,240
|
|
|
|
Current liabilities
|
|
|
|
|
15,760,261
|
|
|
|
|
|
11,295,302
|
|
|
|
|
|
20,261,087
|
|
|
|
Total liabilities
|
|
|
|
|
15,760,261
|
|
|
|
|
|
11,295,302
|
|
|
|
|
|
20,570,856
|
|
|
|
Convertible preferred stock
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(22,718,749)
|
|
|
|
|
|
(18,423,752)
|
|
|
|
|
|
(25,696,692)
|
|
|
RISK FACTORS
Risks related to our Business
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability.
We were founded in 2009 and completed our first commercial sale in 2012. We did not start generating revenues until 2016. We are not profitable and have incurred losses in each period since our inception in 2009. For the nine-month period ended September 30, 2020, and the years ending December 31, 2019 and December 31, 2018, we reported net losses of $3,058,540, $4,727,050 and $5,347,052, respectively. We had an accumulated deficit of $27,464,043 as of September 30, 2020.
We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue to invest in the growth of our business. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The magnitude of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate and grow revenue. Even if we achieve profitability in a future period, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have adverse effects on our stockholders’ equity (deficit) and working capital.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the years ended December 31, 2019 and December 31, 2018 with respect to this uncertainty. While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, we have based these estimates on assumptions that may prove to be wrong, and we may need to raise additional funds. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce, or eliminate our technology development programs, our commercialization efforts, general hiring, or to cease operations.
We will likely require additional capital in the future and an inability to meet future capital needs could adversely impact our ability to operate.
We require substantial capital to fund our business growth and we may need additional capital in the future to fund our operations. In addition to investing in personnel growth commensurate with business growth, we believe we must continue to invest in the development of our iSpecimen Marketplace platform to enhance and improve its performance, functionality, ease of use, and reliability to carry out our business strategies. New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and/or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms. Our success will depend, in part, on our ability to develop new products and services and make corresponding technology enhancements that address the increasingly sophisticated and varied needs of our suppliers and customers and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. We cannot be certain that additional financing will be available to us when required on favorable terms or at all. To the extent that we cannot raise capital, we may not be able to continue operations.
We have a relatively short operating history which can lead to difficulty in accurately forecasting future results.
While we had a small amount of revenue beginning in 2012, we did not have any full-time sales and marketing personnel to build our commercial operations until 2016. As a result of our relatively short history of revenue generation, our ability to accurately forecast future results is limited and is impacted by a number of factors, including:
➢
Our revenue is transactional and not recurring. Researchers pay us to procure specimens when they have a need for specimens. We do not currently charge our customer or supply chain for access to the iSpecimen Marketplace;
➢
Our revenue is significantly concentrated and varies by customer year-over-year. In 2019, the top three customers accounted for approximately 40% of our revenue. These customers were different than the two customers that represented our approximately 30% of our revenue in 2018;
➢
Researcher needs may change over the lifetime of a project, based on the stage of the project. A research customer in one time period may not have a need for specimens again in the next;
➢
Research projects get terminated or suspended for a variety of reasons, including funding issues or unexpected results. Any termination or suspension of a project may cause a corresponding cancellation or delay in purchase orders we have received for specimens;
➢
Suppliers may not accurately estimate how long it will take them to fulfill specimen requests, making it more difficult to accurately forecast when we will recognize revenue on these specimen requests; and
➢
Most of our sales team joined iSpecimen in the fourth quarter of 2019 and therefore we have limited historical selling data per salesperson upon which to generate future revenue forecasts.
Many of these are outside of our control and all of which may change from time to time. Our historical revenue results should not be taken as predictive of future performance. There are many risks that could impact future performance resulting in variations in expected results which could lead to a negative business impact.
Our growth strategy may not prove viable and we may not realize expected results.
Our business strategy is to grow by improving and expanding iSpecimen’s Marketplace platform. This growth is expected to come through: (i) expansion of our platform capabilities to drive increased acquisition of annotated biospecimens through the platform, (ii) further expansion of our customer and supplier base in and outside the United States, and (iii) expansion into new lines of business such as patient recruitment and data licensing. Expansion of our existing business and entry into new lines of business will require a significant investment in technology development, supply development, operations, and marketing and sales. We may not achieve market expansion and acceptance and we may incur problems introducing new solutions and services. We may experience losses related to these investments, which could have a material adverse effect on our results of operations.
Our growth strategy involves a number of risks and uncertainties, including:
➢
We may not successfully enter into contracts with healthcare providers to gain access to specimens, subjects, and data on terms favorable to us or at all. This can limit our ability to grow in existing lines of business and expand into new lines of business;
➢
We may not obtain new customers or may lose existing customers if we cannot offer products and services that they need on a timely basis or at all;
➢
We may fail in the development of our technology and it may not adequately keep pace to support an expansion of our existing line of business or our entry into new lines of businesses;
➢
The market adoption rate of our marketplace technology may be too slow, and we may fail to get our customers and suppliers to transact for products and services using our technology;
➢
We may fail to continue to expand outside of the United States, especially if we are required to comply with laws and regulations that differ from geographies in which we currently operate;
➢
We may fail to gain market acceptance for new products or services; and/or
➢
We may lose to competitors, some of whom may have greater resources than we do. This competition may intensify due to the ongoing consolidation in the biospecimen industry, which may increase our costs to pursue opportunities.
If we fail to properly evaluate and execute existing and new business opportunities properly, we may not achieve anticipated benefits and may incur increased costs. There can be no assurance that we will be able to successfully capitalize on growth opportunities, which may adversely impact our business model, revenues, results of operations, and financial condition.
The continued COVID-19 pandemic could continue to adversely affect our business.
We are subject to the risks arising from the COVID-19 outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders, that limit our ability to procure specimens; (ii) decline in researcher demand for specimens; and (iii) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.
Beginning in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully disabled, more than 40% was partially disabled, and less than 15% was fully operational. As of August 2020, less than 10% of our worldwide supply was fully disabled, approximately 50% was partially disabled, and nearly 40% was fully operational. We expect that while the pandemic lasts, we will continue to experience a slowdown in non-COVID-19 specimen collections due to social distancing on the part of research subjects, supply partner site employees, and customer research organizations. There is considerable uncertainty around the duration of this COVID-19 outbreak and its future impact. While we implemented measures to help stabilize revenue as well as measures to reduce costs in response to the COVID-19 outbreak, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we expect this matter to have an impact on our results of operations, financial condition, or liquidity, which cannot be reasonably estimated at this time.
International operation expansion could expose us to additional risks which could harm our business, prospects, results of operation, and financial condition.
We operate internationally and expect to expand internationally. For example, we procure specimens from sites outside of the United States and we also distribute samples to organizations located around the world. As of September 30, 2020, we have customers in 16 countries, supply sites in 12 countries, and two international distributors. International expansion exposes us to additional risks, including:
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changes in local political, economic, social, and labor conditions, which may adversely affect our business;
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risks associated with trade restrictions and foreign import requirements, including the importation and exportation of our solutions, as well as changes in trade, tariffs, restrictions or requirements;
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heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies;
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fluctuations in currency exchange rates, which may make doing business with us less appealing as our contracts are generally denominated in U.S. dollars;
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greater difficulty in enforcing contracts;
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lack of brand awareness that can make commercializing our products more difficult and expensive;
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management communication and integration problems resulting from cultural differences and geographic dispersion;
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the uncertainty and limitation of protection for intellectual property rights in some countries;
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increased financial accounting and reporting burdens and complexities as a result of being a public company;
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lack of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or partners;
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potentially different pricing environments, longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud;
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uncertainty regarding liability for products and services, including uncertainty as a result of local laws and lack of legal precedent;
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different employee/employer relationships, existence of workers’ councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions; and
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compliance with complex foreign and U.S. laws and regulations applicable to international operations may increase the cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy requirements, research ethics and compliance laws, anti-corruption laws, and anti-competition regulations, among others. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.
The occurrence of any one of these risks could harm our international business and, consequently, our results of operations. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to operate in other countries will produce desired levels of revenue or profitability.
We rely upon our technology solution for the operation of our business and if our technology platform contains defects or fails to perform as expected, we may need to suspend its availability and divert development resources, and our business and reputation may be harmed.
Technology as complex as ours may contain unknown and undetected errors or performance problems. There could be numerous reasons for performance and quality issues including new and updated features, defects in integrated commercial and open source technologies, outages and disruptions in the cloud infrastructure on which our platform relies, human error or malfeasance, scale constraints, design flaws, and bad actions by external factors including security and performance related incidents. Many serious defects are frequently found during the period immediately following introduction and initial release of new capabilities or enhancements to existing platforms. Although we attempt to resolve errors that we believe would be considered serious by our users before making our platforms available to them, our products are not error-free. If a significant failure occurs that prevents our customers, suppliers, or our company from using the iSpecimen Marketplace, our operations may be disrupted, and it may be difficult or, in certain cases, impossible for us to continue our business for a period of time until the failure is corrected. We experienced one such issue when we released our new workflow software in 2018 and it did not deliver the expected value. As a result, our ability to move specimen requests through the sales pipeline was limited, and therefore we elected to delay the planned growth of our sales team until critical software updates were completed in mid-2019. As a result, our revenue remained flat from 2018 to 2019. Any performance or quality problem could result in lost revenues or delays in user acceptance that would be detrimental to our business and reputation. We may not be able to detect and correct errors before releasing our product commercially. Undetected errors or performance problems in our existing or future products may be discovered in the future and known errors, considered minor by us, may be considered serious by our customers, resulting in a loss of customers and a decrease in our revenues.
Sustainable future revenue growth is dependent upon the development of technology solutions that enable scale and address new markets.
Our iSpecimen Marketplace technology consists of four major functional areas: data ingestion and harmonization, search, workflow management, and administration/reporting. Each of these functional
areas need continual development to both enable our current business to scale and to enable us to enter new markets. Our intention is to focus most of our engineering resources on the development of the iSpecimen Marketplace platform for the foreseeable future. In the first nine months of 2020, we incurred $1.1 million in technology expenses, and capitalized $864,000 for internally developed software. While we are spending, and expect to continue to spend, a significant amount of time and resources on the development of this platform, we cannot provide any assurances of our iSpecimen Marketplace’s short or long-term success or growth. While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, there is no assurance that the resources being allocated for the platform will be sufficient to complete planned additional capabilities, or that such completion will result in significant revenues or profit for us. If our customers or suppliers do not perceive this platform to be of high value and quality, we may not be able to retain them or acquire new customers or suppliers.
Our platform may become technologically obsolete or commoditized.
We must continue to enhance and improve the performance, functionality, ease of use, and reliability of our iSpecimen Marketplace platform or it may become obsolete or commoditized. New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and /or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms. Our success will depend, in part, on our ability to develop new products and services that address the increasingly sophisticated and varied needs of our suppliers and customers and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of our technology involves significant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to user requirements or emerging industry standards. If we are unable to adapt to changing market conditions, user requirements, or emerging industry standards, we may not be able to increase our revenue and expand our business. Additionally, if existing or future competitors develop or offer products or services that provide significant performance, price, creative or other advantages over this platform, demand for our services through the iSpecimen Marketplace may decrease and our business, prospects, results of operations and financial condition could be adversely affected.
We use third-party technology licenses as part of our technology solution.
The iSpecimen Marketplace uses third parties for certain technology to support development, delivery, and operations of the platform including product management, software development, cloud hosting, data processing, content mapping, and security services and may need to license additional technology in the future for use in the ongoing operations as part of our technology solution. Most of the software (including source code) and other materials we use are distributed under a “free,” “open source,” or similar licensing model. We also use software and services from commercial providers. However, we believe all of them are generally commercially available to us from other parties. We continue to evaluate partners whose capabilities can help us deliver our iSpecimen Marketplace solution in areas such as functionality, efficiency, and security and expect to continue to leverage and consider additional third-party capabilities in our ongoing Marketplace development. However, there is no assurance that these third-party technology licenses will continue to be available to us on acceptable commercial terms or at all which could significantly harm our business, financial condition, and operating results.
We use open source licenses as part of our technology solution, which may subject us to claims from third parties claiming ownership and unauthorized use.
We use open source software in our software solutions and technology-enabled services. We may encounter claims from third parties claiming ownership and unauthorized use of the software purported to be licensed under the open source terms, demanding release of derivative works of open source software that could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source licenses. These claims could result in litigation that could be expensive to defend. If we become liable to third parties for such claims, we could be required to make our software source code available under the applicable open source license, utilize or develop alternative technology, or cease using, selling, offering for sale, licensing, implementing or supporting the applicable solutions or technology-enabled services. In
addition, use of certain open source software may pose greater risks than use of third-party commercial software, as most open source licensors and distributors do not provide commercial warranties or indemnities or controls on the origin of the software.
We may become subject to third parties’ claims alleging infringement of their patents and proprietary rights, which could be costly, time consuming, and prevent the use of our technology solution.
We cannot assure you that third parties will not claim our current or future products or services infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. As the number of product and services offerings in our market increases and functionalities increasingly overlap, companies such as ours may become increasingly subject to infringement claims. These claims also might require us to enter into royalty or license agreements. If required, we may not be able to obtain such royalty or license agreements or obtain them on terms acceptable to us.
We do not have any patents protecting our intellectual property and if we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary and internally developed technology, our business could be adversely affected.
Our success depends upon our proprietary technology. We do not have registered patents on any of our technology because we do not believe that we could obtain blocking patents and that the costs of patent monitoring and prosecution outweigh the benefits. Instead, we rely upon software copyright laws, service marks, trade secret laws, confidentiality procedures, and contractual provisions to establish and protect our proprietary rights as well as the skills, knowledge and experience of our technical and operational personnel, our consultants and advisors, and contractors. Because we operate in a highly competitive industry, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect.
We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, collaborators, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third-parties confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to protect our rights. These confidentiality, inventions and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we may not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, effective protection of intellectual property rights is unavailable or limited in certain foreign countries. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.
If our security measures are breached, or if our services are subject to attacks that degrade or deny the ability of users to access our platforms, our platforms and applications may be perceived as not being secure, customers and suppliers may curtail or stop using our services, and we may incur significant legal and financial exposure.
Our platforms and the network infrastructure that are hosted by third-party providers involve the storage and transmission of healthcare data as well as proprietary information about organizations and programs, and security breaches could expose us to a risk of loss of this information, litigation, and potential liability. Our security measures may be breached due to the actions of outside parties, employee error, malfeasance, security flaws in the third party hosting service that we rely upon, or any number of other reasons and, as a result, an unauthorized party may obtain access to our suppliers’ or customers’ data. Although we have never had any breach of data in our third-party provider’s environment, any future breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our platforms and applications that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorized access, disable or degrade service, or
sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures on a timely basis. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose suppliers and customers and we may have difficulty obtaining merchant processors or insurance coverage essential for our operations.
Changes in demand for our products and services could affect profitability.
We are fundamentally a matchmaking service provider between researchers who have needs for access to subjects, samples, and data, and healthcare providers and other organizations that have them. Any change that either reduces the demand for our services or changes the composition of the demand could adversely impact our financial results.
Overall customer demand could change for many reasons outside of our control, reducing demand or making it more difficult to match up to our supply chain’s capabilities. These reasons include:
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general economic downturn that impacts the R&D budgets of biopharma;
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changes in the disease landscape, like COVID-19, that affect the types of products and services needed;
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changes in drugs and therapies and the desire to study subjects on these drugs and therapies;
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changes in diagnostic tests performed (like genomic sequencing) that drive the need for subjects and samples with these new or novel test results;
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changes in data requirements, such as the need to know specific outcomes data;
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overall changes in biomarker research, such as emerging liquid biopsy or cell therapy research, that drives the need for different products and services;
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leadership changes within our customers resulting in loss of sponsorship;
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new (alternative) products introduced by competitors and/or developed by customers, which may have potential to reduce or replace the need for certain types of biospecimens that we provide;
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competitive forces, which make it easier for customers to find products and services elsewhere; and/or
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cancellation or delay of research programs, due to funding issues or preliminary research result issues.
If we fail to address these factors in a timely manner or at all, our financial results could be adversely affected.
Additionally, overall customer demand could decrease if we fail to:
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provide high quality products and services;
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provide products and services at a competitive price;
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deliver products and services in a reasonable amount of time;
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offer high levels of customer service;
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offer adjacent services that researchers want to procure along with our existing products and services;
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adequately invest in sales and marketing programs and teams to drive demand or operational support to fulfill requests;
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develop a large and diverse supply network to satisfy demand; or
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provide a technology solution that simplifies the biospecimen procurement process for researchers and specimen providers alike.
Challenges or unanticipated costs in establishing the sales, marketing, and distribution capabilities necessary to successfully commercialize our products globally could affect profitability.
To generate revenue, we need to expand our sales, marketing, and distribution capabilities to support our operations in North America, Europe, and Asia Pacific and we expect approximately $ of the proceeds raised in this offering will be allocated to enhance our sales, marketing, and distribution capabilities. It may be expensive and difficult for us to develop a global sales and marketing presence and therefore, we will likely seek distributors to the life sciences industry to market and sell some of our products and services outside of the United States. In 2020, we started the process of identifying potential distributors to market and sell our products and services to key geographic areas outside the United States. We have entered into agreements with two non-exclusive distributors in the country of Japan and will continue to look for distributor partnership opportunities covering other rest-of-world markets. We may not be able to provide adequate compensation to these distributors for them to spend time and resources marketing and selling our products and some of our products may be too complex for them to adequately represent them. In addition, any third-party distributors with whom we work may not successfully sell our products and services, thereby exposing us to potential expenses in exiting such distribution agreements. We, and any distributors, must also market our services in compliance with federal, state, local and international laws relating to the provision of incentives and inducements. Violation of these laws can result in substantial penalties.
We incur credit risk with our customers, and we may provide them with products and services for which we do not get paid.
Our customers generally place orders for our products and services using a purchase order and we invoice our customers after they have received the products or services from us. During this procurement process, we become obligated to pay our suppliers for any products or services we procure from them on behalf of our customers regardless of our whether our customers ultimately pay us for these products or services. Therefore, we bear the responsibility for the credit risk of our customers. We mitigate this credit risk through procedures that evaluate the creditworthiness of customers prior to accepting a purchase order from them. However, our procedures may not successfully identify all those who ultimately fail to pay us for our products and services and any non-payments may negatively impact our revenues, results of operations, and financial condition.
Our customer mix increases the risk of customers not paying our invoices.
We derive, and believe that we may continue to derive, a significant portion of our revenues from privately held, investor-backed biopharma companies that are not profitable and have little operating history. These organizations may be at a higher risk of not paying for provided products and services on a timely basis or at call. If these companies fail to pay our invoices, our profitability will be adversely impacted.
We rely upon relatively few customers for a significant portion of revenue and do not have a recurring revenue business model. A loss of large customers could affect our ability to operate.
We have derived, and believe that we may continue to derive, a significant portion of our revenue from a limited number of customers that vary each year. For the nine months ended September 30, 2020, our two largest customers accounted for 10% and 32% of our revenue. For the fiscal year ended December 31, 2019, our three largest customers accounted for 20%, 11%, and 10% of our revenue. For the fiscal year ended December 31, 2018, our two largest customers accounted for 18% and 13% of our revenue. We do not have a recurring revenue model and our customers may buy less of our products or services depending on their research and development cycles, internal budget cycles, product and service requirements, and competitive offerings. A major customer in one year may not purchase any of our products or services in another year, which may adversely affect our financial performance.
Customers and customer prospects may be averse to using a self-service marketplace to procure specimens and may continue to require iSpecimen personnel in the procurement process, impacting our scalability and profitability.
The iSpecimen Marketplace functions as a lead generation system to capture customer requests for specimens and as a workflow engine to allow customers, suppliers, and our company to track and manage
specimen requests. Currently, it does not fully support self-service eCommerce because key capabilities required to satisfy these transactions across all of our product lines, such as a pricing engine and patient-level search, have yet to be incorporated. Therefore, currently all customer requests for specimens require assistance from iSpecimen sales personnel. At a minimum, our sales personnel are involved in the generation of customer quotes, but they often also act in a consulting role to help develop specimen request specifications on more complex projects or to perform searches on the customer or customer prospect’s behalf.
While we continue to invest in capabilities to support customer self-service in the iSpecimen Marketplace, including $ of the proceeds of this offering, we do not know when we will have the resources to fully develop these capabilities. Additionally, we do not know if researchers will utilize the iSpecimen Marketplace to transact without the intervention of iSpecimen personnel which could limit our scalability. We may continue to invest in software which may never provide a return on its investment and diverts resources from the development of software that drives other parts of our procurement workflow.
Our business may be materially and adversely impacted by the reduction, delay or cancellation of orders from our customers.
Our contracts with our customers generally allow them to reduce, delay, or cancel the unfulfilled portion of their specimen order with a two-week notice. Customers may reduce, delay, or cancel their unfulfilled orders due to a variety of reasons including: they make changes to project requirements and the open request no longer meets their needs; their budgets change or projects get cancelled; they place orders with multiple specimen providers and cancel open orders when they have procured sufficient quantity of samples across all their sources; or we are unable to fulfill the entire order before the project deadline. For orders received and closed (either fully fulfilled, reduced, or cancelled) between January 1, 2016 and September 30, 2020, we fulfilled approximately 60% of the total value of these orders. Our business, financial condition, results of operations and cash flows may be materially and adversely impacted by the reduction, delay or cancellation of orders.
We have entered into contracts with U.S. government agencies which subjects us to federal contract and audit risks.
We have entered into contracts with U.S. government agencies, representing less than 10% of our total revenue from January 1, 2018 through September 30, 2020, that may contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which subjects us to additional risks. These risks include the ability of the U.S. government to unilaterally:
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suspend or prevent us for a set period of time from receiving new contracts or extending existing contracts;
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terminate our existing contracts;
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reduce the scope and value of our existing contracts;
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audit and object to our contract-related costs and fees, including allocated indirect costs;
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change certain terms and conditions in our contracts.
The U.S. government may terminate any of its contracts with us either for its convenience or if we default by failing to perform in accordance with the contract schedule and terms. Termination for convenience provisions may enable us to recover only our costs incurred or committed, and settlement expenses and profit on the work completed prior to termination. Termination for default provisions may not permit these recoveries and make us liable for excess costs incurred by the U.S. government in procuring undelivered items from another source.
As a U.S. government contractor, we may become subject to periodic audits and reviews. Based on the results of these audits, the U.S. government may adjust our contract-related costs and fees, including allocated indirect costs. As part of any such audit or review, the U.S. government may review the adequacy of, and
our compliance with, our internal control systems and policies, including those relating to our purchasing, property, compensation, and/or management information systems. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government.
We could also suffer serious harm to our reputation if allegations of impropriety were made against us. Although we have not had any government audits and reviews to date, future audits and reviews could cause adverse effects.
Sustainable future revenue growth is dependent on growth in the capabilities of our supply network which we may not be able to achieve.
Our business is fundamentally a match-making business between healthcare providers who have access to subjects, samples, and data and life science researchers who need them. Currently, we receive more requests for our products and services than we have access to in our supply network and we are therefore supply constrained. Although we plan to use $ of the proceeds of this offering in supply development and commensurately grow our supply network capabilities to keep pace with demand, this supply-demand imbalance could increase in the future if we do not continue or increase our investment in this area. Additionally, demand for specimens we receive is becoming more specific, requiring access to a greater population of subjects, samples, and data to find those that meet a researcher’s inclusion and exclusion criteria. For example, whereas a few years ago, a researcher may have requested access to formalin fixed paraffin embedded (“FFPE”) tumor blocks from subjects with lung cancer, now researchers may need access to FFPE blocks that are less than two years old, from subjects with non-small cell lung cancer with a known genetic mutation, who took a specific medication, and whose cancer did not respond to the medication. It takes a larger network of subjects, samples, and data to access a wide enough population of subjects to meet a growing number of requests with more stringent criteria. Delays, difficulties, or unanticipated costs in developing our supply network capabilities necessary to successfully procure products and services could adversely affect revenue and profitability.
Sustainable future revenue growth is dependent upon gaining access to more healthcare data from our supply network and a failure to obtain this data may adversely affect our growth.
Key to our growth strategy is the accessibility and availability of deep medical record data from our healthcare provider supply sites. This data is used to automate the process of matching researchers to subjects, samples, and data, and also used to automate the procurement workflow. Currently, we have gained access to laboratory data to support the distribution of clinical lab specimens as well as biorepository data to support the distribution of banked specimens. However, we have not gained access to deeper medical record data sets from a broad set of healthcare providers to support custom specimen collections, clinical trial recruitment, or data licensing. Should we fail in our ability to access deeper healthcare data, we may not be able to effectively compete in our served markets or grow as anticipated and our business may suffer.
The adoption cycle of our supply network tends to be very lengthy, which may adversely affect our ability to scale rapidly and increase revenues.
The business development cycle for the adoption of our technology solution at healthcare provider supply partners can take up to 18 months or more from initial contact with the prospect through execution of a contract. We may spend significant resources to attempt to secure a new supply partner without successfully engaging the supply partner. Even if we are successful in securing a new supply partner, once a contract is executed, implementation of our technology in the supply partner’s environment can take another several months to a year or more. Because of the lengthy adoption cycle, we may fail to expand our supply network quickly enough to reach our revenue growth targets.
Potential adverse effect from changes in the healthcare industry, including consolidations and regulatory changes, could affect access to subjects, samples, and data and affect our growth.
Changing healthcare-related legislation and regulation may impact the fiscal stability and sustainability of our supply partners. Additionally, many healthcare providers are consolidating to create larger healthcare
systems and/or integrated healthcare delivery systems. These changes can divert resources at our healthcare provider supply sites away from the evaluation or implementation of the iSpecimen solution to the adoption of new infrastructure, policies, and procedures to support the changes, thereby extending their timeline to adopt the iSpecimen solution. We cannot predict whether or when future healthcare reform initiatives at the international, federal, or state level, consolidations, or other initiatives affecting healthcare providers’ businesses will be proposed, enacted, or implemented or what impact those initiatives may have on our business, results of operations, and financial condition.
Our supply chain may not provide adequate resources to quickly respond to requests for specimens and delays in the procurement process can affect our reputation, revenue, and profitability.
Many of the healthcare providers in our supply network are not-for-profit organizations whose primary business is to provide clinical care to patients. Supporting biospecimen research may be an adjunct activity for them. These organizations may lack adequate resources to quickly respond to our requests for specimens now and into the future. Should we and our customers experience slow turnaround times on specimen requests, our reputation may be damaged and there may be an adverse impact on our revenue and profitability.
We do not control the end-to-end quality of specimens and data collected in our supply chain and quality issues can affect our reputation, revenue, and profitability.
We rely upon our supply sites and their quality control processes to provide us with products and services that meet order specifications. Most of the products are shipped directly from the supply sites to our customers but we occasionally receive products from supply sites and ship them to our customers. When we receive products from our supply sites, we perform a visual inspection of the products, but we do not perform an in-depth quality control check to ensure that products meet all specifications. Instead, we rely upon our customers to perform quality checks themselves and offer refunds or replacements for products that do not meet specification. In 2019, approximately 99% of clinical remnant specimens delivered to our customers met specifications, 92% of banked research specimens delivered to our customers met specifications, and 97% of custom research collections delivered to our customers met specifications. Refunds and replacements for our products that did not meet specifications in 2019 were nominal. Through the third quarter of 2020, the number of specimens that met specifications increased to 100% for clinical remnant specimens, 97% for banked research specimens and 97% for custom research collections. Refunds and replacements for our products that did not meet specifications through the third quarter of 2020 were nominal. Any issues with quality from our supply sites can adversely affect our reputation, revenue, and profitability.
Reliance on relatively few supply partners for significant supplies and services could affect our ability to operate and grow.
We have derived, and believe that we may continue to derive, a significant portion of our revenues from products we procure from a limited number of supply sites. There was one supplier that accounted for 14% of our total cost of revenue during the nine months ended September 30, 2020. There were three suppliers that accounted for 22%, 10%, and 10% of our total cost of revenue during the year ended December 31, 2019. There was one supplier that accounted for 13% of our total cost of revenue during the year ended December 31, 2018. No other single supplier accounted for over 10% of our total cost of revenue during the nine months ended September 30, 2020 or for the years ended December 31, 2019 and 2018. Any change in the ability of a major supply site to provide us with products and services (such as financial health of the supply site, key leadership, research focus, information technology, competitive demand for specimens from third-parties, pricing structures, contract status and changes in the general economy) may adversely affect our financial performance.
Our supply partners’ inventories may become obsolete, which could have a material adverse effect upon our ability to generate revenue.
Approximately 50% of our revenue is derived from specimens that are procured from our supply partners’ existing sample inventories in their biobanks. These inventories may become obsolete due to changes in regulatory requirements such as a requirement for new consent form disclosures; changes in researcher
requirements for the types of specimens, subjects, and data they need for their studies; and/or general degradation in the quality of stored specimens. Any change in regulations, researcher needs, or specimen quality could render our supply partners’ inventories obsolete and may adversely affect our financial performance.
Specimen collection from human subjects, including the possible occurrence of adverse events during or after tissue collection, could provide exposure to claims and litigation.
There are inherent risks associated with collecting specimens from human subjects. Although specimen collections are completed by certified staff according to established industry standards, specimen donors vary in their ability to tolerate specimen collection protocols and such donors may potentially have an adverse health reaction either during or following a specimen collection. Research subjects or their legally authorized representative may file claims related to a specimen collection and these claims could result in litigation that could be expensive, and time consuming to defend or result in judgements that exceed the resources of the Company and its insurance coverage.
We procure specimens and data from organizations outside of the U.S. and as such, we rely upon these organizations to collect and distribute specimens and data in accordance with their local regulations as well as our contractual requirements. A failure by our sites to comply with both applicable regulations and our contractual requirements could introduce us to compliance risk.
Some of the organizations from which we procure specimens and data reside outside of the U.S. in jurisdictions that may have data protection rules, human research protection rules, and other pertinent rules that relate to the collection and distribution of specimens and data that vary from U.S. regulations. We, as an organization are not knowledgeable about all the pertinent rules and regulations of all of the jurisdictions in which these sites operate, and therefore we rely upon our contractual relationships with supply sites to ensure that they have legal responsibility for compliance with their own jurisdiction-specific regulations. Should any site fail to comply with the applicable regulations, we may suffer reputational risks if we have distributed specimens and data from that site. Additionally, any compliance failure on the part of our supply sites that impacts our research customers’ ability to utilize specimens and data they previously obtained from us, as well as utilize any research results, they derived from these specimens and data, may subject us to claims by these customers. These claims could result in litigation that could be expensive to defend or result in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition, and results of operations.
We may experience delays or interruption in the shipments of our specimens due to factors outside of our control, and such disruption could lead to lost revenue and customer satisfaction issues.
We distribute biological specimens to customers around the world. These specimens need to be delivered over a range of temperatures from ambient to cryogenic and delivery timeframes that can be as quick as hours. We rely on third-party shipping materials (such as thermal containers) as well as shipping services (such as FedEx) to transport specimens to our customers. Shipping materials may be defective and third-party shipping services, including international shipping services, could become disrupted by adverse weather conditions, natural disasters, flight cancellations, ground logistics issues, customs delays, and other service interruptions. Any defect in our shipping materials or delays in shipping service times could cause damage to these specimens and render them unusable by our customers. If we are unable to deliver our specimens in a timely matter and without damage, our revenue could be negatively impacted and our reputation with our customers could suffer, resulting in material harm to our business.
Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.
Our future success will depend upon our ability to retain our key management and other personnel and will also depend in large part on our ability to attract and retain additional qualified software developers, bioinformaticists, operations personnel, sales and marketing personnel, and business development personnel. Competition for these types of employees is intense due to the limited number of qualified professionals
and the high demand for them, particularly in the Boston, Massachusetts area where our headquarters are located. We have in the past experienced difficulty in recruiting qualified personnel, especially in the area of sales. Failure to attract, assimilate, and retain personnel would have a material adverse effect on our business and potential growth.
Our competitors may have greater resources than us and may outspend us to grow more quickly.
Our competitors are highly fragmented and comprise thousands of biobanks, healthcare providers, and commercial biospecimen organizations. We expect to continue to experience significant and increasing levels of competition in the future, especially from several larger biospecimen providers who have consolidated via mergers and acquisitions and who are well-capitalized by private equity. These organizations are currently acquiring smaller biospecimen businesses and have larger customer bases, their own collection centers, biospecimen inventories, larger marketing and sales budgets, and an international presence. They may also be developing their own technology solution that could be better or less costly to develop than our own iSpecimen Marketplace, thereby eliminating one of our key competitive advantages. They may continue to outspend us to grow more quickly and we may not be able to successfully compete with a competitor that has greater resources; hence such competition may adversely affect our business.
We may lose business to competitors which have or develop their own biorepositories and/or collection centers that can meet customers’ needs.
Many of our competitors have their own biorepository of specimens that they have collected or procured over time. These inventories, when they meet a customer’s needs for product, almost always provide our competitors with a time-to-delivery advantage because they can directly fulfill requests from their own inventories, whereas we must procure products through our supply network after an order has been received from our customers. Additionally, some competitors have their own collection facilities and direct access to eligible research subjects which also provides a time-to-delivery advantage. We have lost and will continue to lose business to competitors when they can provide samples more quickly than we can from our supply network.
We may face pricing pressure from competitors who may lower prices to reduce biorepository inventories or because they have more favorable specimen acquisition costs.
Many competitors invest in biorepositories of specimens and data. These competitors may be incented to drop prices in order to more quickly recoup their inventory carrying costs, especially when they have held inventory for longer periods of time. This may cause downward pricing pressure on us. Additionally, some competitors may have cost advantages on some types of collections either because of more favorable supply relationships or because they have their own collection centers, and they can likewise exert pricing pressure in the market. Lower prices will adversely impact our revenue and gross margins.
Our overall business results may suffer from an economic downturn.
We rely upon researchers from biopharma companies as the primary source of our revenue. During an economic downturn, the biopharma industry typically experiences a drop in the annual growth rate of research and development spending and allocates fewer resources towards it. An economic downturn could adversely affect the demand for our products and services and have a corresponding impact on our revenue and profitability. A prolonged economic downturn may cause us to reduce investment in the longer-term growth of our company in order to reduce short term costs.
We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.
Significant growth in the size and scope of our operations could place a strain on our financial, technical, operational, and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems, or the occurrences of unexpected expansion difficulties, could have a material adverse effect on our financial condition and our ability to timely execute our business plans.
Our revenue may be adversely affected if we are required to charge sales tax or other transaction taxes on all or a portion of our past and future sales.
States and other jurisdictions have varying policies regarding when a company has a taxable presence in their locale. There are many factors to consider when determining if a locale nexus exists and if yes, whether products and services offered by the company are subject to sales tax. To date, we have not paid any sales tax in any state on the provision of services to distribute biospecimens. However, it is possible that we could owe sales tax on past sales or in the future if laws and policies, court decisions, Federal law, or our decisions about where and when sales tax is owed changes.
Our ability to utilize net operating loss carryforwards may be limited, resulting in income taxes sooner than currently anticipated.
As of December 31, 2019, we had net operating loss carryforwards (“NOLs”) of approximately $20.4 million for federal income tax purposes of which approximately $12.9 million expires at various periods through 2037 and approximately $7.5 million can be carried forward indefinitely. These NOLs may be used to offset future taxable income, to the extent we generate any taxable income, and thereby reduce or eliminate our future federal income taxes otherwise payable. Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, imposes limitations on a corporation’s ability to utilize NOLs if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. In the event that an ownership change has occurred, or were to occur, utilization of our NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in the Code. Any unused annual limitation may be carried over to later years. We may be found to have experienced an ownership change under Section 382 as a result of events in the past or the issuance of shares of common stock in the future. If so, the use of our NOLs, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of our NOLs before utilization.
A pandemic, epidemic, or outbreak of an infectious disease in the United States or worldwide could adversely affect our business.
Outbreaks of pandemic, epidemic, or infectious diseases, such as the current COVID-19 pandemic, Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, or the H1N1 virus, could disrupt the operations of our business, much as with the current COVID-19 pandemic. Our supply chain’s ability to collect specimens from subjects may be disrupted if medical resources are re-allocated to focus on the treatment of disease, medical personnel work remotely, or patient appointments are cancelled or move to virtual appointments. Our customers’ demand for specimens may be reduced if research projects are cancelled, paused, or temporarily slowed due to an economic downturn caused by a widespread health crisis or our customers move to remote work environments where they cannot use our products and services. Limitations on travel may disrupt our supply development and customer development initiatives. Our ability to fulfill requests for products and services, develop our technology, and market and sell our solutions may be impacted if there is a closure of our facilities.
We may acquire other businesses, products, or technologies that could disrupt our business, reduce our financial resources, or cause dilution to our stockholders.
Although we have not identified such an opportunity, as part of our business strategy, we may, in the future, pursue acquisitions of businesses and assets or pursue strategic alliances and joint ventures that leverage our core technology and industry experience to expand our offerings, increase our customer base, or increase our supply base. We have no experience with acquiring other companies and limited experience with forming strategic alliances and joint ventures. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in significant
write-offs or the incurrence of debt and contingent liabilities, any of which could have a material adverse effect on our financial condition, results of operations, and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that would otherwise focus on developing our existing business. We may experience losses related to acquisitions of other companies, which could have a material adverse effect on our results of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, or joint venture.
To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.
Risks Related to Regulatory Environment
Failure to comply with federal and state data protection regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
Because we may gain access to protected healthcare or personal data, we must comply with various data protection regulations worldwide, including the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, and their implementing regulations at 45 CFR Parts 160-164 (collectively, “HIPAA”). As part of the operation of our business, we act in the capacity of a HIPAA business associate with respect to protected health information (“PHI’’), we receive from our healthcare provider partners. As a HIPAA business associate, we are required to protect the privacy and confidentiality of PHI, and we are required to comply with HIPAA security regulations requiring certain administrative, physical, and technical safeguards to ensure the confidentiality, integrity, and availability of electronic PHI (“ePHI’’). To comply with our regulatory and contractual obligations, which may change over time, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding data protection requirements. If we, or any of our employees or agents, are unable to maintain the privacy, confidentiality, and security of the PHI that is entrusted to us, we could be subject to civil and criminal fines and sanctions imposed by the Department of Health and Human Services (“HHS”) or state regulatory authorities, and we could be found to have breached our HIPAA business associate agreements with our healthcare provider suppliers. In addition to the HIPAA requirements that we are subject to, we may be subject to similar state laws and regulations, which regulate the collection, handling, processing, and storage of sensitive personal information. While we have never had a data breach, we cannot guarantee that it will not happen in the future nor can we guarantee that we will always be in compliance with these regulations. Failure to comply with federal, state and local laws and regulations could subject the Company to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which would have a material adverse effect on its business. In addition, compliance with future legislation could impose additional requirements on the Company which may be costly.
Failure to comply with international laws related to data protection, such as the GDPR could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business.
We may be required to comply with international laws, such as the European Union (“EU”) General Data Protection Regulation (“GDPR”). The GDPR took effect in May 2018 and regulates the collection, storage, use, disclosure, transfer, and/or other processing of personal data of identified or identifiable individuals located in the European Economic Area (“EEA”), including the EU. This data specifically includes personal health data that generally is provided as part of biospecimen collection studies. The GDPR imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates for processing (with some exceptions), allowing individuals to revoke consents granted, enabling individuals the right to have their data erased (with some exceptions), amended, or transferred to another data controller (known as “data portability”), providing information to individuals regarding data processing
activities, implementing safeguards to protect the security and confidentiality of personal data, limiting the transfer of data to countries outside of the EU, providing notification of data breaches, and taking certain measures when engaging third-parties who may also use or process the data. In addition, EU member states may make their own further laws and regulations limiting the processing of personal data, including biometric, genetic or health data.
The GDPR covers areas where we may not have expertise and the GDPR and the regulatory guidance enforcing GDPR may be actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance with the GDPR or may incur significant costs in obtaining or maintaining regulatory compliance. Any action brought against us for violations of this law, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on the Company which may be costly.
Failure to comply with federal and state laws around environmental, health and safety, biohazards and dangerous goods, and imports/exports could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
In limited instances, we may take temporary possession of specimens from our healthcare provider suppliers and redistribute them to our research customers. Because we receive, store, and ship specimens, we are subject to regulation under federal, state, and local laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation, and disposal of specimens and infectious and hazardous waste materials, as well as regulations relating to the safety and health of laboratory employees. Our laboratory is subject to applicable federal and state laws and regulations relating to biohazard disposal of all laboratory specimens, and we utilize outside vendors for disposal of such specimens. In addition, the federal Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV, COVID-19, and the hepatitis B virus. These requirements, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations, and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens. There are also federal laws related to import and export of biospecimens and related data.
Failure to comply with federal, state and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which would have a material adverse effect on our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.
Failure to comply with other international laws around environmental, health and safety, biohazards and dangerous goods, imports/exports, and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
Because we procure specimens from and distribute specimens to countries outside of the United States, we are subject to international and foreign rules similar to any of the aforementioned U.S. rules, including those related to environmental, health and safety, biozards, and imports/exports. We may be unaware of those international and foreign rules.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory compliance. Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.
Failure to comply with laws and regulations related to the protection of research subjects could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
We are subject to regulation under international, federal, state, and local laws and regulations relating to the protection of research subjects. Federally-funded human-subject research in the United States, including the collection of identifiable human biospecimens, is governed by 45 CFR Part 46, also known as the Health and Human Services Policy for Protection of Human Research Subjects or the “Common Rule.” Use of biospecimens in certain other research is subject to Food and Drug Administration (“FDA”) regulations for the Protection of Human Subjects and Institutional Review Boards at 21 CFR Parts 50 and 56. Research funded by the National Institutes of Health (“NIH”) may be subject to grant or contract requirements, as well as NIH Certificates of Confidentiality. When collecting specimens for research in the United States, iSpecimen and its collection sites are responsible for ensuring that specimens are collected in accordance with these regulations. In addition, other countries have their own regulations around the ethical collection of human specimens for research. While we believe that we are in compliance with these laws, we may not be aware of all such laws or may fail to properly audit and identify gaps in compliance. Similarly, we may find errors in our technology and processes and may fail to properly match the compliance requirements of our researchers to the compliance requirements of our suppliers. Failure of our company or our suppliers to comply with international, federal, state, and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which could have a material adverse effect on our business.
Our lack of knowledge of all the laws and regulations related to our business operations may result in our failure to abide by these rules.
In addition to the above-described laws and regulations, there are many other federal, state and international laws and regulations applicable to iSpecimen. The following list contains some of the other laws and regulations that could directly or indirectly affect our ability to operate the business:
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Occupational Safety and Health regulations and requirements;
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Centers for Disease Control Import Permit Program rules related to biological agents;
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Shipping rules such as IATA Dangerous Goods regulations;
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State and local laws and regulations for the disposal and handling of medical waste and biohazardous material;
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Export laws such as the U.S. Department of Commerce’s Bureau of Industry and Security Export Administration Regulations, U.S. State Department’s Directorate of Defense Trade Controls, and the U.S. Department of the Treasury’s Office of Foreign Assets Control in export licensing;
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Import laws such as the Customs and Border Protection Trade Act of 2002 and the Customs Modernization Act;
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The federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs;
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Federal, state, and local tax and tariff rules;
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Other laws and regulations administered by the FDA;
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Other laws and regulations administered by HHS; and
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State and local laws and regulations governing human subject research and clinical trials.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance or may incur significant costs in obtaining or maintaining regulatory compliance. Any
action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.
Failure to comply with governmental export and import regulations could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business.
Our products and services are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and services must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.
In addition, changes in our products and services or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and services to international markets, prevent our customers from procuring our products and services or, in some cases, prevent the export or import of our products and services to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our products and services, or in our decreased ability to export or sell our products and services to existing or potential customers. Any decreased use of our products and services or limitation on our ability to export or sell our products and services could adversely affect our business, financial condition and results of operations.
Product safety and product liability, including bio-hazard risks, could provide exposure to claims and litigation.
Specimens may have hazardous properties and may carry transmissible infectious agents. There are inherent risks in connection with the handling, storage, disposal, distribution, and/or use of the specimens. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local regulation and regulations of foreign jurisdictions, the risk of accidental contamination or injury from these materials cannot be completely eliminated. Individuals who use or come in contact with the specimens may file claims related to their use and these claims could result in litigation that could be expensive to defend or result in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition and results of operations.
Risks Related to the Offering and our Securities
There has been no prior public market for our common stock and an active trading market may not develop.
Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following completion of this offering or, if developed, may not be sustained. The price for our common stock in this offering will be determined by negotiations between us and the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at or above the initial offering price or at all at the time you wish to sell them. An inactive trading market may also impair our ability to both raise capital by selling shares of common stock and acquire other complementary diagnostic tests, technologies or businesses by using our shares of common stock as consideration and attract and motivate employees through equity and incentive awards.
Upon closing of this offering, we expect that our common stock will be listed on the . If we fail to satisfy the continued listing standards of the , however, we could be delisted, which would adversely impact the price of our common stock and Company reputation.
The sale of substantial shares of our common stock may depress our stock price.
As of September 30, 2020, we have 5,363,365 shares of common stock issued; outstanding stock options to purchase 1,424,041 shares of common stock at an average price of $0.18 per share; outstanding warrants to purchase 129,254 shares of common stock at an average price of $0.01 per share, an aggregate of 7,158,774 shares of Series A, Series A-1 and Series B preferred stock that will convert into 7,158,774 shares of common stock in connection with this offering, and $5.5 million of Convertible Notes and $ of the outstanding principal of the Bridge Notes that will convert into shares of our common stock on in connection with this offering. Additionally, we have reserved shares to issue stock options, restricted stock or other awards under our 2020 Equity Incentive Plan. Upon the closing of this offering, we will issue warrants to purchase shares of our common stock to the representative of the underwriters. Sales of a substantial number of shares of our common stock could cause the price of our common stock to fall and could impair our ability to raise capital by selling additional securities.
If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.
Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing common stock in this offering will incur immediate dilution of $ per share, based on an assumed initial public offering price of $ per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share as of . For more information on the dilution you may suffer as a result of investing in this offering, see the section of this prospectus entitled “Dilution.”
This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering as well as the conversion of our preferred stock and convertible debt into shares of our common stock upon the completion of this offering and the exercise of stock options granted to our employees as the conversion and exercise prices of such securities and options are substantially below the price offered to the public in this offering.
A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell their shares, could result in a decrease in the market price of our common stock. Immediately after this offering, we will have outstanding shares of common stock based on the number of shares outstanding as of September 30, 2020. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares, shares are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described in the section of this prospectus entitled “Shares Eligible For Future Sale.” Moreover, after this offering, holders of an aggregate of up to shares of our common stock, including shares of our common stock issuable upon the conversion of the shares of our Series A, Series A-1 and Series B preferred stock that will be outstanding immediately prior to the consummation of this offering, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders as described in the section of this prospectus entitled “Shares Eligible For Future Sale — Registration Rights.” Once we register these shares, they can be freely sold in the public market, subject to volume limitations applicable to affiliates and the lock-up agreements described in the section of this prospectus entitled “Underwriters.”
Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.
After this offering, our officers, directors and principal stockholders each holding more than 5% of our common stock will collectively control approximately % of our outstanding common stock. As a result,
these stockholders, if they act together, will be able to control the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change of control, impeding a merger, consolidation or other business combination transaction involving us and discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the company and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.
We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section titled “Use of Proceeds.” Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment, and the failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which could cause our stock price to decline.
Certain provisions of our certificate of incorporation, as amended, and our bylaws, as amended, may make it more difficult for a third party to affect a change-of-control.
Our certificate of incorporation, as amended, authorizes the Board of Directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of the Board of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock. In addition, our certificate of incorporation, as amended, provides for a staggered board of directors. As a consequence, only a minority of the board of directors will be considered for election at every annual meeting of stockholders, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. Additional provisions that may discourage unsolicited takeover proposals include (i) board vacancies may be filled by a majority of the remaining board members, (ii) the board may adopt, repeal, rescind, alter or amend our bylaws without stockholder approval, (iii) stockholders holding more than 15% of the outstanding shares may call a special meeting, (iv) a director may be removed from office only by the affirmative vote of the a majority of the issued and outstanding stock entitled to vote; and (v) no cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors.
Our bylaws, as amended, designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our bylaws, as amended, provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of ours to us or our stockholders; (iii) any action asserting a
claim arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation, or the bylaws; and (iv) any action asserting a claim governed by the internal affairs doctrine (the “Delaware Forum Provision”). Our bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision.
Section 27 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the Delaware Forum Provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
We recognize that the Delaware Forum Provision and the Federal Forum Provision in our bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision and the Federal Forum Provision may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court were “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce the Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the United States District Court may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
Limitations on director and officer liability and indemnification of our officers and directors by us may discourage stockholders from bringing suit against an officer or director.
Our certificate of incorporation, as amended, and bylaws, as amended, provide that, to the fullest extent permitted by Delaware law, as it presently exists or may be amended from time to time, a director shall not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director. Under Delaware law, this limitation of liability does not extend to, among other things, acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director or officer.
We are responsible for the indemnification of our officers and directors.
Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our certificate of incorporation, as amended, and bylaws, as amended, also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.
We do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment will only occur if our stock price appreciates.
We may need additional capital, and the sale of additional shares of common stock or other equity securities could result in additional dilution to our stockholders.
While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, we have based these estimates on assumptions that may prove to be wrong. Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, or other sources. We do not currently have any committed external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies or future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate technology development or future commercialization efforts.
Our quarterly revenue tends to fluctuate, making it harder to forecast and meet investor expectations.
Quarterly revenue has been difficult to predict, has historically fluctuated, and may vary from quarter to quarter due to a variety of factors, many of which are beyond our control. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful. Factors that may affect our quarterly revenue and operating results may include: any material changes in demand for our products and services; changes in our supply sites’ ability to collect and ship specimens or our ability to retain them; changes in the number, availability, and quality of competing products; our ability to maintain a timely delivery of high quality products and services; the timing and amount of sales and marketing expenses incurred by us to attract new customers; changes in the economic or business prospects of our customers or the economy generally; changes in the pricing policies of our competitors; unforeseen defects in our technology; changes in the regulatory environment; and unforeseen costs necessary to improve and maintain our technology. These factors affecting our future earnings are difficult to forecast and could harm our quarterly and/or annual operating results. The change in our earnings or general economic conditions may cause the market price of our common stock to fluctuate.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various risk factors, including the following:
➢
changes in our industry;
➢
ability to enhance our platform or to add new functionality;
➢
regulatory changes;
➢
competitive pricing or other pressures;
➢
failures of our suppliers to deliver product on time;
➢
loss of supply partners;
➢
additions or departures of key personnel;
➢
sales of our common stock;
➢
our ability to execute our business plan;
➢
operating results that fall below expectations;
➢
loss of any strategic relationship including customers, suppliers and channel partners; and/or
➢
economic and other external factors.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Our status as an “emerging growth company” under the Jumpstart Our Business Startups (“JOBS”) Act of 2013 may make it more difficult to raise capital when we need to do it or make our common stock less attractive to investors.
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company,” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
We have limited insurance which may not cover claims by third parties against us or our officers and directors.
We have limited directors’ and officers’ liability insurance and commercial liability insurance policies. Claims by third parties against us may exceed policy amounts and we may not have amounts to cover these claims. Also, due to high self-insured retention costs and deductibles, we may incur significant costs from any claim made against us before insurance policies provide coverage. Any significant claims would have a material adverse effect on our business, financial condition, and results of operations. In addition, our limited directors’ and officers’ liability insurance may affect our ability to attract and retain directors and officers.
We identified a material weakness in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal controls over financial reporting pursuant to Section 404 until the later of (i) the year following our first annual report required to be filed with the SEC or (ii) the date we are no longer an emerging growth company. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting, provided that our independent registered public accounting
firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the JOBS Act. We could be an emerging growth company for up to five years.
In connection with the audit of our financial statements for the year ended December 31, 2019, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
For the year ended December 31, 2019, in connection with our adoption of Topic 606 Revenue from Contracts with Customers (“ASC 606”), we began recognizing revenue when specimens are accessioned rather than upon shipment. We generated reports from our Marketplace Platform to determine what specimens had been accessioned but not yet shipped as of December 31, 2019 in order to accrue for unbilled specimen revenue. The underlying conclusions of these reports were not verified by management prior to completion of the financial statements and, these reports were determined to be inaccurate. As a result, audit adjustments were made to unbilled revenue upon adoption of ASC 606 on January 1, 2019 and as of December 31, 2019. Therefore, we have noted a material weakness in internal controls over unbilled revenue.
While our efforts to address this matter should have taken place prior to the 2019 audit process, we believe it has now been addressed and that we have a process and report that provides accurate information for our unbilled specimen revenue. We consider this matter to be remediated.
We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes- Oxley, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations. We cannot assure that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations.
The requirements of being a U.S. public company may strain our resources and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and rules. Following this offering, the requirements of these rules and regulations will significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources and divert management’s attention.
The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain disclosure controls and procedures and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place, as well as maintaining these controls and procedures, is a costly and time-consuming effort that needs to be re-evaluated frequently.
Additionally, various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or higher deductibles or incur substantially higher costs to maintain coverage.
Evaluation of internal control and remediation of potential problems will be costly and time consuming and could expose weaknesses in financial reporting.
Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires that we evaluate our internal control over financial reporting to enable management to report on the effectiveness of those controls annually. In
connection with the Section 404 requirements, we could, as part of that documentation, identify material weaknesses, significant deficiencies, or other areas for further attention or improvement.
Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers, and employees, require the hiring of additional finance, accounting and other personnel, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, adequate internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.
Our senior management team has limited experience managing a public company.
Our senior management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business. Our management team may not successfully or efficiently manage our continued transition to a public company that will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.
Public company compliance may make it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we are expected to follow Sarbanes-Oxley Act regulations and other public company rules, and these rules and regulations will increase our compliance costs and make certain activities more time consuming and costly. As a result, these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult and costly for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus may constitute “forward-looking statements” for purposes of federal and state securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, used in either the singular or plural form, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:
➢
our ability to enter into contracts with healthcare providers to gain access to specimens, subjects, and data on favorable terms;
➢
our ability to obtain new customers and keep existing customers;
➢
development of our technology to adequately keep pace to support expansion of our existing line of business or our entry into new lines of businesses;
➢
market adoption rate of our marketplace technology;
➢
our ability to continue to expand outside of the United States in compliance with local laws and regulations;
➢
our business model generally and our utilization of the proceeds from this offering;
➢
the viability of our current intellectual property;
➢
acceptance of the products and services that we market;
➢
government regulation;
➢
our ability to retain key employees;
➢
adverse changes in general market conditions for medical devices;
➢
our ability to continue as a going concern;
➢
our future financing plans; and
➢
our ability to adapt to changes in market conditions (including as a result of the COVID-19 pandemic) which could impair our operations and financial performance.
The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.
USE OF PROCEEDS
We estimate, based upon an assumed initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover page of this prospectus), that we will receive net proceeds from this offering of approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We currently estimate that we will use the net proceeds from this offering, together with our existing cash as follows:
➢
approximately $ million to continue development and expansion of the iSpecimen Marketplace platform to support more diverse and complex data sets, improve search functionality (including patient/subject search), enhance user workflows, and optimize administrative and reporting functionality;
➢
approximately $ million to expand our supplier development and management capabilities, including gaining access to more diverse and emerging healthcare data sets;
➢
approximately $ million to grow our sales and marketing efforts, including internationally;
➢
approximately $ million to repay the accrued and unpaid interest of the Bridge Notes (with an aggregate principal amount of $6.5 million, an interest rate of 30% per annum and due and payable on March 31, 2021);
➢
approximately $ million for our operations and fulfillment function to support our expected growth in specimen orders; and
➢
the remainder for working capital, business development opportunities, general corporate purposes, including expanding our legal, finance, and compliance capabilities to support operating as a public company.
Our expected use of proceeds from this offering represents our current intentions based on our present plans and business condition as well as the market environment. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the proceeds to be received upon the completion of this offering or any of the actual amounts that we will spend on the uses set forth above. We may also use a portion of the proceeds to license, acquire, or invest in additional businesses, technologies, products, services, or assets, although currently we have no specific agreements, commitments, or understandings in this regard.
The amount and timing of our actual expenditures will depend on numerous factors, including the progress of our technology development efforts, our ability to expand our supply network to access more diverse and complex healthcare datasets, changing customer demands, any collaborations that we may enter into with third parties, and any unforeseen cash needs. As a result, the executive management team will retain broad discretion over the allocation of the net proceeds from this offering.
Pending the use of the proceeds from this offering, we may invest the proceeds in interest-bearing, investment-grade securities, certificates of deposit, or government securities.
Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each 1,000,000 share increase (decrease) in the number of shares offered in this offering would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming that the price per share for the offering remains at $ (which is the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
DIVIDEND POLICY
We currently intend to retain all available funds and any future earnings to fund the development, commercialization, and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on any class of our common stock in the foreseeable future. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors, subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our board of directors may deem relevant.
CAPITALIZATION
The following table sets forth cash, as well as our capitalization, as of September 30, 2020 as follows:
➢
on an actual basis;
➢
on a pro forma basis to give effect to (i) the issuance of shares of common stock, in aggregate, upon conversion of unsecured convertible promissory notes, as amended, we issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018 (collectively, the “Convertible Notes”) and the outstanding principal of the secured promissory notes (the “Bridge Notes”); and (ii) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into shares of our common stock, all of which will occur immediately prior to the closing of this offering;
➢
on a pro forma, as adjusted, basis, giving effect to the pro forma adjustments set forth above and the sale and issuance by us of shares of our common stock in this offering, based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table together with our financial statements and related notes, and the sections titled “Selected Financial and Other Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and financial statements and related notes that are included elsewhere in this prospectus.
|
|
|
|
As of September 30, 2020
|
|
|
|
|
|
Actual
|
|
|
Pro forma
|
|
|
Pro forma
as adjusted
|
|
|
|
|
|
(Unaudited)
|
|
|
Cash
|
|
|
|
$
|
957,246
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs
|
|
|
|
$
|
5,489,728
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Bridge notes payable, net of debt issuance costs
|
|
|
|
|
4,588,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge notes payable, related parties
|
|
|
|
|
1,905,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable (including short-term maturities of $473,239)
|
|
|
|
|
783,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
|
|
12,766,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, $0.0001 par value, 3,200,000
shares authorized, 3,174,363 shares issued and outstanding, actual;
shares outstanding pro forma; and shares outstanding
pro forma as adjusted
|
|
|
|
|
7,999,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1 convertible preferred stock, $0.0001 par value, 556,550 shares authorized, 556,540 issued and outstanding, actual; shares outstanding pro forma; and shares outstanding pro forma as adjusted
|
|
|
|
|
561,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $0.0001 par value, 3,427,871
shares authorized, issued and outstanding, actual; shares
outstanding pro forma; and shares outstanding pro forma as
adjusted
|
|
|
|
|
2,612,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible preferred stock
|
|
|
|
|
11,173,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 16,000,000 shares authorized; 5,363,365 shares outstanding, actual; shares outstanding pro forma; and shares outstanding pro forma as adjusted
|
|
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
1,766,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock, at cost, 171,908 shares
|
|
|
|
|
(172)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020
|
|
|
|
|
|
Actual
|
|
|
Pro forma
|
|
|
Pro forma
as adjusted
|
|
|
|
|
|
(Unaudited)
|
|
|
Accumulated deficit
|
|
|
|
|
(27,464,043)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit:
|
|
|
|
|
(25,696,692)
|
|
|
|
|
|
|
|
|
|
Total capitalization:
|
|
|
|
$
|
(1,757,376)
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (or decrease) each of cash, additional paid in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $ million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each 1,000,000 share increase or decrease in the number of shares offered in this offering would increase (or decrease) each of cash, additional paid in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $ million, assuming that the price per share for the offering remains at $ (which is the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The information in the table above excludes:
➢
an aggregate of 1,424,041 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and the 2013 Stock Incentive Plan (the “2013 Plan”), at a weighted average exercise price of $0.18 per share as of September 30, 2020;
➢
591,180 shares of common stock available for future issuance under the 2013 Plan as of September 30, 2020;
➢
shares of common stock available for future issuance under our 2020 Plan as of , 2020 and
➢
the issuance of warrants to purchase shares of common stock to be issued to the representative of the underwriters upon the consummation of this offering.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book value (deficit) as of September 30, 2020 was $(25.7) million, or $(4.79) per share of our common stock. Our historical net tangible book value (deficit) represents the amount of our total tangible assets less our total liabilities and our Series A, Series A-1, and Series B preferred stock. Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the 5,363,365 shares of our common stock outstanding as of September 30, 2020.
Our pro forma net tangible book value (deficit) as of September 30, 2020 was $ million, or $ per share. Pro forma net tangible book value per share is our total tangible assets less our total liabilities and dividing the difference by the number of shares of common stock deemed to be outstanding, after giving effect to (i) the issuance of shares of common stock, in aggregate, upon conversion of our Convertible Notes and the outstanding principal of the Bridge Notes; and (ii) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock immediately prior to the closing of this offering into shares of common stock.
After giving further effect to our issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of , would have been $ million, or $ per share of common stock. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $ per share to new investors purchasing shares of common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution:
|
|
Assumed initial public offering price per share of common stock
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
Historical net tangible book value (deficit) per share as of September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase per share attributed to the conversion of outstanding preferred stock
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
Pro forma net tangible book value per share as of September 30, 2020 before this offering
|
|
|
|
|
|
|
|
—
|
|
|
|
|
Increase in pro forma as adjusted net tangible book value per share attributable to investors in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share after this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new common stock investors in this offering
|
|
|
|
|
|
|
$
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (which is the midpoint of the price range listed on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $ , and dilution in pro forma as adjusted net tangible book value per share to new investors by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value after the offering would be $ per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $ per share and the dilution in pro forma as adjusted net tangible book value to new investors would be $ per
share, in each case assuming an initial public offering price of $ per share, which is the midpoint of the price range listed on the cover page of this prospectus.
The following table summarizes, as of September 30, 2020, after giving effect to this offering, the number of shares of our common stock purchased from us, the total consideration paid, or to be paid, to us and the average price per share paid, or to be paid, by existing stockholders and by the new investors. The calculation below is based on an assumed initial public offering price of $ per share (which is the midpoint of the price range listed on the cover page of this prospectus) before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
|
|
|
Shares purchased
|
|
|
Total consideration
|
|
|
Average price
per share
|
|
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Existing Shareholders
|
|
|
|
|
5,363,365
|
|
|
|
|
|
%
|
|
|
|
|
|
1,737,720
|
|
|
|
|
|
%
|
|
|
|
|
$
|
0.32
|
|
|
|
New Investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the total consideration paid by new investors and the total consideration paid by all stockholders by $ million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions but before estimated offering expenses.
Except as otherwise indicated, the discussion and the tables above assume no exercise of the underwriters’ option to purchase additional shares of our common stock and excludes:
➢
an aggregate of 1,424,041 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and the 2013 Stock Incentive Plan (the “2013 Plan”), at a weighted average exercise price of $0.18 per share as of September 30, 2020;
➢
591,180 shares of common stock available for future issuance under the 2013 Plan as of September 30, 2020;
➢
shares of common stock available for future issuance under our 2020 Plan as of , 2020; and
➢
the issuance of warrants to purchase shares of common stock to be issued to the representative of the underwriters upon the consummation of this offering.
SELECTED FINANCIAL DATA
You should read the following selected financial data together with our financial statements and the related notes thereto included elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. We have derived the statements of operations data for the years ended December 31, 2019 and 2018 and the balance sheet data as of December 31, 2019 and 2018 from our audited financial statements included elsewhere in this prospectus.
The statement of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited financial statements.
The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements, related notes and other financial information included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of our future results.
|
|
|
|
Years Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
|
4,298,350
|
|
|
|
|
$
|
4,394,818
|
|
|
|
|
$
|
5,466,375
|
|
|
|
|
$
|
3,007,911
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
2,127,900
|
|
|
|
|
|
2,362,495
|
|
|
|
|
|
2,032,111
|
|
|
|
|
|
1,506,820
|
|
|
|
Technology
|
|
|
|
|
993,329
|
|
|
|
|
|
1,210,079
|
|
|
|
|
|
1,131,695
|
|
|
|
|
|
778,892
|
|
|
|
Sales and marketing
|
|
|
|
|
1,413,059
|
|
|
|
|
|
1,313,881
|
|
|
|
|
|
1,305,897
|
|
|
|
|
|
1,029,049
|
|
|
|
Supply development
|
|
|
|
|
792,778
|
|
|
|
|
|
673,439
|
|
|
|
|
|
395,200
|
|
|
|
|
|
593,377
|
|
|
|
Fulfillment
|
|
|
|
|
914,633
|
|
|
|
|
|
736,799
|
|
|
|
|
|
642,140
|
|
|
|
|
|
701,037
|
|
|
|
General and administrative
|
|
|
|
|
1,936,740
|
|
|
|
|
|
1,454,426
|
|
|
|
|
|
1,431,262
|
|
|
|
|
|
1,561,532
|
|
|
|
Total operating expenses
|
|
|
|
|
8,178,439
|
|
|
|
|
|
7,751,119
|
|
|
|
|
|
6,938,305
|
|
|
|
|
|
6,170,707
|
|
|
|
Loss from operations
|
|
|
|
|
(3,880,089)
|
|
|
|
|
|
(3,356,301)
|
|
|
|
|
|
(1,471,930)
|
|
|
|
|
|
(3,162,796)
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,724,450)
|
|
|
|
|
|
(1,214,983)
|
|
|
|
|
|
(1,517,697)
|
|
|
|
|
|
(1,209,857)
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
551,000
|
|
|
|
|
|
(946,000)
|
|
|
|
|
|
(76,000)
|
|
|
|
|
|
725,000
|
|
|
|
Other income
|
|
|
|
|
168,859
|
|
|
|
|
|
41,733
|
|
|
|
|
|
6,691
|
|
|
|
|
|
151,073
|
|
|
|
Interest income
|
|
|
|
|
630
|
|
|
|
|
|
1,499
|
|
|
|
|
|
396
|
|
|
|
|
|
609
|
|
|
|
Other expense, net
|
|
|
|
|
(1,003,961)
|
|
|
|
|
|
(2,117,751)
|
|
|
|
|
|
(1,586,610)
|
|
|
|
|
|
(333,175)
|
|
|
|
Net loss before benefit from income taxes
|
|
|
|
|
(4,884,050)
|
|
|
|
|
|
(5,474,052)
|
|
|
|
|
|
(3,058,540)
|
|
|
|
|
|
(3,495,971)
|
|
|
|
Benefit from income taxes
|
|
|
|
|
157,000
|
|
|
|
|
|
127,000
|
|
|
|
|
|
—
|
|
|
|
|
|
117,750
|
|
|
|
Net loss
|
|
|
|
$
|
(4,727,050)
|
|
|
|
|
$
|
(5,347,052)
|
|
|
|
|
$
|
(3,058,540)
|
|
|
|
|
$
|
(3,378,221)
|
|
|
|
Net loss per common share – basic and diluted(1)
|
|
|
|
$
|
(0.91)
|
|
|
|
|
$
|
(1.03)
|
|
|
|
|
$
|
(0.59)
|
|
|
|
|
$
|
(0.65)
|
|
|
|
Weighted average common shares outstanding – basic and diluted(1)
|
|
|
|
|
5,190,810
|
|
|
|
|
|
5,196,485
|
|
|
|
|
|
5,191,457
|
|
|
|
|
|
5,190,583
|
|
|
|
Pro forma net loss per common share – basic and diluted (unaudited)(2)
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
Pro forma weighted average common shares outstanding – basic and diluted (unaudited)(2)
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
1)
See Note 2 to our audited financial statements and unaudited interim financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per common share.
2)
Reflects (i) the conversion of the Convertible Notes and the outstanding principal of the Bridge Notes into shares of our common stock, and (ii) the automatic conversion of all outstanding shares of our Series A, Series A-1 and Series B preferred stock into shares of our common stock upon the closing of this offering.
|
|
|
|
As of December 31,
|
|
|
As of
September 30,
2020
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
53,893
|
|
|
|
|
$
|
1,130,364
|
|
|
|
|
$
|
957,246
|
|
|
|
Working capital(1)
|
|
|
|
|
(14,179,599)
|
|
|
|
|
|
(8,991,800)
|
|
|
|
|
|
(16,901,190)
|
|
|
|
Total assets
|
|
|
|
|
4,214,588
|
|
|
|
|
|
4,044,626
|
|
|
|
|
|
6,047,240
|
|
|
|
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs
|
|
|
|
|
5,350,278
|
|
|
|
|
|
4,801,189
|
|
|
|
|
|
5,489,728
|
|
|
|
Derivative liability for embedded conversion features
|
|
|
|
|
2,214,000
|
|
|
|
|
|
2,765,000
|
|
|
|
|
|
2,290,000
|
|
|
|
Bridge notes payable, net of debt issuance costs
|
|
|
|
|
3,586,326
|
|
|
|
|
|
1,117,286
|
|
|
|
|
|
4,588,504
|
|
|
|
Bridge notes payable, related parties
|
|
|
|
|
1,655,000
|
|
|
|
|
|
1,050,000
|
|
|
|
|
|
1,905,000
|
|
|
|
Note payable, current portion
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
473,239
|
|
|
|
Note payable, net of current portion
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
309,769
|
|
|
|
Convertible preferred stock
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(22,718,749)
|
|
|
|
|
|
(18,423,752)
|
|
|
|
|
|
(25,696,692)
|
|
|
1)
We define working capital as current assets less current liabilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and plan of operations together with our selected financial data, financial statements and the related notes, and other financial information appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Overview
We were incorporated in 2009 under the laws of the state of Delaware. Our mission is to accelerate life science research and development via a single global marketplace platform that connects researchers to subjects, specimens, and associated data. We are headquartered in Lexington, Massachusetts. We operate as one operating and reporting segment.
In addition to creating a single global platform where both specimen providers and researchers can connect, the platform automates the process of searching for and selecting specimens for research. The platform taps into healthcare provider data to gain insights into the available samples in biobanks or laboratories, or to gain insights into the patient populations to support specimen collections directly from research subjects. The platform receives de-identified data from electronic medical records, laboratory information systems, and other healthcare data sources of available specimens and research subjects and harmonizes the data across all participating organizations.
Researchers can search this data using our intuitive, web-based user interface to obtain specimens more efficiently. They can instantly find the specific specimens they need for their studies, request quotes for these specimens or for custom collections directly from research subjects, place orders, and track and manage their specimens and associated data across projects.
Biospecimen providers also gain efficiencies using the iSpecimen Marketplace, not only because the platform provides instant access to a large researcher base, but because the technology orchestrates the bioprocurement workflow from specimen request to fulfilment. Specimen providers access intuitive dashboards to view requests, create proposals, and track and manage their orders.
Finally, the platform helps with administrative and reporting functions for researchers, suppliers, and our internal personnel, including user and compliance management.
The iSpecimen Marketplace is composed of four major functional areas: search; workflow; data; and administration and reporting. We continue to invest in the evolution of these areas to improve engagement with the platform and liquidity across it. Our core business objective is to retain and grow both researcher and supplier usage of our platform to support biospecimen procurement, as well as to position our Company to explore other adjacent business opportunities that can benefit from the use of the iSpecimen Marketplace.
The iSpecimen Marketplace currently supports the supply chain management and bioprocurement process for specimens and associated data. We derive our revenue by procuring specimens from our healthcare provider network and commercial biobank partners and then distributing these annotated specimens to our research client base. Costs paid to acquire specimens from hospitals and laboratories generally varies depending upon the sample type, collection requirements, and data provided. We generally operate in a “just in time” fashion, meaning we procure specimens from our suppliers and distribute specimens to our customers after we obtain an order for specimens from a research client. Generally, we do not speculatively purchase and bank samples in anticipation of future, unspecified needs. We believe our approach offers many advantages over a more traditional inventory-based supplier business model where biorepositories take inventory risks, and where inventory turnover and cash conversion cycles can be lengthy.
Impact of the COVID-19 Pandemic on Our Operations
We are subject to the risks arising from the SARS-Cov2 (“COVID-19”) outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders, that limit our ability to procure specimens; (ii) decline in researcher demand for specimens; and (iii) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.
Beginning in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully disabled, more than 40% was partially disabled, and less than 15% was fully operational. Consequently, during the three months beginning April 2020, while our purchase order value increased by more than 300% compared to same period in 2019, our ability to fulfill these orders was negatively impacted by COVID-19 and resulted in our revenue only increasing year-over-year by 30% compared to the same period in 2019.
In response to the COVID-19 outbreak, we implemented measures to help stabilize revenue, improve our cash position, and reduce costs. In May 2020, we applied for and received a loan in the amount of $783,008 from the Paycheck Protection Program under the CARES Act. Cost saving measures included the elimination of non-essential travel and in-person training activities, deferral of certain planned expenditures, and the furlough of 7% of our employees in August 2020.
To stabilize revenue, we added COVID-19 samples to our product line to support growing research in this area and also contracted with mobile phlebotomy service providers to more easily collect specimens from research subjects who may be practicing social distancing. We received our first request for samples from patients with a prior or current COVID-19 infection on March 18, 2020, and through September 30, 2020, we fielded additional COVID-19 specimen requests. Because of our large, geographically diverse network with many sites around the country and the world, we were able to respond quickly to this new demand and match requests for COVID-19 specimens to sites in areas of outbreak. As a result, more than 30% of our total purchase orders in the first nine months of the 2020 related to COVID-19 specimens.
As of September 30, 2020, most of our supply organizations had resumed research operations but generally in a more limited capacity than before the pandemic began. Supplier survey results from August 2020 indicate that less than 10% of our worldwide supply was fully disabled, approximately 50% was partially disabled, and nearly 40% was fully operational. We expect that while the pandemic lasts, we will continue to experience a slowdown in non-COVID-19 specimen collections due to social distancing on the part of research subjects, supply partner site employees, and customer research organizations. There is considerable uncertainty around the duration of this COVID-19 outbreak and its future impact. While we implemented measures to help stabilize revenue as well as measures to reduce costs in response to the COVID-19 outbreak, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we expect this matter to have an impact on our results of operations, financial condition, or liquidity, which cannot be reasonably estimated at this time.
Components of Our Results of Operations
Revenue
We generate revenue by procuring various specimens from hospitals, laboratories, and other supply sites comprising our network, and delivering them to our medical research customers using our proprietary software to identify and locate the required specimens. We do not currently charge suppliers or customers for the use of our proprietary online marketplace platform. Each customer executes a material and data use agreement with iSpecimen or agrees to the online purchase terms, both of which include customer rights,
service period, payment, and cancellation terms. These are then supplemented by subsequent statements of work and/or purchase orders that further specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent our contracts with our customers. Generally, contracts have fixed unit pricing.
We have evaluated principal versus agent considerations as part of our revenue recognition policy. We have concluded that our role in procuring specimens for our customers, which is the only performance obligation in a customer contract, is that of a principal as we set the prices for the specimens, control the collection of the specimens being provided prior to transferring control to the customer, and bear the responsibility for customer credit risk associated with selling specimens to customers.
We review contracts and related orders upon receipt to determine if the specimens ordered have an alternative use by the Company. Generally, specimens ordered do not have an alternative future use by us and the performance obligation is satisfied when the related specimens are collected. In the rare circumstances where specimens do have an alternative future use, our performance obligation is satisfied at the time of shipment. We use an output method to recognize revenue for specimens collected with no alternative future use. The output method is measured based on the number of specimens collected. We have an enforceable right to payment when specimens are collected. Customers are typically invoiced upon shipment; however, a customer deposit amount may be required prior to order fulfilment depending on project set-up requirements and type of specimen collection.
Cost of Revenue
Cost of revenue primarily consists of the purchase price to acquire specimens from hospitals and laboratories; inbound and outbound shipping costs; supply costs related to samples; payment processing and related transaction costs; and costs paid to the supply sites to support sample collections. Shipping costs upon receipt of products from suppliers are recognized in cost of revenue.
Additionally, we believe that loss from operations is a more meaningful measure of profitability than gross profit due to the nature of specimens collected and the diversity of our pricing.
Technology
Technology costs include payroll and related expenses for employees involved in the development and implementation of our technology; software license and system maintenance fees; outsourced data center costs; data management costs; depreciation and amortization; and other expenses necessary to support technology initiatives. Collectively, these costs reflect the efforts we make to offer a wide variety of products and services to our customers. Technology and data costs are generally expensed as incurred.
A portion of technology costs are related to research and development. Costs incurred for research and development are expensed as incurred, except for software development costs that are eligible for capitalization. Research and development costs primarily include salaries and related expenses, in addition to the cost of external service providers.
Sales and Marketing
Sales and marketing costs primarily consist of payroll and related expenses for personnel engaged in marketing and selling activities, including salaries and sales commissions; travel expenses; public relations and social media costs; ispecimen.com website development and maintenance costs; search engine optimization fees; advertising costs; direct marketing costs; trade shows and events fees; marketing and customer relationship management software; and other marketing-related costs.
Supply Development
We have agreements with supply partners that allow us to procure specimens from them and distribute these samples to customers. Supply development costs primarily include payroll and related expenses for
personnel engaged in the development and management of this supply network; related travel expenses; regulatory compliance costs to support the network; and other supply development and management costs.
Fulfillment
Fulfillment costs primarily consist of those costs incurred in operating and staffing operations and customer service teams, including costs attributable to assess the feasibility of specimen requests; creating and managing orders; picking, packaging, and preparing customer orders for shipment; responding to inquiries from customers; and laboratory equipment and supplies.
General and Administrative
General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses for human resources, legal, finance, and executive teams; associated software licenses; facilities and equipment expenses, such as depreciation and amortization expense and rent, outside legal expenses, insurance costs, and other general and administrative costs.
Financial Operations Overview and Analysis for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited) and Years Ended December 31, 2019 and 2018
Comparison of the Three Months Ended September 30, 2020 and 2019
|
|
|
|
Three Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Dollars
|
|
|
Percentage
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
|
2,250,147
|
|
|
|
|
$
|
692,707
|
|
|
|
|
$
|
1,557,440
|
|
|
|
|
|
225%
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
903,862
|
|
|
|
|
|
486,665
|
|
|
|
|
|
417,197
|
|
|
|
|
|
86%
|
|
|
|
Technology
|
|
|
|
|
413,381
|
|
|
|
|
|
302,934
|
|
|
|
|
|
110,447
|
|
|
|
|
|
36%
|
|
|
|
Sales and marketing
|
|
|
|
|
506,641
|
|
|
|
|
|
357,209
|
|
|
|
|
|
149,432
|
|
|
|
|
|
42%
|
|
|
|
Supply development
|
|
|
|
|
133,007
|
|
|
|
|
|
205,659
|
|
|
|
|
|
(72,652)
|
|
|
|
|
|
(35)%
|
|
|
|
Fulfillment
|
|
|
|
|
241,785
|
|
|
|
|
|
227,182
|
|
|
|
|
|
14,603
|
|
|
|
|
|
6%
|
|
|
|
General and administrative
|
|
|
|
|
774,407
|
|
|
|
|
|
645,627
|
|
|
|
|
|
128,780
|
|
|
|
|
|
20%
|
|
|
|
Total operating expenses
|
|
|
|
|
2,973,083
|
|
|
|
|
|
2,225,276
|
|
|
|
|
|
747,807
|
|
|
|
|
|
34%
|
|
|
|
Loss from operations
|
|
|
|
|
(722,936)
|
|
|
|
|
|
(1,532,569)
|
|
|
|
|
|
809,633
|
|
|
|
|
|
(53)%
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(469,477)
|
|
|
|
|
|
(454,859)
|
|
|
|
|
|
(14,618)
|
|
|
|
|
|
3%
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
(54,000)
|
|
|
|
|
|
(158,000)
|
|
|
|
|
|
104,000
|
|
|
|
|
|
(66)%
|
|
|
|
Other income
|
|
|
|
|
—
|
|
|
|
|
|
29
|
|
|
|
|
|
(29)
|
|
|
|
|
|
(100)%
|
|
|
|
Interest income
|
|
|
|
|
87
|
|
|
|
|
|
156
|
|
|
|
|
|
(69)
|
|
|
|
|
|
(44)%
|
|
|
|
Other income (expense), net
|
|
|
|
|
(523,390)
|
|
|
|
|
|
(612,674)
|
|
|
|
|
|
89,284
|
|
|
|
|
|
(15)%
|
|
|
|
Benefit from income taxes
|
|
|
|
|
—
|
|
|
|
|
|
39,250
|
|
|
|
|
|
(39,250)
|
|
|
|
|
|
(100)%
|
|
|
|
Net loss
|
|
|
|
$
|
(1,246,326)
|
|
|
|
|
$
|
(2,105,993)
|
|
|
|
|
$
|
859,667
|
|
|
|
|
|
(41)%
|
|
|
Revenue
For the three months ended September 30, 2020, revenue increased by approximately $1,557,000 or 225%, as compared with the three months ended September 30, 2019, primarily due to an expansion of our sales team and new demand for specimens from patients with known COVID-19 test results. In addition to an
expansion of the sales team from three to seven employees, we also had a more seasoned sales team in 2020 compared to 2019. Sales efforts resulted in specimens collected during the three months ended September 30, 2020 increasing by approximately 2,500, or 41.1% to approximately 6,000, compared to approximately 3,500 specimens collected during the three months ended September 30, 2019, contributing to the increase in sales period-over-period. This increase was also impacted by the specimen mix with an increase of $180, or 47.8%, in the average selling price per specimen period-over-period.
Cost of Revenue
For the three months ended September 30, 2020, cost of revenue increased by approximately $417,000 or 86%, as compared with the three months ended September 30, 2019, which was primarily attributable to the increase in specimens collected during the current period over the same period in the prior year. Certain specimens generally have lower procurement costs than other specimens. During 2020, an increase of $13, or 8.6%, in the average cost per specimen collected period-over period allowed the Company’s cost of revenue to increase at a lower rate than revenue for the same period.
Technology
Technology costs increased by approximately $110,000 or 36%, from approximately $303,000 for the three months ended September 30, 2019 to approximately $413,000 for the three months ended September 30, 2020. The increase was primarily related to project expenses in the development and implementation of our technology that were not capitalizable of approximately $379,000 and an increase in depreciation and amortization of approximately $34,000.
Sales and Marketing Expenses
Sales and marketing expenses increased approximately $149,000 or 42%, from approximately $357,000 for the three months ended September 30, 2019 to approximately $507,000 for the three months ended September 30, 2020. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during the fourth quarter of 2019, which amounted to approximately $177,000, partially offset by reductions to external marketing efforts of approximately $30,000 in 2020 due to the COVID-19 outbreak.
Supply Development
Supply development expenses decreased by approximately $73,000 or 35%, from approximately $206,000 for the three months ended September 30, 2019 to approximately $133,000 for the three months ended September 30, 2020. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $71,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak.
Fulfillment
Fulfillment costs increased approximately $15,000 or 6%, from approximately $227,000 for the three months ended September 30, 2019 to approximately $242,000 for the three months ended September 30, 2020. The increase was primarily attributable to an increase in payroll and related expenses of approximately $22,000 for personnel engaged in pre-sales feasibility assessments, and post-sales activities such as order processing and management, shipping and receiving, and customer service, partially offset by other decreases in fulfillment related expenses.
General and Administrative Expenses
General and administrative expenses increased approximately $129,000 or 20%, from approximately $646,000 for the three months ended September 30, 2019 to approximately $774,000 for the three months ended September 30, 2020. The increase was primarily attributable to increases in operating and maintenance
expenses of approximately $339,000 and an increase in utilities and facilities of approximately $27,000, offset by a decrease in payroll and related expenses of $192,000 and general and administrative expenses of approximately $33,000.
Other Income (Expense), net
During the three months ended September 30, 2020 we recorded other expense of approximately $523,000 compared to other expense of approximately $613,000 for the three months ended September 30, 2019. The decrease in other expense was primarily the result of a difference in the change in fair value of the derivative liability related to the Convertible Notes of approximately $104,000.
Benefit from Income Taxes
The Company did not record an income tax benefit for the three months ended September 30, 2020, as the Company did not qualify for a refundable R&D tax credit during the period.
Comparison of the Nine Months Ended September 30, 2020 and 2019
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Dollars
|
|
|
Percentage
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
$
|
5,466,375
|
|
|
|
|
$
|
3,007,911
|
|
|
|
|
$
|
2,458,464
|
|
|
|
|
|
82%
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
2,032,111
|
|
|
|
|
|
1,506,820
|
|
|
|
|
|
525,291
|
|
|
|
|
|
35%
|
|
|
|
Technology
|
|
|
|
|
1,131,695
|
|
|
|
|
|
778,892
|
|
|
|
|
|
352,803
|
|
|
|
|
|
45%
|
|
|
|
Sales and marketing
|
|
|
|
|
1,305,897
|
|
|
|
|
|
1,029,049
|
|
|
|
|
|
276,848
|
|
|
|
|
|
27%
|
|
|
|
Supply development
|
|
|
|
|
395,200
|
|
|
|
|
|
593,377
|
|
|
|
|
|
(198,177)
|
|
|
|
|
|
(33)%
|
|
|
|
Fulfillment
|
|
|
|
|
642,140
|
|
|
|
|
|
701,037
|
|
|
|
|
|
(58,897)
|
|
|
|
|
|
(8)%
|
|
|
|
General and administrative
|
|
|
|
|
1,431,262
|
|
|
|
|
|
1,561,532
|
|
|
|
|
|
(130,270)
|
|
|
|
|
|
(8)%
|
|
|
|
Total operating expenses
|
|
|
|
|
6,938,305
|
|
|
|
|
|
6,170,707
|
|
|
|
|
|
767,598
|
|
|
|
|
|
12%
|
|
|
|
Loss from operations
|
|
|
|
|
(1,471,930)
|
|
|
|
|
|
(3,162,796)
|
|
|
|
|
|
1,690,866
|
|
|
|
|
|
(53)%
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,517,697)
|
|
|
|
|
|
(1,209,857)
|
|
|
|
|
|
(307,840)
|
|
|
|
|
|
25%
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
(76,000)
|
|
|
|
|
|
725,000
|
|
|
|
|
|
(801,000)
|
|
|
|
|
|
(110)%
|
|
|
|
Other income
|
|
|
|
|
6,691
|
|
|
|
|
|
151,073
|
|
|
|
|
|
(144,382)
|
|
|
|
|
|
(96)%
|
|
|
|
Interest income
|
|
|
|
|
396
|
|
|
|
|
|
609
|
|
|
|
|
|
(213)
|
|
|
|
|
|
(35)%
|
|
|
|
Other income (expense), net
|
|
|
|
|
(1,586,610)
|
|
|
|
|
|
(333,175)
|
|
|
|
|
|
(1,253,435)
|
|
|
|
|
|
376%
|
|
|
|
Benefit from income taxes
|
|
|
|
|
—
|
|
|
|
|
|
117,750
|
|
|
|
|
|
(117,500)
|
|
|
|
|
|
(100)%
|
|
|
|
Net loss
|
|
|
|
$
|
(3,058,540)
|
|
|
|
|
$
|
(3,378,221)
|
|
|
|
|
$
|
319,681
|
|
|
|
|
|
(9)%
|
|
|
Revenue
For the nine months ended September 30, 2020, revenue increased by approximately $2,458,000 or 82%, as compared with the nine months ended September 30, 2019 due primarily due to an expansion of our sales team and new demand for specimens from patients with known COVID-19 test results. In addition to an expansion of the sales team from three to seven employees, we also had a more seasoned sales team in 2020 compared to 2019. Sales efforts resulted in specimens collected during the nine months ended September 30, 2020 increasing by approximately 7,800, or 45.9% to approximately 17,000, compared to approximately 9,200 specimens collected during the nine months ended September 30, 2019, contributing to the increase in
sales period-over-period. This increase was also offset by the specimen mix with a decrease of $5, or 1.6%, in the average selling price per specimen period-over-period.
Cost of Revenue
For the nine months ended September 30, 2020, cost of revenue increased by approximately $525,000 or 35%, as compared with the nine months ended September 30, 2019, which was attributable to the increase in specimens collected during the current period over the same period in the prior year. Certain specimens generally have lower procurement costs than other specimens. During 2020, a decrease of $44, or 37.0%, in the average cost per specimen collected period-over period allowed the Company’s cost of revenue to increase at a lower rate than revenue for the same period.
Technology
Technology costs increased approximately $353,000 or 45%, from approximately $779,000 for the nine months ended September 30, 2019 to approximately $1,132,000 for the nine months ended September 30, 2020. The increase was primarily related to project expenses for development of the Company’s technology that were not capitalizable of approximately $187,000 and an increase in depreciation and amortization of approximately $166,000.
Sales and Marketing Expenses
Sales and marketing expenses increased approximately $277,000, or 27%, from approximately $1,029,000 for the nine months ended September 30, 2019 to approximately $1,306,000 for the nine months ended September 30, 2020. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during the fourth quarter of 2019, which amounted to approximately $437,000, partially offset by reductions to external marketing efforts of approximately $102,000 in 2020 due to the COVID-19 outbreak, a reduction in general operating expenses related to sales and marketing of approximately $44,000, and other reductions in marketing efforts.
Supply Development
Supply development expenses decreased approximately $198,000, or 33%, from approximately $593,000 for the nine months ended September 30, 2019 to approximately $395,000 for the nine months ended September 30, 2020. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $217,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak, partially offset by an increase in compliance-related costs to support a larger supply network.
Fulfillment
Fulfillment costs decreased approximately $59,000, or 8%, from approximately $701,000 for the nine months ended September 30, 2019 to approximately $642,000 for the nine months ended September 30, 2020. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $55,000 for personnel engaged in pre-sales feasibility assessments, and post-sales activities such as order processing and management, shipping and receiving, and customer service.
General and Administrative Expenses
General and administrative expenses decreased approximately $130,000 or 8%, from approximately $1,562,000 for the nine months ended September 30, 2019 to approximately $1,431,000 for the nine months ended September 30, 2020. The decrease was primarily attributable to decreases in payroll and related expenses of approximately $180,000 and a decrease in other general and administrative expenses of approximately $77,000, offset by an increase in operating and maintenance expenses of approximately $113,000 and an increase in facilities and utilities expenses of approximately $38,000.
Other Income (Expense), net
During the nine months ended September 30, 2020 we recorded other expense of approximately $1,587,000 compared to other expense of approximately $333,000 for the nine months ended September 30, 2019. The increase in other expense was primarily the result of a difference in the change in fair value of the derivative liability related to the Convertible Notes of approximately $801,000, and an increase in interest expense of approximately $308,000 in 2020 related to the issuance of additional Bridge Notes.
Benefit from Income Taxes
The Company did not record an income tax benefit for the nine months ended September 30, 2020, as the Company did not qualify for a refundable R&D tax credit during the period.
Comparison of the Years Ended December 31, 2019 and 2018
|
|
|
|
Years Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Dollars
|
|
|
Percentage
|
|
|
Revenue
|
|
|
|
$
|
4,298,350
|
|
|
|
|
$
|
4,394,818
|
|
|
|
|
$
|
(96,468)
|
|
|
|
|
|
(2)%
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue
|
|
|
|
|
2,127,900
|
|
|
|
|
|
2,362,495
|
|
|
|
|
|
(234,595)
|
|
|
|
|
|
(10)%
|
|
|
|
Technology
|
|
|
|
|
993,329
|
|
|
|
|
|
1,210,079
|
|
|
|
|
|
(216,750)
|
|
|
|
|
|
(18)%
|
|
|
|
Sales and marketing
|
|
|
|
|
1,413,059
|
|
|
|
|
|
1,313,881
|
|
|
|
|
|
99,178
|
|
|
|
|
|
8%
|
|
|
|
Supply development
|
|
|
|
|
792,778
|
|
|
|
|
|
673,439
|
|
|
|
|
|
119,339
|
|
|
|
|
|
18%
|
|
|
|
Fulfillment
|
|
|
|
|
914,633
|
|
|
|
|
|
736,799
|
|
|
|
|
|
177,834
|
|
|
|
|
|
24%
|
|
|
|
General and administrative
|
|
|
|
|
1,936,740
|
|
|
|
|
|
1,454,426
|
|
|
|
|
|
482,314
|
|
|
|
|
|
33%
|
|
|
|
Total operating expenses
|
|
|
|
|
8,178,439
|
|
|
|
|
|
7,751,119
|
|
|
|
|
|
427,320
|
|
|
|
|
|
6%
|
|
|
|
Loss from operations
|
|
|
|
|
(3,880,089)
|
|
|
|
|
|
(3,356,301)
|
|
|
|
|
|
(523,788)
|
|
|
|
|
|
16%
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,724,450)
|
|
|
|
|
|
(1,214,983)
|
|
|
|
|
|
(509,467)
|
|
|
|
|
|
42%
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
551,000
|
|
|
|
|
|
(946,000)
|
|
|
|
|
|
1,497,000
|
|
|
|
|
|
(158)%
|
|
|
|
Interest income
|
|
|
|
|
168,859
|
|
|
|
|
|
41,733
|
|
|
|
|
|
127,126
|
|
|
|
|
|
305%
|
|
|
|
Other income
|
|
|
|
|
630
|
|
|
|
|
|
1,499
|
|
|
|
|
|
(869)
|
|
|
|
|
|
(58)%
|
|
|
|
Other expense (income), net
|
|
|
|
|
(1,003,961)
|
|
|
|
|
|
(2,117,751)
|
|
|
|
|
|
1,113,790
|
|
|
|
|
|
(53)%
|
|
|
|
Benefit from income taxes
|
|
|
|
|
157,000
|
|
|
|
|
|
127,000
|
|
|
|
|
|
30,000
|
|
|
|
|
|
24%
|
|
|
|
Net loss
|
|
|
|
$
|
(4,727,050)
|
|
|
|
|
$
|
(5,347,052)
|
|
|
|
|
$
|
620,002
|
|
|
|
|
|
(12)%
|
|
|
Revenue
Revenue decreased by approximately $96,000 or 2%, from approximately $4,395,000 for the year ended December 31, 2018 to approximately $4,298,000 for the year ended December 31, 2019. Revenue remained relatively flat year-over-year primarily because we did not invest in our sales and marketing efforts to support revenue growth throughout the three quarters of 2019. This decision was made in large part because our ability to adequately scale operations was severely limited due to a software release in mid-2018 that did not perform as expected. We believed that software modifications were needed prior to increasing the size of our sales and marketing effort. The software was adequately updated by mid-2019 and we subsequently expanded our sales team during the fourth quarter of 2019 in anticipation of resuming revenue growth in 2020. Our sales team increased by four employees in the fourth quarter of 2019. Given the limited sales resources, we also shifted focus from the distribution of specimens with lower average selling price to specimens with a higher average selling price, but are generally sold in lower quantities. During 2019, the
number of specimens collected decreased to approximately 13,150 from 24,000 specimens collected during 2018. The average selling price increased to approximately $327 during 2019 from approximately $183 during 2018.
Cost of Revenue
Cost of revenue decreased by approximately $235,000, or 10%, from approximately $2,362,000 for the year ended December 31, 2018 to approximately $2,128,000 for the year ended December 31, 2019 resulting from the decrease in revenu es during the same period. While there was a decrease in the volume of specimens collectedof approximate 10,900, or 82.6%, that attributed to the decrease in cost of revenue, this decrease was partially offset by an increase of $63, or 39.2% in the average cost per specimen period-over-period.
Technology
Technology expenses decreased by approximately $217,000 or 18% from approximately $1,210,000 for the year ended December 31, 2018 to approximately $993,000 for the year ended December 31, 2019. The decrease in costs expensed year-over-year was primarily attributable to a decrease in related project expenses for the development and implementation of the Company’s technology that were capitalizable of $77,000, offset by an increase in depreciation and amortization of $140,000.
Sales and Marketing Expenses
Sales and marketing expenses increased approximately $99,000, or 8%, from approximately $1,314,000 for the year ended December 31, 2018 to approximately $1,413,000 for the year ended December 31, 2019. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional sales personnel during the fourth quarter of 2019, which amounted to approximately $144,000, partially offset by reductions to external marketing efforts of approximately $8,000 and reductions in other expenses of approximately $34,000.
Supply Development
Supply development expenses increased approximately $119,000, or 18%, from approximately $673,000 for the year ended December 31, 2018 to approximately $793,000 for the year ended December 31, 2019. The increase was primarily attributable to an increase in payroll and related expenses of approximately $170,000 for personnel engaged in supply development activities, partially offset by reductions in other expenses of approximately $47,000.
Fulfillment
Fulfillment costs increased approximately $178,000, or 24%, from approximately $737,000 for the year ended December 31, 2018 to approximately $915,000 for the year ended December 31, 2019. The increase was primarily attributable to an increase in payroll and related expenses of approximately $168,000 for personnel engaged in pre-sales feasibility assessments, and post-sales activities such as order processing and management, shipping and receiving, and customer service.
General and Administrative Expenses
General and administrative expenses increased approximately $482,000 or 33%, from approximately $1,454,000 for the year ended December 31, 2018 to approximately $1,937,000 for the year ended December 31, 2019. The increase was primarily attributable to an increase in payroll and related expenses of approximately $389,000, other general and administrative expenses of approximately $68,000, and depreciation and amortization expenses of approximately $26,000. This increase was partially offset by a decrease in utilities and maintenance expense of approximately $10,000, and a decrease in insurance of approximately $10,000.
Other Expense, net
Other expense, net decreased approximately $1,114,000, or 53%, from approximately $2,118,000 for the year ended December 31, 2018 to approximately $1,004,000 for the year ended December 31, 2019. The decrease in other expense, net was primarily attributable to the change in fair value of the derivative liability related to the Convertible Notes of approximately $1,497,000, offset by an increase in interest expense of approximately $509,000 related to accrued interest on the Bridge Notes and Convertible Notes, as well as amortization of debt discount on the Convertible Notes.
Benefit from Income Taxes
Income tax benefit for the year ended December 31, 2019 was approximately $157,000 representing an increase of $30,000 or 24% increase, as compared to benefit from income tax of approximately $127,000 for the year ended December 31, 2018 due to a refundable R&D tax credit.
Liquidity and Capital Resources
Capital Resources
As of September 30, 2020, our available cash totaled approximately $957,000 which represented an increase of approximately $903,000 compared to December 31, 2019. As of September 30, 2020, we had a working capital deficit of approximately $16,901,000 which represents an increase of approximately $2,721,000 compared to the year ended December 31, 2019. Since inception, we have relied upon raising capital to finance our operations and at September 30, 2020, we did not have sufficient capital to fund our operations through the next twelve months.
The future success of the Company is dependent on its ability to successfully obtain additional working capital and to ultimately attain profitable operations. To attain profitable operations, we expect to achieve economies of scale through further advancements in the iSpecimen Marketplace platform that increase operational efficiencies, while devoting additional resources to customer and supplier acquisition and management. Together, these actions are expected to help to increase revenue and manage expenditures to improve our financial position and fund operations. We may seek to fund our operations through public equity, private equity, or debt financings, as well as other sources. We may obtain and renegotiate debt financing to support operations. However, we may be unable to raise additional capital, or if we are able to raise additional capital, we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements, if and when needed, would have a negative impact on our business, results of operations, and financial condition and our ability to continue. However, as certain elements of our operating plan are outside of our control, they cannot be considered probable. If we do not receive additional capital from future anticipated capital raises, our business plan will need to be scaled down.
These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements are issued should we fail to successfully obtain additional working capital. Our plan to alleviate the conditions that raise substantial doubt include delaying certain projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern.
Additionally, we might need or choose to raise additional capital through debt or equity financings, which might not be available on favorable terms or at all and could hinder our business and dilute our existing shareholders. Our future capital requirements depend on many factors, including our level of investment in technology and our rate of growth into new markets. Our capital requirements might also be affected by factors which we cannot control such as changes in the healthcare industry, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. Additionally, as the impact of the COVID-19 outbreak on the economy and operations evolves, we will continuously assess our liquidity needs. In the event of a sustained market deterioration, we may need or seek advantageously to obtain additional funding through equity or debt financing.
Cash Flows
Nine Months Ended September 30, 2020 and 2019
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Dollars
|
|
|
Percentage
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
|
$
|
(263,728)
|
|
|
|
|
$
|
(1,851,395)
|
|
|
|
|
$
|
1,587,667
|
|
|
|
|
|
(86)%
|
|
|
|
Net cash flows used in investing activities
|
|
|
|
|
(865,927)
|
|
|
|
|
|
(1,119,244)
|
|
|
|
|
|
253,317
|
|
|
|
|
|
(23)%
|
|
|
|
Net cash flows provided by financing activities
|
|
|
|
|
2,033,008
|
|
|
|
|
|
2,373,674
|
|
|
|
|
|
(340,666)
|
|
|
|
|
|
(14)%
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
|
$
|
903,353
|
|
|
|
|
$
|
(596,965)
|
|
|
|
|
$
|
1,500,318
|
|
|
|
|
|
|
|
|
Operating Activities
For the nine months ended September 30, 2020, net cash used in operating activities was $263,728, which consisted of a net loss of $3,058,540 offset by non-cash charges of approximately $931,000 which primarily includes $599,425 related to amortization of internally developed software, $141,628 of amortization of discount and debt issuance costs on the Convertible Notes, $80,597 in share-based compensation, a $76,000 loss on derivative liability and $33,563 related to depreciation and amortization of property and equipment.
Total changes in assets and liabilities of approximately $1,864,000 were primarily driven by a $1,374,139 increase in accrued interest, an increase of $581,912 in deferred revenue, an increase of $474,264 in accounts payable, a $130,813 decrease in accounts receivable-unbilled, an increase in accrued expenses of $129,644, a $104,624 decrease in tax credit receivable, and a decrease of $28,174 in inventory, offset by a $924,827 increase in accounts receivable, and a $35,144 increase in prepaid expenses and other current assets.
For the nine months ended September 30, 2019 net cash used in operating activities was $1,851,395 which consisted of a net loss of $3,378,221, offset by non-cash charges of approximately $506,000, which primarily includes $432,781 of amortization of internally developed software, $415,736 amortization of discount and debt issuance costs on the Convertible Notes, $339,863 of share-based compensation, and $43,020 of depreciation and amortization, offset by a $725,000 gain on derivative liability. Total changes in working capital assets and liabilities of approximately $1,020,000, were primarily driven by an increase in accrued interest of $791,154, a $389,405 decrease in accounts receivable, an increase in accrued expenses of $102,931, and a decrease in prepaid expenses and other current assets of $3,693, offset by an increase in tax credit receivable of $117,750, an increase in accounts receivable-unbilled of $100,435, a decrease in accounts payable of $40,708, and an increase of $7,864 in inventory.
Investing Activities
Net cash used in investing activities was $865,927 and $1,119,244 for the nine months ended September 30, 2020 and 2019, respectively. Net cash used in investing activities for the nine months ended September 30, 2020 consisted of $864,921 of capitalization of internally developed software, and purchases of property and equipment of $1,006. Net cash used in investing activities for the nine months ended September 30, 2019 consisted of $1,081,068 of capitalization of internally developed software, and purchases of property and equipment of $38,176.
Financing Activities
Net cash provided by financing activities was $2,033,008 and $2,373,674 for the nine months ended September 30, 2020 and 2019, respectively. Net cash provided by financing activities for the nine months ended September 30, 2020 consisted of proceeds received from the issuance of Bridge Notes totaling $1,250,000 and proceeds received from notes payable of $783,008. Net cash provided by financing activities
for the nine months ended September 30, 2019 consisted of proceeds received from the issuance of Bridge Notes totaling $2,370,000, and proceeds received from the exercise of stock options of $3,674.
Years Ended December 31, 2019 and 2018
|
|
|
|
Years Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Dollars
|
|
|
Percentage
|
|
|
Net cash flows used in operating activities
|
|
|
|
$
|
(2,679,900)
|
|
|
|
|
$
|
(2,681,749)
|
|
|
|
|
$
|
1,849
|
|
|
|
|
|
—%
|
|
|
|
Net cash flows used in investing activities
|
|
|
|
|
(1,475,245)
|
|
|
|
|
|
(1,025,637)
|
|
|
|
|
|
(449,608)
|
|
|
|
|
|
44%
|
|
|
|
Net cash flows provided by financing activities
|
|
|
|
|
3,078,674
|
|
|
|
|
|
3,515,306
|
|
|
|
|
|
(436,632)
|
|
|
|
|
|
(12)%
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
|
$
|
(1,076,471)
|
|
|
|
|
$
|
(192,080)
|
|
|
|
|
$
|
(884,391)
|
|
|
|
|
|
|
|
|
Operating Activities
For the year ended December 31, 2019, net cash used in operating activities was $2,679,900, which consisted of a net loss of $4,727,050 offset by non-cash charges of approximately $996,000 which primarily includes $577,605 related to amortization of internally developed software, $551,993 of amortization of discount and debt issuance costs on the Convertible Notes, $360,379 in share-based compensation, $57,360 in depreciation and amortization of property and equipment, offset by $551,000 of gain on derivative liability.
Total changes in assets and liabilities of approximately $1,051,000 were primarily driven by a $1,172,359 increase in accrued interest, a decrease in accounts receivable of $192,253, a $94,725 increase in accrued expenses, a $40,882 increase in accounts payable, and a $20,791 decrease in prepaid expenses and other current assets, offset by a $305,576 increase in accounts receivable-unbilled, an increase in tax credit receivable of $157,000, and an increase in inventory of $7,621.
For the year ended December 31, 2018, net cash used in operating activities was $2,681,749 which consisted of a net loss of $5,347,052 offset by non-cash charges of approximately $2,297,000, which primarily includes $946,000 of loss on derivative liability, $767,716 of amortization of discount and debt issuance costs on the Convertible Notes, $438,007 of amortization of internally developed software, $113,921 of share-based compensation, and $31,166 of depreciation and amortization. Total changes in assets and liabilities of approximately $368,000, were primarily driven by an increase in accounts payable of $584,051, an increase in accrued interest of $447,263, a decrease in prepaid expenses and other current assets of $17,212 offset by an increase in accounts receivable of $393,192, a decrease in accrued expenses of $147,178, an increase in tax credit receivable of $127,000, and an increase in inventory of $12,663.
Investing Activities
Net cash used in investing activities was $1,475,245 and $1,025,637 for the years ended December 31, 2019 and 2018, respectively. Net cash used in investing activities for the year ended December 31, 2019 consisted of $1,447,062 of capitalization of internally developed software, and purchases of property and equipment of $28,183. Net cash used in investing activities for the year ended December 31, 2018 consisted of $969,679 of capitalization of internally developed software, and purchases of property and equipment of $55,958.
Financing Activities
Net cash provided by financing activities was $3,078,674 and $3,515,306 for the years ended December 31, 2019 and 2018, respectively. Net cash provided by financing activities for the year ended December 31, 2019 consisted of proceeds received from the issuance of Bridge Notes totaling $3,075,000 and proceeds received from the exercise of stock options of $3,674. Net cash provided by financing activities for the year ended December 31, 2018 primarily consisted of proceeds received from the issuance of Bridge Notes totaling $2,175,000 and proceeds from the issuance of Convertible Notes in the amount of $1,350,000.
Non-GAAP Financial Measure
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we use adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”), a non-GAAP financial measure, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We define our non-GAAP financial measure of Adjusted EBITDA as net loss, excluding income tax benefit, change in fair value of derivative liability, interest expense, depreciation and amortization, and share-based compensation expense.
We believe that Adjusted EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of share-based compensation expense provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations.
We are presenting the non-GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to net loss, the closest comparable GAAP measure. Some of these limitations are that:
➢
Adjusted EBITDA excludes the change in fair value of the derivative liability, which represents a non-cash charge related to the change in fair value for the embedded features on the Convertible Notes;
➢
Adjusted EBITDA excludes amortization of debt issuance costs and discounts on Convertible Notes which are components to interest expense;
➢
Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of leasehold improvements, property and equipment and amortization of internally developed software and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; and
➢
Adjusted EBITDA excludes share-based compensation expense which has been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy.
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented:
|
|
|
|
Nine Months Ended September 30,
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(3,058,540)
|
|
|
|
|
$
|
(3,378,221)
|
|
|
|
|
$
|
(4,727,050)
|
|
|
|
|
$
|
(5,347,052)
|
|
|
|
Income tax benefit
|
|
|
|
|
—
|
|
|
|
|
|
(117,750)
|
|
|
|
|
|
(157,000)
|
|
|
|
|
|
(127,000)
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
76,000
|
|
|
|
|
|
(725,000)
|
|
|
|
|
|
(551,000)
|
|
|
|
|
|
946,000
|
|
|
|
Interest expense
|
|
|
|
|
1,517,697
|
|
|
|
|
|
1,209,857
|
|
|
|
|
|
1,724,450
|
|
|
|
|
|
1,214,983
|
|
|
|
Depreciation & amortization
|
|
|
|
|
632,988
|
|
|
|
|
|
475,801
|
|
|
|
|
|
634,965
|
|
|
|
|
|
469,173
|
|
|
|
Share-based compensation
|
|
|
|
|
80,597
|
|
|
|
|
|
339,863
|
|
|
|
|
|
360,379
|
|
|
|
|
|
113,921
|
|
|
|
Adjusted EBITDA
|
|
|
|
$
|
(751,258)
|
|
|
|
|
$
|
(2,195,450)
|
|
|
|
|
$
|
(2,715,256)
|
|
|
|
|
$
|
(2,729,975)
|
|
|
Critical Accounting Policies
Discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue, and expenses at the date of the financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Revenue Recognition
We recognize 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) we satisfy the performance obligations.
We generate revenue by collecting various specimens from our healthcare provider supply network and delivering them to our life science research customers using our proprietary software to identify and locate the required specimens. We do not currently charge suppliers or customers for the use of our proprietary online marketplace platform. Each customer will execute a material and data use agreement with us or agree to them in online purchase terms, both of which includes customer rights, specimen collection period, payment and cancellation terms. These are then supplemented by subsequent statements of work and/or purchase orders that further specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent our contract with our customer. Generally, contracts have fixed unit pricing.
We have evaluated principal versus agent considerations as part of our revenue recognition policy. We have concluded that our role in collecting specimens for our customers, which is the only performance obligation in a customer contract, is that of a principal as we set the prices for the specimens, control the collection of the specimens being provided prior to transferring control to the customer, and bear the responsibility for customer credit risk associated with selling specimens to customers.
We review a contract and related orders upon receipt to determine if the specimens ordered have an alternative use by us. Generally, specimens ordered do not have an alternative future use by us and the performance obligation is satisfied when the related specimens are collected. In the rare circumstances where specimens do have an alternative future use, our performance obligation is satisfied at the time of shipment. We use an output method to recognize revenue for specimens collected with no alternative future use. The output method is measured based on the number of specimens collected. We have an enforceable right to payment when specimens are collected. Customers are typically invoiced upon shipment; however, a customer
deposit amount may be required prior to order fulfilment depending on project set-up requirements and type of specimen collection. 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 collected over time. However, specimens are generally shipped as soon as possible after they have been collected.
Specimen collection and shipment frequently occur in the same accounting period. For a specimen which has no alternative future use, and for which we have an enforceable right to payment, that has been collected but not shipped, we record the offset to revenue in accounts receivable — unbilled. Once the specimens have 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. We have a nominal history of returns for nonacceptance of specimens delivered. When this has occurred, we have given the customer a credit for the returns. We have not recorded a returns allowance.
Internally Developed Software
We capitalize 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. We amortize 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 and expensed to operations as incurred. Costs that do not meet the capitalization criteria are expensed as incurred.
Derivative Liability for Embedded Conversion Features
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
We evaluate convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
The fair value of the embedded conversion features is estimated using a scenario-based analysis that estimates the fair value of the convertible promissory notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, including various initial public offering, or IPO, settlement, equity financing, corporate transaction and dissolution scenarios. Estimating fair values of embedded conversion features requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Because the embedded conversion features are initially and subsequently carried at fair values, our income will reflect the volatility in these estimate and assumption changes.
Share-based Compensation
We record share-based compensation for options granted to employees, non-employees, and to members of the board of directors for their services on the board of directors, based on the grant date fair value of awards issued, and the expense is recorded on a straight-line basis over the applicable service period. Forfeitures are recognized when they occur.
In order to determine the fair value of our common stock for share-based compensation awards we use 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. In order to determine the fair value of our common stock, we considered, among other things, contemporaneous valuations of our common stock, our business, financial condition and results of operations, including related industry trends affecting its operations; the likelihood of achieving a liquidity event, such as an IPO, or sale, given prevailing market conditions; the lack of marketability of our common stock; the market performance of comparable publicly traded companies; and U.S. and global economic and capital market conditions. We have 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 share-based awards. We compute 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 share-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. We have not paid, and do not anticipate paying, cash dividends on shares of common stock.
Income Taxes
We provide for income taxes using the asset and liability method. We provide deferred tax assets and liabilities for the expected future tax consequences of temporary differences between our financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not be realized.
We do not have any material uncertain tax positions for which reserves would be required. We will recognize interest and penalties related to uncertain tax positions, if any, in income tax expense.
Recent Accounting Standards
For information on recent accounting standards, see Note 2 to our financial statements included elsewhere in this prospectus.
JOBS Act Transition Period
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be
adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
BUSINESS
Our Mission, Vision, and Core Values
iSpecimen’s mission is to accelerate life science research and development with a global marketplace platform that connects researchers to subjects, specimens, and associated data. Our vision is to create an “Amazon-like” global Marketplace of patients, biospecimens, and data for research to improve the quality of human life. We implement employee programs that foster a company culture predicated on the core values of corporate and individual growth; results and accountability; team before self; a can-do positive attitude; and the perseverance to succeed.
Overview
iSpecimen is technology-driven company founded to address a critical challenge: how to connect life science researchers who need human for their research, with the billions of biospecimens available (but not easily accessible) in healthcare provider organizations worldwide. Our ground-breaking iSpecimen Marketplace platform was designed to solve this problem and transform the biospecimen procurement process to accelerate medical discovery.
The iSpecimen Marketplace brings new capabilities to a highly fragmented and inefficient biospecimen procurement market. Our technology consolidates the biospecimen buying experience in a single, online marketplace that brings together healthcare providers who have biospecimens and researchers across industry, academia, and government institutions who need them. We are seeking to transform the world of biospecimen procurement much like the way travel websites changed the consumer buying process for flights, hotels, and rental cars.
Our Marketplace platform ingests de-identified healthcare data provided by our healthcare supply partners — including more than 11 million patient records, 58 million clinical specimen records, one million banked specimen records, 475 million laboratory test results, and 800,000 medical conditions as of September 30, 2020 — to allow researchers to easily search for and select research subjects, specimens, and associated data they need to drive their research programs. It then orchestrates and manages the biospecimen procurement workflows of both researchers and suppliers to bring efficiencies to the entire buying process. Through the iSpecimen Marketplace, researchers gain instant access to millions of specimens anytime, anywhere, while participating supply organizations gain an opportunity to contribute compliantly to medical research while increasing their revenue and sustainability.
The Opportunity
The overall demand for annotated human biospecimens continues to grow dramatically. Global spending on the procurement of annotated biospecimens in 2020 is currently estimated by our management team to be $3 billion to $4 billion annually, with a market growth rate estimated on the order of 10% to 15% annually
through 2024. These expenditures are spread across the commercial, academic, and government sectors of the healthcare and life sciences industry, with the commercial sector (biopharmaceutical and in vitro diagnostics companies) representing the majority of the market. Market growth is primarily driven increases in R&D spending aimed at identifying and aligning biomarkers with clinical outcomes — a key step towards the development of more targeted disease treatments and diagnostics. Both the precision medicine market, estimated to be growing at 10 to 13% per year according to Statista, and the regenerative medicine market, with a growth rate of 26% according to a 2019 article on the Fortune Business Insight, rely heavily upon biospecimens for research and development programs.
Precision medicine, sometimes known as “personalized medicine,” is an innovative approach to tailoring disease prevention and treatment that takes into account differences in people’s genes, environments, and lifestyles. The precision medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of novel drugs, diagnostic tests, and technologies that boost the precision medicine workflow.
Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the Public Health Service Act (42 U.S.C. 264) and Title 21 of the Code of Federal Regulations Part 1271 (21 CFR Part 1271). The regenerative medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of cell and immunotherapies, genetically modified cells, therapeutic tissue engineered products, human cell and tissue products, and combination products using any such therapies or products.
Human biospecimens can be very difficult for researchers to acquire and for healthcare providers to distribute. There are over 10 million healthcare providers that possess collections of such human biospecimens or have access to patients and their biospecimens during clinical care, so many specimens exist that could potentially be used in research. However, researchers have little way to know which healthcare organizations are willing to make their specimens available for research and healthcare providers likewise have little access to the research community. Even if these organizations could identify each other, it takes time and money to execute contracts that allow them to transact. Once organizations are under contract with each other, researchers must then ensure that the specimens have been collected under appropriate compliance frameworks, using collection protocols consistent with their research needs, and accompanied by required data. Our iSpecimen Marketplace compliantly connects each side of this highly fragmented market to reduce the costs, time, and risks for both suppliers and customers in the biospecimen supply chain. We know of no other commercial human biospecimen marketplaces that provide instant online searchability of specimens available across a network of healthcare providers.
The biospecimen procurement market is poised for disruption and has many attractive characteristics of other markets with successful online marketplaces:
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Large and growing. We estimate the biospecimen market to be $3 billion to $4 billion in size and growing rapidly, at an estimated 10 to 15% annually;
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Highly fragmented. This market today is comprised of fragmented landscape of millions of healthcare providers who could potentially offer biospecimens and data for research, and hundreds of thousands of life science researchers who need access to them; and
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Inefficient. Researchers and healthcare providers today largely utilize manual processes such as email, phone calls, and spreadsheets to find each other, request specimens, and manage the specimen procurement process.
We believe our marketplace technology has the potential to disrupt the over $3 billion human biospecimen supply chain industry.
The Challenges
The iSpecimen Marketplace solves the following challenges that researchers and healthcare providers currently face in the biospecimen procurement process:
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Researchers cannot easily or quickly find research subjects, samples, and associated healthcare data for their research. According to market research data from the Center of Medicare and Medicaid Services and Federation of State Medical Boards, in 2020, there were more than 5,000 hospitals, 260,000 Clinical Laboratory Improvement Amendments (“CLIA”) certified laboratories, and 985,000 active physicians in the U.S. alone. Annually, these organizations collectively conduct more than one billion patient encounters as estimated by Centers for Disease Control and Prevention and generate more than 14 billion laboratory test results according to the American Association for Clinical Chemistry. We also estimate that more than one billion associated human specimens are discarded annually, based upon our own database that indicates there are average of 8.2 tests per specimen collected. We also estimate that global numbers are more than three times these U.S. numbers based on the U.S. share of the global laboratory services market. Additionally, in 2012, there were more than 800 biorepositories in the U.S. with an average of 461,396 specimens stored and unused in each surveyed biobank according to national survey published on BMC and more than 1500 biobanks worldwide according to Pascal Puchois in his book Comprehensive Biomarker Discovery and Validation for Clinical Application. This fragmented base of healthcare providers and biobanks, each of which may have different policies around distributing specimens to research programs, makes it exceedingly difficult for life scientists to find organizations that actually can and do provide samples to researchers and then to procure the specific samples and data they need for their studies. Estimates from the Office of Biorepositories and Biospecimen Research conducted in 2011 and our own survey of researchers performed in 2019 indicate that more than 80% of researchers limit the scope of their research because of the difficulty of finding adequate quantity and/or quality of specimens for their research. The drive towards precision medicine research and regenerative medicine research is escalating the biospecimen procurement problem, as the need for ever more specific cohort of research subjects means researchers need to tap into larger patient populations and associated healthcare providers to obtain enough targeted samples for their studies.
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Healthcare providers who have access to patients, samples, and data, have no easy way to find researchers who need them. According to the U.S. Bureau of Labor and Statistics, in 2019, there were more than 138,000 medical scientists in the U.S. alone, and more than 12,000 pharmaceutical and diagnostics companies that employ many of these scientists. Our management estimates that globally, numbers are more than double based upon industry reports indicating the U.S. pharmaceutical R&D expenditures represent approximately half of the worldwide spend. This highly distributed nature of researchers makes it challenging for healthcare providers to access the researchers who have a need for human specimens, especially because healthcare organizations typically lack the resources to market and distribute specimens to researchers. As a result, healthcare providers routinely store samples indefinitely in biorepositories for future use or destroy samples when they are no longer needed for clinical care. Annually, a report on Biopreservation and Biobanking in June 2019 estimates that less than 20% of the specimens stored in biobanks are utilized; billions of clinical and pathology specimens that are suited for research are discarded; and billions of patient encounters occur where the patients could be but are not asked to provide potentially important specimens and data for research.
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Once researchers and healthcare providers find each other, contract negotiations and compliance management are time consuming and costly processes. The negotiation and execution of contracts to allow specimen and data transfers can take many months and sometimes longer than a year, and require the involvement of personnel across research and development, biobank and lab operations, information technology, administration, clinical operations, procurement, legal, and compliance according to industry report and our own observation. This site development process can delay research and can cost over $10,000 in personnel and associated resources for each executed contract. Once healthcare providers are under agreement, researchers must ensure that the providers are operating with appropriate regulatory and ethics oversight and collecting samples under approved Institutional Review Board protocols (or equivalent international ethics standards that protect the rights of research subjects), with informed consent when necessary. Managing compliance frameworks across multiple supplying organizations can be time-consuming and also introduce regulatory compliance risks, if not properly followed.
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Searching for the precise specimens, research subjects, and data needed is a manual, inefficient process. Once contracts are in place and organizations can legally transfer specimens and data, searching for and selecting precise research subjects, specimens, and data that meet research projects’ inclusion and exclusion criteria is a manual, inefficient process that is usually done via email and spreadsheets. This process can take weeks to months to complete because of the back and forth communication required between researchers and providers to refine specimen requirements to match them up to available specimen and data. Specimen providers often lack an easy way to search their inventory for existing samples and data and also lack tools to search their medical record systems for patient populations who may provide specimens at future patient encounters.
We believe that in the currently fragmented biospecimen supply chain, there is an opportunity for consolidation and increased efficiencies through the use of a modern marketplace technology approach. We plan to seize this opportunity via the iSpecimen Marketplace.
The iSpecimen Marketplace Solution
The iSpecimen Marketplace offers single-source access to millions of human biospecimens and patients across a diverse network of specimen providers — quickly and compliantly — saving researchers time and money in their specimen procurement process while making it easier and more efficient for providers to get their specimens in the hands of researchers who need them. Our Marketplace technology makes it as easy to find specimens for research as it is to find flights on a travel website. We have adopted many of the same ease-of-use characteristics of these B2C marketplaces, from simple guided searches, to the ability to refine search criteria with sliders and checkboxes, to the ability to add chosen items to a cart in order to purchase them, to online order management. Our two-sided marketplace platform makes it easy for researchers and healthcare providers to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process.
Our Marketplace technology is groundbreaking in the human biospecimen procurement space. In a world where there are thousands of biospecimen providers who typically rely upon e-mail and spreadsheets to communicate with customers to manage the bioprocurement process, our iSpecimen Marketplace offers a more efficient user experience to life science researchers who are looking for better ways to access research subjects, specimens, and data, and to healthcare provider organizations, who are looking to realize their missions of supporting research while augmenting their bottom line. Our two-sided marketplace platform makes it easy for both sides to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process.
The iSpecimen Marketplace instantly shows researchers the available
specimens that meet their specific inclusion and exclusion criteria.
The platform is built upon a robust healthcare data set comprised of information about available specimens and research subjects, which then enables the search and matchmaking process. It receives de-identified specimen and patient data from electronic medical records, laboratory information systems, biobank inventory systems, and other healthcare data sources (either in real time via data feeds or regularly via file extracts) and harmonizes this “big data” across all participating organizations into a common dataset. The data is then easily searchable by researchers using our intuitive, web-based user interface. Researchers can use their unique study inclusion and exclusion criteria as selection filters to search the de-identified healthcare data to find matching specimens currently available in laboratories and biobanks in our network. Researchers can then select the specific specimens they need for their studies, add them to a cart, request quotes, place orders, and track and manage their specimen requests and associated data across projects. When specimens are not available that meet their research criteria, researchers can, with a click of a button, request a quote for a custom specimen collection and this custom specimen request will be distributed across our network of biospecimen providers.
Biospecimen providers also gain efficiencies using the iSpecimen Marketplace, not only by giving providers instant access to a large researcher base, but because the technology orchestrates the bioprocurement workflow from specimen request to fulfilment. Specimen providers gain access to intuitive dashboards to view requests, create proposals, and track and manage their orders.
In addition to providing the technology platform to connect researchers and healthcare providers, iSpecimen handles all marketing, sales, contracting, and compliance functions across both sides of the marketplace. We market to and develop relationships with researchers and specimen providers alike to bring them together into a single platform. We contract once with each participating customer and with each supplier organization and a single agreement then enables all users in that organization to instantly connect and
work with all other organizations in the iSpecimen network. We also audit our suppliers to confirm they have proper IRB (or equivalent) protocols in place where required by law.
For researchers, the iSpecimen Marketplace saves time and money in the biospecimen procurement process while reducing risks by:
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Eliminating the time-consuming and complex process of identifying, building, and maintaining supply relationships and getting to an executed supply agreement, each of which may take months to more than a year to develop and may cost over $10,000;
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Providing anytime, anywhere access to a searchable database of available specimens in our supply network to reduce the typical back and forth email process that can take days to months per specimen request;
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Simplifying the process of tracking and managing specimen requests; and
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Reducing regulatory compliance complexity by both auditing supply sites for compliance and performing matchmaking between supplier and researcher compliance requirements.
For supply partners, the iSpecimen Marketplace also reduces costs and risks of biospecimen procurement while helping increase sustainability by:
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Eliminating the time consuming and costly process to develop a customer base of researchers;
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Simplifying the process of responding to researcher requests through the iSpecimen Marketplace;
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Providing a new source of revenue as well as helping providers advance their research mission by making their specimens available to a broad research base; and
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Reducing regulatory compliance complexity by performing matchmaking between supplier and researcher compliance requirements.
As of September 30, 2020, we had more than 3,500 external registered users on the iSpecimen Marketplace platform, representing more than 2,700 unique organizations. Collectively, these users logged into the iSpecimen Marketplace more than 80,000 times and performed more than 9,000 specimen searches yielding more than 900 quote requests since its launch.
Planned Developments of our Marketplace
While the iSpecimen Marketplace currently supports our business model of providing access to search, find, and acquire human biospecimens and associated data from “inquiry to invoice” and positions us for future expanded business model exploration, there are a number of areas in which the iSpecimen Marketplace functionality could be enhanced to better support our stakeholders, including our prospects and customers, iSpecimen sales and operations staff, and our supply partners. We believe with additional investment in technology development resources, we could make significant progress in scaling our iSpecimen Marketplace and, by the end of 2022, we expect to have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform. We plan to use a portion of the proceeds of this offering for such development and believe that we would have sufficient funds to support our planned growth. However, if we decide to accelerate our business development, enter into new lines of business or if we fail to meet our revenue and expense targets, we may need to raise additional funds.
We plan to continue technology investment to better connect healthcare researchers with our network of suppliers to enable the acquisition of human biospecimens and data to help accelerate research and expanding the impact of our iSpecimen Marketplace platform from “inquiry to invoice” through the following key approaches:
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Enhance the customer experience. By working with our prospects and customers to understand their needs, we strive to provide a platform that more easily enables them to specify and find human biospecimens and data that meet the requirements of their research.
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Improve operational efficiency. By measuring the results of our operational workflows, we endeavor to reduce the friction and manual efforts in our processes and systems.
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Increase our supplier engagement. By continuing to engage with our supply partners to deliver solutions that make their interactions with us more fulfilling, we become more seamlessly integrated into their workflows and daily operations.
We continue to prioritize and release updated versions of the iSpecimen Marketplace platform in alignment with these approaches and believe that continuing to focus on these approaches will enable us to scale our business model more effectively.
Our Technology
Technology Components
The iSpecimen Marketplace technology is comprised of four major functional areas: search; workflow; data; and administration and reporting. We continue to invest in the evolution of these areas to improve customer and supplier engagement with the platform; provide operational efficiencies for our suppliers, our customers, and our internal operations; and increase the liquidity of products and services obtained through the platform. Our core business objective is to retain and grow both researcher and supplier usage of our platform to support biospecimen procurement, as well as to position our company to explore other adjacent business opportunities that can benefit from the use of the iSpecimen Marketplace.
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Search. The primary purpose of the iSpecimen Marketplace is to matchmake between those with access to subjects, specimens, and data, and those with a need for them to power their research. By entering subject and sample selection requests through the iSpecimen Marketplace, researchers can instantly search across the available medical records of large populations within iSpecimen’s healthcare provider network to create customized patient and specimen cohorts. Researchers can specify their criteria and either refine and review results to select specific specimens instantly, or they can request that iSpecimen find patients, specimens, and associated data to satisfy their needs when specimens do not currently exist in our network. Using our own proprietary algorithms, we enable researchers to explore both what is currently available and what is likely to be available based on historic statistical analysis of data. This allows researchers to quickly and easily determine how we can fulfill their requirements, which is especially useful for project planning and budgeting.
Our search capabilities are what most notably distinguish the iSpecimen Marketplace from other business-to-business, or B2B bioprocurement marketplaces. Whereas some other bioprocurement marketplaces support a search that generates a list of service providers that the researcher must then contact to inquire about specimen availability, the iSpecimen Marketplace goes a step further and returns a list of available specimens and data that actually meet the researcher’s specific requirements. Researchers can then select the individual specimens, add them to a cart, and request a quote for these exact specimens. By incorporating user experiences that researchers are accustomed to from their online consumer shopping experiences, such as faceted searches and the ability to add items to a cart, the iSpecimen Marketplace brings B2C ease of use to the B2B space.
Workflow. Our workflow engine supports the unique bioprocurement workflows of our suppliers, customers, and internal iSpecimen operations users. For our suppliers, our ability to easily integrate into their environments and automate key parts of their bioprocurement workflow enables us to maintain a level of engagement and responsiveness necessary to successfully deliver on specimen requests from our research customers. We make it easy for suppliers to list their specimens in our Marketplace by receiving their data in the most commonly used data transmission formats for healthcare data, such as HL7 feeds (a healthcare data interchange standard), JSON files (a standard data interchange format), and CSV files (a comma separated values file used for tabular data), and then by harmonizing this data into standard terminology sets that allows their specimens to be searchable by our research customers. We provide these onboarding services at no charge to our supply partners. Additionally, our Marketplace technology enables suppliers to track and manage all their specimen requests from feasibility assessment through the ordering and fulfillment process in a single web application, thereby streamlining their bioprocurement workflow. Because the work that we do with our suppliers is often a secondary concern to their primary mission of providing patient care, we believe that seamlessly integrating into their workflow is critical to its use and ongoing success.
In addition to supporting our suppliers’ workflow requirements, our workflow engine orchestrates customers’ bioprocurement workflows from specimen requests through fulfillment. Customers can not only search for and select specimens, but they can track and manage their specimen quote requests; place orders; track the progress of orders as they are fulfilled and shipped; and download packing lists, data sheets, and other accompanying data.
Finally, the Marketplace technology acts as the command and control center for internal iSpecimen operations users and allows them to easily federate and manage the sourcing of specimens and data for all requested projects across a large and growing supply chain. The technology tracks and manages requests for specimens from inquiry-to-invoice and provides a single place for internal users to manage all specimen requests, orders, shipments, and data. Additionally, because our technology easily scales to support a growing supply network and customer base, we have satisfied projects of all types and sizes — from small specimen requests to projects with more than a thousand samples from specific patient cohorts. As of September 30, 2020, we have delivered more than 130,000 specimens in support of more than 1,700 unique projects since inception.
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Data. We power search and orchestrate the procurement workflow through our ability to acquire, ingest, generate, and use big data from our healthcare provider partners. Working with a global, centralized set of healthcare providers, we receive this data in a variety of different formats and quality levels. We de-identify, normalize, and harmonize our supplier network’s data for usage in our iSpecimen Marketplace, ensuring the highest level of patient privacy and compliance with HIPAA and all other applicable regulations that govern the research use of patient specimens and data. As of September 30, 2020, the iSpecimen Marketplace had ingested and harmonized data on more than 11 million patients, 58 million clinical specimens, one million banked specimens, 475 million laboratory test results, and 800,000 medical conditions.
In addition, our platform gathers usage data that enables us to granularly understand supply and demand as well as provide value-added insights to our business partners. For example, our biobanking partners often have access to more samples than they can economically store. Understanding which samples are likely to be the most useful to researchers helps guide the biobanks’ operational practices to optimize their supply chain (for example, providing them with information on the medical conditions and specimen types that are in highest demand can help guide their collection practices). Our ability to deliver relevant insights further increases the engagement with our platform and positions us as a valuable partner.
As we continue to ingest and generate more data, there are additional business opportunities to leverage this our platform and continue to evolve the iSpecimen Marketplace using modern approaches such as robotic process automation and artificial intelligence/machine learning techniques to further improve the efficiency and effectiveness of the platform and enhance the value of the data. Our ability to leverage network effects will enable us to realize increasing returns from our investments and expand into adjacent markets such as clinical trial patient recruitment, data as a product, and software-as-a-service (SaaS).
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Administrative, Compliance, and Reporting. Administration, compliance, and reporting functions are critical components to enable users to properly evaluate and manage the bioprocurement process. Our administrative capabilities include functions such as user management to assign users and roles and password management to ensure passwords are updated regularly, among other capabilities. Compliance management includes manual and technology-based processes that allow iSpecimen to track and manage unique regulatory and legal requirements across customers and suppliers (such as consent requirements versus consents granted, required specimen and data uses versus allowable specimen and data uses, resale or distribution requirements versus resale or distribution rights) to make sure that customer requirements and supplier requirements match before transferring specimens and data. Additionally, we conduct regular audits of supply sites capabilities and confirm that supply sites have IRB (or equivalent) protocols in place where required by law. Our reporting tools turn operational data into useful information by enabling users to view operational data in tables and other visualizations. Together, they help manage and streamline administration, compliance, and operational functions.
Technology Development
The iSpecimen Marketplace software was developed over nine years with more than 80 staff-years invested in research and development. It comprises an orchestration of SaaS solutions, commercial and open source components, and custom developed software deployed in the cloud on a third-party hosting platform built and maintained through a combination of full-time staff and outsourced partners. The team uses agile practices to develop and improve the platform. We continue to enhance and improve the performance, functionality, and reliability of the iSpecimen Marketplace platform based on a user-informed roadmap that is actively updated based on internal and external feedback aligned with our goals.
The iSpecimen Marketplace uses third parties for certain technology to support development, delivery, and operations of the platform including product management, software development, cloud hosting, data processing, content mapping, and security services. The iSpecimen Marketplace uses software (including source code) and other materials that are distributed under a “free,” “open source,” or similar licensing model, including software distributed under the Apache License, Version 2.0, The MIT License, Mozilla Public License 2.0 (MPL-2.0), GNU General Public License version 2, GNU Lesser General Public License version 2.1, Eclipse Public License 1.0 (EPL-1.0), Common Development and Distribution License 1.0. In addition, iSpecimen uses software and services from commercial providers. We believe all of them are generally commercially available to us from other parties. We continue to evaluate partners whose capabilities can help us deliver our iSpecimen Marketplace solution in areas such as functionality, efficiency, and security and expect to continue to leverage and consider additional third-party capabilities in our ongoing technology development.
Our Products and Services
The iSpecimen Marketplace currently supports the supply chain management and bioprocurement process for specimens and associated data. We derive our revenue by procuring specimens from our healthcare provider network and then distributing these annotated biospecimens to our research client base. Revenue flows from the researchers who pay our company to procure the specimens and we share that revenue back with the healthcare providers who supplied them. Revenue share back to the supplying organization is generally 25% to 50%, depending upon the sample type, collection requirements, and data provided. We are flexible and allow our suppliers to work with us using a number of revenue share constructs, including a fixed percent revenue share arrangement (whereby we share a fixed percentage of the revenue back with them), a fixed pricing schedule (whereby they set their pricing per specimen type), or on a project-based pricing (whereby the supply site sets fees on a per project basis). We have derived substantially all of our revenue from biospecimen procurement and to date, have not charged our customers or suppliers fees for the use of the iSpecimen Marketplace platform, or for marketing, sales, contracting, or compliance functions that we provide as part of the specimen procurement process.
We generally operate in a “just in time” fashion, meaning we procure specimens from our suppliers and distribute specimens to our customers after we obtain an order for specimens from a research client. Generally, we do not speculatively purchase and bank samples in anticipation of future, unspecified needs. We believe our approach offers many advantages over a more traditional inventory-based supplier business model where biorepositories take inventory risks, and where turnover and cash conversion cycles can be lengthy, depending on market demand for certain specimen types.
Currently, we provide access to the following types of human biospecimens from healthy and diseased-state subjects:
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Biofluids — such as whole blood, plasma, serum, urine, saliva, sputum, nasopharyngeal material, and cerebral spinal fluid;
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Solid tissue — such as fresh, fixed, and cryopreserved tissue; and formalin-fixed paraffin embedded blocks, slides, and curls; and
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Hematopoietic stem and immune cells — such as bone marrow, cord blood, whole blood, or sub-components of these tissues such as peripheral blood mononuclear cells (including normal or mobilized leukapheresis collections) and other isolated cell types (CD34+, T cells, NK cells, B cells, and monocytes).
For each of the biospecimen types, we offer:
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Remnant specimens — specimens collected originally for clinical testing purposes but are no longer needed for clinical care of that patient. These samples typically are sourced from clinical laboratories and pathology laboratories prior to their disposal; and
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Research use only specimens — specimens collected specifically for research via a direct intervention with a research subject, under a protocol that has been reviewed and approved by an ethics committee such as an IRB and with such research subject’s consent. These samples are typically sourced at healthcare providers or commercial partners that are a part of our supply network.
The cross product of all these categories (i.e. remnant or research use only and biofluids, tissues, or hematopoietic stem or immune cells) describes the product types we use to track and manage the business. These groupings include:
➢
Remnant biofluids — These leftover clinical samples are procured from our clinical lab partners and are typically available days after specimen collection. They are generally priced to the researcher in the $30 to $150 range per specimen, depending upon specimen type, rarity, and requested data. In 2019, these specimens contributed to approximately 5% of our revenue. In the first nine months of 2020, due to new demand for remnant specimens tested for COVID-19, remnant biofluids represented approximately 14% of our revenue.
➢
Remnant tissue — These leftover anatomic pathology samples are procured from ourpathology lab partners and typically are available years after they were first collected for clinical care. They are generally priced in the $50 to $1,000 range, depending upon specimen type, rarity, and requested data. Remnant tissue accounts for an immaterial portion of our yearly revenue in 2019 and 2020 as most of the tissue samples we distribute are research use only specimens.
➢
Remnant hematopoietic stem and immune cells — Remnant hematopoietic stem and immune cells includes bone marrow, cord blood, whole blood, or their viable cellular components, that are left over from a clinical testing process. These samples may be obtained from clinical and anatomic pathology labs and are generally priced to the researcher below $1,000 per specimen. We do not distribute many remnant hematopoietic stem and immune cells and therefore they contribute immaterially to our revenue.
➢
Research use only biofluids — Research use only biofluids are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol. We obtain these samples via a variety of sources, including our biorepository and clinical research center partners. They are generally priced to the researcher in the mid-hundreds-to-low thousands of dollars per collection, depending upon specimen type, rarity, and requested data. In 2019 and also during the first nine months of 2020, these specimens represented approximately 57% to 60% of our revenue.
➢
Research use only tissue — Research use only tissues are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol. They are typically collected during a clinically required surgical procedure. We obtain these specimens from our biorepository partners, anatomic pathology laboratories, or clinical research centers that have relationships with surgical facilities. These samples are priced to the researcher at approximately mid-hundred to low-thousand dollars per sample, depending upon specimen type, rarity, and requested data. In 2019, these specimens contributed to approximately 35% of our revenue and in the first nine months of 2020, they contributed to approximately 25% of our revenue.
➢
Research use only hematopoietic stem and immune cells — Research use only hematopoietic stem and immune cells includes bone marrow, cord blood, whole blood, or their cellular components, which are collected from subjects with their consent and under an IRB (or equivalent) protocol. Some of the aforementioned products are collected from healthy subjects or diagnosed (diseased) subjects and may be offered to researchers in fresh or cryopreserved format. They are prospectively collected primarily from our blood donor center partners or picked from banked inventory maintained by our supply site partners. The collection of these samples may require subjects to undergo apheresis procedures, bone marrow extraction procedures, and/or hematopoietic stem cell
(HSC) mobilization therapies. These products are generally priced to the researcher at $1,000 to $9,000 per collection but could cost tens of thousands of dollars per collection depending upon collection type, specimen type, rarity (subject phenotype or attributes selected), required procedures, and requested data. Research use only hematopoietic stem and immune cells were a relatively new product to us in 2019, with revenue from this product line immaterial in that period. In the first nine months of 2020, they contributed approximately 3% of our revenue.
For each of these product types, biospecimens may already exist in lab archives or banked in our network of biorepositories (“banked”) or may be collected in the future from our network of healthcare providers and commercial specimen providers (“prospectively-collected” or “custom collections”).
Our Supply Partners
Critical to the success of the iSpecimen Marketplace is the network of healthcare providers who make their patients, samples, and data available to researchers. This supply network was built over a nine-year period and as of September 30, 2020, our supply network consisted of more than 160 unique healthcare organizations and biospecimen providers under agreement, including healthcare systems, community hospitals, clinics, private practice groups, commercial laboratories, blood centers, commercial biobanks, clinical research sites, and cadaveric donation centers.
Our suppliers are located in 12 countries across the Americas, Europe, and Asia and our cost of revenue for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, break out as follows geographically:
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September 30, 2020
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2019
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2018
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Americas
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87.9%
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|
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97.7%
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99.5%
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Europe, Middle East, and Africa (“EMEA”)
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3.8%
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0.2%
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0.4%
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Asia Pacific (“APAC”)
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8.3%
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2.1%
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0.1%
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|
There was one supplier that accounted for 14.4% of our total cost of revenue during the nine months ended September 30, 2020. There were three suppliers that accounted for 21.7%, 10.0%, and 9.7% of our total cost of revenue during the year ended December 31, 2019. There was one supplier that accounted for 13.5% of our total cost of revenue during the year ended December 31, 2018. No other single supplier accounted for over 10% of our total cost of revenue during the years ended December 31, 2019 and 2018.
Each supplier organization may give us access to one or more of the following environments within their organization where specimens may be obtained:
➢
Clinical labs — This environment provides access to remnant biofluids and is typically found in hospitals, commercial laboratories, clinics, and private practice groups. As of September 30, 2020,
more than 30 of our healthcare supply sites provided us with access to remnant biofluids originating in clinical labs;
➢
Pathology labs — This environment provides access to remnant tissue and remnant hematopoietic stem and immune cells and typically exists within hospitals or commercial laboratories. As of September 30, 2020, approximately 15 of our healthcare supply sites provided us with access to remnant tissue or cells originating in pathology labs;
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Biorepositories — These organizations typically reside within larger healthcare systems or commercial organizations. Generally, they collect and store specimens for unspecified future research purposes. As of September 30, 2020, approximately 40 of our supply sites provided us with access to specimens stored in biorepositories;
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Blood donor centers — These organizations typically collect large volumes of blood and derivatives for therapeutic or research purposes. They own and operate donor centers and may manufacture broad selection of isolated cell types (fresh or cryopreserved) from consented donors for research use. As of September 30, 2020, five of our supply sites provided us with access to large volume blood products;
➢
Cadaveric donation centers — These organizations receive whole cadavers and provide access to cadaveric tissues, biofluids, and stem cells, specifically for research purposes. As of September 30, 2020, four of our supply sites provided us with cadaveric tissues and biofluids; and
➢
Clinical research centers — These organizations generally reside within healthcare facilities such as hospitals or clinics, or they operate as standalone entities providing access to subjects for research programs. Subjects may be approached and consented to provide specimens when they are in for healthcare appointments (i.e. patient encounters) or may be called in to specifically participate in research projects. As of September 30, 2020, more than 100 of our healthcare supply sites provided us with access to patients directly from over 700 hospitals and thousands of clinics and practice groups.
Supply sites may provide specimens from one or all these environments, depending on their practices and capabilities. Each supply site can select how it will work with our company.
In addition to obtaining specimens and data directly from healthcare organizations, we work with several commercial biobanks and biospecimen brokers who have their own network of healthcare provider supply partners and wish to make their samples available to our research clients as well. While these organizations are generally considered our competitors, they are willing to work with us because we provide value by acting as both a distribution channel for them and a supply partner to them to increase their revenues. Moreover, the inclusion of competitors’ specimens in our iSpecimen Marketplace platform further strengthens our competitive position and value to our customers by further de-fragmenting our customers’ buying experience.
Our Customers
Our customer base is primarily comprised of three main segments: biopharmaceutical companies, in vitro diagnostic (“IVD”) companies, and government/academic institutions. As of September 30, 2020, we have distributed our specimens to more than 300 unique customer organizations, comprising most of the large IVD and biopharma companies along with large government agencies, such as the Centers for Disease Control and Prevention.
Additionally, in 2019, we entered the new and rapidly growing regenerative medicine segment, which according to a market research report published by Fortune Business Insight, was valued at $23.8 billion globally in 2018 and is expected to reach $152 billion by the end of 2026, thereby exhibiting an estimated CAGR of 26%. Moreover, according to the Alliance for Regenerative Medicine, global financing for the regenerative medicine sector set an annual record of $15.9 billion in the first three quarters of 2020. This “rapid growth” of the regenerative medicine market is characterized by the double-digit annual revenue growth rate combined with record global financing levels. We have entered into site participation agreements with several provider partners which enable us to offer through our iSpecimen Marketplace, various types of annotated hematologic products that are used in the research and development of regenerative medicine
therapies. Such products include, for example, whole bone marrow aspirate, mononuclear cell fractions, and isolated immune cell products that have been collected from both healthy and diagnosed (diseased) human donors. Some of the aforementioned products are offered in both fresh and cryopreserved formats depending on the customer’s preference. Since entering the regenerative medicine market late 2019, we have acquired 20 active customers representing 1.8% of our total revenue in 2019 and 2.6% in 2020.
From our inception through September 30, 2020, we have distributed more than 130,000 specimens to 16 countries and our geographical revenues distribution for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, were as follows:
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September 30, 2020
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2019
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2018
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Americas
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94.2%
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77.5%
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97.6%
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Europe, Middle East, and Africa (EMEA)
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3.6%
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22.5%
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1.5%
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Asia Pacific (APAC)
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2.2%
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0.0%
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0.9%
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|
During the nine months ended September 30, 2020, there were two customers that accounted for 20.7% and 14.8% of our total revenue generated. Notably in 2019, we significantly expanded our client base outside the Americas in large part due to one large international project. The project came to completion when the client moved to a new phase of its research. While we expect the client to approach us when it has specimen needs, we have no assurances that we will continue to be awarded projects of significance from this customer. During the year ended December 31, 2019, there were three customers that accounted for 20.0%, 10.6%, and 10.0% of our total revenue generated. There were two different customers that accounted for 18.1% and 12.6% of our total revenue generated during the year ended December 31, 2018. No other single customer accounted for over 10% of our total revenue generated during the years ended December 31, 2019 and 2018. We continuously engage with all customers when we receive inbound requests from them, whether they are within or outside of the Americas. Year-over-year, our top customers have been different because their specimen needs tend to be project-based and depending upon where they are in their research and development cycle, they may not need large numbers of specimens each year. Regardless, our customer retention rates are high, with 20 of our top 25 customers (80%) in 2019 also procuring specimens in the first nine months of 2020.
Biospecimens have broad utility within the healthcare and life science industries, as they are collected and used throughout nearly every stage of diagnostic and therapeutic product discovery and development. For diagnostic products, they are used consistently for preclinical discovery, clinical validation, and post-market validation, as well as surveillance. For therapeutic products, these samples are most often used during preclinical research involving drug target identification and validation, compound screening, lead optimization, predictive toxicology, and pharmacokinetic studies. They are also used for biomarker/companion diagnostic discovery and development, which has been shown to reduce the costs of drug clinical trials by 30 to 60% according to Ark Research. In the case of regenerative medicine applications,
hematologic samples are used for research and development of engineered cell therapies (e.g. CAR-T, CAR-NK), stem cell therapies (e.g. hematopoietic stem cells, mesenchymal stem cells ), exosome therapies, identification of cell immunophenotypes for allogeneic therapies, and for developing and scaling-up cell therapy manufacturing processes.
Given recent advances in technology that now allow for the identification of molecular determinants of disease, the role of the patient’s biospecimen has become even more important in all these endeavors and is essential to the development of precision medicine. This pursuit of precision medicine by the healthcare and life science industries has further increased the already high demand for human biospecimens and the clinical data that describe them.
Our Competitors
We compete with a highly fragmented landscape of organizations who have access to human biospecimens.
The competitive organizations, including:
➢
Healthcare providers, who may offer access to clinical laboratory specimens, pathology laboratory specimens, biorepository specimens, or patients directly for research;
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Commercial biobanks, who purchase and maintain inventories of specimens from healthcare providers in anticipation of future requests from researchers. Some of these organizations offer online catalogs that can be searched for specimens within their own biobanks;
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Specimen brokers, who act as a middleman between healthcare providers and researchers on a transaction-by-transaction basis;
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Commercial specimen providers who operate their own donor centers, specimen procurement groups, and cell manufacturing facilities. Some of these organizations offer online catalogs that can be searched for specimens within their own biobanks; and
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Research services marketplaces, that provide access to a list of biospecimen providers but not a list of available biospecimens. These organizations allow a researcher to fill out a specimen request form online which then gets distributed to the biospecimen providers in their marketplace. They do not support searches for precise specimens in the services marketplace.
In each of these cases, the landscape is extraordinarily fragmented, and our management estimates that most biospecimen providers have less than 1% market share each, and no single biospecimen provider has more than a 10% market share. Most competitors are smaller organizations with limited specimen procurement abilities. However, there are several larger biospecimen providers who are consolidating the industry by acquiring smaller specimen providers to enable them to provide broader access to specimens and research subjects. These organizations are well-capitalized by private equity and while they still lack a technology-based approach that enables them to search the inventories across their biospecimen provider network, because of their broad specimen access, banked inventory, and available cash, they currently represent our biggest competitive threat.
Specimen providers (e.g. Discovery Life Sciences and StemExpress) maintain internal biobanks and enable researchers to search online for specimens that reside within their own biobanks. Other research services marketplaces (e.g. Science Exchange) allow researchers to describe a specimen request which then gets broadcast to a network of specimen providers (i.e. no searching for specimens, but rather the identification of specimen providers who may or may not have matching specimens and the distribution of the specimen request to them). As such, we believe that there are no other online human biospecimen marketplaces that operate in a manner similar to our business. In addition, we believe that over the long term, the iSpecimen technology-based approach will allow us to scale faster than our competitors who rely upon manual efforts to procure specimens. Nonetheless, we believe we will continue to face competition from: healthcare providers that have their own inventory of biospecimens and thus offer lower prices by eliminating us and others as middlemen; commercial biobanks that have their own inventory of biospecimens and thus may deliver samples more quickly when a researcher’s needs align with their existing inventory; specimen brokers with a specific niche (e.g. infectious disease); and commercial specimen providers with their own donor centers who may more predictably collect and deliver specimens.
Our Competitive Advantages
When successfully implemented, online marketplaces are a highly efficient supply chain that offer many advantages to both suppliers and customers, including lower costs, reduced procurement timeframes, increased revenue (for suppliers), increased access to a large and growing supply network (for customers), and reduced risks. While our iSpecimen Marketplace is driving these benefits now, we believe they will become even more apparent when the iSpecimen Marketplace achieves scale by the end of 2022, when we will have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform. To date, we have been unable to operate the marketplace profitably. For the nine month period ended September 30, 2020 and for the years ended December 31, 2019 and 2018, we reported net losses of $1,471,930, $3,880,089, and $3,356,301, respectively.
We provide the following benefits to our research customers and suppliers:
➢
We reduce the time and costs for researchers and specimen providers to connect. The iSpecimen Marketplace is made up of more than 160 unique specimen providers and connects them to thousands of researchers who need access to specimens. We continue to invest in marketing, sales, site development, and technology resources to further increase the number of organizations and users that are connected. Researchers save time and money by eliminating the need to develop their own supply chain while suppliers gain a new source of revenue via access to a large research base without associated marketing and sales costs.
➢
We reduce the cost and risks associated with contracting and compliance. Via a single contract between our company and a supplier or customer organization, researchers and suppliers can instantly access each other. This process is more efficient and cost-effective than each provider and researcher contracting independently. Additionally, we manage the compliance process by matching up researcher requirements to supplier requirements to ensure that consents, protocols, and contracts are all aligned.
➢
We simplify the process to find and procure specimens and data. Researchers can instantly search for specimens and data, anytime and anywhere, eliminating the time that both researchers and specimen providers typically spend handling specimen requests via email and spreadsheets. Both sides can also track and manage projects and get a real-time view into their progress. Finally, our technology harmonizes and manages data associated with projects, making it easier for researchers to access and use the data while reducing the workload and errors that suppliers face with manual data extractions and annotation. Researchers and customers alike obtain operational efficiencies in the biospecimen procurement process using the iSpecimen Marketplace.
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We have lower capital cost structure and little inventory risks when compared to commercial biobanks. Commercial biobanks have consolidated some of the biospecimen supply. However, high capital costs required to establish and maintain freezer farms and specimen inventories ties up capital and increases operational costs. We believe an expensive, capital-intensive approach to procuring and storing large numbers of specimens is not a viable long-term solution, especially as medical researchers’ needs for specimens and data change, potentially rendering existing inventories obsolete. Since we generally only procure specimens in response to an actual customer order, we do not have the capital costs, inventory carrying costs, and associated risks of commercial biobanks.
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We have an experienced management team with deep expertise in biospecimens, life sciences, healthcare, technology, regulatory compliance, and marketplaces. On average, each member of our management team has more than 25 years of relevant industry experience. Many on the team have worked together for 10 years or longer, either at our company or at prior companies.
As a result of these advantages, as of September 30, 2020 we have delivered more than 130,000 specimens in support of more than 1,700 unique customer projects since shipping our first specimens in 2012. We have also provided our healthcare provider partners with more than $7.5 million in revenue during that time.
In short, we believe that our technology-based marketplace approach allows us to better serve our research clients and supply chain today while allowing us to more easily scale both in the future to capture a larger portion of the market.
Our Sales Pipeline
Our sales pipeline is comprised of four active sales stages: inquiry, quote, purchase order, and revenue. Each customer opportunity goes through one or more of these stages before getting closed as a won opportunity or lost opportunity. If the specimen request is not converted into revenue, that customer opportunity is closed as a lost opportunity.
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Inquiry — In this stage, a customer or customer prospect articulates a need for specimens (“Specimen Request”), either by searching the iSpecimen Marketplace, filling out an online request form, or otherwise communicating the Specimen Request to us. This stage starts when the Specimen Request is captured and ends when either a quote is generated, or the opportunity is lost;
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Quote — Once we confirm that the specimens can be obtained in our supply network in accordance with the Specimen Request, the Specimen Request is quoted to the customer or customer prospect. The quote stage starts when the quote is created and ends when a purchase order is received for the order of the specimens or the opportunity is lost;
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Purchase Order — Once a customer or customer prospect would like to place an order, they provide a purchase order to us for the procurement of specimens in accordance with the Specimen Request. the purchase order stage begins with the receipt of the Purchase Order (or equivalent document) and ends when the Specimen Request is closed because the order has been fully fulfilled, partially fulfilled, or cancelled before any specimens are fulfilled; and
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Revenue — Once a Specimen Request or any portion of it is collected specifically for the customer’s purchase order, that portion of the Specimen Request is fulfilled, and we recognize revenue. We generally invoice for specimens upon shipment of the specimens to the customer.
Revenue is generally lower than purchase order value. This is because only a completely fulfilled purchase orders generate the amount of revenue as its value and some purchase orders are not completely fulfilled due to a variety of reasons including:
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researchers make changes in project requirements and the open request no longer meets the researcher’s needs;
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researcher budgets change or projects get cancelled;
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researchers place orders with multiple specimen providers and cancel open orders when they have procured sufficient quantity of samples across all their sources; or
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we have not fulfilled the entire order before the project deadline.
For purchase orders received and closed between January 1, 2016 and September 30, 2020, we fulfilled approximately 60% of the total value of such purchase orders. As of September 30, 2020, we had approximately $8 million in the open backlog.
We track Specimen Requests from “inquiry-to-invoice,” including the total dollar amount, average dollar amount, number of requests, and time spent in each pipeline stage. The following table shows the total value of Specimen Requests that entered that stage each year from 2016 to 2019 along with the compound annual growth rate (“CAGR”) from 2016 to 2019.
Sales Pipeline Totals (Unaudited) ($’s in ‘000)
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As of December 31,
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CAGR
2016-19
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As of September 30,
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Sales Pipeline Stage — Totals
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2019
|
|
|
2018
|
|
|
2017
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|
|
2016
|
|
|
2020
|
|
|
2019
|
|
|
Inquiries
|
|
|
|
$
|
54,266
|
|
|
|
|
$
|
26,530
|
|
|
|
|
$
|
26,237
|
|
|
|
|
$
|
11,057
|
|
|
|
|
|
69.9%
|
|
|
|
|
$
|
56,751
|
|
|
|
|
$
|
39,807
|
|
|
|
Quotes
|
|
|
|
$
|
36,569
|
|
|
|
|
$
|
17,851
|
|
|
|
|
$
|
16,464
|
|
|
|
|
$
|
6,763
|
|
|
|
|
|
75.5%
|
|
|
|
|
$
|
49,805
|
|
|
|
|
$
|
24,245
|
|
|
|
Purchase Orders
|
|
|
|
$
|
12,053
|
|
|
|
|
$
|
8,228
|
|
|
|
|
$
|
5,185
|
|
|
|
|
$
|
2,109
|
|
|
|
|
|
78.8%
|
|
|
|
|
$
|
9,961
|
|
|
|
|
$
|
5,842
|
|
|
|
Revenue
|
|
|
|
$
|
4,298
|
|
|
|
|
$
|
4,395
|
|
|
|
|
$
|
3,067
|
|
|
|
|
$
|
1,448
|
|
|
|
|
|
43.7%
|
|
|
|
|
$
|
5,466
|
|
|
|
|
$
|
3,008
|
|
|
In 2016, we hired our first Vice President of Sales and in that year, with a single salesperson, we generated $1.4 million in revenue. In 2017, we added two additional sales personnel to focus on the remnant biofluids segment to match our supplier concentration at the time. Revenue more than doubled to $3.1 million in 2017. In 2018, we released new workflow software designed to help suppliers and iSpecimen more easily manage the inquiry-to-invoice process which did not deliver the expected value. As a result, our ability to move Specimen Requests through the sales pipeline was limited, and thus revenue growth stalled from mid-2018 to mid-2019 as we made critical software repairs. As a result, our revenue remained flat from 2018 to 2019. The management team made a strategic decision to delay the build out of the sales team until the critical repairs were completed which took to mid-2019. In the fourth quarter of 2019, the sales team was increased from three to seven people in anticipation of growth commencing again in 2020. We ended 2019 with approximately $9 million in open backlog, meaning we had more than $9 million in open orders for specimens.
As a result of these changes, as of the first nine months of 2020, revenue was $5.5 million and grew 81% when compared to the first nine months of 2019. Additionally, the sales pipeline showed strong growth during the first nine months of 2020. Quotes grew 105% year-over-year to $49.8 million during the first nine months of 2020 compared to $24.2 million during the first nine months of 2019. Purchase orders received grew at 70.5% year-over-year to $10.0 million during the first nine months of 2020 compared to $5.8 million during the first nine months of 2019. Additionally, as of September 30, 2020, we had more than $8 million in open backlog, representing open orders for specimens still in the fulfillment process. Management believes that the major scalability issues we faced from mid-2018 to mid-2019 that adversely affected our revenue have been remedied.
In addition to growing our total number of Specimen Requests throughout the sales pipeline, our average value per Specimen Request has increased in all stages of the pipeline between 2016 and 2019. This is in large part due to a change in our specimen mix from predominantly remnant specimens to research use only specimens, the latter of which typically have a higher value per Specimen Request and per specimen. In 2016, remnant specimens accounted for approximately 40% of our revenue. By 2019, remnant specimens accounted for approximately 5% of our revenue. During the first nine months of 2020, our overall specimen mix shifted once again to include approximately 14% remnant specimens, which contributed to a slight decline in the overall average selling price per specimen shipped. This increase in remnant specimen demand is due in large part to COVID-19 and the corresponding growth in requests for remnant plasma, serum, and nasopharyngeal swabs that were tested for this virus.
The following table shows the average value per Specimen Request that entered that stage any time during the year:
Sales Pipeline Average Specimen Request Size (Unaudited) ($’s in ‘000s)
|
|
|
|
As of December 31,
|
|
|
CAGR
2016-19
|
|
|
As of September 30,
|
|
Sales Pipeline Stage — Averages (in
thousands)
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2020
|
|
|
2019
|
|
|
Inquiries
|
|
|
|
$
|
42.1
|
|
|
|
|
$
|
23.2
|
|
|
|
|
$
|
17.8
|
|
|
|
|
$
|
18.8
|
|
|
|
|
|
30.9%
|
|
|
|
|
$
|
54.1
|
|
|
|
|
$
|
40.4
|
|
|
|
Quotes
|
|
|
|
$
|
47.1
|
|
|
|
|
$
|
34.1
|
|
|
|
|
$
|
20.3
|
|
|
|
|
$
|
16.5
|
|
|
|
|
|
41.8%
|
|
|
|
|
$
|
79.9
|
|
|
|
|
$
|
41.4
|
|
|
|
Purchase Orders
|
|
|
|
$
|
35.6
|
|
|
|
|
$
|
26.3
|
|
|
|
|
$
|
9.8
|
|
|
|
|
$
|
7.0
|
|
|
|
|
|
72.0%
|
|
|
|
|
$
|
30.9
|
|
|
|
|
$
|
22.8
|
|
|
Additionally, our average selling price per specimen shipped also increased commensurately as our product mix shifted more towards research use only specimens. The following table shows average selling price per specimen shipped each year from 2016 to 2019 and year to date comparisons between 2019 and 2020:
Average Selling Price per Specimen Shipped (Unaudited)
|
|
|
|
As of December 31,
|
|
|
CAGR
2016-19
|
|
|
As of September 30,
|
|
|
Average Selling Price
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2020
|
|
|
2019
|
|
|
Per Specimen Shipped
|
|
|
|
$
|
329.18
|
|
|
|
|
$
|
163.98
|
|
|
|
|
$
|
95.46
|
|
|
|
|
$
|
35.48
|
|
|
|
|
|
110.1%
|
|
|
|
|
$
|
314.31
|
|
|
|
|
$
|
324.73
|
|
|
The overall size of our customer base continues to grow. The cumulative number of customers (which includes any organization that ever-procured specimens from us) and the number of active customers (i.e. any organization that procured specimens from us in the preceding twelve-month period) both showed increases between 2016 and 2019.
Number of Customers
|
|
|
|
As of December 31,
|
|
|
CAGR
2016-19
|
|
|
As of September 30,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2020
|
|
|
2019
|
|
|
Cumulative Number of Customer Organizations
|
|
|
|
|
234
|
|
|
|
|
|
176
|
|
|
|
|
|
140
|
|
|
|
|
|
69
|
|
|
|
|
|
50.2%
|
|
|
|
|
|
308
|
|
|
|
|
|
212
|
|
|
|
Number of Active Customer Organizations
|
|
|
|
|
110
|
|
|
|
|
|
99
|
|
|
|
|
|
108
|
|
|
|
|
|
56
|
|
|
|
|
|
25.2%
|
|
|
|
|
|
162
|
|
|
|
|
|
102
|
|
|
We believe our 2020 growth to date is primarily attributable with the two-fold growth in our sales team during the fourth quarter of 2019.
Our Growth Strategies
We believe we will continue to accelerate our revenue growth by improving and expanding our iSpecimen Marketplace platform to become the most convenient, efficient, and trusted resource for researchers to acquire, and suppliers to share research subjects, specimens, and data for life science research. We plan to build value by pursuing strategic objectives in five key areas:
➢
Marketplace technology innovation — We continue to innovate our proprietary iSpecimen Marketplace technology with search and workflow automation features that dramatically improve the buyer’s journey of searching for and compliantly acquiring annotated biospecimens from “inquiry to invoice”, and the supplier’s journey of sharing patient and specimen data, confirming project feasibility, and fulfilling orders;
➢
Increased patient data — Healthcare data is an important underlying asset of our marketplace business model. Gaining access to increasing levels of healthcare data at our supply partner organizations will allow us to increase the efficiency of our operations from inquiry-to-invoicing while also accelerating the overall biospecimen procurement process. Additionally, our ability to use increasing volumes of patient data to identify and engage with patients for biospecimen research also provides additional opportunities to move into adjacent spaces — including recurring revenue business models — such as premium search subscriptions, patient data subscriptions, the patient recruitment for clinical trials, and software licensing;
➢
Supply chain expansion — In order to better support worldwide research, we continue to increase access to global patient populations, inventories of banked specimens, patient data, and prospective collection capabilities by expanding our network of high-value suppliers combined with a direct-to-patient specimen collection capability. We are agile in identifying and onboarding new global supply partners who can provide specimens and related services to meet rapidly emerging market needs such as our recent expansion into COVID-19 biomaterials for SARs-CoV-2 research, and into diagnostic, vaccine, and therapeutic development. As part of our effort to expand outside of the United States, we entered into two Non-Exclusive Marketing, Sales & Distribution Agreements, one with BizCom Japan, Inc. on June 8, 2020, and another with Cosmo Bio Co., Ltd. on August 24, 2020, pursuant to which we granted to each distributor a non-exclusive right to purchase, inventory, market, sell and distribute specimens for certain authorized purposes in Japan, and each distributor agreed to maintain an effective marketing and sales effort dedicated towards acquiring new research customers and growing business with existing research customers. The distributors would also receive a 20% discount off list prices or standard price quote amount in cases involving bespoke specimen requirements. BizCom Japan, Inc. is subject to a minimum annual purchase order amount obligation under the terms of the agreement; and
➢
High growth markets — We are focusing on servicing high growth market sectors such as COVID-19 research, precision medicine, regenerative medicine, biopharma/vaccine development, diagnostics
development (e.g. oncology liquid biopsy and infectious disease), and specialized areas of life science research (e.g. cancer and autoimmune disease); and
➢
Organizational capacity — We continue to strengthen our organizational capacity with the right experience, training, skill sets, and resources for developing our iSpecimen Marketplace platform, expanding our marketplace of high-value suppliers and customers located in key geographies, ensuring regulatory compliance, and tracking key performance indicators while fostering a data-driven mindset.
Additionally, we have deployed a multi-faceted go-to-market strategy to support our customer and supplier growth initiatives. This strategy includes a focus on:
➢
Sales and marketing capabilities — Our sales organization will continue to grow and evolve to better focus on targeted market sectors and key stages of sales development to increase sales funnel conversion rates;
➢
High value customers and suppliers — We will continue to grow and retain high-value customers and suppliers by delivering excellent service and pursuing deeper relationships. For example, we are developing preferred supplier contracts to increase purchase volume, customer retention/loyalty, and growth in the number of researchers served within a parent account. We are also investing more resources in customer service personnel, site management personnel, and related processes; and
➢
Channel partners — We will continue to collaborate with channel partners located in key non-U.S. markets to reach more end-users of biospecimens and data, strengthen our brand visibility, increase market share, and drive iSpecimen Marketplace utilization. These partnerships also help mitigate our risk of sales volatility in the case of an economic downturn or other factors that negatively impact sales and market demand in the U.S.
We have articulated our growth plan using a strategy map balanced scorecard approach which identifies strategic objectives and connects internal processes with desired outcomes that align with our mission and vision.
Our Intellectual Property
Intellectual property rights are an important component of our business. While we currently do not have any patents protecting our intellectual property, we rely on a combination of copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as confidentiality and non-disclosure agreements and other contractual protections with employees and third parties to protect our intellectual property rights, including our proprietary technology, brand, and know-how. We believe factors such as the technological and creative skills of our people; our existing and evolving partnerships; the creation of new features, functionality, and services; and the frequent enhancements to our platform have helped us to establish and will help us maintain our technology leadership position.
Regulations
iSpecimen works with the healthcare industry and with clinical researchers, both highly regulated environments in the United States and other countries. Government departments and agencies, at the federal, state, and local levels have regulations related to research activities that involve human subject research as well as regulations about the collection, storage, and dissemination of personal and healthcare data related to individuals. To support compliance with regulations, we have both internal personnel and external resources who provide us with expertise in various areas of compliance including a Chief Information Security Officer, Chief Privacy Officer, contracts manager, biospecimen and data privacy counsel (external), general counsel (external), IRB (external), and other employees with expertise and oversight of site compliance, lab compliance, and operational compliance.
The following is a general overview of the major laws and regulations pertaining to our business in the United States:
➢
45 CFR Part 46 — Federal Policy for the Protection of Human Subjects
➢
HIPAA and 45 CFR Parts 160, 162, and 164 — HIPAA Privacy Rule, Security Rule, and Breach Notification Rule
➢
21 CFR Part 11 — Food and Drug Regulations — Electronic Records, Electronic Signatures
➢
21 CFR Part 50 — FDA Regulations — Protection of Human Subjects
➢
21 CFR Part 56 — FDA Regulations — Institutional Review Boards
➢
Other Information Laws and Regulations
➢
Other Applicable Laws
Most countries have their own corresponding rules that we are also required to follow.
45 CFR Part 46 — Federal Policy for the Protection of Human Subjects — “The Common Rule”
The Common Rule refers to regulations issued by the U.S. Department of Health and Human Services (“HHS”) and other federal agencies that fund or participate in research, which regulations protect individuals participating in research. The Common Rule defines “Human Subjects Research” as research involving a living individual about whom an investigator is conducting research when information or biospecimens are obtained through intervention or interaction with the individual, or where the research uses, studies, analyzes, or generates identifiable private information or identifiable biospecimens. For this type of research, the Common Rule stipulates: (i) when this research must be reviewed and approved by an IRB (as well as when it may be exempt from IRB review and approval); (ii) the requirements for an IRB’s membership, authority, review procedures, record keeping, and approval criteria; (iii) when informed consent must be obtained from a research subject for participation in research and the elements that must be communicated in an informed consent form (as well as when consent may be waived by an IRB); and (iv) rules related to special requirements for vulnerable populations (such as prisoners and pregnant women).
iSpecimen is involved with both Human Subject Research and non-Human Subject Research. The collection of Research Use Only (“RUO”) specimens (i.e., samples collected specifically for research via a direct intervention with the research subject and not collected as part of routine clinical care) is considered Human Subject Research. In those cases, iSpecimen and our suppliers are subject to the Common Rule. Therefore, all research use only specimens collected in the United States need to be collected under an IRB-approved protocol, with informed consent (unless an IRB waives consent under appropriate regulatory standards). When iSpecimen is the study sponsor (i.e. specimens are collected under our IRB protocol), we work with a commercial IRB (currently Advarra) to approve our protocol, informed consent forms, subject recruitment material, and collection sites. These protocols and associated material are reviewed regularly by our IRB in accordance with the Common Rule. When iSpecimen is not the study sponsor (i.e., when research use only specimens are collected at participating healthcare providers under their own IRB-approved protocols), we audit the site before we start procuring specimens to ensure that appropriate IRB approvals are in place. For international specimen collection sites, we rely on those sites to ensure they are collecting specimens in accordance with the laws in their own jurisdictions, in addition to following basic U.S. rules related to Human Subjects Research.
Finally, iSpecimen participates in Non-Human Subject Research, specifically when we collect clinical remnant samples (i.e., those specimens that were collected originally as part of clinical care). According to the Common Rule, as long as the physical sample and any associated dataset is de-identified before being used for research, the use of clinical remnant samples is not considered Human Subject Research and therefore does not need IRB review and approval, nor does it require patient consent. For these samples, iSpecimen leaves it up to each supplier to determine whether the supplier seeks patients’ consent or whether the supplier will inform its patients about the supplier’s use of remnant samples, or allows its patients to opt-out of their use. In all cases, we track any use limitations that attached to a particular specimen. For researchers who only want samples from patients who have consented to allow use in research, we only distribute specimens meeting that criteria to those researchers.
Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health ( “HITECH”) Act, all as implemented by 45 CFR Part 160, 162 and 164 (collectively, “HIPAA”)
HIPAA includes several applicable rules, including the Standards for Privacy of Individually Identifiable Health Information (“Privacy Rule”), the Security Standards for the Protection of Electronic Protected Health Information (“Security Rule”), and the Breach Notification Rule (“Breach Notification Rule”).
The Privacy Rule addresses the allowable uses and disclosures of an individual’s PHI by Covered Entities, defined by HHS as (1) health plans, (2) healthcare clearinghouses, and (3) healthcare providers who electronically transmit any health information in connection with transactions for which HHS has adopted standards (such as electronic billing). The Privacy Rule also applies to Business Associates, which include persons or entities that performs certain functions or activities that involve the use or disclosure of PHI on behalf of, or provide certain services to, a Covered Entity. HIPAA requires Covered Entities to obtain HIPAA Business Associate Agreements with their Business Associates.
The Security Rule establishes a national security standard for protecting ePHI. The Security Rule requires Covered Entities and Business Associates to implement physical, administrative, and technical safeguards to protect ePHI.
The Breach Notification Rule pertains to Covered Entities and Business Associates that have access to PHI and requires them to provide notification following a use or disclosure of PHI that does not comply with the Privacy Rule that compromises the security or privacy of the PHI (a “Breach”).
Covered Entities and Business Associates that fail to comply with the HIPAA standards may be subject to civil money penalties or criminal prosecution.
iSpecimen has implemented many protocols and processes to comply with HIPAA and other data privacy and related laws and regulations. First, to reduce the likelihood of any Breach, iSpecimen removes all ePHI prior to storing information in our datacenter so that we do not possess PHI that is subject to HIPAA. Secondly, to the extent any PHI inadvertently remains in our datacenter, we have implemented physical, administrative, and technical safeguards to comply with the HIPAA Security Rule. We have implemented more than eighty HIPAA privacy and security policies at the Company to help ensure compliance with HIPAA Privacy, Security and Breach Notice rules. Thirdly, we regularly undergo HIPAA gap analyses and security testing using external, independent firms to find weaknesses and vulnerabilities in our technology and our data protection policies and procedures and remediate as needed. Finally, iSpecimen executes Business Associate Agreements or Data Use Agreements with our healthcare provider partners if they might share ePHI with us. To date, iSpecimen has never had a Breach of PHI and has never been investigated by HHS nor found to be out of compliance with HIPAA.
21 CFR — FDA Regulations
The Food and Drug Administration is an HHS agency that regulates clinical investigations of products under its jurisdiction, such as drugs, biological products, and medical devices. The FDA has its own set of rules related to the protection of human subjects in research which may differ from the Common Rule. However, FDA does harmonize its regulations with the Common Rule whenever permitted by law (see section 1002 of the 21st Century Cures Act, Public Law 114-255). iSpecimen follows the FDA regulations related to the protection of research subjects, so that its customers may submit data to the FDA resulting from research performed using data and specimens provided to the researcher by iSpecimen.
21 CFR Part 11 Electronic Records; Electronic Signatures
21 CFR Part 11 is relevant when submissions to the FDA include records in electronic form that are created, modified, maintained, archived, retrieved, or transmitted under any records requirements set forth in FDA regulations. At a high level, Part 11 requires organizations to implement good business practices by defining the criteria under which electronic records and signatures are considered to be accurate, authentic, trustworthy, reliable, confidential, and generally equivalent to paper records and handwritten signatures on paper. These rules stipulate a range of features that must be in place in computer systems that handle electronic data; standard operating procedures relating to information technology systems and processes; system validation processes and procedures to ensure that electronic systems operate as intended.
Although iSpecimen defines and implements many relevant policies, processes, and technical controls, the iSpecimen Marketplace has not been certified or audited for 21 CFR Part 11 compliance. In addition, we do
not require the originating systems from whom we receive data to be 21 CFR Part 11 compliant. While we do not represent to customers or suppliers that our systems are 21 CFR Part 11 compliant, our clients may still submit data to the FDA that was received, stored, and transmitted in our systems.
The vast majority of the specimens used by our customers are for projects that do not require 21 CFR Part 11 compliance, and our customers are responsible for determining whether they require Part 11-compliant data for the particular use. For specimens that are collected with informed consent, we audit informed consent differently for supply sites that use their own IRB or ethics committee and those supply sites that use the IRB we contract. In the event we are required to contact a client about a shipped specimen that is not supported by informed consent, which has not happened as of September 30, 2020, the client would then determine whether it could use the specimen without informed consent. In addition, we contract with an outside IRB for IRB services, which agrees to perform the services in accordance with all applicable laws and regulations governing independent institutional review boards, and to indemnify us for its failure to comply with applicable laws, rules, and regulations. The failure of our company or our supply sites to comply with international, federal, state, and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which could have a material adverse effect on our business.
21 CFR Part 50 — Protection of Human Subjects
21 CFR Part 50 contains the general standards for obtaining informed consent and for human participation in clinical investigations as well as additional safeguards for children involved in clinical investigations, when the investigations are regulated by the FDA. The regulations specify the requirements for informed consent, exceptions to these requirements, elements of informed consent, and documentation of informed consent. Additionally, the requirements detail additional regulations for investigations involving children. Informed consent is not required to use de-identified specimens and data for certain FDA-regulated research, as set forth in guidance documents issued by the FDA.
To the extent our suppliers seek informed consent from individuals to use specimens and data for research, we will provide our clients, upon request, with copies of our or our suppliers’ template informed consent forms and IRB approval prior to obtaining samples from us. However, gaps may exist in our or our suppliers’ protocols and informed consent forms that make them incompatible with this regulation and we may fail to properly audit and identify these gaps.
21 CFR 56 Institutional Review Boards
21 CFR Part 56 contains the general standards for the composition, operation, and responsibility of an IRB that reviews clinical investigations regulated by the FDA. These regulations are intended to protect the rights and welfare of human subjects involved in such investigations and indicate the required organization and membership of an IRB; the IRB’s function and operations; record-keeping and reporting; and administrative actions for non-compliance.
iSpecimen utilizes an outside IRB to review the iSpecimen specimen collection protocol. While we believe the IRB composition and operations to be 21 CFR Part 56 compliant, there may be gaps that make them incompatible with this regulation.
Other Information Laws and Regulations
Other information laws and regulations include all applicable laws concerning the privacy and/or security of personal information including, but not limited to, state data breach notification laws; personal data protection laws such as the California Consumer Privacy Act of 2018, Nevada Senate Bill 220 (an amendment to the state’s existing online privacy policy statute) and Maine’s Act to Protect the Privacy of Online Consumer Information; and all applicable Payment Card Industry Security Standards with respect to account data protection.
Currently, iSpecimen collects personal data on customers, suppliers, investors, employees, research subjects, Marketplace registrants, and other individuals who interact with iSpecimen personnel or our websites. We believe we are in compliance with these data protection rules but there remains inherent risk of a data breach
of iSpecimen’s systems or any of our technology service and SaaS providers (such as those organization who provide us with customer relationship management software, marketing automation software, online file storage, web services, email systems, accounting systems, and data aggregation and visualization services).
Other Applicable Laws
In addition to the above-described regulation by United States federal and state government related to Human Subject Research and data privacy and security, there are many other U.S. and international rules that are applicable to iSpecimen. The following list contains some of the other federal and state laws and regulations that could directly or indirectly affect our ability to operate the business:
➢
Occupational Safety and Health regulations and requirements;
➢
Centers for Disease Control Import Permit Program rules related to biological agents;
➢
Shipping rules such as IATA Dangerous Goods regulations;
➢
State and local laws and regulations for the disposal and handling of medical waste and biohazardous material;
➢
Export laws such as the U.S. Department of Commerce’s Bureau of Industry and Security Export Administration Regulations, U.S. State Department’s Directorate of Defense Trade Controls, and the U.S. Department of the Treasury’s Office of Foreign Assets Control in export licensing;
➢
Import laws such as the Customs and Border Protection Trade Act of 2002 and the Customs Modernization Act;
➢
The federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs;
➢
Federal, state, and local tax and tariff rules;
➢
Other laws and regulations administered by the FDA;
➢
Other laws and regulations administered by HHS;
➢
State and local laws and regulations governing human subject research and clinical trials; and
➢
Other laws and regulations of which we are unaware.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory compliance.
International Regulatory Environment
Because iSpecimen procures specimens from and distributes specimens to countries outside of the United States, we are subject to international rules related to the protection of human subjects in research, data privacy and security, import and export regulations, tariffs, and foreign rules similar to any of the aforementioned U.S. rules, as well as those of which we are unaware.
One of the more prominent international regulations is the GDPR which took effect in May 2018. The GDPR regulates the collection, use, disclosure, transfer, and/or other processing of personal data of identified or identifiable individuals located in the European Economic Areas, including the European Union. This data specifically includes personal health data that generally is provided as part of biospecimen collection studies. The GDPR imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates for processing (with some exceptions), allowing individuals to revoke consents granted, enabling individuals the right to have their data erased (with some exceptions), amended,
or transferred to another data controller (known as “data portability”), providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, limiting the transfer of data to countries outside of the EU, providing notification of data breaches, and taking certain measures when engaging third-party’s who may also use or process the data. In addition, EU member states may make their own further laws and regulations limiting the processing of personal data, including biometric, genetic, or health data.
The GDPR increases our obligations with respect to data collected by our EU suppliers. We generally rely upon our contractual terms with these organizations as a means for obligating them to provide us data in accordance with the GDPR regulations. In addition to utilizing contractual terms to obligate specimen suppliers to conform with GDPR, we generally request the international supplier fills out a pre-contract questionnaire to understand their GDPR compliance before engaging in the contracting process and then perform a post-contract audit that also asks about GDPR applicability and the site’s conformance to the GDPR. Audit questionnaires are distributed every two years after the initial site audit.
COVID-19 and its Impact
On January 30, 2020, the WHO announced a global health emergency because of a new strain of coronavirus (COVID-19) originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The pandemic had and still has both positive and negative effects on iSpecimen’s business.
On the positive side, a new market for COVID-19 samples emerged as a result of the pandemic. We received our first request for samples from patients with a prior or current COVID-19 infection on March 18, 2020, and through September 30, 2020, we fielded 307 unique COVID-19 specimen requests representing approximately $17 million in opportunities. Because of our large, geographically diverse network with many sites around the country and the world, we were able to respond quickly to this new demand and match requests for COVID-19 specimens to sites in areas of outbreak. As a result, we won 98 of these opportunities and received purchase orders for approximately $3.4 million, which represented more than 30% of our purchase orders in the first nine months of 2020. Notable among these COVID-19 opportunities was an $850,000 order from the Centers for Disease Control for a longitudinal collection of blood from subjects who recently had a COVID-19 infection. This project not only provided revenue during the general COVID-19 slowdown, but because of this work, we are now registered as a government contractor and can pursue other opportunities across U.S. governmental agencies.
On the downside, starting in March 2020, COVID-19 negatively impacted our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully disabled; more than 40% was partially disabled; and less than 15% was fully operational. Consequently, during the three months beginning April 2020, while our purchase order value increased by more than 300% compared to same period in 2019, our ability to fulfill these orders was negatively impacted by COVID-19 and resulted in our revenue only increasing year-over-year by 30% compared to the same period in 2019. However, over the course of the pandemic, many supply chain sites began to recover and became operational by August and even more so by November 2020. We expect that while the pandemic lasts, we will continue to experience a slowdown in non-COVID-19 specimen collections due to social distancing on the part of research subjects, supply partner site employees, and customer research organizations.
To help mitigate the financial risks during COVID-19 outbreak, the Company implemented measures to help control costs. For example, we eliminated non-essential travel and in-person training activities, deferred certain planned expenditures, and furloughed 7% employees. Also, going forward, the addition of mobile phlebotomy capabilities provides us with some level of risk reduction as it enables us to more easily pursue direct-to-patient specimen collections, thereby reducing our reliance upon our supply network should this pandemic or other circumstances in the future further limit our supply sites’ specimen collection capabilities.
We also applied for and received a loan in the amount of $783,008 from the Paycheck Protection Program under the CARES Act in May 2020.
There is considerable uncertainty around the duration of this COVID-19 outbreak and its future impact.While we implemented measures to help stabilize revenue as well as measures to reduce costs in response to the COVID-19 outbreak, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we expect this matter to have an impact on our results of operations, financial condition, or liquidity, which cannot be reasonably estimated at this time.
Employees
As of September 30, 2020,we had 37 full time employees (not including co-ops or summer interns), seven of whom were engaged in research and development activities, 11 of whom were engaged in sales and marketing activities, ten who were engaged in operations and fulfillment activities, four who were engaged in supply development and management activities, and five of whom were engaged in general and administrative functions. Our employees are primarily located in Lexington, Massachusetts with ten remote sales, marketing, and supply development personnel located elsewhere in the U.S.
Facilities
We occupy approximately 8,835 square feet of office and laboratory space in Lexington, Massachusetts under a lease that expires on February 28, 2024. Our laboratory is subject to applicable federal and state laws and regulations relating to the safe handling of laboratory specimens along with biohazard disposal, and we utilize an outside medical and biohazard disposal company for disposal of such specimens. We believe our existing facilities meet our current needs. We will need additional office space in the future as we continue to build our development, commercial and support teams. We believe we can find suitable additional space in the future on commercially reasonable terms.
Legal Proceedings
We may from time to time be involved in various legal proceedings and other matters arising in the normal course of business. We may in the future institute additional, legal proceedings to enforce our rights and seek remedies, such as monetary damages, injunctive relief and declaratory relief. We cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on us because of diversion of management time and attention as well as the financial costs related to resolving such disputes.
MANAGEMENT
Officers and Directors
Our officers and directors are as follows:
|
Name
|
|
|
Age
|
|
|
Position
|
|
|
Christopher Ianelli
|
|
|
|
|
53
|
|
|
|
Chief Executive Officer, President, and Director
|
|
|
Jill Mullan
|
|
|
|
|
56
|
|
|
|
Chief Operating Officer, Secretary, Treasurer, and Director
|
|
|
Benjamin Bielak
|
|
|
|
|
51
|
|
|
|
Chief Information Officer
|
|
|
Tracy Curley
|
|
|
|
|
59
|
|
|
|
Chief Financial Officer
|
|
|
Andrew L. Ross
|
|
|
|
|
72
|
|
|
|
Chairman of the Board
|
|
|
George “Bud” Scholl
|
|
|
|
|
61
|
|
|
|
Director
|
|
|
Steven Gullans
|
|
|
|
|
67
|
|
|
|
Director
|
|
|
John L. Brooks III
|
|
|
|
|
69
|
|
|
|
Director Nominee
|
|
|
Margaret H. Lawrence
|
|
|
|
|
45
|
|
|
|
Director Nominee
|
|
Christopher Ianelli has been serving as our Chief Executive Officer, President, and director since founding iSpecimen in July 2009. Mr. Ianelli is the founder of and served as Chief Executive Officer of Abkine Pharmaceuticals, Inc., a development stage biopharmaceutical company pioneering innovative approaches to treatment of inflammatory and autoimmune diseases based on disruption of interleukin 16 signaling and chemoattraction from November 2009 to December 2011. Dr. Ianelli served as Managing Director at Leerink Partners (formerly Leerink Swann), a leading healthcare and life science investment bank, where he managed the expansion and delivery of services and directed strategy to develop new healthcare data and information assets for the firm from August 2003 to March 2008. Prior to that, Dr. Ianelli was a co-founder and Managing Director of Boston Medical & Scientific Advisors, a healthcare investment research firm ultimately acquired by Leerink, from 2000 to 2003. Dr. Ianelli received his Bachelor of Science degree in Biological Sciences from University of Lowell and both his Ph.D. in Immunology and his M.D. from Tufts University. He completed his residency training, including a year as Chief Resident, in Pathology at Brigham & Women’s Hospital and Harvard Medical School. He is well-qualified to serve on our Board due to his extensive experience in operations of biopharmaceutical companies and his expertise in medicine, healthcare and life science.
Jill Mullan has been serving our Chief Operating Officer since August 2013, Secretary since November 2012, Treasurer since February 2017, and director since October 2014. She joined the Company in 2010 as the Vice President of Marketing. She was a marketing/strategy consultant at AppNeta, a computer software company, from 2008 to 2010. From 2003 to 2008, she was a marketing and business strategy consultant to various technology-based companies including EMC and Planon Software. From 2000 to 2003, Ms. Mullan was on the founding team and Director of Marketing at Storigen Systems, a provider of distributed storage networks, where she built and ran the company’s product marketing, communications, and public relations organization; developed the company’s brand identity and launched several successful products. She was also employed at Avid Technology from 1996 to 2000, most recently as a Director of Product Marketing and Management with product responsibility for Avid’s editing product line. Prior to that, Ms. Mullan worked in product management and engineering roles at IBM, MIPS Computer Systems, and Hewlett Packard. Ms. Mullan formerly served as treasurer and board member of the Westford Education Foundation. She graduated with distinction from Cornell University with a Bachelor of Science in electrical engineering and received a Master of Business Administration from Stanford University with a focus on entrepreneurship and marketing. She is well-qualified to serve on our Board due to her extensive experience in operations, strategy, marketing, product, and business development in technology-based companies.
Benjamin Bielak has been serving as our Chief Information Officer since June 2018. He served as the Chief Information Officer at GNS Healthcare, a leading casual machine learning product and services company, from January 2017 to May 2018 and as Director of Academic Technology at Harvard University, from February 2015 to January 2017. Prior to his work at GNS and Harvard, Mr. Bielak was the Chief Information
Officer at Dovetail Health, a high-growth product and services company focused on reducing costs through pharmacy-focused interventions, from November 2006 to April 2014. He previously held roles as Manager of Development and Integration at Boston Medical Center and Senior Manager of Technology at Sapient, a global services company, from December 1997 to July 2005. Mr. Bielak holds a Master of Business Administration degree from Bentley University, where his studies focused on change management, and a master’s degree from Boston University in computer science. He maintains two certifications, the College of Healthcare Information Management Executives (CHIME) Certified Healthcare Chief Information Officer (CHCIO) and the Health Information Management System Society (HIMSS) Certified Professional in Healthcare Information and Management Systems (CPHIMS).
Tracy Curley has been serving as our Chief Financial Officer since August 2020. She was a partner at CohnReznick LLP, a national accounting firm, from September 2017 to June 2020. During her time at CohnReznick, LLP, Ms. Curley led the creation and development of an emerging markets commercial audit practice team for the firm in their Boston, MA office. Her practice focused on recruiting and providing audit services to private and public emerging growth companies in the technology and life sciences industries. From November 2014 to August 2017, she also served as a partner at Marcum LLP, a national accounting firm. Ms. Curley led the northeast regional high-tech practice for the firm. She focused on expanding the client base to provide a full range of accounting, tax and advisory services for private and public emerging growth companies in high tech industries such as technology, life sciences and advanced manufacturing. From March 2010 to October 2014, Ms. Curley served as a partner at Moody, Famiglietti & Andronico, LLP (“MFA”), a proactive consulting firm in the greater Boston, MA area with national and global reach. During her time at MFA, Ms. Curley led the creation and development of a public company audit practice focused on recruiting and providing audit services to public emerging growth companies. Ms. Curley serves as President and a board member of the North Shore Technology Council and as a board member of the Girl Scouts of Eastern Massachusetts and Project Green Schools. Ms. Curley received her Master of Accountancy and Bachelor of Science in Business Administration with a concentration in accounting from Kansas State University. She also attended the United States Military Academy. She is a certified public accountant licensed in the Commonwealth of Massachusetts.
Andrew L. Ross has been serving as our director since 2012. He has been an entrepreneur and investor for almost 50 years. He developed, financed, owned and managed through controlled entities multiple real estate assets, including apartment units, hotels, a golf course, a condominium project, several office and retail commercial properties. Since 2010, Mr. Ross has focused on angel and early-stage investments primarily in biotech and collaborative consumption businesses. He has invested in and advised multiple early-stage enterprises as a seed, angel or A-round investor. Mr. Ross served as a director on the board of Q-State Holdings, Inc., a subsidiary of Q-State Biosciences, Inc., a precision medicine company, from 2013 to February 2020. He is well-qualified to serve on our Board due to his extensive experience in investment.
George “Bud” Scholl has been serving as our director since 2014. He has been an entrepreneur for most of his professional life, primarily focused on purchasing and working out distressed assets across a variety of industries and asset types. He has developed and invested in financial, real estate, service and technology companies. Mr. Scholl currently serves as the President and Chief Executive Officer of OneBlood, which was formed in 2012 as a result of a merger he organized when he was Chairman and Chief Executive Officer of the Community Blood Centers of Florida, one of the three largest blood centers in the southeastern United States. Mr. Scholl also currently serves as the Mayor of the City of Sunny Isles Beach, Florida, where he was elected in 2014 after serving as City Commissioner for 7 years. Mr. Scholl is a graduate of the University of Florida and holds an engineering degree in computer science. He is well-qualified to serve on our Board due to his extensive experience in investment.
Steven Gullans has been serving as our director since October 2020. From May 2018 to December 2019, he served as President and Chief Executive Officer and Director of Gemphire Therapeutics, until it was acquired by NeuroBo Pharmaceuticals. While at Gemphire, he oversaw activities related to clinical trials, manufacturing, finances, business development, R&D and intellectual property. Prior to Gemphire, he was Managing Director at Excel Venture Management, LLC (“Excel”), a Boston-based venture capital firm which he co-founded, from March 2008 to May 2018. At Excel, he focused on investing in life science technology companies with a particular interest in disruptive platforms that can impact multiple industries. Prior to
Excel, Dr. Gullans co-founded RxGen, Inc., a pharmaceutical services company, where he also served as Chief Executive Officer and a director from February 2004 to February 2008. Prior to that, he was the Chief Scientific Officer of US Genomics, Inc., a company that develops technology to analyze DNA for pathogen detection, from November 2002 to January 2004. Dr. Gullans serves as a director at Orionis Biosciences, a drug development company. He was previously a board member of Activate Networks, Inc. which was acquired by Decision Resource Group, nanoMR Inc., which was acquired by DNA Electronics Ltd, Tetraphase Pharmaceuticals, Inc. which went public in 2013, and Molecular Templates, Inc. which was merged into a public entity in 2017. Dr. Gullans was a faculty member at Harvard Medical School and Brigham and Women’s Hospital for almost 20 years. Dr. Gullans holds a B.S. from Union College and a Ph.D. from Duke University. He is well-qualified to serve on our Board due to his extensive experience in biopharmaceutical industries and his expertise in medical and pharmaceutical research.
John L. Brooks III, a director nominee, will join our board of directors upon the effectiveness of the registration statement of which this prospectus forms a part. He currently also serves as a director of Hemoshear Therapeutics since November 2008, Noxilizer since March 2009, Hygieia since June 2016 and Atentiv since March 2020. He also serves as the chairman of Thermalin, Inc. since January 2009. In January 2012, Mr. Brooks founded Ammonett Pharma and continues to serve on its board of directors since then. He has also served as the managing director of Healthcare Capital LLC since February 2007. Previously, Mr. Brooks served as the Chief Executive Officer, President and a director of NeuroBo Pharmaceuticals, Inc. from March 2018 to December 2019 and as the chairman of Cellnovo, Ltd. from 2012 to December 2019. Mr. Brooks is also involved with several non-profit organizations. He currently serves as the Chief Executive Officer and President of Worldwide Network for Innovation in Clinical Education and Research (WNICER) since January 2019 and also serves as a director of T1D Exchange since March 2020, the ADA New England Chapter since January 2015, Population Health Alliance since January 2014, and the University of Massachusetts Amherst Foundation since January 2012. He also chairs the College Diabetes Network since January 2011 and is also on the board of trustees of Suffolk University since March 2012. Mr. Brooks received his BBA and MSBA in Accounting from the University of Massachusetts Amherst. He is well-qualified to serve on our Board due to his expertise in healthcare and life sciences.
Margaret H. Lawrence, a director nominee, will join our board of directors upon the effectiveness of the registration statement of which this prospectus forms a part. Ms. Lawrence is an experienced, entrepreneurial executive with over a decade’s experience in finance roles and as a venture capital investor in the software industry. She has spent the last decade in general management leadership roles at high growth technology companies. She currently serves as a General Manager Wayfair Professional in which role she owns the P&L, leads a large team and the full range of disciplines, including business strategy, customer experience, sales effectiveness, brand development, technology, and merchandising strategy since November 2016. Prior to joining Wayfair, Ms. Lawrence was Chief Services Officer at Motus, a SaaS-based expense reimbursement company, in 2016. She previously worked at Google from 2011 to 2015, most recently as the Chief of Staff for Google’s Small and Medium Business organization for the Americas, running strategy and operations for the region. Prior to Google, Ms. Lawrence was a Partner at Pilot House Ventures, a Boston-based early stage venture capital firm. She led the investment process for and held board seats at a number of early stage technology companies. Over the last 15 years, Ms. Lawrence has held several board positions as part of her community engagement as well as her venture capital career. She was on the Planned Parenthood League of Massachusetts board from 2011 to 2017 and served as the Chair of both the Finance Committee and Investment Committee for several years which included a CFO and CEO transition. She currently remains involved in the Planned Parenthood League of Massachusetts as a member of the Finance Committee. Additionally, Ms. Lawrence served on the Spruce Street Nursery School Board and as a member of its Finance Committee from 2011 to 2014. Ms. Lawrence received her BA in economics from Williams College and an MBA from Harvard Business School. She is well-qualified to serve on our Board due to her extensive experience in business strategy and operations, including relevant experience with online marketplaces.
Family Relationships
There are no family relationships among any of our executive officers or directors.
Composition of our Board of Directors
Our board of directors currently consists of five directors. Our certificate of incorporation, as amended, and bylaws, as amended, provide that our board of directors can consist of any number of directors as voted on and approved by the board of directors, currently approved for up to seven directors. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of office of the first class of directors, consisting of , will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of , will expire at the third annual meeting of stockholders.
When considering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Director Independence
Prior to the consummation of this offering, our board of directors undertook a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities. Our board of directors has affirmatively determined that each of Dr. Gullans and is an “independent director,” as defined under the Exchange Act and the listing rules. We plan to utilize the phase-in exemption under the listing rules and expect to have a majority independent board within 12 months of the closing of this offering.
Committees of Our Board of Directors
Our board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business through meetings of the board of directors and standing committees. We will have a standing audit committee, compensation committee, and nominating and corporate governance committee. In addition, from time to time, special committees may be established under the direction of the board of directors when necessary to address specific issues.
Audit Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish an audit committee of the board of directors. Dr. Gullans, and will serve as members of our audit committee, and Dr. Gullans will chair the audit committee. Each member of the audit committee is financially literate, and our board of directors has determined that Dr. Gullans qualifies as an “audit committee financial expert” as defined in applicable SEC rules and has accounting or related financial management expertise.
We will adopt an audit committee charter, which will detail the principal functions of the audit committee, including:
➢
reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
➢
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
➢
discussing with management major risk assessment and risk management policies;
➢
monitoring the independence of the independent auditor;
➢
verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
➢
reviewing and approving all related-party transactions;
➢
inquiring and discussing with management our compliance with applicable laws and regulations;
➢
pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
➢
appointing or replacing the independent auditor;
➢
determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
➢
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and
➢
approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
Compensation Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish a compensation committee of the board of directors. Dr. Gullans, and will serve as members of our compensation committee. will chair the compensation committee.
We will adopt a compensation committee charter, which will detail the principal functions of the compensation committee, including:
➢
reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
➢
reviewing and approving the compensation of all our other executive officers;
➢
reviewing our executive compensation policies and plans;
➢
implementing and administering our incentive compensation equity-based remuneration plans;
➢
assisting management in complying with our proxy statement and annual report disclosure requirements;
➢
approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
➢
if required, producing a report on executive compensation to be included in our annual proxy statement; and
➢
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
Notwithstanding the foregoing, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly
responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by and the SEC.
Nominating and Corporate Governance Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish a nominating and corporate governance committee of the board of directors. Dr. Gullans, and will serve as members of our nominating and corporate governance committee. will chair the nominating and corporate governance committee.
We will adopt a nominating and corporate governance committee charter, which will provide that persons to be nominated:
➢
should have demonstrated notable or significant achievements in business, education or public service;
➢
should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
➢
should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.
The nominating and corporate governance committee will consider several qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is or has been an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our board of directors or compensation committee. See the section titled “Certain Relationships and Related Party Transactions” for information about related party transactions involving members of our compensation committee or their affiliates.
Code of Ethics and Code of Conduct
Prior to the completion of this offering, we will adopt a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code will be posted on our website, www.ispecimen.com. In addition, we intend to post on our website all disclosures that are required by law or the listing standards concerning any amendments to, or waivers from, any provision of the code. The information on or accessed through our website is deemed not to be incorporated in this prospectus or to be part of this prospectus.
EXECUTIVE COMPENSATION
The following discussion of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs, see “Special Note Regarding Forward-Looking Statements.” Actual compensation programs that we adopt may differ materially from the programs summarized in this discussion.
The discussion below includes a review of our compensation decisions with respect to fiscal years 2019 and 2018 for our “named executive officers,” or NEOs, namely our principal executive officer and our two other most highly compensated executive officers. Our NEOs for fiscal years 2019 and 2018 were:
➢
Christopher Ianelli, Chief Executive, President and Director
➢
Jill Mullan, Chief Operating Officer, Secretary and Treasurer
➢
Benjamin Bielak, Chief Information Officer
➢
Tracy Curley, Chief Financial Officer
In 2019, we compensated our NEOs through base salary, as described below. Our officers are also eligible for the standard benefits programs we offer all employees.
Summary Compensation Table
The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for fiscal years 2019 and 2018.
|
Name and Principal Position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
awards
($)(1)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
Christopher Ianelli,
|
|
|
|
|
2019
|
|
|
|
|
$
|
250,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
297,587
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
547,587
|
|
|
|
Chief Executive, President and Director
|
|
|
|
|
2018
|
|
|
|
|
$
|
220,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
220,000
|
|
|
|
Jill Mullan,
|
|
|
|
|
2019
|
|
|
|
|
$
|
230,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
397,617
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
627,617
|
|
|
|
Chief Operating Officer, Secretary and Treasurer
|
|
|
|
|
2018
|
|
|
|
|
$
|
220,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
220,000
|
|
|
|
Benjamin Bielak
|
|
|
|
|
2019
|
|
|
|
|
$
|
220,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
25,500
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
245,500
|
|
|
|
Chief Information Officer
|
|
|
|
|
2018
|
|
|
|
|
$
|
205,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
202,800
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
407,800
|
|
|
|
Tracy Curley
|
|
|
|
|
2019
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Chief Financial Officer
|
|
|
|
|
2018
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
1)
The amounts reported in the “Option awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of FASB ASC Topic 718. See Note 10 to our financial statements appearing at the end of this prospectus regarding assumptions underlying the valuation of equity awards.
Employment Agreements
We currently have no employment agreements with any of our officers, directors, or key employees. Following this offering, we plan to enter into employment agreements with our officers and key employees.
Indemnification Agreements
We intend to enter into indemnification agreements with our directors and executive officers that require us to indemnify them against expenses, judgments, fines, settlements and other amounts that any such
person becomes legally obligated to pay (including with respect to a derivative action) in connection with any proceeding, whether actual or threatened, to which such person may be made a party by reason of the fact that such person is or was a director or officer of us or any of our affiliates, provided such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, our best interests. We maintain a directors’ and officers’ liability insurance policy. The policy insures directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses us for those losses for which we have lawfully indemnified the directors and officers. The policy contains various exclusions.
Equity Incentive Plans
Our Board has adopted, and our shareholders have approved, the 2010 Plan and 2013 Plan. The number of shares issued, number of shares reserved for issuance, number of shares underlying outstanding stock options and number of shares remaining available for future issuance under each plan, as of September 30, 2020, are as follows:
|
Plan
|
|
|
Number of
Shares Issued
|
|
|
Number of
Shares
Reserved for
Issuance
|
|
|
Number of
Shares
underlying
Outstanding
Options or
Warrants
|
|
|
Number of
Shares
Remaining
Available for
Future
Issuance
|
|
|
2010 Stock Incentive Plan
|
|
|
|
|
868,427
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
631,573
|
|
|
|
|
|
—
|
|
|
|
2013 Stock Incentive Plan
|
|
|
|
|
329,922
|
|
|
|
|
|
1,713,570
|
|
|
|
|
|
792,468
|
|
|
|
|
|
591,180
|
|
|
In addition, we plan to adopt a 2020 Stock Incentive Plan prior to the consummation of this offering. For descriptions of each stock incentive plan, please see “Description of Capital Stock — Stock Incentive Plans.”
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding all outstanding stock options and restricted stock held by each of our named executive officers as of December 31, 2019:
|
|
|
|
Option Awards
|
|
|
Name
|
|
|
Number of
securities
underlying
unexercised
options (#)
exercisable
|
|
|
Number of
securities
underlying
unexercised
options (#)
unexercisable
|
|
|
Equity incentive
plan awards;
Number of
securities
underlying
unexercised
unearned
options (#)
|
|
|
Option exercise
price ($)
|
|
|
Option
expiration date
|
|
|
Christopher Ianelli
|
|
|
|
|
9,375
|
|
|
|
|
|
15,625
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.02
|
|
|
|
January 31, 2029
|
|
|
Christopher Ianelli
|
|
|
|
|
266,752
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.02
|
|
|
|
July 12, 2029
|
|
|
Jill Mullan
|
|
|
|
|
107,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.08
|
|
|
|
June 29, 2026
|
|
|
Jill Mullan
|
|
|
|
|
9,375
|
|
|
|
|
|
15,625
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.02
|
|
|
|
January 31, 2029
|
|
|
Jill Mullan
|
|
|
|
|
364,821
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.02
|
|
|
|
July 12, 2029
|
|
|
Benjamin Bielak
|
|
|
|
|
65,000
|
|
|
|
|
|
65,000
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.56
|
|
|
|
June 14, 2028
|
|
|
Benjamin Bielak
|
|
|
|
|
9,375
|
|
|
|
|
|
15,625
|
|
|
|
|
|
—
|
|
|
|
|
$
|
1.02
|
|
|
|
January 31, 2029
|
|
Changes in Control
There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Non-Employee Director Compensation
As of September 30, 2020, we have not paid our non-employee directors for their service.
The following table sets forth information regarding the total compensation paid to our current non-employee directors during 2019 for their service on our Board. Our directors who are employed by us do not receive any additional compensation for serving on our Board.
|
Name and Principal Position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
awards
($)(1)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
Andrew Ross,
|
|
|
|
|
2019
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Chairman of the Board
|
|
|
|
|
2018
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Bud Scholl
|
|
|
|
|
2019
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Director
|
|
|
|
|
2018
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Steven Gullans
|
|
|
|
|
2019
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Director
|
|
|
|
|
2018
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
1)
The amounts reported in the “Option awards” column reflect the aggregate fair value of stock-based compensation awarded during the year computed in accordance with the provisions of FASB ASC Topic 718. See Note 10 to our financial statements appearing at the end of this prospectus regarding assumptions underlying the valuation of equity awards.
We plan to adopt an official compensation policy for our non-employee directors following this offering.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following are summaries of certain provisions of transactions within the past three years to which we have been a party, in which the amount involved exceeds or will exceed $120,000 and in which any of our directors, executive officers, holders of more than 5% of our capital stock, or immediate family member thereof, had or will have a direct or indirect material interest, and are qualified in their entirety by reference to all of the provisions of such agreements.
We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that we would pay or receive, as applicable, in arm’s-length transactions.
Issuance of Convertible Promissory Notes
From March 2017 through July 2018, we issued and sold an aggregate of $5.5 million principal amount in unsecured Convertible Notes with an annual non-compounding interest rate of 6%, which will convert upon the closing of this offering into shares of our common stock at 30% discount to the public offering price. The following persons who are directors, executive officers, holders of more than 5% of our capital stock, or immediate family member thereof currently own Convertible Notes with a combined principal plus interest value that exceeds or will exceed $120,000 as of September 30, 2020. On October 1, 2020, the maturity date of the Convertible Notes was extended to March 31, 2021.
➢
Andrew Ross, Chairman of our Board of Directors and a principal stockholder, purchased Convertible Notes in the aggregate principal amount of $1,650,000
➢
OBF Investments, LLC, a principal stockholder, purchased Convertible Notes in the aggregate principal amount of $2,150,000
➢
Kellen Foundation, a principal stockholder, purchased Convertible Notes in the aggregate principal amount of $1,700,000
Issuance of Secured Promissory Notes
From August 2018 through September 2020, we issued and sold an aggregate of $6.5 million in Bridge Notes with an annual non-compounding interest rate of 24%, and a current maturity date of the earlier of September 30, 2020, the closing of a new permanent equity financing in excess of $10,000,000, the sale of our Company or the pre-payment by our Company. On October 1, 2020, the maturity date was further extended to March 31, 2021.
The following persons who are directors, executive officers, holders of more than 5% of our capital stock, or immediate family member thereof currently own Bridge Notes with a combined principal plus interest value that exceeds or will exceed $120,000 as of September 30, 2020. On October 1, 2020, we amended the Bridge Notes to extend the maturity date to March 31, 2021 and to increase the interest rate from 24% to 30% after October 1, 2020.
➢
Andrew Ross, a principal stockholder and Chairman of our Board of Directors, and the Andrew L. Ross 2013 Irrevocable Trust, purchased Bridge Notes in the aggregate principal amount of $205,000
➢
Callen Ross, son of Andrew Ross, purchased Bridge Notes in the aggregate principal amount of $100,000
➢
Barri Mullan-Goodman, sister of Jill Mullan, our Chief Operating Officer, purchased Bridge Notes in the aggregate principal amount of $150,000
➢
Jill Mullan, our Chief Operating Officer, purchased Bridge Notes in the aggregate principal amount of $350,000
➢
David Ianelli, brother of Christopher Ianelli, our Chief Executive Officer, purchased Bridge Notes in the aggregate principal amount of $100,000
➢
Joseph Ianelli, father of Christopher Ianelli, our Chief Executive Officer, purchased Bridge Notes in the aggregate principal amount of $300,000
➢
OBF Investments, LLC, a principal stockholder, purchased Bridge Notes in the aggregate principal amount of $500,000
Policies and Procedures for Related Person Transactions
We have not yet adopted a formal policy for the review, approval or ratification of related party transactions. Accordingly, the transactions discussed above were not reviewed, approved or ratified in accordance with any such policy.
Prior to the consummation of this offering, we will adopt a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company. A form of the code of ethics that we plan to adopt prior to the consummation of this offering is filed as an exhibit to the registration statement of which this prospectus is a part.
In addition, our audit committee, pursuant to a written charter that we will adopt prior to the consummation of this offering, will be responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. A form of the audit committee charter that we plan to adopt prior to the consummation of this offering is filed as an exhibit to the registration statement of which this prospectus is a part. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock as of November 16, 2020 (i) reflecting the automatic conversion of all outstanding shares of our convertible preferred stock into 7,158,774 shares of our common stock, (ii) 129,254 shares of common stock potentially issuable upon the cancellation of the common stock warrants, and (iii) as adjusted to give effect to this offering, without giving effect to the shares of common stock potentially issuable upon the automatic conversion of the Convertible Notes and the outstanding principal of the Bridge Notes and for:
➢
each person known by us to beneficially own more than 5% of our common stock;
➢
each of our directors;
➢
each of our named executive officers; and
➢
all of our executive officers and directors as a group.
The number of shares beneficially owned by each stockholder as described in this prospectus is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, or other rights, held by such person that are currently exercisable or will become exercisable within 60 days of the date of this prospectus, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. The percentage ownership of each individual or entity before this offering is computed on the basis of 5,363,365 total shares of our common stock outstanding and the conversion of all outstanding shares of our convertible preferred stock into 7,158,774 shares of our common stock, in each case immediately prior to the closing of this offering (other than this offering). The percentage ownership of each individual or entity following this offering is after giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock into 7,158,774 shares of our common stock, (ii) an estimated shares of common stock potentially issuable upon the conversion of the Convertible Notes and the outstanding principal of the Bridge Notes and (iii) 129,254 shares potentially issuable upon the cancellation of the common stock warrants. Unless otherwise indicated, the address of all listed stockholders is 450 Bedford Street, Lexington, MA 02420.
Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
|
|
|
|
Shares beneficially
owned prior to the offering
|
|
|
Shares beneficially
owned after the offering
|
|
|
Name of beneficial owner
|
|
|
Common
stock
|
|
|
Options
exercisable
within
60 days
|
|
|
Aggregate
number of
shares
beneficially
owned
|
|
|
%
|
|
|
Assuming
no exercise of
option to
purchase
additional
shares
|
|
|
%
|
|
|
Assuming
exercise of
option to
purchase
additional
shares
|
|
|
%
|
|
|
5% or more stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anna-Maria &
Stephen Kellen Foundation(1)
|
|
|
|
|
1,091,187(2)
|
|
|
|
|
|
—
|
|
|
|
|
|
1,091,187
|
|
|
|
|
|
8.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OBF Investments
|
|
|
|
|
1,388,784(3)
|
|
|
|
|
|
—
|
|
|
|
|
|
1,388,784
|
|
|
|
|
|
11.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named executive officers and directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew L. Ross
|
|
|
|
|
4,740,153(4)
|
|
|
|
|
|
—
|
|
|
|
|
|
4,740,153
|
|
|
|
|
|
37.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Ianelli
|
|
|
|
|
1,903,933(5)
|
|
|
|
|
|
277,689
|
|
|
|
|
|
2,181,622
|
|
|
|
|
|
17.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jill Mullan
|
|
|
|
|
274,859(6)
|
|
|
|
|
|
482,758
|
|
|
|
|
|
757,617
|
|
|
|
|
|
5.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Gullans
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Brooks III
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret H. Lawrence
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All current directors and executive officers as a group (6 persons)
|
|
|
|
|
6,918,945
|
|
|
|
|
|
760,447
|
|
|
|
|
|
7,679,392
|
|
|
|
|
|
57.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
Mr. Kellen is the President of the Anna-Maria and Stephen Kellen Foundation, Inc. and therefore may be deemed to hold voting and dispositive power of the securities held by Anna-Maria and Stephen Kellen Foundation, Inc.
2)
Consists of 991,988 shares of common stock issuable upon conversion of Series B preferred stock and 91,999 shares of common stock issuable upon exercise of warrants.
3)
Consists of 1,388,784 shares of common stock issuable upon conversion of Series B preferred stock. Mr. Scholl is the President and Chief Executive Officer of OBF Investments, and therefore, may be deemed to hold voting and dispositive power of the securities held by OBF Investments.
4)
Consists of 2,689,815 shares of common stock issuable upon conversion of Series A and Series B preferred stock and 30,055 shares of common stock issuable upon exercise of warrants.
5)
Consists of 14,768 shares of common stock issuable upon conversion of Series A preferred stock.
6)
Consists of 34,657 shares of common stock issuable upon conversion of Series A preferred stock.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is based upon our fourth amended and restated certificate of incorporation, our second amended and restated bylaws and applicable provisions of law, in each case as in effect as of the date of this prospectus. This discussion does not purport to be complete and is qualified in its entirety by reference to our fourth amended and restated certificate of incorporation, and our second amended and restated bylaws, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part.
Authorized Capital Stock
As of September 30, 2020, our authorized capital was, 23,184,411 shares, of which (1) 16,000,000 shares are common stock, par value $0.0001 per share (or common stock), (2) 556,540 are Series A-1 preferred stock, par value $0.0001 per share (or Series A-1 preferred stock), (3) 3,427,871 are Series A preferred stock, par value $0.0001 per share (or Series A preferred stock), and (4) 3,200,000 are Series B preferred stock, par value $0.0001 per share (or Series B preferred stock).
As of September 30, 2020, there were issued and outstanding 5,363,365 shares of common stock, 3,427,871 shares of Series A Preferred Stock, which are convertible into 3,427,871 shares of common stock, 556,540 shares of Series A-1 Preferred Stock, which are convertible into 556,540 shares of common stock, and 3,174,363 shares of Series B Preferred Stock, which are convertible into 3,174,363 shares of our common stock. Upon the consummation of this offering and assuming conversion of all outstanding preferred stock, we will have shares of common stock issued and outstanding.
As of the date of this prospectus, pursuant to our fourth amended and restated certificate of incorporation, our authorized capital is 250,000,000 shares, of which (1) 200,000,000 shares are common stock, par value $0.0001 per share (or common stock) and (2) 50,000,000 shares are preferred stock, par value $0.0001 per share, which may, at the sole discretion of our board of directors be issued in one or more series (the “Preferred Stock”).
Our board may from time to time authorize by resolution the issuance of any or all shares of the common stock and the preferred stock authorized in accordance with the terms and conditions set forth in the fourth amended and restated certificate of incorporation for such purposes, in such amounts, to such persons, corporations, or entities, for such consideration and in the case of the preferred stock, in one or more series, all as the Board in its discretion may determine and without any vote or other action by the stockholders, except as otherwise required by law.
Common Stock
Holders of our common stock are entitled to one (1) vote for each share on all matters submitted to a stockholder vote. The common stock does not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. Subject to the rights of holders of any class of stock having preference over our common stock, holders of our common stock are entitled to share in all dividends that our board of directors, in its discretion, declares from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Our common stock has no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the common stock.
Preferred Stock
Our board of directors may by resolution authorize the issuance of shares of preferred stock from time to time in one or more series. We may reissue shares of preferred stock that are redeemed, purchased, or otherwise
acquired by us unless otherwise provided by law. Our board of directors is authorized to fix or alter the designations, powers and preferences, and relative, participating, optional or otherwise rights if any, and qualifications, limitations or restrictions thereof, including, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes if any, per share, as well as the number of members, if any, of the board of directors or the percentage of members, if any, of the board of directors each class or series of preferred stock may be entitled to elect), rights and terms of redemption (including, sinking fund provisions, if any), redemption price and liquidation preferences of any wholly unissued series of preferred stock, and the number of shares constituting any such series and the designation thereof, and to increase or decrease the number of shares of any such series subsequent to the issuance of shares of such series, but not below the number of shares of such series then issued.
Series A, A-1 and B Preferred Stock
We issued 3,427,871 shares of Series A preferred stock with an original issue price at $0.762 per share, 556,540 shares of Series A-1 preferred stock with an original issue price at $1.00808 per share, 3,174,363 shares of Series B preferred stock with an original issue price at $2.52019 per share. Upon closing of this offering, all issued and outstanding preferred stock will be converted into 7,158,774 shares of common stock.
Dividend
Holders of preferred stock are entitled to receive cumulative dividends at the annual rate of six percent (6%) per share of the original issue price of each series of the preferred stock from the date of original issuance. Such cumulative dividends accumulate annually but not compound. In the event of a declaration of a cash dividend to holders of common stock, holders of preferred stock are entitled to the amount of dividends on the preferred stock as would be declared payable on the largest number of whole shares of common stock into which the shares of preferred stock held by each holder thereof could be converted. Cumulative dividends shall be payable only in the event of a liquidation, dissolution or winding up of the Company.
Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution or winding up of the Company, holders of Series B preferred stock are entitled to be paid prior to Series A/A-1 preferred stock and common stock, and holders of Series A/A-1 preferred stock are entitled to be paid prior to common stock. The residual assets will be distributed among the holders of the common stock, ratably in proportion to the number of shares of common stock held by each such holder.
Distribution Other Than Cash
The value of any distributions in property other than cash is the fair market value of such property as determined in good faith by the board of directors. All distributions are to be made pro rata to the holders of the preferred stock. In the event of any business combination involving non-cash consideration, the acquisition consideration is reallocated among the holders of preferred stock and common stock in an appropriate and equitable manner to give economic effect; provided that holders of preferred stock have the right to convert into common stock at any time prior to any such merger, sale of assets or capital stock, business combination or other acquisition.
Voting Rights
Holders of preferred stock are entitled to vote on all matters submitted to the general vote of all stockholders and to that number of votes equal to the largest number of whole shares of common stock into which such holders of preferred stock could be converted.
Election of Directors
Holders of a majority of the outstanding shares of the Series A/A-1 preferred stock, voting together as a single class, shall be entitled to elect one (1) director of the Company. Holders of a majority of the outstanding
shares of the Series B preferred stock, voting together as a single class, shall be entitled to elect one (1) director of the Company.
Protective Provisions
So long as the Series A/A-1 preferred stock or Series B preferred stock represents a minimum of twenty percent (20%) or fifty percent (50%), respectively, of the outstanding voting capital of the Company, without prior approval of the holders of a majority of the then outstanding shares of Series A/A-1 preferred stock or Series B preferred stock, respectively, the Company may not (i) alter any preference, privileges or rights of preferred stock or the certificate of incorporation or bylaws in a manner adverse to the holders of preferred stock, (ii) increase or decrease the authorized number of shares of any series of preferred stock, (iii) approve any transaction or series of transactions deemed to be a liquidation, dissolution or winding up of the Company, (iv) approve any liquidity event or other corporate reorganization or acquisition, or (v) declare or pay any cash dividends or distribution or approve any repurchase with respect to the preferred stock or common stock.
Conversion
Each series of preferred stock are convertible at any time into fully-paid and non-assessable shares of common stock at a conversion rate that is the quotient obtained by dividing the original issue price of such series of preferred stock by the conversion value, subject to anti-dilution adjustment. The conversion value for Series A preferred stock, Series A-1 preferred stock and Series B preferred stock are $0.762 per share, $1.00808 per share and $2.52019 per share, respectively. In another word, each share of preferred stock is convertible at any time into one share of common stock. Upon closing of this offering, all issued and outstanding preferred stock will be converted into 7,158,774 shares of common stock.
Lock-up Period for Public Offering
Holders of preferred stock have agreed not to sell, pledge, transfer or otherwise dispose of, or grant any option or purchase right with respect to, any shares of capital stock then owned and not otherwise offered in the public offering, or engage in any short sale, hedging transaction or other derivative security transaction involving the registrable securities or other shares of common stock of the Company held, for a lock-up period commencing thirty (30) days prior to the proposed effective date of the Company’s public offering of equity securities until 180 days following the effective date of the registration statement of which this prospectus forms a part.
Stock Incentive Plans
Our board of directors and shareholders adopted and approved on the 2010 Plan and 2013 Plan, under which stock options and restricted stock may be granted to officers, directors, employees and consultants.
Issuance of Stock Options under 2010 Plan
The 2010 Plan was adopted on June 28, 2010 to enhance our 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 2010 Plan authorizes options, restricted stock, restricted stock units and other stock-based awards. Our 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 2010 Plan. Awards may be made under the 2010 Plan for up to 1,500,000 shares of our common stock. The shares of common stock underlying any unexercised award shall again be available for the grant of awards under the 2010 Plan, subject to the limitations of any applicable law.
We may grant participants of the 2010 Plan options to purchase common stock and determine the terms of such options (including number of shares of common stock to be covered by each option, the exercise price and the conditions and limitations of each option). Incentive stock options may be granted to employees
pursuant to Section 422 of the Code at an exercise price not less than 100% of the fair market value of the common stock on the date of grant.
In addition, we may grant restricted stock or restricted stock units granting the right to receive shares of common stock when such award vests under the 2010 Plan, subject to our right to repurchase all or part of such shares. Our Board of Directors determines the terms and conditions of such restricted stock awards, including the conditions for vesting and repurchase (or forfeiture) and the issue price. Participants holding shares of restricted stock are entitled to all ordinary cash dividends paid with respect to such shares unless otherwise determined by our Board of Directors.
The 2010 Plan also provides for substitute awards (the “2010 Substitute Awards”), which may be issued in connection with a merger and acquisition. The 2010 Substitution Awards may substitute any options or other stock or stock-based awards granted by any merged or acquired entity or its affiliate on such terms as our Board of Directors deems appropriate.
In the event of any stock split, reverse stock split, reclassification of shares, spin-off or similar change in capitalization or any dividend or distribution other than an ordinary cash dividend, the number and class of securities, the Company as determined by our Board of Directors. In the event of a reorganization, merger liquidation or similar transaction, the Board of Directors has the discretion to provide that awards are assumed, substituted, terminated immediately prior to the consummation of such event, declare them exercisable or provide cash consideration for such award.
On July 13, 2019, we granted options to purchase 266,752 and 364,821 shares of common stock at an exercise price of $1.02 per share to each of Christopher Ianelli and Jill Mullan, respectively, (for an aggregate of 631,573 shares) in recognition of their service as officers. All of the options have been vested.
Issuance of Stock Options under 2013 Plan
The 2013 Plan was adopted by our Board of Directors and approved by our stockholders on April 12, 2013 to enhance our 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 2013 Plan similarly authorizes options, restricted stock, restricted stock units and other stock-based awards and grants our Board of Directors, or any committee to which the Board of Directors delegates such authority, the sole discretion in administering, interpreting, amending or accelerating the 2013 Plan. Further, our Board of Directors may delegate to one or more officers of the Company the power to grant awards and exercise such other powers under the 2013 Plan as the Board of Directors may determine, provided, that the maximum number of awards to be granted and the maximum number of shares issuable to any one participant by such officer or officers are fixed by the Board of Directors. No officer may designate himself or herself as a recipient of any such awards.
Awards may be made under the 2013 Plan for up to 1,713,570 shares of our common stock. The shares of common stock underlying any unexercised award shall again be available for the grant of awards under the 2013 Plan, subject to any limitations under the Code. No participant may be granted awards, over the ten-year term of the 2013 Plan, equating to more than an aggregate of 50% of the shares of common stock available under the 2013 Plan.
Our Board of Directors may grant participants of the 2013 Plan options to purchase our common stock and determine the terms of such options (including the number of shares of common stock to be covered by each option, the exercise price of each option and the conditions and limitations applicable to the exercise of each option). Incentive stock options and nonqualified stock options to purchase common stock may also be awarded under the 2013 Plan. Any incentive stock options that, in the aggregate, become exercisable for the first time in any one calendar year for shares of common stock with an aggregate fair market value of more than $100,000 are deemed to be nonstatutory or nonqualified stock options. These options may not be granted at less than the fair market value of our common stock (or 110% of the fair market value if an incentive stock option is granted to any stockholder who owns beneficially more than 10% of the voting power of all classes of the issued and outstanding stock).
Our Board of Directors may also grant shares of restricted stock or restricted stock units. Participants holding shares of restricted stock are entitled to all ordinary cash dividends paid with respect to such shares unless otherwise provided by our Board of Directors. Further, within 120 days of the termination of a participant’s employment, for any reason, the Company may purchase any shares of unvested restricted stock awards at the lower of the original purchase or issue price to the participant, or the fair market value.
In addition, other stock-based awards including stock appreciation rights, bonus stock, phantom stock awards and stock units may be issued, entitling recipients to receive shares of common stock to be delivered in the future. Such other stock-based awards may be available as a form of payment in the settlement of other awards granted under the 2013 Plan or as payment in lieu of compensation to which a participant is otherwise entitled. The 2013 Plan also provides for substitute awards (the “2013 Substitute Awards”), which may be issued in connection with a merger or acquisition. The 2013 Substitution Awards may substitute any options or other stock or stock-based awards granted by any merged or acquired entity or its affiliate on such terms as our Board of Directors deems appropriate.
In the event of any stock split, reverse stock split, reclassification of shares, spin-off or similar change in capitalization or any dividend or distribution other than an ordinary cash dividend, the number and class of securities, exercise price per share and the terms of each outstanding award are to be adjusted equitably by the Company as determined by our Board of Directors. In the event of a reorganization, merger liquidation or similar transaction, the Board of Directors as the discretion to provide that awards are assumed, substituted, terminated immediately prior to the consummation of such event, declare them exercisable or provide cash consideration for such award.
We have the right to repurchase awards in the event a participant is terminated or leaves the Company, regardless of the reason or cause.
The participants to the 2013 Plan are subject to a lock-up whereby they may not, directly or indirectly, offer, sell, pledge, contract to sell (including any short sale), grant any option to purchase or otherwise dispose of any securities of the Company from the effective date of this registration statement for 180 days, or 90 days in the case of any other follow-on offering.
On February 1, 2016, we granted options to purchase 315,627 shares of common stock at an exercise price of $1.08 per share to certain employees in recognition of their service to our Company. Such granted options are subject to graduated vesting in the following installments on each of the following dates: (i) options to purchase 25% of the shares as of the date of grant and (ii) options to purchase 6.25% shares at the end of each calendar quarter over the three-year period thereafter.
Repricing of Stock Options
In September 2020, our Board of Directors approved the repricing of all outstanding stock options to purchase an aggregate of 1,404,823 shares of common stock at an exercise price of $0.18 per share.
2020 Stock Incentive Plan
We plan to adopt the 2020 Plan prior to the consummation of this offering. The following is summary of the principal features of the 2020 Incentive Plan.
The purpose of the 2020 Plan is to enable us to offer our employees, officers, directors and consultants whose past, present and/or potential future contributions to us have been, are, or will be important to its success, an opportunity to acquire a proprietary interest in our Company. The various types of incentive awards that may be provided under the plan are intended to enable our Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its business.
The 2020 Plan will be administered by the Board of Directors or by a committee of the Board of Directors. The committee will be comprised solely of “non-employee” directors, as defined in Rule 16b-3 under the Exchange Act, as amended. Subject to the provisions of the plan, the committee will determine, among other
things, the persons to whom from time to time awards may be granted, the specific type of awards to be granted, the number of shares subject to each award, share prices, any restrictions or limitations on the awards, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards.
There will be available for issuance shares of common stock, which is % of the issued and outstanding shares of our common stock under the 2020 Plan. Shares of stock subject to other awards that are forfeited or terminated will be available for future award grants under the 2020 Plan. If a holder pays the exercise price of a stock option by surrendering any previously owned shares of common stock or arranges to have the appropriate number of shares otherwise issuable upon exercise withheld to cover the withholding tax liability associated with the stock option exercise, the number of shares available under the plan may be increased by the lesser of (i) the number of such surrendered shares and shares used to pay taxes; and (ii) the number of shares purchased under such stock option.
We may grant awards under the 2020 Plan to employees, officers, directors, and consultants who are deemed to have rendered, or to be able to render, significant services to us and who are deemed to have contributed, or to have the potential to contribute, to its success. An incentive stock option may be granted under the plan only to a person who, at the time of the grant, is an employee of our Company or our subsidiaries.
Options. The 2020 Plan provides both for “incentive” stock options as defined in Section 422 of the Code, and for options not qualifying as incentive options, both of which may be granted with any other stock-based award under the plan. The committee determines the exercise price per share of common stock purchasable under an incentive or non-qualified stock option, which may not be less than 100% of the fair market value on the day of the grant or, if greater, the par value of a share of common stock. However, the exercise price of an incentive stock option granted to a person possessing more than 10% of the total combined voting power of all classes of our stock may not be less than 110% of the fair market value on the date of grant. The aggregate fair market value of all shares of common stock with respect to which incentive stock options are exercisable by a participant for the first time during any calendar year (under all of the plans), measured at the date of the grant, may not exceed $100,000.
An incentive stock option may only be granted within 10 years from the effective date of the 2020 Plan. An incentive stock option may only be exercised within ten years from the date of the grant, or within five years in the case of an incentive stock option granted to a person who, at the time of the grant, owns common stock possessing more than 10% of the total combined voting power of all classes of our stock.
Stock Appreciation Rights. Under the 2020 Plan, we may grant stock appreciation rights to participants who have been, or are being, granted stock options under the plan as a means of allowing the participants to exercise their stock options without the need to pay the exercise price in cash, or we may grant them alone and unrelated to an option. In conjunction with non-qualified stock options, stock appreciation rights may be granted either at or after the time of the grant of the non-qualified stock options. In conjunction with incentive stock options, stock appreciation rights may be granted only at the time of the grant of the incentive stock options. A stock appreciation right entitles the holder to receive a number of shares of common stock having a fair market value equal to the excess fair market value of one share of common stock over the exercise price of the related stock option, multiplied by the number of shares subject to the stock appreciation rights. The granting of a stock appreciation right in tandem with a stock option will not affect the number of shares of common stock available for awards under the plan. In such event, the number of shares available for awards under the plan will, however, be reduced by the number of shares of common stock acquirable upon exercise of the stock option to which the stock appreciation right relates.
Restricted Stock. Under the 2020 Plan, we may award shares of restricted stock either alone or in addition to other awards granted under the plan. The committee determines the persons to whom grants of restricted stock are made, the number of shares to be awarded, the price (if any) to be paid for the restricted stock by the person receiving the stock from us, the time or times within which awards of restricted stock may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the restricted stock awards.
The 2020 Plan will require that all shares of restricted stock awarded to the holder remain in our physical custody until the restrictions have terminated and all vesting requirements with respect to the restricted stock have been fulfilled. We will retain custody of all dividends and distributions made or declared with respect to the restricted stock during the restriction period. A breach of any restriction regarding the restricted stock will cause a forfeiture of the restricted stock and any retained dividends and distributions. Except for the foregoing restrictions, the holder will, even during the restriction period, have all of the rights of a stockholder, including the right to vote the shares.
Restricted Stock Units. Under the 2020 Plan, we may also award restricted stock units. Restricted stock units are the right to receive shares of common stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the committee, which include substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. Restrictions or conditions could also include, but are not limited to, the attainment of performance goals, continuous service with our Company, the passage of time or other restrictions or conditions. The committee determines the persons to whom grants of restricted stock units are made, the number of restricted stock units to be awarded, the time or times within which awards of restricted stock units may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the restricted stock units awards. The value of the restricted stock units may be paid in shares, cash, or a combination of both, as determined by the committee.
Other Stock-Based Awards. Under the 2020 Plan, we may grant other stock-based awards, subject to limitations under applicable law that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed consistent with the purposes of the plan. These other stock-based awards may be in the form of purchase rights, shares of common stock awarded that are not subject to any restrictions or conditions, convertible or exchangeable debentures or other rights convertible into shares of common stock and awards valued by reference to the value of securities of, or the performance of, one of our subsidiaries. These other stock-based awards may include performance shares or options, whose award is tied to specific performance criteria. These other stock-based awards may be awarded either alone, in addition to, or in tandem with any other awards under the 2020 Plan or any of our other plans.
Registration Rights
As of the date of this prospectus, the holders of shares of our common stock, including shares issuable upon the conversion of the preferred stock, Convertible Notes, are entitled to (or we have otherwise granted to certain parties) registration rights. Subject to certain exceptions, we and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including these shares would adversely affect the offering.
Cash Dividends
As of the date of this prospectus, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, the general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Anti-Takeover Effects of Certain Provisions of Our Bylaws
Provisions of our second amended and restated bylaws could make it more difficult to acquire us by means of a merger, tender offer, proxy contest, open market purchases, removal of incumbent directors and otherwise. These provisions, which are summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the
disadvantages of discouraging takeover or acquisition proposals because negotiation of these proposals could result in an improvement of their terms.
Vacancies. Newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled by a majority of the remaining directors on the board.
Bylaws. Our fourth amended and restated certificate of incorporation and second amended and restated bylaws authorizes the board of directors to adopt, repeal, rescind, alter or amend our bylaws without shareholder approval.
Removal. Except as otherwise provided, a director may be removed from office only by the affirmative vote of the holders of not less than a majority of the voting power of the issued and outstanding stock entitled to vote.
Calling of Special Meetings of Stockholders. Our second amended and restated bylaws provide that special meetings of stockholders for any purpose or purposes may be called at any time only by the board of directors or by our Secretary following receipt of one or more written demands from stockholders of record who own, in the aggregate, at least 15% the voting power of our outstanding stock then entitled to vote on the matter or matters to be brought before the proposed special meeting.
Effects of authorized but unissued common stock and blank check preferred stock. One of the effects of the existence of authorized but unissued common stock and undesignated preferred stock may be to enable our board of directors to make more difficult or to discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby to protect the continuity of management. If, in the due exercise of its fiduciary obligations, the board of directors were to determine that a takeover proposal was not in our best interest, such shares could be issued by the board of directors without stockholder approval in one or more transactions that might prevent or render more difficult or costly the completion of the takeover transaction by diluting the voting or other rights of the proposed acquirer or insurgent stockholder group, by putting a substantial voting block in institutional or other hands that might undertake to support the position of the incumbent board of directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.
In addition, our fourth amended and restated certificate of incorporation grants our board of directors’ broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance also may adversely affect the rights and powers, including voting rights, of those holders and may have the effect of delaying, deterring or preventing a change in control of our company.
Cumulative Voting. Our fourth amended and restated certificate of incorporation does not provide for cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors.
Staggered Board. Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. As a result, only a minority of the board of directors will be considered for election at every annual meeting of stockholders, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Choice of Forum
Our second amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for: (i) any
derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of ours or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation, or the bylaws; and (iv) any action asserting a claim governed by the internal affairs doctrine. In addition, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Our second amended and restated bylaws further provide that any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to these forum selection clauses.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, our second amended and restated bylaws provide that the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Indemnification of Directors and Officers
Our fourth amended and restated certificate of incorporation and second amended and restated bylaws provide that, to the fullest extent permitted by the laws of the State of Delaware, any officer or director of our company, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he/she is or was or has agreed to serve at our request as a director, officer, employee or agent of our company, or while serving as a director or officer of our company, is or was serving or has agreed to serve at the request of our company as a director, officer, employee or agent (which includes service as a trustee, partner or manager or similar capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity. For the avoidance of doubt, the foregoing indemnification obligation includes, without limitation, claims for monetary damages against Indemnitee to the fullest extent permitted under Section 145 of the Delaware General Corporation Law as in existence on the date hereof.
The indemnification provided shall be from and against expenses (including attorneys’ fees) actually and reasonably incurred by a director or officer in defending such action, suit or proceeding in advance of its final disposition, upon receipt of an undertaking by or on behalf of such person to repay all amounts advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be indemnified for such expenses under our fourth amended and restated certificate of incorporation and second amended and restated bylaws or otherwise.
To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by any of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.
Transfer Agent
The transfer agent and registrar for our common stock is Continental Stock Transfer & Trust Company. The transfer agent and registrar’s address is 1 State Street 30th Floor, New York, NY 10004. The transfer agent’s telephone is (212) 509-4000.
SHARES ELIGIBLE FOR FUTURE SALE
Shares Eligible for Future Sale
Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options or warrants, or the perception that these sales could occur in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Based on the number of shares of common stock outstanding as of the date of this prospectus, upon the closing of this offering, shares of common stock will be outstanding. All of the shares sold in this offering will be freely tradable unless purchased by our affiliates. shares (representing %) of the common stock outstanding after this offering will be restricted as a result of securities laws, shares (representing %) of the common stock outstanding after this offering will be subject to the lock-up agreements as described below. Following the expiration of the lock-up period, all shares will be eligible for resale pursuant to such registration statement or in compliance with Rule 144 or Rule 701.
Rule 144
In general, under Rule 144 as currently in effect, any person who is or has been an affiliate of ours during the 90 days immediately preceding the sale and who has beneficially owned shares for at least six months is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
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1% of the then-outstanding shares of common stock, which will equal approximately shares immediately after this offering; and
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the average weekly trading volume during the four calendar weeks preceding the sale, subject to the filing of a Form 144 with respect to the sale.
Sales under Rule 144 by our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the 90 days immediately preceding the sale and who has beneficially owned his or her shares for at least six months is entitled to sell his or her shares under Rule 144 without regard to the limitations described above, subject only to the availability of current public information about us during the six months after the initial six-month holding period is met. After a non-affiliate has beneficially owned his or her shares for one year or more, he or she may freely sell his or her shares under Rule 144 without complying with any Rule 144 requirements.
We are unable to estimate the number of shares that will be sold under Rule 144, since this will depend on the market price for our common stock, the personal circumstances of the sellers and other factors. Prior to the offering, there has been no public market for the common stock, and there can be no assurance that a significant public market for the common stock will develop or be sustained after the offering. Any future sale of substantial amounts of the common stock in the open market may adversely affect the market price of the common stock offered by this prospectus.
Rule 701
In general, under Rule 701 under the Securities Act, any of our employees, directors, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock or option plan or other written agreement and in compliance with Rule 701, is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with the various restrictions, including the holding period, contained in Rule 144.
Lock-up Agreements
Pursuant to “lock-up” agreements, we, our executive officers and directors, and all of our other stockholders, have agreed, without the prior written consent of the representative not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of ours or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of six months (nine months in the case of our officers and directors) after the date of this prospectus. The Underwriter may, in its sole discretion, release any of the securities subject to these lock-up agreements at any time.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of certain material U.S. federal income and estate tax consequences to a non-U.S. holder (as defined below) of the purchase, ownership and disposition of our common stock as of the date hereof. Except where noted, this summary deals only with common stock that is held as a capital asset.
A “non-U.S. holder” means a beneficial owner of our common stock (other than an entity treated as a partnership for U.S. federal income tax purposes) that is not, for U.S. federal income tax purposes, any of the following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
This summary is based upon provisions of the Code, and the Treasury Regulations promulgated thereunder, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income and estate tax consequences different from those summarized below. We cannot assure you that such a change in law will not alter significantly the U.S. federal income and estate tax considerations we describe in this summary. This summary does not address all aspects of U.S. federal income and estate taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed description of the U.S. federal income and estate tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws (including if you are a U.S. expatriate, foreign pension fund, financial institution, insurance company, tax-exempt organization, trader, broker or dealer in securities “controlled foreign corporation,” “passive foreign investment company,” a partnership or other pass-through entity for U.S. federal income tax purposes (or an investor in such a pass-through entity), a person who acquired shares of our common stock as compensation or otherwise in connection with the performance of services, or a person who has acquired shares of our common stock as part of a straddle, hedge, conversion transaction or other integrated investment).
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.
If you are considering the purchase of our common stock, you should consult your own tax advisors concerning the particular U.S. federal income and estate tax consequences to you of the purchase, ownership and disposition of our common stock, as well as the consequences to you arising under other U.S. federal tax laws and the laws of any other taxing jurisdiction.
Distributions
As discussed above under “Dividend Policy”, we do not currently anticipate paying cash dividends on shares of our common stock in the foreseeable future. If we make distributions of cash or other property (other than certain pro rata distributions of our stock) in respect of our common stock, the distribution will generally be treated as a dividend for U.S. federal income tax purposes to the extent it is paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any portion of a distribution that exceeds our current and accumulated earnings and profits generally will be treated first as a tax-free return of capital to the extent of the non-U.S. holder’s adjusted tax basis in our
common stock, causing a reduction in the adjusted tax basis of a non-U.S. holder’s common stock, but not below zero. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits and a non-U.S. holder’s adjusted basis in our common stock, the excess will be treated as described below under “— Gain on Disposition of Common Stock.”
Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment of the non-U.S. holder) are not subject to such withholding tax, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a “United States person” as defined under the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to provide the applicable withholding agent with a properly executed Internal Revenue Service Form W-8BEN or Form W-8BEN-E (or other applicable form) certifying under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our common stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.
A non-U.S. holder of our common stock eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service. Non-U.S. holders are urged to consult their own tax advisors regarding their entitlement to the benefits under any applicable income tax treaty.
Gain on Disposition of Common Stock
Subject to the discussion of backup withholding below, any gain realized by a non-U.S. holder on the sale or other taxable disposition of our common stock generally will not be subject to U.S. federal income tax unless:
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the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder);
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the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition, and certain other conditions are met; or
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we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes and certain other conditions are met.
A non-U.S. holder described in the first bullet point immediately above will be subject to tax on the gain derived from the sale under regular graduated U.S. federal income tax rates. In addition, if any non-U.S. holder described in the first bullet point immediately above is a foreign corporation, the gain realized by such non-U.S. holder may be subject to the branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty). An individual non-U.S. holder described in the second bullet point immediately above will be subject to a tax equal to 30% (or such lower rate as may be specified by an applicable income tax treaty) on the gain derived from the sale, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States, provided that the individual has timely filed U.S. federal income tax returns with respect to such losses.
We believe we are not, and have not been at any time since formation, and do not anticipate becoming a “United States real property holding corporation” for U.S. federal income tax purposes.
Federal Estate Tax
Common stock held by an individual non-U.S. holder at the time of death will be included in such holder’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of distributions paid to such holder and the tax withheld with respect to such distributions, regardless of whether withholding was required. Copies of the information returns reporting such distributions and any withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.
A non-U.S. holder will not be subject to backup withholding on dividends received if such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a U.S. person as defined under the Code), or such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition of our common stock made within the United States or conducted through certain U.S.-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person as defined under the Code), or such owner otherwise establishes an exemption.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.
Additional Withholding Requirements
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), a 30% U.S. federal withholding tax may apply to any dividends paid on our common stock to (i) a “foreign financial institution” (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental agreement with the United States) in a manner which avoids withholding, or (ii) a “non-financial foreign entity” (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) adequate information regarding certain substantial U.S. beneficial owners of such entity (if any). If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under “— Distributions,” the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. While withholding under FATCA would have also applied to payments of gross proceeds from the sale or other disposition of our common stock on or after January 1, 2019, recently proposed Treasury Regulations eliminate such withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. You should consult your own tax advisors regarding these requirements and whether they may be relevant to your ownership and disposition of our common stock.
UNDERWRITING
ThinkEquity, a division of Fordham Financial Management, Inc., is acting as representative of the underwriters. Subject to the terms and conditions of an underwriting agreement between us and the representative, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:
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Underwriters
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Number of Shares
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ThinkEquity, a division of Fordham Financial Management, Inc.
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Total
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The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to various conditions and representations and warranties, including the approval of certain legal matters by their counsel and other conditions specified in the underwriting agreement. The shares of common stock are offered by the underwriters, subject to prior sale, when, as and if issued to and accepted by them. The underwriters reserve the right to withdraw, cancel or modify the offer to the public and to reject orders in whole or in part. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares of common stock are taken, other than those shares of common stock covered by the over-allotment option described below.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
Over-Allotment Option
We have granted a 45-day option to the representative of the underwriters to purchase up to additional shares of our common stock at a public offering price of $ per share, solely to cover over-allotments, if any. The underwriters may exercise this option for 45 days from the date of this prospectus solely to cover sales of shares of common stock by the underwriters in excess of the total number of shares of common stock set forth in the table above. If any of these additional shares are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
Discounts and Commissions
The underwriters propose initially to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at those prices less a concession not in excess of $ per share of common stock. If all of the shares of common stock offered by us are not sold at the public offering price, the underwriters may change the offering price and other selling terms by means of a supplement to this prospectus.
The following table shows the public offering price, underwriting discounts and commissions and proceeds before expenses to us. The information assumes either no exercise or full exercise of the over-allotment option we granted to the representative of the underwriters.
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Total
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Per Share
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Without Over-Allotment
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With Over-Allotment
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Public offering price
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$
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Underwriting discount (7.5%)
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$
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Proceeds, before expenses, to us
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$
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We have agreed to pay a non-accountable expense allowance to the representative of the underwriters equal to 1% of the gross proceeds received at the closing of the offering. The non-accountable expense allowance of 1% is not payable with respect to the shares sold upon exercise of the underwriters’ over-allotment option. We have paid an expense deposit of $40,000 to the representative, which will be applied against the out-of-pocket accountable expenses that will be paid by us to the underwriters in connection with this offering, and will be reimbursed to us to the extent not actually incurred in compliance with FINRA Rule 5110(f)(2)(C).
We have also agreed to pay certain of the representative’s expenses relating to the offering, including (a) filing fees associated with the review of the offering by FINRA; (b) all fees and expenses relating to the listing of such public securities on the , including any fees charges by The Depository Trust for new securities; (c) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors in an amount not to exceed $15,000 in the aggregate; (d) all fees, expenses and disbursements relating to the registration or qualification of the public securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including external attorneys’ fees (such fees not to exceed $20,000); (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the public securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (f) the costs associated with post-Closing advertising the offering in the national editions of the Wall Street Journal and New York Times; (g) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and Lucite tombstones, each of which the Company or its designee shall provide within a reasonable time after the Closing Date in such quantities as the Representative may reasonably request, in an amount not to exceed $3,000; (h) fees and expenses of the Representative’s legal counsel not to exceed $125,000; (i) a $29,500 cost associated with the Underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the Offering; (j) $10,000 for data services and communications expenses; and (k) up to $20,000 of the Underwriters’ actual accountable “road show” expenses for the offering.
Our total estimated expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions, are approximately $ .
Representative’s Warrants
Upon closing of this offering, we have agreed to issue to the representative as compensation warrants to purchase up to shares of common stock (4% of the aggregate number of shares of common stock sold in this offering exclusive of the overallotment option, or the representative’s warrants). The representative’s warrants will be exercisable at a per share exercise price equal to 125% of the public offering price per share in this offering (excluding the over-allotment option). The representative’s warrants 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 registration statement of which this prospectus is a part.
The representative’s warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The representative (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the registration statement. In addition, the warrants provide for registration rights upon request, in certain cases. The demand registration right provided will not be greater than five years from the effective date of the registration statement in compliance with FINRA Rule 5110(f)(2)(G)(iv). The piggyback registration right provided will not be greater than seven years from the effective date of the registration statement in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant
exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Lock-Up Agreements
Pursuant to “lock-up” agreements, we, our executive officers and directors, and all of our other stockholders, have agreed, without the prior written consent of the representative not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of ours or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of six months (nine months in the case of our officers and directors) after the date of this prospectus. The Underwriter may, in its sole discretion, release any of the securities subject to these lock-up agreements at any time.
Right of First Refusal
Until eighteen months from the closing date of this offering, the representative will have an irrevocable right of first refusal, in its sole discretions, to act as sole investment banker, sole book-runner, and/or sole placement agent participation at the representative’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financings on terms customary to the representative. The representative will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation. The representative will not have more than one opportunity to waive or terminate the right of first refusal in consideration of any payment or fee.
On September 16, 2020, we engaged Think Equity to provide financial advisory services in connection with a proposed debt financing. The agreement provides that if we complete a debt financing during the term of the agreement, we shall pay to Think Equity a debt financing fee equal to 3% of the total credit facility and issue to Think Equity a number of debt financing warrants equal to 3.5% of a fraction, the numerator of which is the size of the credit facility and the denominator of which is equal to the exercise price. The debt financing warrants shall have the same terms, including the exercise price, as any warrants issued to investors ion the debt financing. In the event warrants are not issued in the debt financing, the exercise price shall be equal to the per share price paid by investors in our most recent equity financing, which is $2,52019 per share. Think Equity would also be entitled to receive the debt financing fee and debt financing warrants with respect to any subsequent financing the company receives from an investor within 12 months from the initial financing by such investor. We will reimburse Think Equity for its reasonable out-of-pocket expenses in connection with such engagement, which shall not exceed $1,000 without the written consent of the company. We paid to Think Equity a non-refundable retainer fee, which shall be applied to reduce any fees payable at closing of a debt financing.
Determination of Offering Price
The public offering price of the securities we are offering was negotiated between us and the underwriters. Factors considered in determining the public offering price of the shares include the history and prospects of the Company, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Other
From time to time, certain of the underwriters and/or their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive customary fees. In the
course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection with this offering, no underwriter has provided any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus and we do not expect to retain any underwriter to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. Specifically, the underwriters may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of shares of common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of common stock involved is greater than the number of shares common stock in the over-allotment option. To close out a short position, the underwriters may elect to exercise all or part of the over-allotment option. The underwriters may also elect to stabilize the price of our common stock or reduce any short position by bidding for, and purchasing, common stock in the open market.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing shares of common stock in this offering because the underwriter repurchases the shares of common stock in stabilizing or short covering transactions.
Finally, the underwriters may bid for, and purchase, shares of our common stock in market making transactions, including “passive” market making transactions as described below.
These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities and may discontinue any of these activities at any time without notice. These transactions may be affected on the national securities exchange on which our shares of common stock are traded, in the over-the-counter market, or otherwise.
Indemnification
We have agreed to indemnify the underwriters against liabilities relating to this offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.
Electronic Distribution
This prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Selling Restrictions
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of our common stock, or the possession, circulation or distribution of this prospectus or any other material relating to us or our common stock in any jurisdiction where action for that purpose is required.
Accordingly, our common stock may not be offered or sold, directly or indirectly, and this prospectus or any other offering material or advertisements in connection with our common stock may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each a “Relevant Member State”, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, or the “Relevant Implementation Date”, our securities will not be offered to the public in that Relevant Member State prior to the publication of a prospectus in relation to our securities that has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of our securities may be made to the public in that Relevant Member State at any time:
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to any legal entity that is a qualified investor as defined in the Prospectus Directive;
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to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the manager for any such offer; or
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in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3(2) of the Prospectus Directive, provided that no such offer of the securities shall require the issuer or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive
For the purposes of this provision, the expression an “offer of securities to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and securities to be offered so as to enable an investor to decide to purchase or subscribe securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
In the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order), and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together, the relevant persons). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Canada
The offering of our common stock in Canada is being made on a private placement basis in reliance on exemptions from the prospectus requirements under the securities laws of each applicable Canadian province and territory where our common stock may be offered and sold, and therein may only be made with investors that are purchasing, or deemed to be purchasing, as principal and that qualify as both an
“accredited investor” as such term is defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario) and as a “permitted client” as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any offer and sale of our common stock in any province or territory of Canada may only be made through a dealer that is properly registered under the securities legislation of the applicable province or territory wherein our common stock is offered and/or sold or, alternatively, where such registration is not required.
Any resale of our common stock by an investor resident in Canada must be made in accordance with applicable Canadian securities laws, which require resales to be made in accordance with an exemption from, or in a transaction not subject to, prospectus requirements under applicable Canadian securities laws. These resale restrictions may under certain circumstances apply to resales of the common stock outside of Canada.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Upon receipt of this prospectus, each Québec investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur québecois confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.
LEGAL MATTERS
Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel in connection with the registration of our securities under the Securities Act, and as such, will pass upon the validity of the securities offered in this prospectus. Certain legal matters will be passed upon on behalf of the underwriters by Blank Rome LLP, New York, New York.
EXPERTS
The consolidated financial statements of iSpecimen Inc. as of and for the year ended December 31, 2019 and 2018 included in this prospectus and registration statement have been audited by Wolf & Company, P.C., an independent registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration statement, which report expresses an unqualified opinion on the financial statements and includes an explanatory paragraph referring to substantial doubt that exists regarding the ability of the Company to continue as a going concern. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed with the registration statement. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits filed with the registration statement. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC also maintains an internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
Upon the closing of this offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. These reports, proxy statements, and other information will be available on the website of the SEC referred to above.
We also maintain a website at www.ispecimen.com, through which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or accessed through our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
Index to Financial Statements
iSpecimen Inc.
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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F-27
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F-28
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F-29
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F-30
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F-31
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of iSpecimen Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of iSpecimen Inc. (the “Company”) as of December 31, 2019 and 2018, the related statements of operations, changes in stockholders’ deficit and cash flows for the years then ended, and the related notes to the financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of a Matter Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and its total liabilities exceed its total assets. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
November 19, 2020
We have served as the Company’s auditor since 2014.
iSpecimen Inc.
Balance Sheets
|
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
53,893
|
|
|
|
|
$
|
1,130,364
|
|
|
|
Accounts receivable
|
|
|
|
|
833,580
|
|
|
|
|
|
1,025,833
|
|
|
|
Accounts receivable – unbilled
|
|
|
|
|
454,576
|
|
|
|
|
|
—
|
|
|
|
Inventory
|
|
|
|
|
54,908
|
|
|
|
|
|
47,287
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
79,227
|
|
|
|
|
|
100,018
|
|
|
|
Tax credit receivable, current portion
|
|
|
|
|
104,478
|
|
|
|
|
|
—
|
|
|
|
Total current assets
|
|
|
|
|
1,580,662
|
|
|
|
|
|
2,303,502
|
|
|
|
Property and equipment, net
|
|
|
|
|
119,921
|
|
|
|
|
|
149,098
|
|
|
|
Internally developed software, net
|
|
|
|
|
2,306,882
|
|
|
|
|
|
1,437,425
|
|
|
|
Tax credit receivable, net of current portion
|
|
|
|
|
179,522
|
|
|
|
|
|
127,000
|
|
|
|
Security deposits
|
|
|
|
|
27,601
|
|
|
|
|
|
27,601
|
|
|
|
Total assets
|
|
|
|
$
|
4,214,588
|
|
|
|
|
$
|
4,044,626
|
|
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
737,794
|
|
|
|
|
$
|
696,912
|
|
|
|
Accrued expenses
|
|
|
|
|
471,348
|
|
|
|
|
|
291,759
|
|
|
|
Accrued interest
|
|
|
|
|
1,745,515
|
|
|
|
|
|
573,156
|
|
|
|
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs
|
|
|
|
|
5,350,278
|
|
|
|
|
|
4,801,189
|
|
|
|
Derivative liability for embedded conversion features
|
|
|
|
|
2,214,000
|
|
|
|
|
|
2,765,000
|
|
|
|
Bridge notes payable, net of debt issuance costs
|
|
|
|
|
3,586,326
|
|
|
|
|
|
1,117,286
|
|
|
|
Bridge notes payable, related parties
|
|
|
|
|
1,655,000
|
|
|
|
|
|
1,050,000
|
|
|
|
Total current liabilities
|
|
|
|
|
15,760,261
|
|
|
|
|
|
11,295,302
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, $0.0001 par value, 3,200,000 shares authorized, 3,174,363 shares issued and outstanding at December 31, 2019 and 2018 (preference in liquidation of $10,122,925)
|
|
|
|
|
7,999,997
|
|
|
|
|
|
7,999,997
|
|
|
|
Series A-1 convertible preferred stock, $0.0001 par value, 556,550 shares authorized, 556,540 issued and outstanding at December 31, 2019 and 2018 (preference in liquidation of $746,415)
|
|
|
|
|
561,041
|
|
|
|
|
|
561,041
|
|
|
|
Series A convertible preferred stock, $0.0001 par value, 3,427,871 shares authorized, issued and outstanding at December 31, 2019 and 2018 (preference in liquidation of $3,778,652)
|
|
|
|
|
2,612,038
|
|
|
|
|
|
2,612,038
|
|
|
|
Total convertible preferred stock
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 16,000,000 shares authorized, 5,363,365
and 5,360,240 issued and outstanding at December 31, 2019 and 2018
|
|
|
|
|
537
|
|
|
|
|
|
537
|
|
|
|
Additional paid-in capital
|
|
|
|
|
1,686,389
|
|
|
|
|
|
1,322,336
|
|
|
|
Treasury stock, 171,908 shares at December 31, 2019 and 2018, at cost
|
|
|
|
|
(172)
|
|
|
|
|
|
(172)
|
|
|
|
Accumulated deficit
|
|
|
|
|
(24,405,503)
|
|
|
|
|
|
(19,746,453)
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(22,718,749)
|
|
|
|
|
|
(18,423,752)
|
|
|
|
Total liabilities, convertible preferred stock and stockholders’ deficit
|
|
|
|
$
|
4,214,588
|
|
|
|
|
$
|
4,044,626
|
|
|
See the accompanying notes to the financial statements.
iSpecimen Inc.
Statements of Operations
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
Revenue
|
|
|
|
$
|
4,298,350
|
|
|
|
|
$
|
4,394,818
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
2,127,900
|
|
|
|
|
|
2,362,495
|
|
|
|
Technology
|
|
|
|
|
993,329
|
|
|
|
|
|
1,210,079
|
|
|
|
Sales and marketing
|
|
|
|
|
1,413,059
|
|
|
|
|
|
1,313,881
|
|
|
|
Supply development
|
|
|
|
|
792,778
|
|
|
|
|
|
673,439
|
|
|
|
Fulfillment
|
|
|
|
|
914,633
|
|
|
|
|
|
736,799
|
|
|
|
General and administrative
|
|
|
|
|
1,936,740
|
|
|
|
|
|
1,454,426
|
|
|
|
Total operating expenses
|
|
|
|
|
8,178,439
|
|
|
|
|
|
7,751,119
|
|
|
|
Loss from operations
|
|
|
|
|
(3,880,089)
|
|
|
|
|
|
(3,356,301)
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,724,450)
|
|
|
|
|
|
(1,214,983)
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
551,000
|
|
|
|
|
|
(946,000)
|
|
|
|
Other income
|
|
|
|
|
168,859
|
|
|
|
|
|
41,733
|
|
|
|
Interest income
|
|
|
|
|
630
|
|
|
|
|
|
1,499
|
|
|
|
Other expense, net
|
|
|
|
|
(1,003,961)
|
|
|
|
|
|
(2,117,751)
|
|
|
|
Net loss before benefit from income taxes
|
|
|
|
|
(4,884,050)
|
|
|
|
|
|
(5,474,052)
|
|
|
|
Benefit from income taxes
|
|
|
|
|
157,000
|
|
|
|
|
|
127,000
|
|
|
|
Net loss
|
|
|
|
$
|
(4,727,050)
|
|
|
|
|
$
|
(5,347,052)
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
$
|
(0.91)
|
|
|
|
|
$
|
(1.03)
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
|
5,190,810
|
|
|
|
|
|
5,196,485
|
|
|
See the accompanying notes to the financial statements.
iSpecimen Inc.
Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit
|
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series A-1
Convertible
Preferred Stock
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Balance at January 1, 2018
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,359,115
|
|
|
|
|
$
|
537
|
|
|
|
|
|
130,954
|
|
|
|
|
$
|
(131)
|
|
|
|
|
$
|
1,207,200
|
|
|
|
|
$
|
(14,399,401)
|
|
|
|
|
$
|
(13,191,795)
|
|
|
|
Issuance of common
stock through
exercise of stock
options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
1,125
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,215
|
|
|
|
|
|
—
|
|
|
|
|
|
1,215
|
|
|
|
Repurchase of
restricted common
stock
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
40,954
|
|
|
|
|
|
(41)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(41)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
113,921
|
|
|
|
|
|
—
|
|
|
|
|
|
113,921
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(5,347,052)
|
|
|
|
|
|
(5,347,052)
|
|
|
|
Balance at December 31, 2018
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,360,240
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,322,336
|
|
|
|
|
$
|
(19,746,453)
|
|
|
|
|
$
|
(18,423,752)
|
|
|
|
Cumulative effect from adoption of ASC 606
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
68,000
|
|
|
|
|
|
68,000
|
|
|
|
Issuance of common
stock through
exercise of stock
options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
3,125
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,674
|
|
|
|
|
|
—
|
|
|
|
|
|
3,674
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
360,379
|
|
|
|
|
|
—
|
|
|
|
|
|
360,379
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(4,727,050)
|
|
|
|
|
|
(4,727,050)
|
|
|
|
Balance at December 31, 2019
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,686,389
|
|
|
|
|
$
|
(24,405,503)
|
|
|
|
|
$
|
(22,718,749)
|
|
|
See the accompanying notes to the financial statements.
iSpecimen Inc.
Statements of Cash Flows
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(4,727,050)
|
|
|
|
|
$
|
(5,347,052)
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
360,379
|
|
|
|
|
|
113,921
|
|
|
|
Amortization of internally developed software
|
|
|
|
|
577,605
|
|
|
|
|
|
438,007
|
|
|
|
Depreciation and amortization of property and equipment
|
|
|
|
|
57,360
|
|
|
|
|
|
31,166
|
|
|
|
Amortization of discount and debt issuance costs on convertible notes
|
|
|
|
|
551,993
|
|
|
|
|
|
767,716
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
(551,000)
|
|
|
|
|
|
946,000
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
192,253
|
|
|
|
|
|
(393,192)
|
|
|
|
Accounts receivable – unbilled
|
|
|
|
|
(305,576)
|
|
|
|
|
|
—
|
|
|
|
Inventory
|
|
|
|
|
(7,621)
|
|
|
|
|
|
(12,663)
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
20,791
|
|
|
|
|
|
17,212
|
|
|
|
Tax credit receivable
|
|
|
|
|
(157,000)
|
|
|
|
|
|
(127,000)
|
|
|
|
Accounts payable
|
|
|
|
|
40,882
|
|
|
|
|
|
584,051
|
|
|
|
Accrued expenses
|
|
|
|
|
94,725
|
|
|
|
|
|
(147,178)
|
|
|
|
Accrued interest
|
|
|
|
|
1,172,359
|
|
|
|
|
|
447,263
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
(2,679,900)
|
|
|
|
|
|
(2,681,749)
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
(28,183)
|
|
|
|
|
|
(55,958)
|
|
|
|
Capitalization of internally developed software
|
|
|
|
|
(1,447,062)
|
|
|
|
|
|
(969,679)
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1,475,245)
|
|
|
|
|
|
(1,025,637)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible notes payable
|
|
|
|
|
—
|
|
|
|
|
|
1,350,000
|
|
|
|
Proceeds from issuance of bridge notes payable
|
|
|
|
|
3,075,000
|
|
|
|
|
|
2,175,000
|
|
|
|
Payment of debt issuance costs
|
|
|
|
|
—
|
|
|
|
|
|
(10,868)
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
3,674
|
|
|
|
|
|
1,215
|
|
|
|
Repurchase of restricted common stock
|
|
|
|
|
—
|
|
|
|
|
|
(41)
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
3,078,674
|
|
|
|
|
|
3,515,306
|
|
|
|
Net decrease in cash
|
|
|
|
|
(1,076,471)
|
|
|
|
|
|
(192,080)
|
|
|
|
Cash at beginning of period
|
|
|
|
|
1,130,364
|
|
|
|
|
|
1,322,444
|
|
|
|
Cash at end of period
|
|
|
|
$
|
53,893
|
|
|
|
|
$
|
1,130,364
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Income taxes paid
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance cost included in accrued expenses
|
|
|
|
$
|
(3,862)
|
|
|
|
|
$
|
—
|
|
|
|
Derivative liability for embedded conversion features on convertible notes issued
|
|
|
|
$
|
—
|
|
|
|
|
$
|
314,000
|
|
|
See the accompanying notes to the financial statements.
iSpecimen, Inc.
Notes to Financial Statements
Years Ended December 31, 2019 and 2018
1.
NATURE OF 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 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.
Liquidity and Going Concern
The Company has recognized recurring losses. At December 31, 2019, the Company had a working capital deficit of $14,179,599, an accumulated deficit of $24,405,503, cash of $53,893 and accounts payable and accrued expenses of $1,209,142. Since inception, the Company has relied upon raising capital to finance operations and at December 31, 2019, the Company did not have sufficient capital to fund its operations.
The future success of the Company is dependent on its ability to successfully obtain additional working capital and to ultimately attain profitable operations. In addition, the Company plans to add additional customers and suppliers to increase revenue and to manage expenditures to improve its financial position and fund operations. The Company may seek to fund its operations through public equity, private equity, or debt financings, as well as other sources. The Company may obtain and renegotiate debt financing to support operations. However, the Company may be unable to raise additional capital, or if it is able to raise additional capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital, or enter into such other arrangements if and when needed, 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. However, as certain elements of the Company’s operating plan are outside of the Company’s control, they cannot be considered probable. If the Company does not receive additional capital from future anticipated capital raises, its business plan will be scaled down.
These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the conditions that raise substantial doubt include delaying certain projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern.
The accompanying 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 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
Basis of Presentation
The Company’s financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Use of Estimates
The preparation of the Company’s 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 fair value of its common stock and warrants, deferred tax valuation allowances, revenue recognition, share-based compensation, and accrued expenses. 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.
Off-Balance Sheet Risk and Concentrations of Credit Risk
The Company has no significant off-balance sheet risks, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Cash accounts are maintained at financial institutions that potentially subject the Company to concentrations of credit risk. At December 31, 2019 and 2018, substantially all of the Company’s cash was deposited in accounts at one financial institution. The Company maintains its cash deposits, which at times may exceed the federally insured limits, with a reputable financial institution and, accordingly, the Company believes such funds are subject to minimal credit risk.
Concentration of credit risk with respect to accounts receivable is typically related to customers who account for a significant portion of revenue. During 2019, three customers represented approximately 20%, 11%, and 10% of the Company’s 2019 revenues and comprised 4%, 44%, and 1% of accounts receivable and 0%, 0%, and 0% of accounts receivable — unbilled at December 31, 2019. Two customers represented approximately 18% and 13% of the Company’s 2018 revenue and comprised 8% and 1% of accounts receivable and 0% and 0% of accounts receivable — unbilled at December 31, 2018. During the years ended December 31, 2019 and 2018, revenue attributable to customers located in foreign countries is approximately 23% and 2% of revenue, respectively. During the years ended December 31, 2019 and 2018, accounts receivable attributable to customers located in foreign countries is approximately 5% and 18% of accounts receivable, respectively. During the years ended December 31, 2019 and 2018, accounts receivable — unbilled attributable to customers located in foreign countries is approximately 17% and 0% of accounts receivable — unbilled, respectively.
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 our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
For certain financial instruments, including cash, accounts receivable, accounts receivable — unbilled, and accounts payable, the carrying amounts approximate their fair values as of December 31, 2019 and 2018 because of their short-term nature. The liability in connection with conversion features included within
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
certain of the Company’s convertible notes payable is classified as a derivative liability for embedded conversion features on the balance sheets and is considered to be a Level 3 liability.
Derivative Liability for Embedded Conversion Features
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
The Company evaluates its convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for separately. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other bifurcated embedded derivative instruments in the convertible instrument, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market each balance sheet date, with the change in fair value recorded in the statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
Recent Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are generally adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
Accounting Standards Adopted
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASC 2016-15”), which provides guidance on the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. The standard requires the use of a retrospective approach to all periods presented but may be applied prospectively if retrospective application would be impracticable. The guidance is effective for public entities for fiscal years beginning after December 15, 2017 and interim periods within those years, and after December 31, 2018 and interim periods beginning after December 31, 2019 for all other entities. Early adoption is permitted. The Company adopted this standard effective January 1, 2019. The adoption of ASU 2016-15 did not have a material effect on the Company’s financial statements.
In June 2014, the FASB issued amended guidance, ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The new guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. The Company adopted the new standard, effective January 1, 2019, under the modified retrospective method only to contracts that are not completed as of the adoption date. The Company applied the practical expedient to account for shipping and handling activities
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
as fulfillment cost rather than as a separate performance obligation. Shipping and handling costs incurred are included in cost of revenue. The impact of the standard as of January 1, 2019 had a transition impact to the opening balance of retained earnings of approximately $68,000. The adoption of ASU 2014-09 in 2019 resulted in an increase to revenue of approximately $306,000 due to revenues being recognized upon specimen collection rather than upon shipment. The cumulative effect of this change in accounting method as defined by ASC 606, is presented below:
|
|
|
|
Balance at
December 31, 2018
|
|
|
Adjustments
|
|
|
Balance at
January 1, 2019
|
|
|
Accounts receivable – unbilled
|
|
|
|
$
|
—
|
|
|
|
|
$
|
149,000
|
|
|
|
|
$
|
149,000
|
|
|
|
Accrued expenses
|
|
|
|
$
|
291,759
|
|
|
|
|
$
|
81,000
|
|
|
|
|
$
|
372,759
|
|
|
|
Accumulated deficit
|
|
|
|
$
|
(19,746,453)
|
|
|
|
|
$
|
68,000
|
|
|
|
|
$
|
(19,678,453)
|
|
|
In June 2018, the FASB issued ASU 2018-07, Compensation — Stock Compensation: Improvements to Nonemployee Share Based Payment Accounting (“ASU 2018-17”), which simplifies the accounting for share based payments granted to nonemployees for goods and services. Under ASU 2018-17, most of the guidance on such payments to nonemployees would be aligned with the requirements for share based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606. The Company adopted ASU 2018-07 on a prospective basis as of January 1, 2019 and the adoption did not have a material impact upon the Company’s financial statements.
Accounting Standards Issued, Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02” or “Topic 842”), which applies to all leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases. ASU 2016-02 is effective for public entities for fiscal years beginning after December 15, 2018 and interim periods within those years, and after December 15, 2020 and interim periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. On June 3, 2020, the FASB issued ASU No. 2020-05, which amends the effective dates of Topic 842 to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. Specifically, the FASB deferred the effective dates of Topic 842 for private companies. The deferrals apply only if an entity has not yet issued their financial statements (or made their financial statements available for issuance) as of June 3, 2020. The effective date of Topic 842 as amended by ASU No. 2020-05 is for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and total liabilities that the Company reports relative to such amounts prior to adoption. The Company is expected to adopt this new standard as of January 1, 2022.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, that 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
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
beginning after December 15, 2022. The Company is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of January 1, 2023.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which modifies ASC 740 to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 is effective for the Company for interim and annual reporting periods beginning after December 15, 2021. The Company is currently assessing the impact of ASU 2019-12, but it is not expected to have a material impact on the Company’s financial statement.
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 is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of January 1, 2024.
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 comprising our network, and delivering them to its medical research customers using its proprietary software to identify and locate the required specimens. The Company does not charge suppliers or customers for the use of their proprietary online marketplace platform. Each customer will execute a material and data use agreement with the Company or agrees to online purchase terms, both of which includes customer rights, specimen collection period, payment and cancellation terms. These are then supplemented by subsequent statements of work and/or purchase orders that further 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.
The Company has evaluated principal verses agent considerations as part of its revenue recognition policy. The Company has concluded that its role in procuring specimens for its customers, which is the only performance obligation in a customer contract, is that of a principal as the Company sets the prices for the specimens, controls the collection of the specimens being provided prior to transferring control to the customer, and bears the responsibility for customer credit risk associated with selling specimens to customers.
The Company reviews a contract and related orders upon receipt to determine if the specimens ordered have an alternative use by the Company. Generally, specimens ordered do not have an alternative future use by the Company and the performance obligation is satisfied when the related specimens are collected. In the rare circumstances where specimens do have an alternative future use, the Company’s performance obligation is satisfied at the time of shipment. The Company uses the output method to recognize revenue for specimens collected with no alternative future use. The output method is measured based on the number of specimens collected. The Company has an enforceable right to payment when specimens are collected.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Customers are typically 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 collected over time. However, specimens are generally shipped as soon as possible after they have been collected.
Specimen collection and delivery frequently occur in the same accounting period. For a specimen which has no alternative future use, and for which the Company has an enforceable right to payment, that has been collected but not shipped, the Company records the offset to revenue in accounts receivable — unbilled. Once the specimens have 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 has occurred, the Company has given 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 years ended December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Specimens – contracts with customers
|
|
|
|
$
|
4,215,002
|
|
|
|
|
$
|
4,304,376
|
|
|
|
Shipping and other
|
|
|
|
|
83,348
|
|
|
|
|
|
90,442
|
|
|
|
Revenue
|
|
|
|
$
|
4,298,350
|
|
|
|
|
$
|
4,394,818
|
|
|
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 December 31, 2019, and 2018, management has determined that no allowance for doubtful accounts was necessary.
Inventory
Inventory, consisting of specimens, is stated at the lower of cost or net realizable value. Cost is determined using the specific identification method. The Company takes possession of specimens in limited circumstances. The reserve for obsolete inventory is based on management’s analysis of historical and expected sales and required usage dates. There was no reserve for excess or obsolete inventory at December 31, 2019 and 2018.
Property and Equipment, net
Property and equipment are stated at cost, net of accumulated depreciation and amortization. When an item is sold or retired, the costs and related accumulated depreciation or amortization are eliminated, and the resulting gain or loss, if any, is credited or charged to income in the statement of operations. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the respective assets. A summary of estimated useful lives is as follows:
|
Asset category
|
|
|
Estimated Useful Life
|
|
|
Website
|
|
|
3 years
|
|
|
Computer equipment and purchased software
|
|
|
5 years
|
|
|
Equipment
|
|
|
5 years
|
|
|
Furniture and fixtures
|
|
|
5 years
|
|
|
Leasehold improvements
|
|
|
Shorter of useful life of asset or lease term
|
|
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Major improvements are capitalized while replacement, maintenance and repairs which do not improve or extend the lives of the respective assets are expensed as incurred.
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 and 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 and internal-use software. No impairment charges were recorded for the years ended December 31, 2019 and 2018.
Debt Issuance Costs
Debt issuance costs are recorded net against the related debt and amortized to interest expense over the life of the related debt. During the years ended December 31, 2019 and 2018, amortized debt issuance costs of $7,252 and $0, respectively, were recorded as a component of interest expense.
Cost of Revenue
Cost of revenue primarily consists of the purchase price to acquire specimens from hospitals and laboratories; inbound and outbound shipping costs; supply costs related to samples; payment processing and related transaction costs; and costs paid to the supply sites to support sample collections. Shipping costs upon receipt of products from suppliers are recognized in cost of revenue. For the year ended December 31, 2019, the Company acquired approximately 22%, 10%, and 10% of specimens from three vendors. For the year ended December 31, 2018, the Company acquired approximately 13% of specimens from one vendor.
Technology
Technology costs include payroll and related expenses for employees involved in the development and implementation of iSpecimen’s technology; software license and system maintenance fees; outsourced data center costs; data management costs; depreciation and amortization; and other expenses necessary to support technology initiatives. Collectively, these costs reflect the investments the Company makes in order to offer a wide variety of products and services to customers. Technology and data costs are generally expensed as incurred.
A portion of technology costs are related to research and development. Costs incurred for research and development are expensed as incurred, except for software development costs that are eligible for capitalization. Research and development costs primarily include salaries and related expenses, in addition to the cost of external service providers. For the years ended December 31, 2019 and 2018, research and development costs totaled $155,244 and $506,038, respectively.
Sales and Marketing
Sales and marketing costs primarily consist of payroll and related expenses for personnel engaged in marketing and selling activities, including salaries and sales commissions; travel expenses; public relations and social media costs; ispecimen.com website development and maintenance costs; search engine
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
optimization fees; advertising costs; direct marketing costs; trade shows and events fees; marketing and customer relationship management software; and other marketing-related costs. Advertising expenses consist primarily of marketing, public relations, and promotional materials. Advertising costs are expensed as incurred and totaled $168,115 and $157,054 for the years ended December 31, 2019 and 2018, respectively.
Supply Development
The Company has agreements with supply partners that allow the Company to procure specimens from them and distribute these samples to customers. Supply development costs primarily include payroll and related expenses for personnel engaged in the development and management of this supply network; related travel expenses; regulatory compliance costs to support the network; and other supply development and management costs.
Fulfillment
Fulfillment costs primarily consist of those costs incurred in operating and staffing operations and customer service teams, including costs attributable to assess the feasibility of specimen requests; creating and managing orders; picking, packaging, and preparing customer orders for shipment; responding to inquiries from customers; and laboratory equipment and supplies.
General and Administrative
General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses for human resources, legal, finance, and executive teams; associated software licenses; facilities and equipment expenses, such as depreciation and amortization expense and rent, outside legal expenses, insurance costs, and other general and administrative costs.
Share-Based Compensation
The Company records share-based compensation for options granted to employees, non-employees, and to members of the board of directors for their services on the board of directors 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. In order to determine the fair value of the Company’s common stock, the Company considered, among other things, contemporaneous valuations of the Company’s common stock, the Company’s business, financial condition and results of operations, including related industry trends affecting its operations; the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale, given prevailing market conditions; the lack of marketability of the Company’s common stock; the market performance of comparable publicly traded companies; and U.S. and global economic and capital market conditions. 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 share-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 share-based awards. The risk-free interest rate is determined by reference to U.S. Treasury
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
Income Taxes
The Company provides for income taxes using the asset and liability method. The Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not be realized.
The Company does not have any material uncertain tax positions for which reserves would be required. The Company will recognize interest and penalties related to uncertain tax positions, if any, in income tax expense.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of shares 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 outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, the potential impact of shares to be issued upon conversion of Series A, Series A-1 and Series B preferred stock, stock options, and warrants to purchase common stock are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.
The table below provides total potential shares outstanding, including those that are anti-dilutive as of December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Shares issuable upon conversion of preferred stock
|
|
|
|
|
7,158,774
|
|
|
|
|
|
7,158,774
|
|
|
|
Shares issuable upon exercise of stock options
|
|
|
|
|
1,247,198
|
|
|
|
|
|
503,656
|
|
|
|
Shares issuable upon exercise of stock warrants
|
|
|
|
|
129,254
|
|
|
|
|
|
129,254
|
|
|
3.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following at December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Website
|
|
|
|
$
|
105,376
|
|
|
|
|
$
|
105,376
|
|
|
|
Computer equipment and purchased software
|
|
|
|
|
84,481
|
|
|
|
|
|
56,298
|
|
|
|
Equipment
|
|
|
|
|
35,134
|
|
|
|
|
|
35,134
|
|
|
|
Furniture and fixtures
|
|
|
|
|
87,184
|
|
|
|
|
|
87,184
|
|
|
|
Leasehold improvements
|
|
|
|
|
24,935
|
|
|
|
|
|
24,935
|
|
|
|
Total property and equipment
|
|
|
|
|
337,110
|
|
|
|
|
|
308,927
|
|
|
|
Accumulated depreciation
|
|
|
|
|
(217,189)
|
|
|
|
|
|
(159,829)
|
|
|
|
Total property and equipment, net
|
|
|
|
$
|
119,921
|
|
|
|
|
$
|
149,098
|
|
|
Depreciation expense for property and equipment was $57,360 and $31,166 for the years ended December 31, 2019 and 2018, respectively.
4.
INTERNALLY DEVELOPED SOFTWARE, NET
During 2019 and 2018, the Company capitalized $1,447,062 and $969,679, 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 $577,605 and $438,007 of amortization expense associated with capitalized internally developed software costs during the years ended December 31, 2019 and 2018, respectively.
5.
DEBT
Related Party Convertible Notes Payable
During 2017 and 2018, the Company issued Related Party Convertible Promissory Notes (the “Convertible Notes”) to related parties totaling $5,500,000. In 2017, the Company issued Convertible Notes to executive members and other related parties in the aggregate principal sum of $2,450,000. In 2018, the Company issued Convertible Notes to executive members and other related parties in the aggregate principal sum of $1,350,000. The Convertible Notes bear interest at a rate of six percent (6%) per annum, without compounding. The Convertible Notes are convertible into shares of the Company’s preferred stock, upon the following: (i) a new permanent equity financing yielding gross proceeds of in excess of $10,000,000, including conversion of the outstanding principal of the Convertible Notes (a “Qualified Equity Financing”), (ii) achievement of positive free cash flow from operations on a quarterly basis for the two consecutive quarters ending 90 days prior to the maturity date, (iii) an acquisition, or (iv) upon election of the holders of the majority of the aggregate principal outstanding (the “Majority Lenders”). An “acquisition” shall mean the sale of all or substantially all of the capital stock or assets of the Company in a business combination or other acquisition; a merger, consolidation or reorganization of the Company in connection with a business combination (but not in connection with an equity financing); or the sale or transfer of control by the stockholders of the Company to a third party (in a single transaction or series of related transactions) representing a majority of the voting power of the Company (other than in connection with an issuance of equity securities designed to raise working capital, including a Qualified Equity Financing). Preferred stock issued on conversion shall be shares of the Company’s stock that have substantially the same rights and preferences as the Company’s Series B Preferred Stock or that which is issued in such Qualified Equity Financing, depending on the applicable conversion event.
Conversion Prices
The conversion price of the Convertible Notes may vary based on the type of triggering event which causes conversion of the Convertible Notes. If the Qualified Equity Financing occurs within 12 months from the
5.
DEBT (continued)
issuance date of the Convertible Note, the conversion price will be the lesser of (A) if (i) the holder is a Majority Lender, the issue price of the preferred stock less a twenty percent (20%) discount to the issue price of such preferred stock (that is, at a rate of eighty percent (80%) of the issue price of the preferred stock), or (ii) the holder is not a Majority Lender, the issue price of the preferred stock less a ten percent (10%) discount to the issue price of such preferred stock (that is, at a rate of ninety percent (90%) of the issue price of the preferred stock), or (B) such price per share commensurate with a pre-money valuation of the Company, as defined in the note subscription agreement, calculated on a fully-diluted basis.
If the Qualified Equity Financing occurs later than 12 months from the issuance date of the Convertible Note, the conversion price ranges from the lesser of (A) if (i) the holder is a Majority Lender, the issue price of the preferred stock less a thirty percent (30%) discount to the issue price of such preferred stock (that is, at a rate of seventy percent (70%) of the issue price of the preferred stock),or (ii) the holder is not a Majority Lender, the issue price of the preferred stock less a twenty percent (20%) discount to the issue price of such preferred stock (that is, at a rate of eighty percent (80%) of the issue price of the preferred stock),or (B) such price per share commensurate with a pre-money valuation of the Company, as defined in the note subscription agreement, calculated on a fully-diluted basis.
In the event that the Company is sold, the Convertible Notes shall either be repaid in full or converted into common stock at the option of the Majority Lenders. The conversion price shall be the quotient of the aggregate principal and accrued interest outstanding on the Convertible Notes divided by a price per share determined in accordance with the same two scenarios noted above in the event of a Qualified Equity Financing.
Should the Company achieve positive free cash flows pursuant to the note subscription agreement or the Majority Lenders elect to convert the Convertible Notes prior to or at maturity, the conversion price per share shall be commensurate with a pre-money valuation of the Company, as defined in the note subscription agreement, calculated on a fully-diluted basis.
Embedded Conversion Features
The Company has determined that the terms related to the Qualified Equity Financing conversion and acquisition conversion features (collectively, the “Embedded Conversion Features”) were determined to not be clearly and closely related to the Convertible Note host instrument and meet the definition of a derivative. Therefore, the Embedded Conversion Features were bifurcated from the Convertible Notes and separately measured at fair value. The derivative liability has been subsequently marked-to-market each reporting period with changes in fair value recognized in the statement of operations.
The Embedded Conversion Features were initially recorded as a debt discount with an offset to the derivative liability at fair value. The debt discount is amortized using the effective interest rate over the original term of the Convertible Notes.
Maturity Date
The maturity date on the Convertible Notes is the earliest occurrence of (i) the closing of a Qualified Equity Financing, (ii) the date upon which prepayment by the Company occurs with the consent of the Majority Lenders, (iii) the date upon which the Convertible Notes are otherwise converted into equity securities, or (iv) June 30, 2019. In August 2018, the maturity date was extended to March 31, 2020. If, upon the maturity date, the Convertible Notes have not been converted into preferred stock, then the Majority Lenders may elect to (i) demand repayment of the outstanding principal and accrued interest, (ii) convert the Notes into two times the Participating Preferred Stock (as defined in the note subscription agreement) and Conversion Preferred Stock (as defined in the note subscription agreement), or (iv) extend the maturity date by up to an additional 18 months. In March 2020, the Majority Lenders elected to extend the maturity date through September 30, 2020. On October 1, 2020, the maturity date was further extended to March 31, 2021. The Company may not prepay the Convertible Notes without the written consent of the Majority
5.
DEBT (continued)
Lender. The Convertible Notes are subordinated in right of payment and priority to any Senior Debt. “Senior Debt” refers to all present and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit companies, commercial banks, credit unions, government agencies, venture debt firms, and other commercial lenders.
Interest expense on the Convertible Notes totaled $330,000 and $314,762 for the years ended December 31, 2019 and 2018, respectively. Debt issuance costs on the Convertible Notes totaled $13,539 and $17,889 for the years ended December 31, 2019 and 2018, respectively.
Debt discounts on the Convertible Notes totaled $136,185 and $680,926 for the years ended December 31, 2019 and 2018, respectively. During the years ended December 31, 2019 and 2018, amortization of debt discounts amounted to $544,741 and $769,731, respectively.
Bridge Financing
During 2019 and 2018, the Company issued Secured Promissory Notes (the “Bridge Notes”) to new investors and existing stockholders in an amount of $5,250,000 in order to finance the Company’s interim working capital needs. Of this amount, $1,655,000 is held by related parties. The Bridge Notes bear interest at a rate of twenty-four percent (24%) per annum, without compounding. The Bridge Notes and all accrued interest are due and payable on the earliest occurrence of (i) a Qualified Equity Financing, (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) December 31, 2019, which was subsequently extended to June 30, 2020. The Bridge Notes will be repayable upon demand of the Majority Lenders of the Bridge Notes at any time on or after the maturity date. The Bridge Notes are senior in right of payment and priority to any Convertible Debt and subordinated to any Senior Debt. The investors that hold the Bridge Notes are granted a first-lien security interest in substantially all assets of the Company (“Collateral”). During 2019 and 2018, the Company issued Bridge Notes totaling $3,075,000 and $2,175,000, respectively. In June 2020, the Bridge Notes were amended to further extend the maturity date through September 30, 2020. In January 2020, the Company issued additional Bridge Notes for proceeds of $1,000,000. On October 1, 2020, the Company amended the Bridge Notes to extend the maturity date to March 31, 2021 and to increase the interest rate from 24% to 30% after October 1, 2020.
Interest expense on the Bridge Notes totaled $549,248 and $36,740 for the years ended December 31, 2019 and 2018, respectively. Debt issuance costs on the Bridge Notes totaled $8,673 and $7,713 for the years ended December 31, 2019 and 2018, respectively.
Related Party Bridge Notes
In 2018, the Company issued Secured Promissory Notes (“Related Party Bridge Notes”) to an executive member for the principal sum of $350,000, and issued Related Party Bridge Notes to immediate family members of executive members and other related parties in the aggregate principal sum of $700,000. In 2019, the Company issued Related Party Bridge Notes to executive members in the aggregate principal sum of $455,000 and issued Related Party Bridge Notes to immediate family members of an executive member and other related parties in the principal sum of $150,000. The Related Party Bridge Notes bear interest at a rate of twenty-four percent (24%) per annum, without compounding. The principal and all accrued interest are due and payable on the earliest occurrence of (i) a Qualified Equity Financing, (ii) the sale of the Company, prepayment by the Company, or (iii) December 31, 2019, which has been extended to June 30, 2020. In June 2020, the Company extended the maturity date through September 30, 2020. In September 2020, the Company issued additional Related Party Bridge Notes for proceeds of $250,000. On October 1, 2020, the Company amended the Bridge Notes to extend the maturity date to March 31, 2021 and to increase the interest rate from 24% to 30% after October 1, 2020.
The interest expense associated with the Related Party Bridge Notes was $292,938 and $95,934 for the years ended December 31, 2019 and 2018, respectively.
6.
FAIR VALUE OF DERIVATIVE LIABILITY
Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the Company’s balance sheets as of the following dates indicated:
|
|
|
|
Fair value at December 31, 2019
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,214,000
|
|
|
|
Total liabilities
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,214,000
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2018
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
|
$
|
2,765,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,765,000
|
|
|
|
Total liabilities
|
|
|
|
$
|
2,765,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,765,000
|
|
|
The table below provides a summary of the changes in fair value of the derivative liability measured on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Balance, beginning of period
|
|
|
|
$
|
2,765,000
|
|
|
|
|
$
|
1,505,000
|
|
|
|
Derivative liability for embedded conversion features on Convertible Notes
|
|
|
|
|
—
|
|
|
|
|
|
314,000
|
|
|
|
(Gain) loss included in earnings
|
|
|
|
|
(551,000)
|
|
|
|
|
|
946,000
|
|
|
|
Balance, end of period
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
2,765,000
|
|
|
The Embedded Conversion Features are separately measured at fair value, with changes in fair value recognized in current operations. The Company used a scenario-based analysis to estimate the fair value of the Embedded Conversion Features at issuance of the Convertible Notes and as of December 31, 2019 and 2018. The scenario-based analysis estimates the fair value of the convertible promissory notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, including various IPO, settlement, equity financing, corporate transaction and dissolution scenarios. Estimating fair values of Embedded Conversion Features requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Because the Embedded Conversion Features are initially and subsequently carried at fair values, the Company’s income will reflect the volatility in these estimate and assumption changes. The original values of the Embedded Conversion Features were recorded as a derivative liability with the offset as a debt discount to the Convertible Notes which is being amortized over the term of the Convertible Notes.
7.
COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its office space in Lexington, Massachusetts under a non-cancelable operating lease that was entered into in September 2012 and most recently amended on April 10, 2017. The lease requires monthly rental payments which escalate during the lease term and expires on February 28, 2024. The difference between straight-line rent expense and rent paid is immaterial.
|
Years Ended December 31,
|
|
|
Operating Leases
|
|
|
2020
|
|
|
|
$
|
162,597
|
|
|
|
2021
|
|
|
|
|
161,062
|
|
|
|
2022
|
|
|
|
|
163,158
|
|
|
|
2023
|
|
|
|
|
165,254
|
|
|
|
2024
|
|
|
|
|
27,601
|
|
|
|
Total
|
|
|
|
$
|
679,672
|
|
|
Rent expense for the years ended December 31, 2019 and 2018 amounted to $172,621 and $179,004, respectively.
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 unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. As of December 31, 2019, there was no material litigation against the Company.
8.
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
The Company is authorized to issue 16,000,000 shares of common stock with a par value of $0.0001 per share and 8,000,000 shares of convertible preferred stock with a par value of $0.0001 per share, of which 3,427,871 shares are designated Series A convertible preferred stock (“Series A”), 556,550 shares are designated Series A-1 convertible preferred stock (“Series A-1”) and 3,200,000 shares are designated Series B convertible preferred stock (“Series B”). The Company has 815,579 shares of preferred stock that are undesignated.
The Series A, Series A-1, and Series B are presented in temporary or “mezzanine” equity as the convertible preferred stock give the holders (by majority vote) the option if there is a sale, merger or change of control to redeem shares for cash. The convertible preferred stock is recorded at fair value as of the date of issuance. No subsequent adjustment of the initial measurement amounts for these contingently redeemable Series A, Series A-1, and Series B is necessary unless the redemption of the convertible preferred shares becomes probable. Accordingly, the amount presented as temporary equity for the contingently redeemable Series A, Series A-1, and Series B outstanding is its issuance-date fair value.
8.
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (continued)
The rights and preferences of the Series B, Series A-1, Series A convertible preferred stock collectively, preferred stock, are as follows:
Preferred Stock
Dividends
Cumulative Dividends
Commencing on the date of original issuance, dividends shall accrue, whether or not declared by the Board, on each share of the preferred stock on a cumulative, non-compounding basis at the annual rate of 6% of the original issue price (the “Original Issue Price”). The Original Issue Price for Series A, Series A-1, and Series B is equal to $0.762, $1.00808, and $2.52019 per share, respectively. The cumulative aggregate amounts of arrearages in preferred dividends as of December 31, 2019 for Series A, Series A-1, and Series B preferred stock were $1,166,615, $185,374, and $2,122,928, respectively. The per-share amounts of arrearages in cumulative preferred dividends as of December 31, 2019 for Series A, Series A-1, and Series B preferred stock were $0.34, $0.33, and $0.67, respectively.
Cumulative dividends shall be payable only in the event of a liquidation, dissolution, or winding-up of the Company. Upon voluntary conversion of the preferred stock or a Qualified Public Offering, as defined, no accrued but unpaid cumulative dividends shall be payable. Dividends on preferred stock will be in preference to dividends paid on any other equity securities.
Participating Dividends
In the event the Board declares a cash dividend payable on the then outstanding shares of common stock, the holders of preferred stock shall be entitled to the amount of dividends as would be declared payable on the largest number of shares of common stock into which the shares of preferred stock held could be then converted.
There have been no dividends declared to date.
Liquidation Preferences
In the event of any liquidation event, as defined, either voluntary or involuntary, the holders of the Series B preferred stock are entitled to receive, prior and in preference to holders of Series A preferred stock, Series A-1 preferred stock, and common stock. The “Series B Liquidation Preference” is defined as a per share amount equal to the Original Issue Price of the Series B preferred stock, plus any declared but unpaid cumulative dividends. In lieu of receiving the Series B Liquidation Preference amount, the holders of the Series B preferred stock may elect to convert to common stock at any time prior to liquidation, dissolution or winding up.
If the assets of the Company are insufficient to pay the full aforesaid preferential amounts to the holders of the Series B preferred stock, then the entire proceeds legally available for distribution shall be distributed ratably among the holders of the Series B preferred stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.
In the event of any liquidation event, as defined, either voluntary or involuntary, the holders of the Series A preferred stock and Series A-1 preferred stock are entitled to receive, prior and in preference to holders of common stock. The Series A Liquidation Preference and Series A-1 Liquidation Preference are each defined as a per share amount equal to the Original Issue Price of the Series A preferred stock and the Original Issue Price of the Series A-1 preferred stock, respectively, plus any respective declared but unpaid cumulative dividends. In lieu of receiving the Series A Liquidation Preference amount and Series A-1 Liquidation
8.
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (continued)
Preference amount, the holders of the Series A preferred stock and Series A-1 preferred stock may elect to convert to common stock at any time prior to liquidation, dissolution or winding up.
If the assets of the Company are insufficient to pay the full aforesaid preferential amounts to the holders of Series A preferred stock and Series A-1 preferred stock, then the entire proceeds legally available for distribution to Series A preferred stock and Series A-1 preferred stock shall be distributed ratably among the holders of Series A preferred stock and Series A-1 preferred stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.
Conversion
The preferred stock may be converted at any time, at the option of the holder, into shares of common stock. The conversion rate for preferred stock is equal to the Original Issuance Price divided by the Conversion Value. The Conversion Value shall initially be equal to the Original Issuance Price, subject to adjustments including anti-dilution protection. In the event that the Company issue or sell shares of common stock or equivalents, without consideration or at a price per share less than the applicable preferred stock conversion value then the applicable preferred stock conversion value shall be lowered.
Each share of the preferred stock shall automatically convert into common stock at the then applicable conversion rate, upon (i) the closing of a firmly underwritten public offering of common stock with total gross proceeds of at least $25,000,000, or (ii) at the written consent of the majority holders of the Series A preferred stock and Series A-1 preferred stock, voting together as a single series, or (iii) at the written consent of the majority holders of the Series B preferred stock. Additionally, the holders of the Series A preferred stock and Series A-1 preferred stock cannot compel conversion of the Series B preferred stock, and the holders of the Series B preferred stock cannot compel conversion of the Series A preferred stock and Series A-1 preferred stock.
Voting
The holders of preferred stock shall be entitled to vote with respect to all matters voted on by the stockholders of the Company. Each holder of preferred stock shall be entitled to that number of votes on the largest number of shares of common stock into which the shares of preferred stock held could be then converted. The holders of the Series A preferred stock and Series A-1 preferred stock, voting together, have the right to elect one director. The holders of the Series B preferred stock have the right to elect one director.
Common Stock
The rights and preferences of the common stock are as follows:
Voting
The holders of common stock shall be entitled to one vote for each share held with respect to all matters voted on by the stockholders of the Company. The holders of common stock shall be entitled to elect one director.
Dividends
Subject to the preferential rights of the preferred stock, the holders of common stock are entitled to receive dividends, when and if declared by the Board.
Liquidation Rights
In certain events, including the liquidation, dissolution or winding-up of the Company, immediately after the holders of preferred stock have been paid in full preference, the remaining assets of the Company shall be distributed ratably among the holders of common stock.
9.
SHARE-BASED COMPENSATION
Stock Options
In April 2013, the Company established the 2013 Stock Incentive Plan (the “2013 Plan”). Pursuant to the 2013 Plan, the Company’s Board of Directors (or committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options, restricted stock and other share-based awards to the Company’s employees, officers, directors, consultants, and advisors. In November 2015, the 2013 Plan was amended to increase the number of shares that may be authorized for issuance to 1,713,570 shares. As of December 31, 2019, there were 768,023 shares available for future grants. The Company also maintains a 2010 Stock Incentive Plan (the “2010 Plan”). A total of 1,500,000 shares of common stock were authorized to be issued pursuant to the 2010 Plan, 631,573 shares have been issued, and there are no shares available for issuance, under the 2010 Plan.
The fair value of the Company’s common stock was estimated to be $0.29 and $1.02 at December 31, 2019 and 2018, respectively.
The following assumptions were used to estimate the fair value of stock options granted using the Black-Scholes-Merton option pricing model at December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.59% – 2.58%
|
|
|
2.33% – 3.13%
|
|
|
Expected term (in years)
|
|
|
5.00 – 6.14
|
|
|
4.83 – 9.08
|
|
|
Expected volatility
|
|
|
41.00% – 43.92%
|
|
|
39.74% – 43.17%
|
|
|
Expected dividend yield
|
|
|
—%
|
|
|
—%
|
|
A summary of stock option activity under the Plans are follows:
|
|
|
|
Options
Outstanding
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Term
in Years
|
|
|
Balance at January 1, 2018
|
|
|
|
|
371,343
|
|
|
|
|
$
|
1.14
|
|
|
|
|
|
8.63
|
|
|
|
Granted
|
|
|
|
|
247,250
|
|
|
|
|
|
1.49
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
(1,125)
|
|
|
|
|
|
1.08
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited
|
|
|
|
|
(113,812)
|
|
|
|
|
|
1.36
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
|
|
|
|
503,656
|
|
|
|
|
$
|
1.27
|
|
|
|
|
|
6.92
|
|
|
|
Granted
|
|
|
|
|
898,523
|
|
|
|
|
|
1.02
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
(3,125)
|
|
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited
|
|
|
|
|
(151,856)
|
|
|
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
|
|
1,247,198
|
|
|
|
|
$
|
1.10
|
|
|
|
|
|
8.78
|
|
|
|
Options exercisable at December 31, 2019
|
|
|
|
|
872,519
|
|
|
|
|
$
|
1.08
|
|
|
|
|
|
8.72
|
|
|
The weighted-average grant date fair value of stock options issued in 2019 and 2018 was $0.42 and $0.66, respectively. The Company recorded $360,379 and $113,921 of compensation expense in 2019 and 2018, respectively. A total of $170,316 of unamortized compensation expense at December 31, 2019, will be recognized over the remaining requisite service period of 2.97 years. Subsequent to December 31, 2019, the Board of Directors of the Company approved the repricing of all outstanding stock options. See Note 13 for further information.
9.
SHARE-BASED COMPENSATION (continued)
During 2019 and 2018, the Company received proceeds of $3,674 and $1,215 from the exercise of stock options, respectively. The aggregate intrinsic value for options outstanding and exercisable was $0 at December 31, 2019 and 2018. The total intrinsic value of the options exercised during 2019 and 2018 was $0 and $0, respectively.
Restricted Stock
During 2018, the Company repurchased 40,954 shares of restricted stock from stockholders at a cost of $41. These shares have been placed in treasury. As of December 31, 2019, there were no non-vested restricted stock arrangements.
10.
WARRANTS
At December 31, 2019, the Company had outstanding warrants to purchase 129,254 shares of common stock at an exercise price of $0.01 per share, which expire in September 2021. The weighted average exercise price is $0.01 and the weighted average time to expiration is 1.73 years.
During 2019 and 2018, no warrants to purchase common stock were issued, exercised or expired.
11.
INCOME TAXES
There was no provision for income taxes for the years ended December 31, 2019 and 2018 due to the Company’s operating losses and a full valuation allowance on deferred tax assets.
The Company completed research and development studies covering all tax years currently under the applicable statute of limitations. The benefits of the study are reflected in the 2019 and 2018 financial statements as a tax credit receivable in the amount of $284,000 and $127,000, respectively.
Significant components of the Company’s deferred tax assets and liabilities as of December 31 are as follows:
|
|
|
|
2019
|
|
|
2018
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss carryforwards
|
|
|
|
$
|
5,600,000
|
|
|
|
|
$
|
4,600,000
|
|
|
|
Other
|
|
|
|
|
1,000,000
|
|
|
|
|
|
800,000
|
|
|
|
Total deferred tax assets
|
|
|
|
|
6,600,000
|
|
|
|
|
|
5,400,000
|
|
|
|
Deferred tax liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles
|
|
|
|
|
(150,000)
|
|
|
|
|
|
(70,000)
|
|
|
|
Total deferred tax liabilities
|
|
|
|
|
(150,000)
|
|
|
|
|
|
(70,000)
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
|
|
|
6,450,000
|
|
|
|
|
|
5,330,000
|
|
|
|
Valuation allowance
|
|
|
|
|
(6,450,000)
|
|
|
|
|
|
(5,330,000)
|
|
|
|
Net deferred tax asset
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
Due to a history of losses the Company has generated since inception, management believes it is more-likely-than-not that all the deferred tax assets will not be realized as of December 31, 2019 and 2018. Therefore, the Company has recorded a full valuation allowance on our deferred tax assets. The Company currently believes that it is more likely than not that the deferred tax assets will not be realized in the future. The change in the valuation allowance during 2019 was an increase of $1,120,000.
At December 31, 2019, the Company had federal net operating loss (“NOL”) carryforwards of approximately $20,400,000 of which approximately $12,900,000 expire at various periods through 2037 and approximately
11.
INCOME TAXES (continued)
$7,500,000 can be carried forward indefinitely. The Company also had state level NOL carryforwards of approximately $16,800,000 that expire at various periods through 2039. At December 31, 2019, the Company had federal and state tax credits of approximately $531,000 available for future periods that expire at various periods through 2039. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s NOL carryforwards may be subject to annual limitations under Section 382 of the Internal Revenue Code against taxable income in the future period, which could substantially limit the eventual utilization of such carryforwards.
The Company applies the standards on uncertainty in income taxes. The Company did not have any significant unrecognized tax benefits during the year ended December 31, 2019. The Company’s U.S. federal operating losses have occurred since its inception and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.
The Company’s income tax provision was computed using the federal statutory rate and average state statutory rates, net of related federal benefit. The following represents a reconciliation of the statutory income tax rates to the effective rates at December 31:
|
|
|
|
2019
|
|
|
2018
|
|
|
Reconciliation to statutory rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected federal income taxes benefit at statutory rates
|
|
|
|
|
(21)%
|
|
|
|
|
|
(21)%
|
|
|
|
Expected state tax benefit at statutory rates, net of federal benefit
|
|
|
|
|
(8)
|
|
|
|
|
|
(8)
|
|
|
|
Change in valuation allowance
|
|
|
|
|
29
|
|
|
|
|
|
29
|
|
|
|
Income tax expense (benefit)
|
|
|
|
|
—%
|
|
|
|
|
|
—%
|
|
|
12.
EMPLOYEE BENEFITS PLAN
The Company has established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan is available to all eligible employees. The 401(k) Plan allows participants to defer a portion of their annual compensation subject to certain Internal Revenue Service limitations. The Company may make matching contributions and additional profit-sharing contributions at its discretion. The Company has not made any matching contributions to the 401(k) Plan during the years ended December 31, 2019 and 2018.
13.
SUBSEQUENT EVENTS
Impact of the COVID-19 Pandemic on our Operations
In December 2019, the novel coronavirus SARS-Cov2, or COVID-19 outbreak, was reported to have surfaced in China. On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency due to the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
iSpecimen is subject to the risks arising from the COVID-19 outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders; (ii) decline in researcher demand for specimens; and (iii) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.
Although the Company did not experience a material impact on its operations during the year ended December 31, 2019, and the disruption is currently expected to be temporary, there is considerable uncertainty
13.
SUBSEQUENT EVENTS (continued)
around the duration of this uncertainty. In response to the COVID-19 outbreak, the Company implemented measures to help stabilize revenue as well as measures to reduce costs. To stabilize revenue, the Company added COVID-19 samples to its product line to support growing research in this area and also implemented mobile phlebotomy to more easily access research subjects. Cost saving measures included the elimination of non-essential travel and in-person training activities, the deferral of certain planned expenditures, and the furlough of a small number of employees. Given the evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company expects this matter to have an impact on its results of operations, financial condition, or liquidity. However, the extent of the financial impact and the duration cannot be reasonably estimated at this time.
Paycheck Protection Program Notes Payable
In May 2020, the Company applied for and received a loan under the CARES Act. The loan is from the Paycheck Protection Program (the “PPP”) in the amount of $783,008. In accordance with the provisions of the PPP, the loan accrues interest at an annual rate of 1% and may be fully forgiven if it is used to pay qualifying costs such as payroll, rent, and utilities. Amounts that are not forgiven will be repaid within two years from the date of the loan.
Repricing of Stock Options
In September 2020, the Board of Directors of the Company approved the repricing of all outstanding stock options representing 1,404,823 shares at an exercise price of $0.18.
iSpecimen Inc.
Condensed Balance Sheets
|
|
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
957,246
|
|
|
|
|
$
|
53,893
|
|
|
|
Accounts receivable
|
|
|
|
|
1,758,407
|
|
|
|
|
|
833,580
|
|
|
|
Accounts receivable – unbilled
|
|
|
|
|
323,763
|
|
|
|
|
|
454,576
|
|
|
|
Inventory
|
|
|
|
|
26,734
|
|
|
|
|
|
54,908
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
114,371
|
|
|
|
|
|
79,227
|
|
|
|
Tax credit receivable, current portion
|
|
|
|
|
179,376
|
|
|
|
|
|
104,478
|
|
|
|
Total current assets
|
|
|
|
|
3,359,897
|
|
|
|
|
|
1,580,662
|
|
|
|
Property and equipment, net
|
|
|
|
|
87,364
|
|
|
|
|
|
119,921
|
|
|
|
Internally developed software, net
|
|
|
|
|
2,572,378
|
|
|
|
|
|
2,306,882
|
|
|
|
Tax credit receivable, net of current portion
|
|
|
|
|
—
|
|
|
|
|
|
179,522
|
|
|
|
Security deposits
|
|
|
|
|
27,601
|
|
|
|
|
|
27,601
|
|
|
|
Total assets
|
|
|
|
$
|
6,047,240
|
|
|
|
|
$
|
4,214,588
|
|
|
|
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
1,212,058
|
|
|
|
|
$
|
737,794
|
|
|
|
Accrued expenses
|
|
|
|
|
600,992
|
|
|
|
|
|
471,348
|
|
|
|
Accrued interest
|
|
|
|
|
3,119,654
|
|
|
|
|
|
1,745,515
|
|
|
|
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs
|
|
|
|
|
5,489,728
|
|
|
|
|
|
5,350,278
|
|
|
|
Derivative liability for embedded conversion features
|
|
|
|
|
2,290,000
|
|
|
|
|
|
2,214,000
|
|
|
|
Bridge notes payable, net of debt issuance costs
|
|
|
|
|
4,588,504
|
|
|
|
|
|
3,586,326
|
|
|
|
Bridge notes payable, related parties
|
|
|
|
|
1,905,000
|
|
|
|
|
|
1,655,000
|
|
|
|
Note payable, current portion
|
|
|
|
|
473,239
|
|
|
|
|
|
—
|
|
|
|
Deferred revenue
|
|
|
|
|
581,912
|
|
|
|
|
|
—
|
|
|
|
Total current liabilities
|
|
|
|
|
20,261,087
|
|
|
|
|
|
15,760,261
|
|
|
|
Note payable, net of current portion
|
|
|
|
|
309,769
|
|
|
|
|
|
—
|
|
|
|
Total liabilities
|
|
|
|
|
20,570,856
|
|
|
|
|
|
15,760,261
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, $0.0001 par value, 3,200,000 shares authorized, 3,174,363 shares issued and outstanding at September 30, 2020 and December 31, 2019 (preference in liquidation of $10,483,253)
|
|
|
|
|
7,999,997
|
|
|
|
|
|
7,999,997
|
|
|
|
Series A-1 convertible preferred stock, $0.0001 par value, 556,540 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019 (preference in liquidation of $771,685)
|
|
|
|
|
561,041
|
|
|
|
|
|
561,041
|
|
|
|
Series A convertible preferred stock, $0.0001 par value, 3,427,871 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019 (preference in liquidation of $3,896,301)
|
|
|
|
|
2,612,038
|
|
|
|
|
|
2,612,038
|
|
|
|
Total convertible preferred stock
|
|
|
|
|
11,173,076
|
|
|
|
|
|
11,173,076
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 16,000,000 shares authorized, 5,363,365 issued and outstanding at September 30, 2020 and December 31, 2019
|
|
|
|
|
537
|
|
|
|
|
|
537
|
|
|
|
Additional paid-in capital
|
|
|
|
|
1,766,986
|
|
|
|
|
|
1,686,389
|
|
|
|
Treasury stock, 171,908 shares at September 30, 2020 and December 31, 2019, at cost
|
|
|
|
|
(172)
|
|
|
|
|
|
(172)
|
|
|
|
Accumulated deficit
|
|
|
|
|
(27,464,043)
|
|
|
|
|
|
(24,405,503)
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(25,696,692)
|
|
|
|
|
|
(22,718,749)
|
|
|
|
Total liabilities, convertible preferred stock and stockholders’ deficit
|
|
|
|
$
|
6,047,240
|
|
|
|
|
$
|
4,214,588
|
|
|
See the accompanying notes to the unaudited condensed financial statements.
iSpecimen Inc.
Condensed Statements of Operations
(Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Revenue
|
|
|
|
$
|
2,250,147
|
|
|
|
|
$
|
692,707
|
|
|
|
|
$
|
5,466,375
|
|
|
|
|
$
|
3,007,911
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
|
|
903,862
|
|
|
|
|
|
486,665
|
|
|
|
|
|
2,032,111
|
|
|
|
|
|
1,506,820
|
|
|
|
Technology
|
|
|
|
|
413,381
|
|
|
|
|
|
302,934
|
|
|
|
|
|
1,131,695
|
|
|
|
|
|
778,892
|
|
|
|
Sales and marketing
|
|
|
|
|
506,641
|
|
|
|
|
|
357,209
|
|
|
|
|
|
1,305,897
|
|
|
|
|
|
1,029,049
|
|
|
|
Supply development
|
|
|
|
|
133,007
|
|
|
|
|
|
205,659
|
|
|
|
|
|
395,200
|
|
|
|
|
|
593,377
|
|
|
|
Fulfillment
|
|
|
|
|
241,785
|
|
|
|
|
|
227,182
|
|
|
|
|
|
642,140
|
|
|
|
|
|
701,037
|
|
|
|
General and administrative
|
|
|
|
|
774,407
|
|
|
|
|
|
645,627
|
|
|
|
|
|
1,431,262
|
|
|
|
|
|
1,561,532
|
|
|
|
Total operating expenses
|
|
|
|
|
2,973,083
|
|
|
|
|
|
2,225,276
|
|
|
|
|
|
6,938,305
|
|
|
|
|
|
6,170,707
|
|
|
|
Loss from operations
|
|
|
|
|
(722,936)
|
|
|
|
|
|
(1,532,569)
|
|
|
|
|
|
(1,471,930)
|
|
|
|
|
|
(3,162,796)
|
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(469,477)
|
|
|
|
|
|
(454,859)
|
|
|
|
|
|
(1,517,697)
|
|
|
|
|
|
(1,209,857)
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
(54,000)
|
|
|
|
|
|
(158,000)
|
|
|
|
|
|
(76,000)
|
|
|
|
|
|
725,000
|
|
|
|
Other income
|
|
|
|
|
—
|
|
|
|
|
|
29
|
|
|
|
|
|
6,691
|
|
|
|
|
|
151,073
|
|
|
|
Interest income
|
|
|
|
|
87
|
|
|
|
|
|
156
|
|
|
|
|
|
396
|
|
|
|
|
|
609
|
|
|
|
Other expense, net
|
|
|
|
|
(523,390)
|
|
|
|
|
|
(612,674)
|
|
|
|
|
|
(1,586,610)
|
|
|
|
|
|
(333,175)
|
|
|
|
Net loss before benefit from income taxes
|
|
|
|
|
(1,246,326)
|
|
|
|
|
|
(2,145,243)
|
|
|
|
|
|
(3,058,540)
|
|
|
|
|
|
(3,495,971)
|
|
|
|
Benefit from income taxes
|
|
|
|
|
—
|
|
|
|
|
|
39,250
|
|
|
|
|
|
—
|
|
|
|
|
|
117,750
|
|
|
|
Net loss
|
|
|
|
$
|
(1,246,326)
|
|
|
|
|
$
|
(2,105,993)
|
|
|
|
|
$
|
(3,058,540)
|
|
|
|
|
$
|
(3,378,221)
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
$
|
(0.24)
|
|
|
|
|
$
|
(0.41)
|
|
|
|
|
$
|
(0.59)
|
|
|
|
|
$
|
(0.65)
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
|
5,191,457
|
|
|
|
|
|
5,191,457
|
|
|
|
|
|
5,191,457
|
|
|
|
|
|
5,190,583
|
|
|
See the accompanying notes to the unaudited condensed financial statements.
iSpecimen Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
|
|
Series B
Convertible
Preferred Stock
|
|
|
Series A-1
Convertible
Preferred Stock
|
|
|
Series A
Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Treasury Stock
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Balance at January 1, 2019
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,360,240
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,322,336
|
|
|
|
|
$
|
(19,746,453)
|
|
|
|
|
$
|
(18,423,752)
|
|
|
|
Cumulative effect from adoption of ASC 606
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
68,000
|
|
|
|
|
|
68,000
|
|
|
|
Issuance of common stock through exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
3,062
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,606
|
|
|
|
|
|
—
|
|
|
|
|
|
3,606
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
28,658
|
|
|
|
|
|
—
|
|
|
|
|
|
28,658
|
|
|
|
Net income
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
133,521
|
|
|
|
|
|
133,521
|
|
|
|
Balance at March 31, 2019 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
|
2,612,038
|
|
|
|
|
|
|
5,363,302
|
|
|
|
|
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
|
(172)
|
|
|
|
|
|
1,354,600
|
|
|
|
|
|
(19,544,932)
|
|
|
|
|
|
(18,189,967)
|
|
|
|
Issuance of common stock through exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
63
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
68
|
|
|
|
|
|
—
|
|
|
|
|
|
68
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
27,918
|
|
|
|
|
|
—
|
|
|
|
|
|
27,918
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,405,749)
|
|
|
|
|
|
(1,405,749)
|
|
|
|
Balance at June 30, 2019 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
|
(172)
|
|
|
|
|
|
1,382,586
|
|
|
|
|
|
(20,950,681)
|
|
|
|
|
|
(19,567,730)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
283,287
|
|
|
|
|
|
—
|
|
|
|
|
|
283,287
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,105,993)
|
|
|
|
|
|
(2,105,993)
|
|
|
|
Balance at September 30, 2019 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,665,873
|
|
|
|
|
$
|
(23,056,674)
|
|
|
|
|
$
|
(21,390,436)
|
|
|
|
Balance at January 1, 2020
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,686,389
|
|
|
|
|
$
|
(24,405,503)
|
|
|
|
|
$
|
(22,718,749)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
22,044
|
|
|
|
|
|
—
|
|
|
|
|
|
22,044
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,604,514)
|
|
|
|
|
|
(1,604,514)
|
|
|
|
Balance at March 31, 2020 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
|
(172)
|
|
|
|
|
|
1,708,433
|
|
|
|
|
|
(26,010,017)
|
|
|
|
|
|
(24,301,219)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
29,287
|
|
|
|
|
|
—
|
|
|
|
|
|
29,287
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(207,700)
|
|
|
|
|
|
(207,700)
|
|
|
|
Balance at June 30, 2020 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
|
(172)
|
|
|
|
|
|
1,737,720
|
|
|
|
|
|
(26,217,717)
|
|
|
|
|
|
(24,479,632)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
29,266
|
|
|
|
|
|
—
|
|
|
|
|
|
29,266
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,246,326)
|
|
|
|
|
|
(1,246,326)
|
|
|
|
Balance at September 30, 2020 (unaudited)
|
|
|
|
|
3,174,363
|
|
|
|
|
$
|
7,999,997
|
|
|
|
|
|
556,540
|
|
|
|
|
$
|
561,041
|
|
|
|
|
|
3,427,871
|
|
|
|
|
$
|
2,612,038
|
|
|
|
|
|
|
5,363,365
|
|
|
|
|
$
|
537
|
|
|
|
|
|
171,908
|
|
|
|
|
$
|
(172)
|
|
|
|
|
$
|
1,766,986
|
|
|
|
|
$
|
(27,464,043)
|
|
|
|
|
$
|
(25,696,692)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited condensed financial statements.
iSpecimen Inc.
Condensed Statements of Cash Flows
(Unaudited)
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(3,058,540)
|
|
|
|
|
$
|
(3,378,221)
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
80,597
|
|
|
|
|
|
339,863
|
|
|
|
Amortization of internally developed software
|
|
|
|
|
599,425
|
|
|
|
|
|
432,781
|
|
|
|
Depreciation and amortization of property and equipment
|
|
|
|
|
33,563
|
|
|
|
|
|
43,020
|
|
|
|
Amortization of discount and debt issuance costs on convertible notes
|
|
|
|
|
141,628
|
|
|
|
|
|
415,736
|
|
|
|
Change in fair value of derivative liability
|
|
|
|
|
76,000
|
|
|
|
|
|
(725,000)
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
(924,827)
|
|
|
|
|
|
389,405
|
|
|
|
Accounts receivable – unbilled
|
|
|
|
|
130,813
|
|
|
|
|
|
(100,435)
|
|
|
|
Inventory
|
|
|
|
|
28,174
|
|
|
|
|
|
(7,864)
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
(35,144)
|
|
|
|
|
|
3,693
|
|
|
|
Tax credit receivable
|
|
|
|
|
104,624
|
|
|
|
|
|
(117,750)
|
|
|
|
Accounts payable
|
|
|
|
|
474,264
|
|
|
|
|
|
(40,708)
|
|
|
|
Accrued expenses
|
|
|
|
|
129,644
|
|
|
|
|
|
102,931
|
|
|
|
Accrued interest
|
|
|
|
|
1,374,139
|
|
|
|
|
|
791,154
|
|
|
|
Deferred revenue
|
|
|
|
|
581,912
|
|
|
|
|
|
—
|
|
|
|
Net cash used in operating activities
|
|
|
|
|
(263,728)
|
|
|
|
|
|
(1,851,395)
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
(1,006)
|
|
|
|
|
|
(38,176)
|
|
|
|
Capitalization of internally developed software
|
|
|
|
|
(864,921)
|
|
|
|
|
|
(1,081,068)
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(865,927)
|
|
|
|
|
|
(1,119,244)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of bridge notes payable
|
|
|
|
|
1,250,000
|
|
|
|
|
|
2,370,000
|
|
|
|
Proceeds from issuance of note payable
|
|
|
|
|
783,008
|
|
|
|
|
|
—
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
3,674
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
2,033,008
|
|
|
|
|
|
2,373,674
|
|
|
|
Net increase (decrease) in cash
|
|
|
|
|
903,353
|
|
|
|
|
|
(596,965)
|
|
|
|
Cash at beginning of period
|
|
|
|
|
53,893
|
|
|
|
|
|
1,130,364
|
|
|
|
Cash at end of period
|
|
|
|
$
|
957,246
|
|
|
|
|
$
|
533,399
|
|
|
See the accompanying notes to the unaudited condensed financial statements.
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 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 interim 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. 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 interim 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 financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.
Liquidity and Going Concern
The Company has recognized recurring losses. At September 30, 2020, the Company had a working capital deficit of $16,901,190, an accumulated deficit of $27,464,043, cash of $957,246 and accounts payable and accrued expenses of $1,813,050. Since inception, the Company has relied upon raising capital to finance operations and at September 30, 2020, the Company did not have sufficient capital to fund its operations.
The future success of the Company is dependent on its ability to successfully obtain additional working capital and to ultimately attain profitable operations. In addition, the Company plans to add additional customers and suppliers to increase revenue and to manage expenditures to improve its financial position and fund operations. The Company may seek to fund its operations through public equity, private equity, or debt financings, as well as other sources. The Company may obtain and renegotiate debt financing to support operations. However, the Company may be unable to raise additional capital, or if it is able to raise additional capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital, or enter into such other arrangements if and when needed, 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. However, as certain elements of the Company’s operating plan are outside of the Company’s control, they cannot be considered probable. If the Company does not receive additional capital from future anticipated capital raises, its business plan will be scaled down.
These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the
1.
NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
conditions that raise substantial doubt include delaying certain projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern.
The accompanying 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 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 COVID-19 Pandemic on our Operations
In December 2019, the novel coronavirus SARS-Cov2, or COVID-19 outbreak, was reported to have surfaced in China. On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency due to the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
iSpecimen is subject to the risks arising from the COVID-19 outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders; (ii) reduced capacity if personnel is infected or quarantined; (iii) decline in researcher demand for specimens; and (iv) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.
The Company has experienced an impact due to the COVID-19 outbreak on its operations during the nine months ended September 30, 2020. In response to the COVID-19 outbreak, the Company implemented measures to help stabilize revenue as well as measures to reduce costs. To stabilize revenue, the Company added COVID-19 samples to its product line to support growing research in this area and also implemented mobile phlebotomy to more easily access research subjects. Cost saving measures included the elimination of non-essential travel and in-person training activities, the deferral of certain planned expenditures, and the furlough of a small number of employees in August 2020. Given the evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company expects this matter to have an impact on its results of operations, financial condition, or liquidity. However, the extent of the financial impact and the duration cannot be reasonably estimated at this time.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Off-Balance Sheet Risk and Concentrations of Credit Risk
The Company has no significant off-balance sheet risks, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Cash accounts are maintained at financial institutions that potentially subject the Company to concentrations of credit risk. At September 30, 2020 and December 31, 2019, substantially all of the Company’s cash was deposited in accounts at one financial institution. The Company maintains its cash deposits, which at times may exceed the federally insured limits, with a reputable financial institution and, accordingly, the Company believes such funds are subject to minimal credit risk.
Concentration of credit risk with respect to accounts receivable is typically related to customers who account for a significant portion of revenue. During the three months ended September 30, 2020, two customers represented approximately 10% and 32% of the Company’s revenues and comprised 13% and 0% of accounts receivable and 0% and 0% of accounts receivable — unbilled at September 30, 2020. During the nine months ended September 30, 2020, two customers represented approximately 21% and 15% of the
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Company’s 2020 revenues and comprised 13% and 0% of accounts receivable and 0% and 0% of accounts receivable — unbilled at September 30, 2020. Two customers represented approximately 15% and 16% of the Company’s revenue and comprised 17% and 17% of accounts receivable and 0% and 0% of accounts receivable — unbilled for the three months ended September 30, 2019. One customer represented approximately 28% of the Company’s revenue and comprised 7% of accounts receivable and 0% of accounts receivable — unbilled for the nine months ended September 30, 2019.
During the three months ended September 30, 2020 and 2019, revenue attributable to customers located in foreign countries is approximately 6% and 8% of total revenue, respectively. During the nine months ended September 30, 2020 and 2019, total revenue attributable to customers located in foreign countries is approximately 6% and 31% of total revenue, respectively. At September 30, 2020 and December 31, 2019, accounts receivable attributable to customers located in foreign countries is approximately 8% and 5% of total accounts receivable, respectively. At September 30, 2020 and December 31, 2019, accounts receivable — unbilled attributable to customers located in foreign countries is approximately 12% and 17% of total accounts receivable-unbilled, respectively.
Recent Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are generally adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
Accounting Standards Issued, Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02” or “Topic 842”), which applies to all leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases. ASU 2016-02 is effective for public entities for fiscal years beginning after December 15, 2018 and interim periods within those years, and after December 15, 2020 and interim periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. On June 3, 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates For Certain Entities (“ASU 2020-05”), which amends the effective dates of Topic 842 to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID-19) pandemic. Specifically, the FASB deferred the effective dates of Topic 842 for private companies. The deferrals apply only if an entity has not yet issued their financial statements (or made their financial statements available for issuance) as of June 3, 2020. The effective date of Topic 842 as amended by ASU No. 2020-05 is for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
total liabilities that the Company reports relative to such amounts prior to adoption. The Company is expected to adopt this new standard as of January 1, 2022.
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 is currently evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of January 1, 2024.
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 comprising our network, and delivering them to its medical research customers using its proprietary software to identify and locate the required specimens. The Company does not charge suppliers or customers for the use of their proprietary online marketplace platform. Each customer will execute a material and data use agreement with the Company or agrees to the online purchase terms, both of which includes customer rights, specimen collection period, payment and cancellation terms. These are then supplemented by subsequent statements of work and/or purchase orders that further specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent the Company’s contract with its customer. Generally, contracts have fixed unit pricing.
The Company has evaluated principal verses agent considerations as part of its revenue recognition policy. The Company has concluded that its role in procuring specimens for its customers, which is the only performance obligation in a customer contract, is that of a principal as the Company sets the prices for the specimens, controls the collection of the specimens being provided prior to transferring control to the customer, and bears the responsibility for customer credit risk associated with selling specimens to customers.
The Company reviews a contract and related orders upon receipt to determine if the specimens ordered have an alternative use by the Company. Generally, specimens ordered do not have an alternative future use by the Company and the performance obligation is satisfied when the related specimens are collected. In the rare circumstances where specimens do have an alternative future use, the Company’s performance obligation is satisfied at the time of shipment. The Company uses an output method to recognize revenue for specimens collected with no alternative future use. The output method is measured based on the number of specimens collected. The Company has an enforceable right to payment when specimens are collected. Customers are typically invoiced upon shipment; however, for certain orders, the Company may collect a refundable prepayment from customers in advance of the specimen being collected for an order, presented as deferred revenue. The Company expects to recognize the deferred revenue within the next twelve months. 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 collected over time. However, specimens are generally shipped as soon as possible after they have been collected.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Specimen collection and delivery frequently occur in the same accounting period. For a specimen which has no alternative future use, and for which the Company has an enforceable right to payment that has been collected but not shipped, the Company records the offset to revenue in accounts receivable — unbilled. Once the specimens have 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 has occurred, the Company has given 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 following periods:
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Specimens – contracts with customers
|
|
|
|
$
|
2,223,057
|
|
|
|
|
$
|
680,556
|
|
|
|
|
$
|
5,408,012
|
|
|
|
|
$
|
2,942,268
|
|
|
|
Shipping and other
|
|
|
|
|
27,090
|
|
|
|
|
|
12,151
|
|
|
|
|
|
58,363
|
|
|
|
|
|
65,643
|
|
|
|
Revenue
|
|
|
|
$
|
2,250,147
|
|
|
|
|
$
|
692,707
|
|
|
|
|
$
|
5,466,375
|
|
|
|
|
$
|
3,007,911
|
|
|
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 September 30, 2020 and December 31, 2019, management has determined that no allowance for doubtful accounts was necessary.
The Company may enter into bill-and-hold arrangements with certain customers, whereby the Company collects specimens for its customers and the product is held, at the customer’s request, at a supplier location for a specified period of time, typically less than a year. Even though the product remains in the supplier’s physical possession, the customer has the right to direct the use of the specimen. Revenue is recognized at the point in time when specimens are collected under bill-and-hold arrangements as transfer of control criteria have been met including the transfer of legal title and risks and rewards of ownership have transferred to the customer. The amount of revenue recognized under bill-and-hold arrangements was $726,000 and $0 for the nine months ended September 30,2020 and 2019, respectively.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of shares 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 outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, the potential impact of shares to be issued upon conversion of Series A, Series A-1 and Series B preferred stock, stock options and warrants to purchase common stock are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The table below provides total potential shares outstanding, including those that are anti-dilutive for the following periods:
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
Shares issuable upon conversion of preferred stock
|
|
|
|
|
7,158,774
|
|
|
|
|
|
7,158,774
|
|
|
|
|
|
7,158,774
|
|
|
|
|
|
7,158,774
|
|
|
|
Shares issuable upon exercise of stock options
|
|
|
|
|
1,424,041
|
|
|
|
|
|
1,279,398
|
|
|
|
|
|
1,424,041
|
|
|
|
|
|
1,279,398
|
|
|
|
Shares issuable upon exercise of warrants to purchase common stock
|
|
|
|
|
129,254
|
|
|
|
|
|
129,254
|
|
|
|
|
|
129,254
|
|
|
|
|
|
129,254
|
|
|
3.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following at the dates indicated:
|
|
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
Website
|
|
|
|
$
|
105,376
|
|
|
|
|
$
|
105,376
|
|
|
|
Computer equipment and purchased software
|
|
|
|
|
84,588
|
|
|
|
|
|
84,481
|
|
|
|
Equipment
|
|
|
|
|
35,449
|
|
|
|
|
|
35,134
|
|
|
|
Furniture and fixtures
|
|
|
|
|
87,184
|
|
|
|
|
|
87,184
|
|
|
|
Leasehold improvements
|
|
|
|
|
24,936
|
|
|
|
|
|
24,935
|
|
|
|
Total property and equipment
|
|
|
|
|
337,533
|
|
|
|
|
|
337,110
|
|
|
|
Accumulated depreciation
|
|
|
|
|
(250,169)
|
|
|
|
|
|
(217,189)
|
|
|
|
Total property and equipment, net
|
|
|
|
$
|
87,364
|
|
|
|
|
$
|
119,921
|
|
|
Depreciation expense for property and equipment was approximately $4,883 and $14,340 for the three months ended September 30, 2020 and 2019, respectively, and $33,563 and $43,020 for the nine months ended September 30, 2020 and 2019, respectively.
4.
INTERNALLY DEVELOPED SOFTWARE, NET
During the nine months ended September 30, 2020 and 2019, the Company capitalized $864,921 and $1,081,068, 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 $179,168 and $143,696 of amortization expense associated with capitalized internally developed software costs during the three months ended September 30, 2020 and 2019, respectively. The Company recognized $599,425 and $432,781 of amortization expense associated with capitalized internally developed software costs during the nine months ended September 30, 2020 and 2019, respectively. Internally developed software net totaled $2,572,378 and $2,306,882 at September 30, 2020 and December 31, 2019, respectively.
5.
DEBT
Note Payable
In May 2020, the Company applied for and received $783,008 in unsecured loan funding from the Paycheck Protection Program (the “PPP Loan”), established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The
5.
DEBT (continued)
application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account current business activity and ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business.
Under the terms of the promissory note (the “PPP Note”) and the PPP Loan, interest accrues on the outstanding principal at the rate of 1% per annum. The term of the PPP Note is two years, though payments greater than the monthly payment or additional payments may be made at any time without prepayment penalty but shall not relieve the Company of its obligations to pay the next succeeding monthly payment. There is a deferment period of six months until equal installment payments of $43,845 of principal and interest are due.
The CARES Act and the PPP Loan provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP Loan, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the twenty-four week period after the loan origination for certain purposes including payroll costs, rent payments on certain leases, and certain qualified utility payments, provided that at least 60% of the loan amount is used for eligible payroll costs; the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered twenty-four-week period will qualify for forgiveness. Forgiveness of the loan is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on future adherence to the forgiveness criteria. The Company believes it has used the entire PPP Loan amount for qualifying expenses and plans to apply for forgiveness in December 2020, however, until forgiveness is approved by the SBA there is no assurance that the Company will obtain forgiveness of the PPP Loan in whole or in part.
Interest expense on the PPP Loan totaled $1,961 and $0 for the three months ended September 30, 2020 and 2019, respectively.
Interest expense on the PPP Loan totaled $2,518 and $0 for the nine months ended September 30, 2020 and 2019, respectively.
Related Party Convertible Notes Payable
During 2017 and 2018, the Company issued Related Party Convertible Promissory Notes (the “Convertible Notes”) to related parties totaling $5,500,000. The Convertible Notes bear interest at a rate of six percent (6%) per annum, without compounding. The Convertible Notes are convertible into shares of the Company’s preferred stock, upon (i) a new permanent equity financing yielding gross proceeds of in excess of $10,000,000, including conversion of the outstanding principal of the Convertible Notes (a “Qualified Equity Financing”), (ii), achievement of positive free cash flow from operations on a quarterly basis for two consecutive quarters ending ninety days prior to the maturity date, (iii) an acquisition, or (iv) upon election of the holders of the majority of the aggregate principal outstanding (the “Majority Lenders”). Preferred stock issued on conversion shall be shares of the Company’s stock that have substantially the same rights and preferences as the Company’s Series B Preferred Stock or that which is issued in such Qualified Equity Financing, depending on the applicable conversion event. During 2020, there have been no changes to the conversion prices which are detailed in the Company’s audited financial statements for the years ended December 31, 2019 and 2018.
The maturity date on the Convertible Notes is the earliest occurrence of (i) the closing of a Qualified Equity Financing, (ii) the date upon which prepayment by the Company occurs with the consent of the Majority Lenders, (iii) the date upon which the Convertible Notes are otherwise converted into equity
5.
DEBT (continued)
securities, or (iv) March 31, 2020. In March 2020, the Majority Lenders elected to extend the maturity date through September 30, 2020. On October 1, 2020, the maturity date was further extended to March 31, 2021.
The Company has determined that the terms related to the Qualified Equity Financing conversion and acquisition conversion features (collectively, the “Embedded Conversion Features”) were determined to not be clearly and closely related to the Convertible Note host instrument and meet the definition of a derivative. Therefore, the Embedded Conversion Features were bifurcated from the Convertible Notes and separately measured at fair value. The derivative liability has been subsequently marked-to-market each reporting period with changes in fair value recognized in the statement of operations (see Note 6).
Interest expense on the Convertible Notes totaled $83,178 and $83,178 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on the Convertible Notes totaled $247,726 and $246,822 for the nine months ended September 30, 2020 and 2019, respectively.
Unamortized debt issuance costs on the Convertible Notes totaled $10,277 and $13,539 at September 30, 2020 and December 31, 2019, respectively.
Debt discounts on the Convertible Notes were $0 and $136,185 as of September 30, 2020 and December 31, 2019, respectively. During the nine months ended September 30, 2020 and 2019, amortization of debt discounts amounted to $136,185 and $408,556, respectively.
Bridge Financing
During the nine months ended September 30, 2020 the Company approved the issuance of Secured Promissory Notes (the “Bridge Notes”) to new investors and existing stockholders in an amount of $1,250,000 in order to finance the Company’s interim working capital needs bringing the total amount of Bridge Notes issued to $6,500,000 at September 30, 2020. Of this amount, $1,905,000 is held by related parties at September 30, 2020.
The Bridge Notes bear interest at a rate of twenty-four percent (24%) per annum, without compounding. The Bridge Notes and all accrued interest are due and payable on the earliest occurrence of (i) the closing of a new permanent equity financing yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes), (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) December 31, 2019, which was initially extended to June 30, 2020. The Bridge Notes will be repayable upon demand of the Majority Lenders of the Bridge Notes at any time on or after the maturity date. The Bridge Notes are senior in right of payment and priority from the holders of any Convertible Debt and subordinated to any Senior Debt. “Senior Debt” refers to all present and future indebtedness for money borrowed by the Company from institutional lenders, commercial credit companies, commercial banks, credit unions, government agencies, venture debt firms, and other commercial lenders. The investors that hold the Bridge Notes are granted a first-lien security interest in substantially all assets of the Company (“Collateral”). In June 2020, the Bridge Notes were amended to extend the maturity date through September 30, 2020. On October 1, 2020 the Company amended the Bridge Notes to extend the maturity date to March 31, 2021 and to increase the interest rate from 24% to 30% after October 1, 2020.
Interest expense on the Bridge Notes totaled $277,966 and $159,544 for the three months ended September 30, 2020 and 2019, respectively. Interest expense on the Bridge Notes totaled $821,280 and $340,488 for the nine months ended September 30, 2020 and 2019, respectively. Unamortized debt issuance costs on the Bridge Notes totaled $6,497 and $8,673 at September 30, 2020 and December 31, 2019, respectively.
Related Party Bridge Notes
The Company has issued Secured Promissory Notes (“Related Party Bridge Notes”) to an executive member, immediate family members, and other related parties in the aggregate principal sum of $1,905,000. The Related Party Bridge Notes have identical terms to the Bridge Notes. The interest expense associated
5.
DEBT (continued)
with the Related Party Bridge Notes was $104,555 and $72,592 for the three months ended September 30, 2020 and 2019, respectively. The interest expense associated with the Related Party Bridge Notes was $302,610 and $203,671 for the nine months ended September 30, 2020 and 2019, respectively. In September 2020, the Company issued additional Related Party Bridge Notes for proceeds of $250,000. On October 1, 2020, the Company amended the Related Party Bridge Notes to extend the maturity date to March 31, 2021 and to increase the interest rate from 24% to 30% after October 1, 2020.
6.
FAIR VALUE OF DERIVATIVE LIABILITY
Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the Company’s balance sheets as of the following dates indicated:
|
|
|
|
Fair value at September 30, 2020
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability for embedded conversion features
|
|
|
|
$
|
2,290,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,290,000
|
|
|
|
Total liabilities
|
|
|
|
$
|
2,290,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,290,000
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2019
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability for embedded conversion features
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,214,000
|
|
|
|
Total liabilities
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,214,000
|
|
|
The table below provides a summary of the changes in fair value of the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
|
|
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
|
Balance, beginning of period
|
|
|
|
$
|
2,214,000
|
|
|
|
|
$
|
2,765,000
|
|
|
|
(Gain) loss included in earnings
|
|
|
|
|
76,000
|
|
|
|
|
|
(725,000)
|
|
|
|
Balance, end of period
|
|
|
|
$
|
2,290,000
|
|
|
|
|
$
|
2,040,000
|
|
|
The Embedded Conversion Features are separately measured at fair value, with changes in fair value recognized in current operations. The Company used a scenario-based analysis to estimate the fair value of the Embedded Conversion Features at issuance of the Convertible Notes and as of September 30, 2020 and 2019. The fair value of the Embedded Conversion Features is estimated using a scenario-based analysis that estimates the fair value of the convertible promissory notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholders, including various IPO, settlement, equity financing, corporate transaction and dissolution scenarios. Estimating fair values of Embedded Conversion Features requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Because the Embedded Conversion Features are initially and subsequently carried at fair values, the Company’s income will reflect the volatility in these estimate and assumption changes. The original values of the Embedded Conversion Features were recorded as a derivative liability with the offset as a debt discount to the Convertible Notes which is being amortized over the term of the Convertible Notes.
The Company recorded a loss related to the increase in fair value of the derivative liability of $54,000 and $158,000 for the three months ended September 30, 2020 and 2019, respectively.
6.
FAIR VALUE OF DERIVATIVE LIABILITY (continued)
The Company recorded a loss related to the increase in fair value of the derivative liability of $76,000, and a gain related to the decrease in the fair value of the derivative liability of $725,000 for the nine months ended September 30, 2020 and 2019, respectively.
7.
COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its office space in Lexington, Massachusetts under a non-cancelable operating lease that was entered into in September 2012 and most recently amended on April 10, 2017. The lease requires monthly rental payments, presented below, which escalate during the lease term and expires on February 28, 2024. The difference between straight-line rent expense and rent paid is immaterial as of September 30, 2020.
|
Year Ending December 31,
|
|
|
Operating Leases
|
|
|
2020 (remaining)
|
|
|
|
$
|
39,829
|
|
|
|
2021
|
|
|
|
|
161,062
|
|
|
|
2022
|
|
|
|
|
163,158
|
|
|
|
2023
|
|
|
|
|
165,254
|
|
|
|
2024
|
|
|
|
|
27,601
|
|
|
|
Total
|
|
|
|
$
|
556,904
|
|
|
Rent expense for the three months ended September 30, 2020 and 2019 amounted to $13,276 and $79,442, respectively. Rent expense for the nine months ended September 30, 2020 and 2019 amounted to $82,794 and $139,110, respectively.
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 unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. As of September 30, 2020, there was no material litigation against the Company.
8.
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDER’S DEFICIT
Preferred Stock
There have been no changes to the rights and preferences of the Company’s Preferred Stock during 2020. The cumulative aggregate amounts of arrearages in preferred dividends as of September 30, 2020 for Series A, Series A-1, and Series B preferred stock were $1,284,264, $210,644, and $2,483,257, respectively. The per-share amounts of arrearages in cumulative preferred dividends as of September 30, 2020 for Series A, Series A-1, and Series B preferred stock were $0.37, $0.38, and $0.78, respectively.
Common Stock
There have been no issuances of Common Stock during the nine months ended September 30, 2020.
Stock Options
As of September 30, 2020, there were 591,180 shares available for future grants under the Company’s 2013 Stock Incentive Plan. The fair value of the Company’s Common Stock was estimated to be $0.07 and $0.29 at September 30, 2020 and December 31, 2019, respectively.
8.
CONVERTIBLE PREFERRED STOCK AND STOCKHOLDER’S DEFICIT (continued)
The following assumptions were used to estimate the fair value of stock options granted using the Black-Scholes option pricing model during the nine months ended September 30:
|
|
|
|
2020
|
|
|
2019
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.30%-1.41%
|
|
|
1.86%-2.51%
|
|
|
Expected term (in years)
|
|
|
5.32-6.14
|
|
|
5.00-6.13
|
|
|
Expected volatility
|
|
|
43.11%-50.14%
|
|
|
41.12%-43.92%
|
|
|
Expected dividend yield
|
|
|
—%
|
|
|
—%
|
|
A summary of stock option activity under the Plans are as follows:
|
|
|
|
Options
Outstanding
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contractual
Term in Years
|
|
|
Balance at December 31, 2019
|
|
|
|
|
1,247,198
|
|
|
|
|
$
|
0.18
|
|
|
|
|
|
8.78
|
|
|
|
Granted
|
|
|
|
|
240,000
|
|
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited
|
|
|
|
|
(63,157)
|
|
|
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020
|
|
|
|
|
1,424,041
|
|
|
|
|
$
|
0.18
|
|
|
|
|
|
8.29
|
|
|
|
Options exercisable at September 30, 2020
|
|
|
|
|
979,777
|
|
|
|
|
$
|
0.18
|
|
|
|
|
|
8.05
|
|
|
The weighted-average grant date fair value of stock options issued in the nine months ended September 30, 2020 and 2019 was $0.10 and $0.42, respectively. The Company recorded $29,266 and $283,287 of compensation expense for the three months ended September 30, 2020 and 2019, respectively. The Company recorded $80,597 and $339,863 of compensation expense for the nine months ended September 30, 2020 and 2019, respectively. A total of $128,876 of unamortized compensation expense at September 30, 2020, will be recognized over the remaining requisite service period of 2.67 years.
During the first nine months of 2020 and 2019, the Company received proceeds of $0 and $3,674 from the exercise of stock options, respectively. The aggregate intrinsic value for options outstanding and exercisable was $0 and $0 at September 30, 2020 and December 31, 2019, respectively. The total intrinsic value of the options exercised during the first nine months of 2020 and 2019 was $0 and $0, respectively.
On September 4, 2020, the Board of Directors of the Company approved the repricing of 1,404,823 outstanding stock options held by current employees to an exercise price of $0.18, accordingly the summary of stock option activity above has been updated to reflect the exercise price of $0.18 for all outstanding options. No other changes to the original stock option grant terms were made. The incremental compensation cost was measured as the fair value of the stock options immediately before and immediately after the modification. The Company determined the total incremental compensation cost from the modification to be $9,900 of which $7,078 related to fully vested options and was expensed as stock based compensation expense, and $2,822 related to unvested options and will be recognized over the remaining service period.
9.
WARRANTS
At September 30, 2020, the Company had outstanding warrants to purchase 129,254 shares of common stock at an exercise price of $0.01 per share, which expires in 2021. The weighted average exercise price is $0.01 and the weighted average time to expiration is 1.00 year.
During the nine months ended September 30, 2020 and 2019, no warrants to purchase common stock were issued, exercised or expired.
10.
INCOME TAXES
As of September 30, 2020 and December 31, 2019, the Company had federal net operating loss carryforwards of $22,700,000 and $20,400,000 of which approximately $12,900,000 and $12,900,000 expire at various periods through 2037 and approximately $9,800,000 and $7,500,000 can be carried forward indefinitely, respectively. As of September 30, 2020 and December 31, 2019, the Company had state net operating loss carryforwards of approximately $18,000,000 and $16,800,000 that expire at various periods through 2040, respectively. At September 30, 2020 and December 31, 2019, the Company had federal and state tax credits of approximately $570,000 and $531,000 available for future periods that expire at various periods through 2039. The Company has recorded a full valuation allowance against net deferred income taxes assets due to a history of losses generated since inception.
11.
EMPLOYEE BENEFITS PLAN
The Company has established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan is available to all eligible employees. The 401(k) Plan allows participants to defer a portion of their annual compensation subject to certain Internal Revenue Service limitations. The Company may make matching contributions and additional profit-sharing contributions at its discretion The Company has not made any matching contributions to the 401(k) Plan during the nine months ended September 30, 2020.
Shares of Common Stock
iSpecimen Inc.
PROSPECTUS
ThinkEquity
a division of Fordham Financial Management, Inc.
, 2020
Through and including , 2020 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth all fees and expenses, other than the underwriting discounts and commissions payable solely by iSpecimen Inc. in connection with the offer and sale of the securities being registered. All amounts shown are estimated except for the SEC registration fee, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filing fee and the exchange listing fee.
|
|
|
|
Amount to be
paid
|
|
|
SEC registration fee
|
|
|
|
$
|
2,313.38
|
|
|
|
FINRA filing fee
|
|
|
|
|
*
|
|
|
|
Exchange listing fee
|
|
|
|
|
*
|
|
|
|
Accounting fees and expenses
|
|
|
|
|
*
|
|
|
|
Legal fees and expenses
|
|
|
|
|
*
|
|
|
|
Printing expenses
|
|
|
|
|
*
|
|
|
|
Transfer agent and registrar fees
|
|
|
|
|
*
|
|
|
|
Miscellaneous expenses
|
|
|
|
|
*
|
|
|
|
Total
|
|
|
|
$
|
*
|
|
|
*
To be completed by amendment.
Item 14.
Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation. Section 145 of the Delaware General Corporation Law also provides that expenses (including attorneys’ fees) incurred by a director or officer in defending an action may be paid by a corporation in advance of the final disposition of an action if the director or officer undertakes to repay the advanced amounts if it is determined such person is not entitled to be indemnified by the corporation. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Our second amended and restated bylaws provide that, to the fullest extent permitted by law, we shall indemnify and hold harmless any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person, or the person for whom he is the legally representative, is or was a director or officer of ours, against all liabilities, losses, expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such proceeding.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its Certificate of Incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit.
Our fourth amended and restated certificate of incorporation provides that we shall, to the maximum extent permitted from time to time under the law of the State of Delaware, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of ours or while a director or officer is or was serving at our request as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit, proceeding or claim; provided, however, that the foregoing shall not require us to indemnify or advance expenses to any person in connection with any action, suit, proceeding or claim initiated by or on behalf of such person or any counterclaim against us initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any person seeking indemnification shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any repeal or modification of our fourth amended and restated certificate of incorporation shall not adversely affect any right or protection of a director or officer of ours with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification.
Our fourth amended and restated certificate of incorporation and second amended and restated bylaws provide we shall, to the fullest extent permitted under the laws of the State of Delaware, as amended and supplemented from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such party is or was, or has agreed to become, a director or officer of ours, or is or was serving, or has agreed to serve, at our request, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such party or on such party’s behalf in connection with such action, suit or proceeding and any appeal therefrom.
Expenses incurred by such a person in defending a civil or criminal action, suit or proceeding by reason of the fact that such person is or was, or has agreed to become, a director or officer of ours, or is or was serving, or has agreed to serve, at our request, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity shall be paid by us in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by us as authorized by relevant sections of the Delaware General Corporation Law. Notwithstanding the foregoing, we shall not be required to advance such expenses to a person who is a party to an action, suit or proceeding brought by us and approved by a majority of our Board of Directors that alleges willful misappropriation of corporate assets by such person, disclosure of confidential information in violation of such person’s fiduciary or contractual obligations to us or any other willful and deliberate breach in bad faith of such person’s duty to us or our stockholders.
We shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by our Board of Directors.
The indemnification rights provided in our fourth amended and restated certificate of incorporation and second amended and restated bylaws shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, continue as to such person who has ceased to be a director or officer, and inure to the benefit of the heirs, executors and administrators of such a person.
If the Delaware General Corporation Law is amended to expand further the indemnification permitted to indemnitees, then we shall indemnify such persons to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
We may, to the extent authorized from time to time by our Board of Directors, grant indemnification rights to other employees or agents of ours or other persons serving us and such rights may be equivalent to, or greater or less than, those set forth in our second amended and restated bylaws.
Our obligation to provide indemnification under our second amended and restated bylaws shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by us or any other person.
To assure indemnification under our second amended and restated bylaws of all directors, officers, employees or agents who are determined by us or otherwise to be or to have been “fiduciaries” of any employee benefit plan of ours that may exist from time to time, Section 145 of the Delaware General Corporation Law shall, for the purposes of our second amended and restated bylaws, be interpreted as follows: an “other enterprise” shall be deemed to include such an employee benefit plan, including without limitation, any plan of ours that is governed by the Act of Congress entitled “Employee Retirement Income Security Act of 1974,” as amended from time to time; we shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to us also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; and excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed “fines.”
Our second amended and restated bylaws shall be deemed to be a contract between us and each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that person is or was, or has agreed to become, a director or officer of ours, or is or was serving, or has agreed to serve, at our request, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity, at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.
The indemnification provision of our second amended and restated bylaws does not affect directors’ responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.
We may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of ours, or is or was serving at our request as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not we would have the power to indemnify him against liability under the provisions of this section. We currently maintain such insurance.
The right of any person to be indemnified is subject to our right, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at our expense of by the payment of the amount of such settlement and the costs and expenses incurred in connection therewith.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered herewith, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 15.
Recent Sales of Unregistered Securities.
During the past three years, we issued securities that were not registered under the Securities Act as set forth below. The following is a summary of transactions during the preceding three fiscal years involving sales of our securities that were not registered under the Securities Act:
In 2017 and 2018, we issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation and OBF Investments, LLC, all accredited investors, in private placements under Rule 506(b) of Regulation D of the Securities Act, for $5,500,000 of proceeds, Convertible Notes that bear simple interest at the rate of 6% per annum, on a non-compounding basis, and due on maturity on the earlier of (i) the closing of a new permanent equity financing yielding gross proceeds in excess of $10 million, (ii) the date upon which prepayment by the Company occurs with the consent of the majority lenders, (iii) the date upon which the Convertible Notes are otherwise converted into equity securities, or (iv) the stated maturity dates, which may be extended. As of the date of this prospectus, all of the Convertible Notes have been converted into an aggregate of shares of common stock.
Item 16.
Exhibits and Financial Statement Schedules.
(a) Exhibits. The following exhibits are being filed herewith:
EXHIBIT INDEX
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|
Exhibit
No.
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|
|
Description
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|
|
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1.1
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|
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Form of Underwriting Agreement.***
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|
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3.1
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|
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Third Amended and Restated Certificate of Incorporation of the Registrant, as in effect prior to the consummation of this offering.***
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|
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3.2
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|
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Form of Fourth Amended and Restated Certificate of Incorporation of the Registrant, to be in effect upon the consummation of this offering.***
|
|
|
|
3.4
|
|
|
Amended and Restated Bylaws.***
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|
|
|
3.5
|
|
|
Form of Second Amended and Restated Bylaws.***
|
|
|
|
4.1
|
|
|
Specimen Stock Certificate evidencing the shares of common stock.*
|
|
|
|
5.1
|
|
|
Opinion of Ellenoff Grossman & Schole LLP.*
|
|
|
|
10.1
|
|
|
iSpecimen Inc. 2010 Stock Incentive Plan.***
|
|
|
|
10.2
|
|
|
iSpecimen Inc. 2013 Stock Incentive Plan.***
|
|
|
|
10.3
|
|
|
Form of Indemnification Agreement, by and between iSpecimen Inc. and certain directors and executive officers***
|
|
|
|
10.4
|
|
|
Form of Confidentiality, Non-Competition And Assignment Agreement, by and between iSpecimen Inc. and each of its employees***
|
|
|
|
10.5
|
|
|
Lease between iSpecimen Inc. and Bedford Street LLC***
|
|
|
|
10.6
|
|
|
Form of Series A Preferred Stock Subscription Agreement***
|
|
|
|
10.7
|
|
|
Capital Commitment Agreement, dated September 1, 2012***
|
|
|
|
10.8
|
|
|
Form of Series B Preferred Stock Purchase Agreement, dated August 22, 2014***
|
|
|
|
10.9
|
|
|
Form of Investors’ Rights Agreement for Series A-1 Preferred Stock and Series B Preferred Stock Investors***
|
|
|
|
10.10
|
|
|
Form of Convertible Note Subscription Agreement***
|
|
|
|
10.11
|
|
|
Form of Unsecured Convertible Promissory Note***
|
|
|
|
10.12
|
|
|
Unsecured Convertible Promissory Note, dated December 29, 2017, issued by iSpecimen Inc. to Anna-Maria and Stephen Kellen Foundation, Inc.***
|
|
|
|
Exhibit
No.
|
|
|
Description
|
|
|
|
10.13
|
|
|
Omnibus Amendment to Unsecured Convertible Notes and Subscription Agreement, dated August 3, 2018, by and among iSpecimen Inc., Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC***
|
|
|
|
10.14
|
|
|
Second Omnibus Amendment to Unsecured Convertible Notes and Subscription Agreement, dated May 1, 2019, by and among iSpecimen Inc., Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC***
|
|
|
|
10.15
|
|
|
Third Omnibus Amendment to Unsecured Convertible Notes and Subscription Agreement, dated November 15, 2019, by and among iSpecimen Inc., Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC***
|
|
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|
10.16
|
|
|
Fourth Omnibus Amendment to Unsecured Convertible Notes and Subscription Agreement, dated September 19, 2020, by and among iSpecimen Inc., Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC***
|
|
|
|
10.17
|
|
|
Form of Note Subscription Agreement for Secured Bridge Debt***
|
|
|
|
10.18
|
|
|
Form of Secured Promissory Note for Secured Bridge Debt***
|
|
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|
10.19
|
|
|
First Amendment to Note Subscription Agreements and Secured Promissory Notes, dated May 1, 2019, by and among iSpecimen Inc. and Note Investors***
|
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10.20
|
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|
Second Amendment to Note Subscription Agreements and Secured Promissory Notes, dated November 15, 2019, by and among iSpecimen Inc. and Note Investors***
|
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10.21
|
|
|
Third Amendment to Note Subscription Agreements and Secured Promissory Notes, dated June 15, 2020, by and among iSpecimen Inc. and Note Investors***
|
|
|
|
10.22
|
|
|
Fourth Amendment to Note Subscription Agreements and Secured Promissory Notes, dated October 1, 2020, by and among iSpecimen Inc. and Note Investors***
|
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|
14
|
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|
Form of Code of Business Conduct and Ethics.*
|
|
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23.1
|
|
|
Consent of Wolf & Company, P.C..***
|
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23.2
|
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|
Consent of Ellenoff Grossman & Schole LLP (included on Exhibit 5.1).*
|
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24
|
|
|
Power of Attorney (included on signature page to the initial filing of this Registration Statement).**
|
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|
99.1
|
|
|
Form of Audit Committee Charter.*
|
|
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|
99.2
|
|
|
Form of Compensation Committee Charter.*
|
|
|
|
99.3
|
|
|
Form of Nominating and Corporate Governance Committee Charter.*
|
|
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|
99.4
|
|
|
Consent of John L. Brooks III.*
|
|
|
|
99.5
|
|
|
Consent of Margaret H. Lawrence.*
|
|
*
To be filed by amendment.
**
Previously filed.
***
Filed herewith.
(b)
Financial Statements. See page F-1 for an index to the financial statements and schedules included in the registration statement.
Item 17.
Undertakings.
(a)
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
(b)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c)
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Lexington, State of Massachusetts, on the 31st day of December, 2020.
iSPECIMEN INC.
By:
/s/ Christopher Ianelli
Christopher Ianelli
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities set forth opposite their names on December 31, 2020.
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|
Name
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|
|
Position
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|
|
Date
|
|
|
|
/s/ Christopher Ianelli
Christopher Ianelli
|
|
|
Chief Executive Officer, President and Director
(Principal Executive Officer)
|
|
|
December 31, 2020
|
|
|
|
/s/ Jill Mullan
Jill Mullan
|
|
|
Chief Operating Officer, Secretary, Treasurer and Director
|
|
|
December 31, 2020
|
|
|
|
/s/ Tracy Curley
Tracy Curley
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
December 31, 2020
|
|
|
|
/s/ Andrew L. Ross
Andrew L. Ross
|
|
|
Chairman of the Board
|
|
|
December 31, 2020
|
|
|
|
/s/ George “Bud” Scholl
George “Bud” Scholl
|
|
|
Director
|
|
|
December 31, 2020
|
|
|
|
/s/ Steven Gullans
Steven Gullans
|
|
|
Director
|
|
|
December 31, 2020
|
|
Exhibit 1.1
UNDERWRITING AGREEMENT
between
iSPECIMEN INC.
and
THINKEQUITY
A DIVISION OF FORDHAM FINANCIAL MANAGEMENT,
INC.
as Representative of the Several Underwriters
iSPECIMEN INC.
UNDERWRITING AGREEMENT
New York, New York
[•], 202[•]
ThinkEquity
A Division of Fordham Financial Management, Inc.
As Representative of the several Underwriters named on Schedule
1 attached hereto
17 State Street, 22nd Fl
New York, NY 10004
Ladies and Gentlemen:
The undersigned, iSpecimen
Inc., a corporation formed under the laws of the State of Delaware (collectively with its subsidiaries and affiliates, including,
without limitation, all entities disclosed or described in the Registration Statement (as hereinafter defined) as being a subsidiary
or affiliates of iSpecimen Inc., the “Company”), hereby confirms its agreement (this “Agreement”)
with ThinkEquity, a division of Fordham Financial Management, Inc., (hereinafter referred to as “you” (including its
correlatives) or the “Representative”) and with the other underwriters named on Schedule 1 hereto for
which the Representative is acting as representative (the Representative and such other underwriters being collectively called
the “Underwriters” or, individually, an “Underwriter”) as follows:
|
|
1.
|
Purchase and Sale of Shares.
|
1.1
Firm Shares.
1.1.1.
Nature and Purchase of Firm Shares.
(i)
On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth,
the Company agrees to issue and sell to the several Underwriters, an aggregate of [•]
shares (the “Firm Shares”)
of the Company’s common stock, par value $0.0001 per share (the “Common Stock”).
(ii)
The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their
respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[•]
per share (92.5% of the per Firm
Share offering price). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page
of the Prospectus (as defined in Section 2.1.1 hereof).
1.1.2.
Shares Payment and Delivery.
(i)
Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the second (2nd) Business
Day following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section
2.1.1 below) (or the third (3rd) Business Day following the Effective Date if the Registration Statement is
declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and
the Company, at the offices of Blank Rome LLP, 1271 Avenue of the Americas, New York, NY 10020 (“Representative
Counsel”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon
by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called
the “Closing Date.”
(ii)
Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order
of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm
Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters. The
Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in
writing at least two (2) full Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the
Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day”
means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated
by law to close in New York, New York.
1.2
Over-allotment Option.
1.2.1.
Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm
Shares, the Company hereby grants to the Underwriters an option to purchase up to [•]
additional shares of Common Stock, representing fifteen
percent (15%) of the Firm Shares sold in the offering, from the Company (the “Over-allotment
Option”). Such 262,500 additional shares of Common Stock, the net proceeds of which will
be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to
be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the
Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public
Securities is hereinafter referred to as the “Offering.”
1.2.2.
Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative
as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters
shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment
Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed
in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares to be purchased
and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not
be later than one (1) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company
and the Representative, at the offices of Representative Counsel or at such other place (including remotely by facsimile or other
electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option
Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment
Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company
shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters,
acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set
forth in Schedule 1 opposite the name of such Underwriter.
1.2.3. Payment
and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same
day) funds, payable to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to
the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The
Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may
request in writing at least one (1) full Business Day prior to the Option Closing Date. The Company shall not be obligated to
sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares. The
Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time
and date are simultaneous with the Closing Date, the term “Closing
Date” shall refer to the time and date of delivery of the Firm Shares and Option
Shares.
1.3
Representative’s Warrants.
1.3.1.
Purchase Warrants. The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing
Date an option (“Representative’s Warrant”)
for the purchase of an aggregate of [•]
shares of Common Stock, representing [•]%
of the Public Securities, for an aggregate purchase price of $100.00. The Representative’s Warrant agreement, in the
form attached hereto as Exhibit A (the “Representative’s
Warrant Agreement”), shall be exercisable, in whole or in part, commencing on a date which
is six months from the Effective Date and expiring on the fifth (5th) year anniversary of the Effective Date at an initial
exercise price per share of Common Stock of $[•],
which is equal to 125% of the initial public offering price of the Firm Shares. The Representative’s Warrant Agreement and
the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s
Securities.” The Representative understands and agrees that there are significant restrictions
pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant Agreement and the underlying shares of Common
Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will
not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement, or any portion thereof, or be the
subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition
of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter
or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such
Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
1.3.2.
Delivery. Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued
in the name or names and in such authorized denominations as the Representative may request.
2.
Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the Applicable
Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows:
2.1
Filing of Registration Statement.
2.1.1.
Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”)
a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-250198), including any related prospectus
or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities
Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been
prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations
of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements
that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the
context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration
statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements,
schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a
part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule
430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration
statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement”
shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective
by the Commission on the date hereof.
Each
prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information
that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary
Prospectus.” The Preliminary Prospectus, subject to completion, dated [•],
202[•],
that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing
Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter
called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer
to the latest Preliminary Prospectus included in the Registration Statement.
“Applicable
Time” means [•] p.m.,
Eastern time, on the date of this Agreement.
“Issuer
Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities
Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in
Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission
by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether
or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i)
because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case
in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s
records pursuant to Rule 433(g).
“Issuer
General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to
prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona
Fide Electronic Road Show”)), as evidenced by its being specified in Schedule 2-B hereto.
“Issuer
Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing
Prospectus.
“Pricing
Disclosure Package” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the
Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2.
Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 001-[•])
providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared
effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any
notification that the Commission is contemplating terminating such registration.
2.2
Stock Exchange Listing. The shares of Common Stock have been approved for listing on the [•]
(the “Exchange”),
subject to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting
the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating
terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.3
No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued
any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has
instituted or, to the Company’s knowledge, threatened to institute, any proceedings
with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
2.4
Disclosures in Registration Statement.
2.4.1.
Compliance with Securities Act and 10b-5 Representation.
(i)
Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material
respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including
the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto,
and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of
the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection
with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii)
Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing
Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted,
omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
provided however, that this representation and warranty shall not apply to the Underwriters Information (as defined below).
(iii)
The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not,
does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use
Free Writing Prospectus hereto does not conflict with the information contained in the Registration Statement, any Preliminary
Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented
by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or
statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters
by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment
thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter
consists solely of the following disclosure contained in the “Underwriting” section of the Prospectus: the first sentence
in the first paragraph and the table in the second paragraph under the caption “Underwriting” and the first three paragraphs
under the caption “Underwriting–Price Stabilization, Short-Positions and Penalty Bids” (the “Underwriters
Information”); and
(iv)
Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the
time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes
or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to the Underwriters’ Information.
2.4.2.
Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package
and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or
other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement,
that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the
Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized
and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company
and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as
enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and
(z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments
has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default
thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder. To the Company’s knowledge, performance by the Company of the material provisions
of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, ordinance, judgment,
order or decree of any governmental or regulatory agency, body, authority or court, domestic or foreign, having jurisdiction over
the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those
relating to environmental laws and regulations. The Company has no subsidiaries and has no other interest, nominal or beneficial,
direct or indirect, in any other corporation, joint venture or other business entity.
2.4.3.
Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for
the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed
in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
2.4.4.
Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning
the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated
are accurate, correct and complete in all material respects and no other such regulations are required to be disclosed in the Registration
Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
2.4.5.
No Other Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute
any offering material in connection with the Offering other than any Preliminary Prospectus, the Disclosure Package, the Prospectus
and other materials, if any, permitted under the Securities Act and consistent with Section 3.2 below.
2.5
Changes After Dates in Registration Statement.
2.5.1. No
Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no
material adverse change or development in the business of the Company which would involve a material adverse change or
prospective material adverse change, whether or not arising from transactions in the ordinary course of business, in or
affecting the business, general affairs, management, condition (financial or otherwise), results of operations,
stockholders’ equity, business, assets, properties or prospects of the Company (a “Material Adverse
Change”);
(ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this
Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company; and (iv) the
Company has not sustained any material loss or interference with its business or properties from fire, explosion, flood,
earthquake, hurricane, accident or other calamity.
2.5.2.
Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or
disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued
any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid
any dividend or made any other distribution on or in respect to its capital stock.
2.6
Independent Accountants. To the knowledge of the Company, Wolf & Company P.C. (the “Auditor”),
whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus,
is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the
Public Company Accounting Oversight Board. The Auditor has not, during the periods covered by the financial statements included
in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services,
as such term is used in Section 10A(g) of the Exchange Act.
2.7
Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules included in the
Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present in all material respects the financial
position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial
statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”),
consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end
audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and
the supporting schedules included in the Registration Statement present fairly in all material respects the information required
to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in
the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations.
Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet
transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated
entities or other persons that may have a material current or future effect on the Company’s financial condition, changes
in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of
revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a)
the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution
of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company, or, other
than in the course of business, any grants under any stock compensation plan, and (d) there has not been any material adverse change
in the Company’s long-term or short-term debt.
2.8
Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based
on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have
on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration
Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing
Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued shares of Common Stock of the Company or any security convertible
or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock
or any such options, warrants, rights or convertible securities.
2.9
Valid Issuance of Securities, etc.
2.9.1.
Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated
by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have
no rights of rescission or similar rights with respect thereto or put rights, and are not subject to personal liability by reason
of being such holders; and none of such securities were issued in violation of the preemptive rights, rights of first refusal or
rights of participation of any holders of any security of the Company or similar contractual rights granted by the Company. The
authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were
at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky”
laws or, based in part on the representations and warranties of the purchasers of such Shares, exempt from such registration requirements.
2.9.2.
Securities Sold Pursuant to this Agreement. The Public Securities and Representative’s Securities have been duly authorized
for issuance and sale and, when issued and paid for pursuant to the terms of this Agreement, and the Representative’s Warrant
Agreement for the Representative’s Securities , will be validly issued, fully paid and non-assessable; the holders thereof
are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s
Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public
Securities and Representative’s Securities has been duly and validly taken. The Public Securities and Representative’s
Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the
Pricing Disclosure Package and the Prospectus.
2.10
Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package
and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any such securities of the Company under the Securities
Act or to include any such securities in a registration statement to be filed by the Company.
2.11
Validity and Binding Effect of Agreements. This Agreement and the Representative’s Warrant Agreement have been duly
and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the
Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and
(iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought.
2.12
No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement, the Representative’s
Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated
and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice
or the lapse of time or both: (i) result in a material breach of, or conflict with any of the terms and provisions of, or
constitute a material default under, or result in the creation, modification, termination
or imposition of any lien, charge,
mortgage, ledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement or restriction of any
kind whatsoever or encumbrance upon any portion of any property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, note, lease, loan agreement or any other agreement or instrument, license or permit to which the Company
is a party or as to which any property of the Company is a party, except as set forth in the Registration Statement, Pricing disclosure
Package and Prospectus; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation
governing documents (as the same may be amended or restated from time to time, the “Charter”) or the by-laws of the
Company (as the same may be amended or restated form time to time); or (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Entity as of the date hereof.
2.13
No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition
of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is
not in violation of any term or provision of its Charter or by-laws, or in violation of any franchise, license, permit, applicable
law, rule, regulation, judgment, order or decree of any Governmental Entity.
2.14
Corporate Power; Licenses; Consents.
2.14.1.
Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus,
the Company has all requisite corporate power and authority, and has all necessary consents, authorizations, approvals, registrations,
orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the
date hereof to conduct its business purpose as described in the Registration Statement, the Disclosure Package and the Prospectus,
except where such failure to have such consents, authorizations, approvals, registrations, orders, license, certificates and permit
would not reasonably be expected to result in a Material Adverse Change.
2.14.2.
Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to
carry out the provisions and conditions hereof, and all consents, authorizations, approvals, registrations and orders required
in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency
or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions
and agreements contemplated by this Agreement and the Representative’s Warrant Agreement and as contemplated by the Registration
Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws
and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
2.15
D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”)
completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”)
as supplemented by all information concerning the Company’s directors, officers and principal stockholders as described in
the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined
in Section 2.24 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become
aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate and
incorrect.
2.16
Litigation; Governmental Proceedings. There is no material action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the
Company, or,
to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement,
the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing
of the Public Securities on the Exchange, and which if resolved adversely to the Company would result in a Material Adverse Change
or otherwise affect the Company’s ability to consummate the Offering.
2.17
Good Standing. The Company has been duly incorporated and is validly existing as a corporation and is in good standing under
the laws of the state of its organization as of the date hereof, and is duly qualified to do business and is in good standing in
each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except
where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material
Adverse Change.
2.18
Insurance. The Company carries or is entitled to the benefits of insurance, with, to the Company’s knowledge, reputable
insurers, in such amounts and covering such risks which the Company believes are adequate, including but not limited to, directors
and officers insurance coverage at least equal to $[•],000,000
and all such insurance is in full force and effect. As of the date hereof, the Company has no reason to believe that it will not
be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result
in a Material Adverse Change.
2.19
Transactions Affecting Disclosure to FINRA.
2.19.1.
Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus,
there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting
or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements,
agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’
compensation, as determined by FINRA.
2.19.2.
Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and
the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person,
as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing
to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity
that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective
Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
2.19.3.
Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member
or its affiliates, except as specifically authorized herein.
2.19.4.
FINRA Affiliation. There is no (i) officer or director of the Company, (ii) beneficial owner of 5% or more of any class
of the Company's securities or (iii) beneficial owner of the Company's unregistered equity securities which were acquired during
the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of
a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA). Except as disclosed
in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company (i) does not have any material lending
or other relationship with any bank or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds
from the sale of the Public Securities to repay any outstanding debt owed to any affiliate of any Underwriter.
2.19.5.
Information. All information provided by the Company and to the Company’s knowledge all the information provided by
its officers and directors in their FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel
in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all
material respects.
2.20
Foreign Corrupt Practices Act. Neither the Company or, to the Company’s knowledge, any director, officer, agent, employee
or affiliate of the Company or any other person acting on behalf of the Company, has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who
was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation
or proceeding, (ii) if not given in the past, might have had a Material Adverse Change or (iii) if not continued in the
future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps
to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with
the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (collectively, the “FCPA”);
(iv) violated or is in violation of any provision of the FCPA or any applicable non-U.S. anti-bribery statute or regulation; (v)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment; or (vi) received notice of any investigation,
proceeding or inquiry by any Governmental Entity regarding any of the matters in clauses (i)-(v) above; and the Company and, to
the knowledge of the Company, the Company’s affiliates have conducted their respective businesses in compliance with the
FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith.
2.21
Compliance with OFAC. Neither the Company or, to the Company’s knowledge, any director, officer, agent, employee or
affiliate of the Company or any other person acting on behalf of the Company, is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”),
and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by OFAC.
2.22
Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act) contained in either the Registration Statement, Disclosure Package or Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good faith.
2.23
Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money
Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity
involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
2.24
Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or
to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered
thereby.
2.25
Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s executive officers and
directors and each owner of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into
shares of Common Stock) who will be subject to the Lock-Up Agreement (as defined below) (collectively, the “Lock-Up
Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative
an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”),
prior to the execution of this Agreement.
2.26
Related Party Transactions. There are no business relationships or related party transactions involving the Company or any
other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have
not been described as required.
2.27
No Relationships with Customers and Suppliers. No relationship, direct or indirect, exists between or among the Company
on the one hand, and the directors, officers, 5% or greater stockholders, customers or suppliers of the Company or any of the Company’s
affiliates on the other hand, which is required to be described in the Pricing Disclosure Package and the Prospectus or a document
incorporated by reference therein and which is not so described.
2.28
No Unconsolidated Entities. There are no transactions, arrangements or other relationships between and/or among the Company,
any of its affiliates (as such term is defined in Rule 405 of the Securities Act) and any unconsolidated entity, including, but
not limited to, any structure finance, special purpose or limited purpose entity that could reasonably be expected to materially
affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described
in the Pricing Disclosure Package and the Prospectus or a document incorporated by reference therein which have not been described
as required
2.29
Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the heading of the
Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members
and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of
2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”)
applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors
of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and
the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as
“independent,” as defined under the listing rules of the Exchange.
2.30
Sarbanes-Oxley Compliance.
2.30.1.
Disclosure Controls. The Company has developed and currently maintains disclosure controls and procedures that will comply
with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, applicable to it, and except as described in the Registration Statement,
the Pricing Disclosure Package or Prospectus and such controls and procedures are effective as of the date hereof to ensure that
all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation
of the Company’s Exchange Act filings and other public disclosure documents.
2.30.2.
Compliance. The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions
of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure
the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the
material provisions of the Sarbanes-Oxley Act.
2.30.3.
Accounting Controls. The Company maintain systems of “internal control over financial reporting” (as defined
under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply with the requirements of the Exchange Act and have
been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons
performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s
general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The
Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant
deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to
the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’
ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management,
whether or not material, that involves management or other employees who have a significant role in the Company’s internal
controls over financial reporting.
2.31
No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds
thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to
register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
2.32
No Labor Disputes. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent.
2.33
Intellectual Property Rights. The Company owns or possesses or has valid rights to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions,
trade secrets and similar rights (“Intellectual Property Rights”)
necessary for the conduct of the business of the Company as currently carried on and as described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company necessary
for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will
involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. The Company
has not received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others.
Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the
knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual
Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding
or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware
of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with
any other claims in this Section 2.33, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property
Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have
not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending
or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope
of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any
such claim that would, individually or in the aggregate, together with any other claims in this Section 2.33, reasonably be expected
to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual
Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company
is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate,
together with any other claims in this Section 2.33, reasonably be expected to result in a Material Adverse Change; and (E) to
the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term
of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation
agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation
relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company
and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s
knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept
confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package
and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus
contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology
employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on
the Company or its or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation
of the rights of any persons.
All
licenses for the use of the Intellectual Property described in the Registration Statement, the Pricing Disclosure Package and the
Prospectus are in full force and effect in all material respects and are enforceable by the Company and, to the Company’s
knowledge, the other parties thereto, in accordance with their terms, except (x) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification
or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and
the Company, has no knowledge, no other party is in default thereunder and no event has occurred that, with the lapse of time or
the giving of notice, or both, would constitute a default thereunder.
2.34
Taxes. The Company has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to
the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter
defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company. The provisions
for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient
for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated
financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending)
by any taxing authority in connection with any of the returns or taxes asserted as due from the Company, and (ii) no waivers of
statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company. The
term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind
whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns”
means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
2.35
ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”))
established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material
respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined
under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established
or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by
the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount
of unfunded benefit liabilities” (as defined under ERISA). Neither the Company, nor any of its ERISA Affiliates has incurred
or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit
plan” established or maintained by the Company, or any of its ERISA Affiliates that is intended to be qualified under Section
401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to
act, which would cause the loss of such qualification.
2.36
Compliance with Laws. The Company: (A) is and at all times has been in compliance with all statutes, rules, regulations,
ordinances, judgments, orders and decrees of all Governmental Entities applicable to the Company’s business (“Applicable
Laws”), except as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or notice from
any other Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any licenses, consents, certificates,
approvals, clearances, authorizations, permits, orders and supplements or amendments thereto required by any such Applicable Laws
(“Authorizations”);(C) possesses all material Authorizations and such Authorizations
are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received
notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, inquiry, arbitration or other action from any
governmental authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or
Authorizations and has no knowledge that any such governmental authority or third party is considering any such claim, litigation,
arbitration, action, suit, investigation or proceeding; (E) has not received notice that any Governmental Entity has taken, is
taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental
Entity considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, filings,
notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations
and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments
were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either
voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market
withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating
to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company’s
knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
2.37
Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the
time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company
or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations)
of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined
in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the
Company be considered an ineligible issuer.
2.38
Environmental Laws. The Company is in compliance with all foreign, federal, state and local rules, laws and regulations
relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety
or the environment which are applicable to their businesses (“Environmental Laws”),
except where the failure to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been
no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused by the Company (or, to the Company’s knowledge, any other
entity for whose acts or omissions the Company is or may otherwise be liable) upon any of the property now or previously owned
or leased by the Company, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment,
decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment,
decree or permit, give rise to any liability; and there has been no disposal, discharge, emission or other release of any kind
onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances
with respect to which the Company has knowledge.
2.39
Real Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the
Company has good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal
property which are material to the business of the Company, in each case free and clear of all liens, encumbrances, security interests,
claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company; and all of the leases and subleases material to the business
of the Company under which the Company holds properties described in the Registration Statement, the Pricing Disclosure Package
and the Prospectus, are in full force and effect, and the Company has not received any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company to the continued possession of the leased or subleased premises under any such
lease or sublease.
2.40
Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company,
any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including,
but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially
affect the Company’s liquidity or the availability of or requirements for their capital resources required to be described
or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been
described or incorporated by reference as required.
2.41
Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors
of the Company or any of their family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package
and the Prospectus.
2.42
Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller
reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.43
Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing
Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes
are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from
such sources.
2.44
Forward Stock Split. The Company has taken all necessary corporate action to effectuate a forward stock split of its shares
of Common Stock on the basis of 1.74 shares for each share issued and outstanding shares thereof (the “Forward
Stock Split”), such Forward Stock Split to be effective no later than the first trading day of the Firm Shares following
the date hereof.
2.45
Minute Books. The minute books of the Company has been made available to the Underwriters and Representative Counsel, and
such books (i) contain a complete summary of all meetings and actions of the board of directors (including each board committee)
and stockholders of the Company (or analogous governing bodies and interest holders, as applicable), and since December 2014 through
the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in
such minutes. There are no material transactions, agreements, dispositions or other actions of the Company that are not properly
approved and/or accurately and fairly recorded in the minute books of the Company, as applicable.
2.46
Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would
cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the
registration of any such securities under the Securities Act.
2.47
No Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the
consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted
or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization
or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
2.48
Confidentiality and Non-Competition. To the Company’s knowledge, no director, officer, key employee or consultant
of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with
any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective
capacity of the Company or be expected to result in a Material Adverse Change.
2.49
Emerging Growth Company. From the time of the initial confidential submission of the Registration Statement to the Commission
(or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf
in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”).
“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance
on Section 5(d) of the Securities Act.
2.50
Testing-the-Waters Communications. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other
than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional
buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning
of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications.
The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications.
The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-C hereto.
“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication
within the meaning of Rule 405 under the Securities Act.
2.51
Electronic Road Show. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii)
of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of
the Securities Act Regulations) is required in connection with the Offering.
2.52
Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board
of Governors of the Federal Reserve System (the “Federal Reserve Board”),
and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the shares of Common Stock to be considered a “purpose credit”
within the meanings of Regulation T, U or X of the Federal Reserve Board.
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3.
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Covenants of the Company. The Company covenants and agrees
as follows:
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3.1
Amendments to Registration Statement. The Company shall deliver to the Representative, prior to filing, any amendment or
supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment
or supplement to which the Representative shall reasonably object in writing.
3.2
Federal Securities Laws.
3.2.1. Compliance.
The Company, subject to Section 3.2.2, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and
will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of
the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public
Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening
of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act
concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of
the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company
shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period
required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of
any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible
moment.
3.2.2.
Continued Compliance. The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act
and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in
this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus
relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule
172”), would be) required by the Securities Act to be delivered in connection with sales
of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion
of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration
Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the
Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement
or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements
of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of
such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make
the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount
of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file
with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement
to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters
such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative
notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable
Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until
the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof
and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed
filing, as the case may be, and
will not file or use any such document to which any Representative or counsel for the Underwriters shall reasonably object.
3.2.3. Exchange
Act Registration. For a period of three (3) years after the date of this Agreement, the Company shall use its commercially
reasonable efforts to maintain the registration of the shares of Common Stock under the Exchange Act. The Company shall not deregister
the shares of Common Stock under the Exchange Act without the prior written consent of the Representative.
3.2.4.
Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it
shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the
Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each
Issuer General Use Free Writing Prospectus hereto and any “road show that is a written communication” within the meaning
of Rule 433(d)(8)(i) that has been reviewed by the Representative. The Company represents that it has treated or agrees that it
will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free
writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of
Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at
any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of
which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement
or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the
Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing
Prospectus to eliminate or correct such conflict, untrue statement or omission.
3.2.5. Testing-the-Waters
Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred
or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would
include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall
promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written
Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
3.3 Delivery
to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available
to the Representative and counsel for the Representative, without charge, signed copies of the Registration Statement as originally
filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts,
and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed
and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.4 Delivery
to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each
Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter,
without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by
Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
3.5 Effectiveness
and Events Requiring Notice to the Representative. The Company shall use its commercially reasonable efforts to cause the
Registration Statement to remain effective with a current prospectus for at least nine (9) months after the Applicable Time, and
shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration
Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings
for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for
any additional information from the Commission; and (vi) of the happening of any event during the period described in this
Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the
Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement
in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to
make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any
state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall make every reasonable
effort to obtain promptly the lifting of such order.
3.6 Review
of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall
use its commercially reasonable efforts to cause its regularly engaged independent registered public accounting firm to review
(but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement
of any quarterly financial information.
3.7 Listing.
The Company shall use its commercially reasonable efforts to maintain the listing of the shares of Common Stock (including the
Public Securities) on the Exchange for at least three years from the date of this Agreement.
3.8 Financial
Public Relations Firm. Within two weeks from the Closing Date, the Company shall have retained a financial public relations
firm jointly selected by the Representative and the Company, which firm shall be experienced in assisting issuers in initial public
offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably
acceptable to the Representative for a period of not less than two (2) years after the Effective Date.
3.9 Reports
to the Representative.
3.9.1.
Periodic Reports, etc. For a period of three (3) years after the date of this Agreement, the Company shall use its commercially
reasonable efforts to furnish or make available to the Representative copies of such financial statements and other periodic and
special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly
furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under
the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect
to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company;
(iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents
and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may
from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant
confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the
Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed
to have been delivered to the Representative pursuant to this Section 3.9.1.
3.9.2.
Transfer Agent; Transfer Sheets. For a period of three (3) years after the date of this Agreement, the Company shall retain
a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the
Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative
may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. VStock Transfer,
LLC is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.
3.9.3. Trading
Reports. During such time as the Public Securities are listed on the Exchange, the Company shall provide to the Representative,
at the Company’s expense, such reports published by Exchange relating to price trading of the Public Securities, as the
Representative shall reasonably request.
3.10
Payment of Expenses
3.10.1. General
Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date,
if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration
of the shares of Common Stock to be sold in the Offering (including the Options Shares) with the Commission; (b) all Public Filing
System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such
Public Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine, including
any fees charges by The Depository Trust for new securities; (d) all fees, expenses and disbursements relating to background checks
of the Company’s officers and directors in an amount not to exceed $15,000 in the aggregate; (e) all fees, expenses and
disbursements relating to the registration or qualification of the Public Securities under the “blue sky” securities
laws of such states and other jurisdictions as the Representative may reasonably designate including external attorneys fees (not
to exceed $20,000); (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public
Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g)
the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement,
any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’
Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto
and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses
of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities;
(j) fees and expenses of the transfer agent for the shares of Common Stock; (k) stock transfer and/or stamp taxes, if any, payable
upon the transfer of securities from the Company to the Underwriters; (l) the
costs associated with post-Closing advertising the Offering in the national editions of the Wall Street Journal and New York Times
not to exceed $3,000; (m) the costs associated with bound volumes of the public offering materials as well as commemorative mementos
and lucite tombstones, each of which the Company or its designee shall provide within a reasonable time after the Closing Date
in such quantities as the Representative may reasonably request; (n) the fees and expenses of the Company’s accountants;
(o) the fees and expenses of the Company’s legal counsel and other agents and representatives; (p) fees and expenses of
the Representative’s legal counsel not to exceed $125,000; (q) the $29,500 cost associated with the Underwriter’s
use of Ipreo’s book-building, prospectus tracking and compliance software for the Offering; (r) $10,000 for data services
and communications expenses; and (s) up to $20,000 of the Underwriters’ actual accountable “road show” expenses
for the Offering. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date,
or the Option Closing Date, if any, the expenses set forth herein (less any amounts previously advanced against such actual reimbursable
expense) to be paid by the Company to the Underwriters; provided however, that in the event that the Offering is terminated, the
Company agrees to reimburse the Underwriters pursuant to Section 8.3(c).
3.10.2. Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10.1,
on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein,
a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the
Shares, less the Advance (as such term is defined in Section 8.3 hereof), provided, however, that in the event that the Offering
is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
3.11
Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent
with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing
Disclosure Package and the Prospectus.
3.12
Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders
as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the date
of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required
by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a)
of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.
3.13
Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent
of the Representative) has taken directly or indirectly, any action designed to or that has constituted or that might reasonably
be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Public Securities.
3.14
Internal Controls. The Company shall use its commercially reasonable efforts to maintain a system of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s
general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial
statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
3.15
Accountants. As of the date of this Agreement, the Company shall use its commercially reasonable efforts to retain a nationally
recognized independent registered public accounting firm.
3.16
FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes
aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company's securities
or (iii) any beneficial owner of the Company's unregistered equity securities which were acquired during the 180 days immediately
preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating
in the Offering (as determined in accordance with the rules and regulations of FINRA).
3.17
No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely
contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in
a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering
and the other transactions contemplated by this Agreement.
3.18
Company Lock-Up Agreements.
3.18.1.
Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the
prior written consent of the Representative, it will not, for a period of six (6) months after the date of this Agreement (the
“Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of capital stock of the Company; (ii) file or caused to be filed any registration statement
with the Commission (other than on a Form S-8 or successor form thereto) relating to the offering of any shares of capital stock
of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (iii)
complete any offering of debt securities of the Company, other than entering into a line of credit with a traditional bank or (iv)
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of capital stock of the Company, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled
by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
The
restrictions contained in this Section 3.18.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the
issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security
outstanding on the date hereof, which is disclosed in the Registration Statement, Pricing Disclosure Package and Prospectus or
(iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan
of the Company, provided that (a) in each of (ii) and (iii) above, the underlying shares shall be restricted from sale during the
entire Lock-Up Period and (b) such options, warrants and convertible securities shall not have been amended, revised or otherwise
modified since the date of this Agreement to increase the number of securities or decrease the exercise, or conversion price or
exchange price or rate or extend the term of the security.
3.18.2. Restriction
on Continuous Offerings. Notwithstanding the restrictions contained in Section 3.18.1, the Company, on behalf of itself
and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of
twelve (12) months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous
equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of
capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of
the Company.
3.19
Release of D&O Lock-up Period. If the Representative, in its sole discretion, agrees to release or waive the restrictions
set forth in the Lock-Up Agreements described in Section 2.24 hereof for an officer or director of the Company and provide the
Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release
or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit
C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
3.20
Blue Sky Qualifications. The Company shall use its commercially reasonable efforts, in cooperation with the Underwriters,
if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as
required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction
in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
3.21
Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities is (or, but for
the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required
to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange
Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be
required under Rule 463 under the Securities Act Regulations.
3.22
Emerging Growth Company Status. The Company shall promptly notify the Representative if the Company ceases to be an Emerging
Growth Company at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning
of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period.
4.
Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Public Securities,
as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder;
and (iv) the following conditions:
4.1
Regulatory Matters.
4.1.1. Effectiveness
of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00
p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you,
and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have
been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied
with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A
Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b)
(without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed
with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
4.1.2.
FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as
to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3.
Exchange Stock Market Clearance. On the Closing Date, the Company’s shares of Common Stock, including the Firm Shares,
shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing
Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on
the Exchange, subject only to official notice of issuance.
4.2 Company
Counsel Matters.
4.2.1.
Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the favorable opinion of Elenoff
Grossman & Schole LLP, counsel to the Company, dated the Closing Date and addressed to the Representative, substantially in
the form of Exhibit D-1 attached hereto.
4.2.2.
Opinion of Regulatory Counsel for the Company. On the Closing Date, the Representative shall have received the opinion of
[•],
special regulatory counsel for the Company, dated the Closing Date, addressed to the Representative substantially in the form of
Exhibit D-2 attached hereto.
4.2.3.
Intentionally Omitted. .
4.2.4. Option
Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable
opinions of each counsel listed in Sections 4.2.1, 4.22 and 4.2.3, dated the Option Closing Date, addressed to the Representative
and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements
made by such counsels in their respective opinions delivered on the Closing Date.
4.2.5.
Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other
than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to
the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to
the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as
to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and
officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested.
The opinions of each counsel listed in Sections 4.2.1 through 4.2.3 and any opinion relied upon by any such counsel shall include
a statement to the effect that it may be relied upon by Representative Counsel in its opinion delivered to the Underwriters.
4.3 Comfort
Letters.
4.3.1.
Cold Comfort Letter. At the time this Agreement is executed you shall have received a cold comfort letter containing statements
and information of the type customarily included in accountants’ comfort letters with respect to the financial statements
and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed
to the Representative and in form and substance satisfactory in all respects to you and to the Auditor, dated as of the date of
this Agreement.
4.3.2. Bring-down
Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from
the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms
the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date
not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.
4.4 Officers’
Certificates.
4.4.1. Officers’
Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing
Date (if such date is other than the Closing Date), of its Chief Executive Officer, its President and its Chief Financial Officer
(on behalf of the Company and not in an individual capacity) stating that (i) such officers have carefully examined the Registration
Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, to their knowledge, the
Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing
Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing
Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than
the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if
such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date
thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material
fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading,
(ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement
or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to their knowledge, as of
the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties
of the Company in this Agreement are true and correct in all material respects (except for those representations and warranties
qualified as to materiality, which shall be true and correct in all respects and except for those representations and warranties
which refer to facts existing at a specific date, which shall be true and correct as to such date) and the Company has complied
with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing
Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the
date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package,
any material adverse change in the financial position or results of operations of the Company, or any change or development that,
singularly or in the aggregate, would involve a Material Adverse Change.
4.4.2.
Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall
have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as
the case may be, respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified
and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering
are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between
the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents
referred to in such certificate shall be attached to such certificate.
4.5 No
Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have
been no Material Adverse Change or development involving a prospective Material Adverse Change from the latest dates as of which
such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action,
suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by
any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling
or finding would
reasonable be expected to materially adversely affect the business, operations, properties, assets, prospects or financial condition
or income of the Company, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus;
(iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated
or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and
any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance
with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the
Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 Corporate
Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of
this Agreement, the Public Securities, the Registration Statement, the Disclosure Package and the Prospectus and all other legal
matters relating to this Agreement and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
4.7 Delivery
of Agreements.
4.7.1.
Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed
copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
4.7.2.
Representative’s Warrant Agreement. On the Closing Date, the Company shall have delivered to the Representative executed
copies of the Representative’s Warrant Agreement.
4.8 Additional
Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with
such documents and opinions as they may require for the purpose of enabling Representative Counsel to deliver an opinion to the
Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public
Securities and the Representative’s Securities as herein contemplated shall be satisfactory in form and substance to the
Representative and Representative Counsel.
4.9 Forward
Stock Split. Not later than the first trading day of the Firm Shares following the date hereof, the Forward Stock Split shall
be effective.
5.1 Indemnification
of the Underwriters.
5.1.1.
General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter,
its affiliates and each of its and their respective directors, officers, members, employees, representatives, partners, stockholders,
affiliates, counsel, and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,”
and each an “Underwriter Indemnified Party”), against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever,
whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act,
the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries (a
“Claim”), (i) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained
in (A) the Registration Statement, the Pricing Disclosure Package, any Preliminary Prospectus, the Prospectus, or in any Issuer
Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented);
(B) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing
of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in
person or electronically); or (C) any application or other document or written communication (in this Section 5, collectively
called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction
in order to qualify the Public Securities and Representative’s Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission
or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, the Underwriters’ Information or (ii) otherwise arising in connection with or allegedly in
connection with the Offering. The Company also agrees that it will reimburse each Underwriter Indemnified Party for all fees and
expenses (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between
any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third
party, or otherwise) (collectively, the “Expenses”),
and further agrees wherever and whenever possible to advance payment of Expenses as they are incurred by an Underwriter Indemnified
Party in investigating, preparing, pursuing or defending any Claim.
5.1.2. Procedure.
If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company
pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject
to the approval of such Underwriter Indemnified Party) and payment of actual expenses if an Underwriter Indemnified Party requests
that the Company do so. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of the Company, and shall be advanced by the Company.
The Company shall not be liable for any settlement of any action effected without its consent (which shall not be unreasonably
withheld). In addition, the Company shall not, without the prior written consent of the Underwriters, settle, compromise or consent
to the entry of any judgment in or otherwise seek to terminate any pending or threatened action in respect of which advancement,
reimbursement, indemnification or contribution may be sought hereunder (whether or not such Underwriter Indemnified Party is a
party thereto) unless such settlement, compromise, consent or termination (i) includes an unconditional release of each Underwriter
Indemnified Party, acceptable to such Underwriter Indemnified Party, from all liabilities, expenses and claims arising out of
such action for which indemnification or contribution may be sought and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any Underwriter Indemnified Party.
5.2 Indemnification
of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors,
its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the
foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions
made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment
or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information.
In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus,
the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application,
and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given
to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters
by the provisions of Section 5.1.2. The Company agrees promptly to notify the Representative of the commencement of any litigation
or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the
Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer
Free Writing Prospectus or any Written Testing-the-Waters Communication.
5.3 Contribution.
5.3.1.
Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient
to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action
in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute
to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand,
and the Underwriters, on the other, from the Offering of the Public Securities, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect
to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters,
on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering
of the Public Securities purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the
table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Common Stock purchased under this Agreement, as set forth in the table on the cover
page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1,
any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute
any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with
respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
5.3.2.
Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of
notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (“contributing party”), notify the contributing party of the commencement thereof,
but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party
other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party
notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing
party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any
such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action
or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected
by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained
in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities
Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are
several and not joint.
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6.
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Default by an Underwriter.
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6.1 Default
Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations
to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the
Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of
Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to
which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments
hereunder.
6.2 Default
Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 relates to more than
10% of the Firm Shares or Option Shares, you may in your discretion arrange for yourself or for another party or parties to purchase
such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day
after such default relating to more than 10% of the Firm Shares or Option Shares, you do not arrange for the purchase of such
Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure
another party or parties satisfactory to you to purchase said Firm Shares or Option Shares on such terms. In the event that neither
you nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this
Section 6, this Agreement will automatically be terminated by you or the Company without liability on the part of the Company
(except as provided in Sections 3.10 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided,
however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares;
and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters
and to the Company for damages occasioned by its default hereunder.
6.3 Postponement
of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business
Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure
Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to
the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter
may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted
under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common
Stock.
7.1 Board
Composition and Board Designations. The Company shall use its commercially reasonable efforts that: (i) the qualifications
of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley
Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may
be, in the event the Company seeks to have its Public Securities listed on another exchange or quoted on an automated quotation
system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit
committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
7.2 Prohibition
on Press Releases and Public Announcements. The Company shall not issue press releases or engage in any other publicity, without
the Representative’s prior written consent, for a period ending at 5:00 p.m., Eastern time, on the first (1st)
Business Day following the forty-fifth (45th) day after the Closing Date, other than normal and customary releases
issued in the ordinary course of the Company’s business.
7.3 Right
of First Refusal. Provided that the Firm Shares are sold in accordance with the terms of this Agreement, the Representative
shall have an irrevocable right of first refusal (the “Right of First Refusal”), for a period of twelve (12) months
from the Closing Date, to act as sole and exclusive investment banker, sole and exclusive book-runner, sole and exclusive financial
advisor, sole and exclusive underwriter and/or sole and exclusive placement agent, at the Representative’s sole and exclusive
discretion, for each and every future public and private equity and debt offering, including all equity linked financings (each,
a “Subject Transaction”), during such twelve
(12) month period, for the Company, or any successor to or subsidiary of the Company, on terms and conditions customary to the
Representative for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit
any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction
without the express written consent of the Representative.
The Company shall notify
the Representative of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written
notice to the Representative pursuant to Section 9.1. If the Representative fails to exercise its Right of First Refusal
with respect to any Subject Transaction within ten (10) Business Days after such written notice is given pursuant to Section 9.1,
then the Representative shall have no further claim or right with respect to the Subject Transaction. The Representative may elect,
in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided
that any such election by the Representative shall not adversely affect the Representative’s Right of First Refusal with
respect to any other Subject Transaction during the twelve (12) month period agreed to above.
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8.
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Effective Date of this Agreement and Termination Thereof.
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8.1 Effective
Date. This Agreement shall become effective when both the Company and the Representative have executed the same and delivered
counterparts of such signatures to the other party.
8.2 Termination.
The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic
or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially
disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq
Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government
authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major
hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if
a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets;
or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable
to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of
its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the
date hereof of such a Material
Adverse Change, or such Adverse Material Change in general market conditions as in the Representative’s judgment would make
it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the
Underwriters for the sale of the Public Securities.
8.3 Expenses.
Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section
6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein
or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual
and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees
and disbursements of Representative Counsel) up to $175,000, inclusive of the $40,000 advance for accountable expenses previously
paid by the Company to the Representative (the “Advance”)
and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however,
that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding
the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred
in compliance with FINRA Rule 5110(g)(4)(A).
8.4 Indemnification.
Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect
and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any
part hereof.
8.5 Representations,
Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates
of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter,
its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.
9.1 Notices.
All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered
or certified mail, return receipt requested), personally delivered or sent by facsimile transmission and confirmed and shall be
deemed given when so delivered or faxed and confirmed or if mailed, two (2) days after such mailing.
If to the Representative:
ThinkEquity
17 State Street, 22nd Fl
New York, NY 10004
Attn: Mr. Eric Lord, Head of Investment Banking
Fax: (212) 349-2550
with a copy (which shall not constitute notice) to:
Blank Rome LLP
1271 Avenue of the Americas
New York, NY 10020
Attn: Brad L. Shiffman, Esq.
Fax No.: (917) 332-3275
If to the Company:
iSpecimen Inc.
450 Bedford Street
Lexington, MA 02420
Attention: Christopher Ianelli
Fax No: [•]
with a copy (which shall not constitute notice) to:
Elenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Attention: Barry I. Grossman, Esq.
Fax No: [•]
9.2 Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
9.3 Amendment.
This Agreement may only be amended by a written instrument executed by each of the parties hereto.
9.4 Entire
Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with
this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof,
and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms
and conditions of that certain engagement letter between the Company and ThinkEquity, a division of Fordham Financial Management,
Inc., dated September 30, 2019 shall remain in full force and effect, provided however that to the extent that any provision of
the engagement letter is inconsistent with a provision of this Agreement, the terms contained in this Agreement shall prevail.
9.5 Binding
Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters,
the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors,
legal representatives, heirs and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or
any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity
as such, of securities from any of the Underwriters.
9.6 Governing
Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees
that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and
enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of
New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served
upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall
be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in
any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses
relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf
and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby.
9.7 Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one
and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto
and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf
transmission shall constitute valid and sufficient delivery thereof.
9.8 Waiver,
etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be
deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision
hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in
a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver
of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[Signature Page Follows]
If
the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
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Very truly yours,
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iSPECIMEN INC.
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By:
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Name:
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Title:
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Confirmed as of the date first written
above mentioned,
on behalf of itself and as
Representative of the several Underwriters
named on Schedule 1 hereto:
THINKEQUITY
A Division of Fordham Financial Management, Inc.
[Signature
Page]
iSPECIMEN
Inc. – Underwriting Agreement
SCHEDULE 1
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Underwriter
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Total Number of
Firm Shares to be
Purchased
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Number of Additional
Shares to be Purchased if
the Over-Allotment Option
is Fully Exercised
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ThinkEquity, a division of Fordham Financial Management, Inc.
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TOTAL
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SCHEDULE 2-A
Pricing Information
Number of Firm Shares: [•]
Number of Option Shares: [•]
Public Offering Price per Share: $[•]
Underwriting Discount per Share: $[•]
Underwriting Non-accountable expense allowance per Share: $[•]
Proceeds to Company per Share (before expenses): $[•]
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
Free writing prospectus filed with the Commission on [•],
202[•].
SCHEDULE 2-C
Written Testing-the-Waters Communications
None.
SCHEDULE 3
List of Lock-Up Parties
[EGS
TO PROVIDE]
Executive Directors and Affiliates:
Other Stockholders:
EXHIBIT A
Form of Representative’s Warrant
Agreement
THE REGISTERED HOLDER
OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT
AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR
HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE
OTHER THAN (I) THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION
WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF THINKEQUITY, A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC., OR
OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE WARRANT
IS NOT EXERCISABLE PRIOR TO [________________] [DATE THAT IS [180 DAYS OR ONE YEAR] FROM THE EFFECTIVE DATE OF THE OFFERING].
VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING].
WARRANT TO PURCHASE COMMON STOCK
iSPECIMEN INC.
Warrant Shares: _______
Initial Exercise Date: ______, 20__
THIS WARRANT TO PURCHASE
COMMON STOCK (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on
or after ____, 20[•] which is six months from the Effective Date (the “Initial Exercise Date”) and, in
accordance with FINRA Rule 5110(g)(8)(a), prior to at 5:00 p.m. (New York time) on the date that is five (5) years following the
Effective Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from iSPECIMEN INC.,
a Delaware corporation (the “Company”), up to ______ shares of Common Stock, par value $0.0001 per share, of
the Company (the “Warrant Shares”), as subject to adjustment hereunder. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions.
In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“Commission”
means the United States Securities and Exchange Commission.
“Effective
Date” means the effective date of the registration statement on Form S-1 (File No. 333-250198) including any related
prospectus or prospectuses, for the registration of the Company’s Common Stock under the Securities Act, that the Company
has filed with the Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading
Day” means a day on which the New York Stock Exchange is open for trading.
“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
or the New York Stock Exchange (or any successors to any of the foregoing).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of a share of Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX
as applicable, (c) if Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for Common Stock
are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other
cases, the fair market value of the Common Stock as determined by an independent appraiser selected in good faith by the Holder
and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Section 2. Exercise.
a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of
the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise Form annexed hereto. Within two
(2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within five (5) Trading
Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and
the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within two (2) Business Days of receipt of such notice. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following
the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any
given time may be less than the amount stated on the face hereof.
b) Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $_______, subject to adjustment
hereunder (the “Exercise Price”).
c) Cashless
Exercise. If at any time on or after the Initial Exercise Date, there is no effective registration statement registering,
or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder, then this Warrant may
also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be
entitled to receive the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable:
(i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise
is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and
delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined
in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the VWAP on the Trading
Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the
close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of
the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed
and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the
Exercise Price of this Warrant, as adjusted hereunder; and
(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.
If
Warrant Shares are issued in such a “cashless exercise,” the parties acknowledge and agree that in accordance with
Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised,
and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The
Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant
to this Section 2(c).
d) Mechanics
of Exercise.
i. Delivery
of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by its
transfer agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The
Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an effective registration statement permitting the issuance of
the Warrant Shares to or resale of the Warrant Shares by Holder, or (B) the Warrant Shares are eligible for resale by the
Holder without volume or manner-of-sale limitations pursuant to Rule 144 and, in either case, the Warrant Shares have been
sold by the Holder prior to the Warrant Share Delivery Date (as defined below), and otherwise by physical delivery of a
certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of
Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice
of Exercise by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Exercise (such
date, the “Warrant Share Delivery Date”). If the Warrant Shares can be delivered via DWAC, the transfer
agent shall have received from the Company, at the expense of the Company, any legal opinions or other documentation required
by it to deliver such Warrant Shares without legend (subject to receipt by the Company of reasonable back up documentation
from the Holder, including with respect to affiliate status) and, if applicable and requested by the Company prior to the
Warrant Share Delivery Date, the transfer agent shall have received from the Holder a confirmation of sale of the Warrant
Shares (provided the requirement of the Holder to provide a confirmation as to the sale of Warrant Shares shall not be
applicable to the issuance of unlegended Warrant Shares upon a cashless exercise of this Warrant if the Warrant Shares are
then eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares shall be deemed to have been issued, and Holder or
any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to
the issuance of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant
Shares subject to a Notice of Exercise by the second Trading Day following the Warrant Share Delivery Date, the Company shall
pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day
(increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading
Day after the second Trading Day following such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder
rescinds such exercise.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder
a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause its transfer agent to deliver to the Holder the Warrant Shares pursuant to Section 2(d)(i)
by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided, however,
that the Holder shall be required to return any Warrant Shares or Common Stock subject to any such rescinded exercise notice concurrently
with the return to Holder of the aggregate Exercise Price paid to the Company for such Warrant Shares and the restoration of Holder’s
right to acquire such Warrant Shares pursuant to this Warrant (including, issuance of a replacement warrant certificate evidencing
such restored right).
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the
Holder, if the Company fails to cause its transfer agent to transmit to the Holder the Warrant Shares pursuant to an exercise
on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which
(x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to
such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the
amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.
vi. Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder
and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise and all fees
to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
viii. Signature.
This Section 2 and the exercise form attached hereto set forth the totality of the procedures required of the Holder in order to
exercise this Purchase Warrant. Without limiting the preceding sentences, no ink-original exercise form shall be required,
nor shall any medallion guarantee (or other type of guarantee or notarization) of any exercise form be required in order to exercise
this Purchase Warrant. No additional legal opinion, other information or instructions shall be required of the Holder to
exercise this Purchase Warrant. The Company shall honor exercises of this Purchase Warrant and shall deliver Shares underlying
this Purchase Warrant in accordance with the terms, conditions and time periods set forth herein.
e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number
of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the
Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e)
applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall
have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s
most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by
the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99%
of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds
9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.
Section 3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
For the purposes of clarification, the Exercise Price of this Warrant will not be adjusted in the event that the Company or any
subsidiary thereof, as applicable, sells or grants any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common
Stock Equivalents, at an effective price per share less than the Exercise Price then in effect.
b) [RESERVED]
c)
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).
d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
(other than cash dividends) or other distribution of its assets (or rights to acquire its assets) to holders of shares of
Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of shares or other
securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this
Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that
the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation
in such Distribution (provided, however, to the extent that the Holder's right to participate in any such
Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled
to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result
of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution,
such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this
Warrant.
e) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer,
tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by
the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off
or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50%
of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable
upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable by holders of Common Stock as a result of such Fundamental
Transaction for each share of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such
exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is
exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent
to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on
the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise
price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that
from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.
f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice
to Holder.
i.
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company
shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the
Company shall cause to be mailed a notice to the Holder at its last address as it shall appear upon the Warrant Register of
the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, stating (x)
the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it
is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to provide such notice or any defect therein shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any subsidiary of the Company, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer
of Warrant.
a)
Transferability. Pursuant to FINRA Rule 5110(e)(1), neither this Warrant nor any Warrant Shares issued upon exercise
of this Warrant shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative,
put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of
180 days immediately following the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant
is being issued, except the transfer of any security:
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i.
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by operation of law or by reason of reorganization of the Company;
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ii.
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to any FINRA member firm participating in the offering and the officers or partners thereof, if
all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;
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iii.
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if the aggregate amount of securities of the Company held by the Holder or related person do not
exceed 1% of the securities being offered;
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iv.
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that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided
that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do
not own more than 10% of the equity in the fund;
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v.
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the exercise or conversion of any security, if all securities received remain subject to the lock-up
restriction in this Section 4(a) for the remainder of the time period.
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Subject to the foregoing restriction,
any applicable securities laws and the conditions set forth in Section 4(d), this Warrant and all rights hereunder (including,
without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal
office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this
Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning
this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued; or
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vi.
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the transfer or sale of any security back to the Company in a transaction exempt from registration
with the Commission.
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b) New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial
issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.
d) Representation
by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any
exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities
law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Registration
Rights.
5.1
Demand Registration.
5.1.1 Grant
of Right. The Company, upon written demand (a “Demand Notice”) of the Holder(s) of at least 51% of the Warrants and/or
the underlying Warrant Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the
Warrant Shares underlying the Warrants (collectively, the “Registrable Securities”). On such occasion, the Company
will file a registration statement with the Commission covering the Registrable Securities within thirty (30) days after receipt
of a Demand Notice and use its commercially reasonable efforts to have the registration statement declared effective promptly thereafter,
subject to compliance with review by the Commission; provided, however, that the Company shall not be required to comply with a
Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration
rights pursuant to Section 5.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration
statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until
the offering covered by such registration statement has been withdrawn or until thirty (30) days after such offering is consummated.
The demand for registration may be made at any time beginning on the Initial Exercise Date and expiring on the fifth anniversary
of the Effective Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s)
to all other registered Holders of the Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt
of any such Demand Notice.
5.1.2 Terms.
The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 5.1.1,
but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities. The Company agrees to use its commercially reasonable
efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities
in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required
to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register
or license to do business in such State or submit to general service of process in such State, or (ii) the principal stockholders
of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration
statement filed pursuant to the demand right granted under Section 5.1.1 to remain effective for a period of at least twelve (12)
consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first
given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell
the Warrant Shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company
if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding
the provisions of this Section 5.1.2, the Holder shall be entitled to a demand registration under this Section 5.1.2 on only one
(1) occasion and such demand registration right shall terminate on the fifth anniversary of the date of the Underwriting Agreement
(as defined below) in accordance with FINRA Rule 5110(g)(8)(C).
5.2
“Piggy-Back” Registration.
5.2.1 Grant
of Right. In addition to the demand right of registration described in Section 5.1 hereof, the Holder shall have the right,
for a period of no more than two (2) years from the Initial Exercise Date in accordance with FINRA Rule 5110(g)(8)(D), to
include the Registrable Securities as part of any other registration of securities filed by the Company (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any
equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the
account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the
number of Shares which may be included in the Registration Statement because, in such underwriter(s)’ judgment,
marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be
obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to
which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable
Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities.
5.2.2 Terms.
The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 5.2.1 hereof,
but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company
shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to
the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration
statement filed by the Company during the two (2) year period following the Initial Exercise Date until such time as all of the
Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back”
rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention
to file a registration statement. Except as otherwise provided in this Warrant, there shall be no limit on the number of times
the Holder may request registration under this Section 5.2.2; provided, however, that such registration rights shall terminate
on the second anniversary of the Initial Exercise Date.
5.3
General Terms
5.3.1 Indemnification.
The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder
and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of
the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other
expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become
subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained
in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [•],
2021. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including
all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any
claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement
pursuant to which the Underwriters have agreed to indemnify the Company.
5.3.2 Exercise
of Warrants. Nothing contained in this Warrant shall be construed as requiring the Holder(s) to exercise their Warrants prior to
or after the initial filing of any registration statement or the effectiveness thereof.
5.3.3 Documents
Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter
of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the
Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering,
an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort”
letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering,
a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting
firm which has issued a report on the Company’s financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and,
in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten
public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting
the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between
the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff
with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to
comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties
and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent
and at such reasonable times as any such Holder shall reasonably request.
5.3.4 Underwriting
Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders
whose Registrable Securities are being registered pursuant to this Section 5, which managing underwriter shall be reasonably satisfactory
to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily
contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations,
warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of
such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or
the underwriters except as they may relate to such Holders, their Warrant Shares and their intended methods of distribution.
5.3.5 Documents
to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company
a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
5.3.6
Damages. Should the registration or the effectiveness thereof required by Sections
5.1 and 5.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s)
shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance
or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any
such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
Section 6. Miscellaneous.
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a)
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No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
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b)
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Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to
it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such
Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor
and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c)
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Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action
or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right
may be exercised on the next succeeding Trading Day.
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The Company
covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.
The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged
with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be
listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such
issue).
Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth
in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the
par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction
thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking
any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
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e)
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Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the underwriting agreement, dated June 10, 2020, by and
between the Company and ThinkEquity, a division of Fordham Financial Management, Inc., as representatives of the underwriters set
forth therein (the “Underwriting Agreement”).
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f)
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Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise
of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed
by state and federal securities laws.
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g)
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Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers
or remedies. Without limiting any other provision of this Warrant or the Underwriting Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay
to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
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h)
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Notices. Any notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice provisions of the Underwriting Agreement.
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i)
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Limitation of Liability. No provision hereof, in the absence of any affirmative action by
the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
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j)
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Remedies. The Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would
be adequate.
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k)
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Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights
and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the
Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of
any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
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l)
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Amendment. This Warrant may be modified or amended or the provisions hereof waived with
the written consent of the Company and the Holder.
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m)
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Severability. Wherever possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating
the remainder of such provisions or the remaining provisions of this Warrant.
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n)
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Headings. The headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
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********************
(Signature Page Follows)
IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
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iSPECIMEN Inc.
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By:__________________________________________
Name:
Title:
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NOTICE OF EXERCISE
TO: iSPECIMEN
Inc.
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment
shall take the form of (check applicable box):
¨ in lawful money of the United
States; or
¨ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 2(c).
(3) Please
register and issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to
the following DWAC Account Number or by physical delivery of a certificate to:
(4) Accredited
Investor. If the Warrant is being exercised via cash exercise, the undersigned is an “accredited investor” as defined
in Regulation D promulgated under the Securities Act of 1933, as amended
[SIGNATURE
OF HOLDER]
Name of Investing Entity: _______________________________________________________________
Signature of Authorized Signatory of Investing Entity:
_________________________________________
Name of Authorized Signatory: ___________________________________________________________
Title of Authorized Signatory: ____________________________________________________________
Date: ________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____]
all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
_______
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Holder’s
Signature:
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Holder’s
Address:
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NOTE: The signature to this Assignment
Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever.
Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority
to assign the foregoing Warrant.
Exhibit B
Lock-Up Agreement
[•],
202[•]
ThinkEquity
A Division of Fordham Financial Management, Inc.
17 State Street, 22nd Floor
New York, NY 10004
As Representative of the several Underwriters named on Schedule
1 to the Underwriting Agreement referenced below
Ladies and Gentlemen:
The undersigned understands
that ThinkEquity, a Division of Fordham Financial Management, Inc. (the “Representative”), proposes to enter
into an Underwriting Agreement (the “Underwriting Agreement”) with iSPECIMEN Inc.
a Delaware corporation (the “Company”), providing for the initial public offering (the “Public Offering”)
of shares of common stock, par value $0. 0001 per share, of the Company (the “Common Shares”).
To induce the
Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without
the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof
and ending six months [nine months] after the date of the Underwriting Agreement relating to the Public Offering (the
“Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or
dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for
Common Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or
hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of
the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of
Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of
any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter
into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and
subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the
Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after
the completion of the Public Offering; provided that no filing under Section 13 or Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or other public announcement shall be
required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market
transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or
trust for the benefit of the undersigned or a family member (for purposes of this lock-up agreement, “family
member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of
Lock-Up Securities to a charity or educational institution; (d) if the undersigned is a corporation, partnership, limited
liability company or other business entity, (i) any transfers of Lock-Up Securities to another corporation, partnership or
other business entity that controls, is controlled by or is under common control with the undersigned or (ii) distributions
of Lock-Up Securities to members, partners, stockholders, subsidiaries or affiliates (as defined in Rule 405 promulgated
under the Securities Act of 1933, as amended) of the undersigned; (e) if the undersigned is a trust, to a trustee or
beneficiary of the trust; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c)
(d) or (e), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to
the Representative a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under
Section 13 or Section 16(a) of the Exchange Act or other public announcement shall be required or shall be voluntarily
made; (f) the receipt by the undersigned from the Company of Common Shares upon the vesting of restricted stock awards or
stock units or upon the exercise of options to purchase the Company’s Common Shares issued under an equity incentive
plan of the Company or an employment arrangement described in the Pricing Prospectus (as defined in the Underwriting
Agreement) (the “Plan Shares”) or the transfer of Common Shares or any securities convertible into Common
Shares to the Company upon a vesting event of the Company’s securities or upon the exercise of options to purchase the
Company’s securities, in each case on a “cashless” or “net exercise” basis or to cover tax
obligations of the undersigned in connection with such vesting or exercise, but only to the extent such right expires during
the Lock-up Period, provided that no filing under Section 13 or Section 16(a) of the Exchange Act or other public
announcement shall be required or shall be voluntarily made within 90 days after the date of the Underwriting Agreement, and
after such 90th day, if the undersigned is required to file a report under Section 13 or Section 16(a) of the
Exchange Act reporting a reduction in beneficial ownership of Common Shares during the Lock-Up Period, the undersigned shall
include a statement in such schedule or report to the effect that the purpose of such transfer was to cover tax withholding
obligations of the undersigned or pursuant to a “cashless” or “net exercise” by the undersigned in
connection with such vesting or exercise and, provided further, that the Plan Shares shall be subject to the terms of
this lock-up agreement; (g) the transfer of Lock-Up Securities pursuant to agreements described in the Pricing Prospectus
under which the Company has the option to repurchase such securities or a right of first refusal with respect to the transfer
of such securities, provided that if the undersigned is required to file a report under Section 13 or Section 16(a) of
the Exchange Act reporting a reduction in beneficial ownership of Common Shares during the Lock-Up Period, the undersigned
shall include a statement in such schedule or report describing the purpose of the transaction; (h) the establishment of a
trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Lock-Up Securities, provided that (i)
such plan does not provide for the transfer of Lock-Up Securities during the Lock-Up Period and (ii) to the extent a public
announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned
or the Company regarding the establishment of such plan, such public announcement or filing shall include a statement to the
effect that no transfer of Lock-Up Securities may be made under such plan during the Lock-Up Period; (i) the transfer of
Lock-Up Securities that occurs by operation of law, such as pursuant to a qualified domestic order or in connection with a
divorce settlement, provided that the transferee agrees to sign and deliver a lock-up agreement substantially in the
form of this lock-up agreement for the balance of the Lock-Up Period, and provided further, that any filing under
Section 13 or Section 16(a) of the Exchange Act that is required to be made during the Lock-Up Period as a result of such
transfer shall include a statement that such transfer has occurred by operation of law; and (j) the transfer of Lock-Up
Securities pursuant to a bona fide third party tender offer, merger, consolidation or other
similar transaction made to all holders of the Common Shares involving a change of control (as defined below) of the Company
after the closing of the Public Offering and approved by the Company’s board of directors; provided that in the
event that the tender offer, merger, consolidation or other such transaction is not completed, the Lock-Up Securities owned
by the undersigned shall remain subject to the restrictions contained in this lock-up agreement. For purposes of clause (j)
above, “change of control” shall mean the consummation of any bona fide third party tender offer, merger,
amalgamation, consolidation or other similar transaction the result of which is that any “person” (as defined in
Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
of the Exchange Act) of a majority of total voting power of the voting stock of the Company. The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
The undersigned agrees
that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during
the period from the date hereof to and including the 34th day following the expiration of the Lock-Up Period, the undersigned
will give notice thereof to the Company and will not consummate any such transaction or take any such action unless it has received
written confirmation from the Company that the Lock-Up Period has expired.
If the undersigned
is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable
to any issuer-directed or “friends and family” Common Shares that the undersigned may purchase in the Public Offering;
(ii) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the
foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending
release or waiver; and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by
press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any
release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business
days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver
is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing
to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in
effect at the time of such transfer.
No provision in this
lock-up agreement shall be deemed to restrict or prohibit the exercise, exchange, or conversion by the undersigned of any securities
exercisable or exchangeable for or convertible into Common Shares, as applicable; provided, that, the undersigned does not transfer
Common Shares acquired on such exercise, exchange, or conversion during the Lock-Up Period, unless otherwise permitted pursuant
to the terms of this lock-up agreement.
The undersigned understands
that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s
heirs, legal representatives, successors and assigns.
The undersigned understands
that, if the Underwriting Agreement is not executed by [•], 2021, or if the
Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Shares to be sold thereunder, then this lock-up agreement shall be void and of no further
force or effect.
Whether or not the
Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.
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(Title of Signatory, in the case
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EXHIBIT C
Form of Press Release
iSPECIMEN INC.
[Date]
iSpecimen Inc. (the “Company”)
announced today that ThinkEquity, a division of Fordham Financial Management, Inc., acting as representative for the underwriters
in the Company’s recent public offering of _______ shares of the Company’s common stock, is [waiving] [releasing]
a lock-up restriction with respect to _________ shares of the Company’s common stock held by [certain officers or directors]
[an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares
may be sold on or after such date.
This press release is not an offer or
sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities
may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act
of 1933, as amended.
EXHIBIT
D-1
Form
of Opinion of Counsel
(i)
The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State
of Delaware with the requisite corporate power and authority to own or lease, as the case may be, and operate its respective properties,
and to conduct its business, as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and
to enter into and perform its obligations under the Underwriting Agreement. The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing
would not result in a Material Adverse Change.
(ii)
All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable
and none of such securities were issued in violation of the preemptive rights of any stockholder of the Company arising by operation
of law or under the Charter, the Bylaws or, to such counsel’s knowledge, the Material Contracts (as defined below). The authorized
and outstanding shares of capital stock of the Company is as set forth in the Prospectus.
(iii)
The Public Securities have been duly authorized for issuance and sale to the Underwriters pursuant to the Underwriting Agreement
and, when issued and paid for pursuant to the terms of the Underwriting Agreement, will be validly issued and fully paid and non-assessable.The
issuance of the Public Securities is not and will not be subject to the preemptive or similar rights of any holders of any security
of the Company arising by operation of law or under the Charter, the Bylaws or the Material Contracts.
(iv)
The Underwriting Agreement has been duly and validly authorized, executed and delivered by the Company.
(v)
The Representative’s Warrant Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes
the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except (a)
as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights
generally, (b) as enforceability of any indemnification or contribution provisions may be limited under the Federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. The shares of Common
Stock issuable upon exercise of the Representative’s Warrant Agreement have been duly authorized and reserved for issuance
by all necessary corporate action on the part of the Company and, when paid for and issued in accordance with the terms of the
Representative’s Warrant Agreement, will be validly issued, fully paid and non-assessable and will not be subject to the
preemptive or similar rights of any holders of any security of the Company arising by operation of law or under the Charter, the
Bylaws or the Material Contracts.
(vi)
The execution, delivery and performance of the Underwriting Agreement and the Representative’s Warrant Agreement, and
compliance by the Company with the terms and provisions thereof and the consummation of the transactions contemplated
thereby, and the issuance and sale of the Public Securities, do not and will not, whether with or without the giving of
notice or the lapse of time or both, (a) violate, conflict with, or result in a breach of, any of the terms or
provisions of, or constitute a material default under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the Company pursuant to the terms of,
any mortgage, deed of trust, note, indenture, loan, contract, commitment or other agreement or instrument filed or
incorporated by reference as an exhibit to the Registration Statement (collectively, the “Material
Contracts”), (b) result in any violation of the provisions of the Charter, the
By-laws or any other governing documents of the Company, or (c) violate any law, statute or any judgment, order or
decree, rule or regulation known to us applicable to the Company of any Governmental Entity, except, in the case of each of
clauses (a) and (c) , for those breaches and violations which would not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate.
(vii)
The shares of Common Stock offered pursuant to the Prospectus conform in all material respects to the description thereof contained
in the Registration Statement, the Pricing Disclosure Package and the Prospectus. No United States or state statute or regulation
required to be described in the Prospectus pursuant to Item 101(h)(4)(ix) is not described as required (except as to the “blue
sky” laws of the various states, as to which such counsel expresses no opinions), nor are any material contracts or documents,
based on the Company’s management that they provided to us a list of material contract, of a character required to be described
in the Registration Statement, Pricing Disclosure Package or the Prospectus or to be filed or incorporated by reference as exhibits
to the Registration Statement not so described or filed as required.
(viii)
The form of certificate used to evidence the Common Stock complies in all material respects with all applicable Delaware law requirements,
with any applicable requirements of the Charter and By-laws and with the requirements of the Exchange.
(ix)
The statements in the Registration Statement, Pricing Disclosure Package and the Prospectus under the heading “Description
of Capital Stock,” insofar as such statements purport to summarize legal matters, legal conclusions, the Charter, the By-laws,
or other agreements or documents discussed therein, fairly summarize the matters described therein in all material respects.
(x)
The Registration Statement has been declared effective by the Commission under the Securities Act and the Securities Act Regulations.
To our knowledge, based solely on a review of the Commission’s website at https://www.sec.gov/litigation/stoporders.shtml
on the date hereof No stop order suspending the effectiveness of the Registration Statement has been issued under the Securities
Act or any order preventing or suspending the use of any Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus
has been issued, and no proceedings for any such purpose have been instituted or, to such counsel’s knowledge, are pending
by the Commission or any other Governmental Entity. Any required filing of the Prospectus, and any required supplement thereto,
pursuant to Rule 424(b) under the Securities Act Regulations, has been made in the manner and within the time period required
by Rule 424(b) (without reference to Rule 424(b)(8)).
(xi)
The Company is not required and, after giving effect to the Offering and sale of the Public Securities and the application of
the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be
required, to register as an “investment company,” under the Investment Company Act of 1940, as amended.
(xii)
From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first
date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the Waters
Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section
2(a) of the Securities Act.
(xiii)
No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any
Governmental Entity (other than under the Securities Act and the Securities Act Regulations, which have been obtained, or as
may be required under the securities or blue sky laws of the various states, and
from FINRA in connection with the offering and sale of the Securities by the Underwriter or applicable state securities or
blue sky laws, as to which we need express no opinion) that, in such counsel’s experience is normally applicable to
transactions of the type contemplated by the Underwriting Agreement, is necessary or required for the performance by the
Company of its obligations under the Underwriting Agreement, in connection with the offering, issuance or sale of the Public
Securities thereunder or the consummation of the transactions contemplated thereby, except such as have been already made or
obtained or as may be required under the rules of the Exchange, state securities laws or the rules of FINRA.
(xiv)
The Public Securities have been approved for listing on the Exchange upon official notice of issuance.
(xv)
To such counsel’s knowledge, there are no persons with registration rights or other similar rights to have any securities
registered pursuant to the Registrant Statement or otherwise registered for sale by the Company under the Securities Act, except
as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
(xvi)
To such counsel’s knowledge, there are not (1) any pending legal proceedings to which the Company is a party or of which
the Company’s property is the subject, or (2) any proceedings contemplated by any Governmental Authority, in each case,
which are required to be disclosed in the Registration Statement, Pricing Disclosure Package and the Prospectus and are not so
disclosed.
(xvii)
To such counsel’s knowledge, neither the Company, nor any of its affiliates, nor any person acting on its behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that
would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act, which would
require the registration of the sales of any such securities under the Securities Act.
(xviii)
Each of (1) the Registration Statement, as of the time it became effective, (2) the Pricing Disclosure Package, as of the Applicable
Time, and (3) the Prospectus, as of its date (in each case other than the financial statements and supporting schedules included
therein, as to which no opinion need be rendered), complied as to form in all material respects with the requirements of the Securities
Act and Securities Act Regulations.
The opinion
shall further include the following:
Nothing
has come to such counsel’s attention that caused such counsel to believe that (1) the Registration Statement, as of the
time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (2) the Pricing Disclosure Package, as of the Applicable
Time, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading; or (3) the Prospectus, as of its date and
as of the Closing Date or Option Closing Date, as applicable, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (except that, in each case, such counsel need express no view, and make no statement,
with respect to the financial statements and schedules and notes thereto and other financial data derived therefrom that are contained
in or omitted from the Registration Statement, the Pricing Disclosure Package or the Prospectus).
EXHIBIT D-2
Form of Opinion of Regulatory Counsel
(i)
The Company (a) is in all material respects in compliance with the provisions of all laws relating to the regulation of
the Company’s products and services, including (I) the Federal Food, Drug, and Cosmetic Act (the “FDC Act”) and
all state laws comparable to the FDC Act, the rules and regulations promulgated thereunder and all rules and regulations promulgated
by the United States Food and Drug Administration (“FDA”) and all comparable state regulatory authorities and
(b) has all authorizations, approvals, consents, orders, registrations, licenses or permits of any court or the FDA and all state
regulatory authorities comparable to the FDA which are necessary or required for it to conduct its current business in material
compliance with the FDC Act or comparable state law, (II) the Health Insurance Portability and Accountability Act of August 1996
(“HIPPA”) and all state laws comparable to HIPPA and the rules and regulations promulgated thereunder and all rules
and regulations promulgated by the U.S. Department of Health and Human Services, including 45 CFR Part 46.
(ii)
Based on such counsel’s review of the statements in the Prospectus Supplement under the captions “Risk Factors”
Related to Regulatory Environment” and “Business – Regulations” (collectively, the “Covered Disclosures”),
the Covered Disclosures are correct and complete in all material respects.
The opinion shall further include the following:
Nothing has come to such counsel’s
attention that caused such counsel to believe that (1) the Covered Disclosures included in the Registration Statement, as of the
time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (2) the Covered Disclosures included in the Pricing
Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
or (3) the Covered Disclosures included in the Prospectus, as of its date and as of the Closing Date or Option Closing Date, as
applicable, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Exhibit 3.1
State
of Delaware
Secretary of State
Division of
Corporations
Delivered
07:33 PM 08/21/2014
FILED 07:33 PM 08/21/2014
SRV 141098463 - 4705663 FILE
iSpecimen Inc.
THIRD AMENDED &
RESTATED CERTIFICATE OF INCORPORATION
*
* * * * *
1.
The present name of the Corporation is iSpecimen Inc., which is the name
under which the Corporation was originally incorporated. The date of filing of the original Certificate of Incorporation of the
Corporation with the Secretary of State of the State of Delaware was July 2. 2009. The Corporation filed its Amended &
Restated Certificate of Incorporation on June 28. 20 I 0. The Corporation filed its Second Amended &
Restated Certificate of Incorporation on August 31, 2012.
2,
The Certificate of Incorporation of the Corporation, as so amended to date, is hereby amended and restated as set forth
in the Third Amended & Restated Certificate of Incorporation hereinafter provided for.
3.
The provisions of the Certificate of Incorporation of the Corporation as heretofore amended and/or supplemented to date,
and as herein amended, are hereby restated and integrated into the single instrument which is hereinafter set forth, and which
is entitled the Third Amended & Restated Certificate of iSpecimen Inc., without any further
amendment(s) other than the amendment(s) herein certified and without any discrepancy between the provisions of the certificate
of incorporation as heretofore amended and supplemented and the provisions of the said single instrument hereinafter set forth.
4.
The amendments and the restatement of the certificate of incorporation herein certified have been duly adopted by the stockholders
in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware.
5.
The Certificate of Incorporation of the Corporation, as amended and restated herein, shall at the effective time of this
Third Amended & Restated Certificate of Incorporation, shall read as follows:
*
* * * * * *
ARTICLE FIRST. The
name of the Corporation is iSpecimen Inc. (the "Corporation").
ARTICLE
SECOND. The address, including street, number, city, and county, of the registered office of the Corporation in the
State of Delaware is 160 Greentree Drive, Suite IOI, City of Dover 19904, County of Kent; and the name of the registered agent
of the Corporation in the State of Delaware at such address is National Registered Agents, Inc.
ARTICLE
THIRD. The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE
FOURTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue
is Twenty Four Million (24,000,000) shares, consisting of (i) Sixteen Million (16,000,000) shares of Common Stock, with a par value
of $0.0001 per share (the "Common Stock"), and (ii)
Eight Million (8,000,000) shares of Preferred Stock, with a par value of
$0.0001
per share (the "Preferred Stock").
iSpecimen Inc.
Third
Amended & Restated Certificate of Incorporation
A description
of the respective classes of stock and a statement of the designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the qualifications, limitations and restrictions of the Preferred
Stock and Common Stock are as follows:
The
Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Corporation's
Board of Directors (the "Board") may determine. Each series of Preferred Stock shall be so designated as
to distinguish the shares thereof from the shares of all other series and classes. Except as otherwise provided in this Third Amended
& Restated Certificate of lncorporation, different series of Preferred Stock shall not
be construed to constitute different classes of shares for the purpose of voting by classes.
The
Board is expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more series,
each with such designations, preferences, voting powers (or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or restrictions thereof as shall be stated in the
resolution or resolutions adopted by the Board to create such series, and a certificate of said resolution or resolutions
shall be filed in accordance with the General Corporation Law of the State of Delaware. The authority of the Board with
respect to each such series shall include, without limitation of the foregoing, the right to provide that the shares of each
such series may: (i) have such distinctive designation and consist of such number of shares; (ii) be subject to redemption at
such time or times and at such price or prices; (iii) be entitled to tl1e benefit of a retirement or sinking fund for the
redemption of such series on such terms and in such amounts; (iv) be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or any other series of stock; (v) be entitled to such rights upon the
voluntary or involuntary liquidation, dissolution or winding up of the affairs, or upon any distribution of the assets of the
Corporation in preference to, or in such relation to, any other class or classes or any other series of stock; (vi) be
convertible into, or exchangeable for, shares of any other class or classes or any other series of stock at such price or
prices or at such rates of exchange and with such adjustments, if any; (vii) be entitled to the benefit of such conditions,
limitations or restrictions, if any, on the creation of indebtedness, the issuance of additional shares of such series or
shares of any other series of Preferred Stock, the amendment of this Certification of Incorporation or the Corporation's
By-Laws, the payment of dividends or the making of other distributions on, or the purchase, redemption or other acquisition
by the Corporation of, any other class or classes or series of stock, or any other corporate action; ( viii) be entitled to
voting rights, special voting rights, or no voting rights, as may be set forth in the applicable instrument; or (ix) be
entitled to such other preferences, powers, qualifications, rights and privileges, all as the Board may deem advisable and as
are not inconsistent with law and the provisions of this Third Amended & Restated
Certificate of Incorporation.
* * * * *
* * * * *
1. Description
and Designation of the Series A Preferred Stock A total of Three Million Four Hundred Twenty Seven Thousand Eight
Hundred Seventy One (3,427,871) shares of the Corporation's previously undesignated Preferred Stock, $0.001 par value, shall
be designated as the "Series A Preferred Stock" The original issue price per share of the Series A
Preferred Stock shall be $0.762 per share (the "Series A Original Issue Price"). A total of Five
Hundred Fifty Six Thousand Five Hundred Fifty (556,550) shares of the Corporation's previously undesignated Preferred Stock,
$0.001 par value, shall be designated as the "Series A-1 Preferred Stock" The original issue price
per share of the Series A-1 Preferred Stock shall be $1.00808 per share (the "Series A-1 Original
Issue Price").
A total of Three Million Two Hundred Thousand (3,200,000) shares of the Corporation's previously undesignated Preferred Stock,
$0.001 par value, shall be designated as the "Series B Preferred Stock." The original issue price per share
of the Series B Preferred Stock shall be $2.52019 per share (the "Series B Original Issue Price"). The
Series A Preferred Stock and Series A-I Preferred Stock are referred to herein collectively as the "Series A/A-1 Preferred
Stock", without distinction as to series. The Series A Preferred Stock, Series A-I Preferred Stock and Series B Preferred
Stock are referred to herein collectively as the "Series Preferred Stock", without distinction as to series.
When used herein, the term "Original Issue Price" means each of the Series A Original Issue Price, the
Series A-I Original Issue Price and the Series B Original Issue Price, as tl1e case may be.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(a)
6% Cumulative. Non-Compounding Dividend. The holders of Series Preferred Stock, shall be entitled to receive,
out of any funds legally available therefor, cumulative dividends at the annual rate of six percent (6%) per share of the Original
Issue Price of each series of Series Preferred Stock from the date of original issuance of each share of each such series of Series
Preferred Stock by the Corporation to the original holder (the "Series Preferred Cumulative Dividend").
Such Series Preferred Cumulative Dividend shall accumulate annually but not compound, whether or not declared by the Board, from
the date of original issuance by the Corporation of each share of each such series to any initial holder, and shall accrue until
paid as set forth herein. The Series Preferred Cumulative Dividend shall be payable only upon a Liquidation Event as provided in
Section 3 (including any election to treat a merger or sale as such as a Deemed Liquidity Event, as defined below). Upon any voluntary
conversion of the Series Preferred Stock or Qualified Public Offering (as defined herein), no accrued but unpaid Series Preferred
Cumulative Dividend on the shares of Series Preferred Stock so converted shall be due and payable. Dividends on the Series Preferred
Stock will be paid in preference to dividends paid on any other equity securities of the Corporation.
(b) Participating
Dividends. In the event that the Board shall declare a cash dividend payable upon
the then outstanding shares of Common Stock, the holders of the Series Preferred Stock shall be entitled to the amount of dividends
on the Series Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which the
shares of Series Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof,
such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend.
Such determination of "whole shares" shall be based upon the aggregate number of shares of Series Preferred Stock of
each series held by each holder, and not upon each share of Series Preferred Stock so held by the holder.
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3.
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Liquidation, Dissolution or Winding Up.
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(a)
Treatment at Liquidation. Dissolution or Winding Up - Series B
Preferred Stock. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, or in the event of its insolvency (each, a "Liquidation Event"), before any
distribution or payment is made to any holders of Series A/A-1 Preferred Stock or Common Stock,
and subject to the liquidation rights and preferences of any class or series of Preferred Stock designated in the future to be
senior to, or on a parity with, the Series B Preferred Stock with respect to liquidation preferences, the holders of Series B Preferred
Stock shall be entitled to be paid prior to the Series A/A-1 Preferred Stock and Cornn1on
Stock out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes,
whether such assets are capital, surplus or earnings, an amount equal to the Series B Original Issue Price per share of Series
B Preferred Stock held by any holder plus any declared but w1paid Series Preferred Cumulative Dividend (if any) (the
"Series B Liquidation Preference"). In lieu of receiving the Series B Liquidation Preference amount, the
holders of the Series B Preferred Stock may elect to convert to Common Stock
pursuant to Section 5 hereof at any time prior to any liquidation, dissolution or winding up.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
If,
upon liquidation, dissolution or winding up of the Corporation, the assets available for distribution to
its stockholders shall be insufficient to pay the holders of the Series B Preferred Stock the Series B Liquidation Preference
to which they otherwise would be entitled, the holders of Series B Preferred Stock shall share ratably in any distribution of available
assets pro rata in proportion to the liquidation preference amounts which would otherwise be payable upon liquidation with
respect to the outstanding shares of the Series B Preferred Stock if all liquidation preference amounts with respect to such shares
were paid in full.
(c)
Treatment at Liquidation. Dissolution or Winding Up - Series AJA-I
Preferred Stock. In the event of any Liquidation Event, before any distribution or payment is made
to any holders of Common Stock, and subject to the liquidation rights and preferences of any class or series of Preferred Stock
designated in the future to be senior to, or on a parity with, the Series NA-I Preferred Stock with respect to liquidation preferences
(including for tl1is purpose, the Series B Preferred Stock), the holders of Series NA-I
Preferred Stock shall be entitled to be paid prior to the Common Stock out of the assets of tl1e Corporation available
for distribution to holders of the Corporation's capital stock of all classes, whether such assets are capital, surplus or earnings,
an amount equal to the Series A Original Issue Price or Series A-1 Original Issue Price per share of Series NA-I Preferred Stock
held by any holder plus any declared but unpaid Series Preferred Cumulative Dividend on each such series of Series
NA-I Preferred Stock (if any) (the "Series
A/A-1 Liquidation Preference"). In lieu of receiving the Series NA-I
Liquidation Preference, the holders of the Series N A-l Preferred Stock may elect to convert to Common Stock
pursuant to Section 5 hereof at any time prior to any liquidation, dissolution or winding up. The Series NA-I
Liquidation Preference and Series B Liquidation Preference are referred to collectively as the "Series
Preferred Liquidation Preference".
If,
upon liquidation, dissolution or winding up of the Corporation, the assets available for distribution to its stockholders
shall be insufficient to pay the holders of the Series A/A-I Preferred Stock the Series NA-I
Liquidation Preference to which they otherwise would be entitled, the holders of Series NA-I
Preferred Stock shall share ratably in any distribution of available assets pro rata in proportion to the liquidation
preference amounts which would otherwise be payable upon liquidation with respect to the outstanding shares of the Series NA-I
Preferred Stock if all liquidation preference amounts with respect to such shares were paid in full.
(c}
Distribution o( Residual Assets to Holders of Common Stock. After the Series B Liquidation Preference and Series NA-1
Liquidation Preference shall have been made in full to the holders of tl1e Series Preferred Stock, or funds necessary
for such payment shall have been set aside by the Corporation in trust for the account of holders of the Series Preferred Stock
so as to be available for such payment, then the remaining assets or consideration available for distribution to stockholders shall
be distributed ratably among the holders of the Common Stock, ratably in proportion to the number of shares of Common Stock held
by each such holder. The amounts set forth above shall be subject to equitable adjustment whenever there shall occur a stock dividend,
stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the capital
structure of the Common Stock or Series Preferred Stock.
iSpecimen Inc.
Third Amended & Restated Certificate of Incorporation
(d)
Distributions Other than Cash. Whenever the distributions provided for in this Section 3 shall be payable
in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good
faith by the Board. All distributions (including distributions other than cash) made hereunder shall be made pro rata to
the holders of Series Preferred Stock. In the event of any business combination involving non-cash consideration, the acquisition
consideration (including any
shares of capital stock or other securities to be delivered or exchanged by the acquiring corporation) shall be reallocated among
the holders of Series Preferred Stock and Common Stock in an appropriate and equitable manner to give economic effect to the intent
and purposes of Sections 3(a), 3(b) and 3(c) hereof; provided, however, that each holder of Series Preferred Stock has the
right to convert such holder's shares of Series Preferred Stock at any time prior to any such merger, sale of assets or capital
stock, business combination or other acquisition into shares of Common Stock.
(e)
Treatment o(Mergers. Sales o(Assets or Business Combinations. The holders of not less than a majority
of the outstanding shares of Series Preferred Stock (voting together as a single class on an as converted basis) may elect to have
treated as a Liquidation Event: (i) any merger or consolidation of the Corporation into or with another corporation (except one
in which the holders of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at
least a majority of the voting power of the capital stock of the surviving corporation), (ii) any sale of all or substantially
all of the assets, outstanding capital stock or intellectual property of the Corporation, or (iii) any acquisition (other than
through a direct issuance of securities by the Corporation) by any person (or group of affiliated or associated persons) of beneficial
ownership of a majority of the equity securities of the Corporation or any material subsidiary (whether or not newly-issued shares)
in a single transaction or a series of related transactions in a transaction designed to be a business combination or acquisition
of the Corporation and not an equity financing for the purpose of securing working capital (each, a "Deemed Liquidity
Event").
If such
election is made, all consideration payable to the stockholders of the Corporation in connection with any such Deemed Liquidity
Event, or all consideration payable to the Corporation and distributable to its stockholders, together with all other available
assets of the Corporation (net of obligations owed by the Corporation that are senior to the Series Preferred Stock), in connection
with any such asset sale, shall be, as applicable, paid by the purchaser to the holders of, or distributed by the Corporation in
redemption (out of funds legally available therefor) of, the Series Preferred Stock and any junior stock in accordance with the
preferences and priorities set forth in Sections 3(a), 3(b), 3(c) and 3(d) above, with such preferences and priorities specifically
intended to be applicable in any such merger or consolidation, asset sale, as if such transaction were a Liquidation Event. In
furtherance of the foregoing, the Corporation shall take such actions as are necessary to give effect to the provisions of this
Section 3(e), including without limitation, (x) in the case of a merger or consolidation, causing the definitive agreement relating
to such merger or consolidation to provide for a rate at which the shares of each subseries of Series Preferred Stock are converted
into or exchanged for cash, new securities or other property which gives effect to the preferences and priorities set forth in
Sections 3(a), 3(b) and 3(c) above, or (y) in the case of an asset sale, redeeming the Series Preferred Stock in a manner which
gives effect to the preferences and priorities set forth in Sections 3(a), 3(b) and 3(c) above.
For
purposes hereof, the foregoing transactions for constituting a Deemed Liquidity Event shall not include any reorganization, merger
or consolidation involving (I) only a change in
the state of incorporation of the Corporation, (2) a merger of the Corporation with or into a wholly-owned subsidiary of the Corporation
that is incorporated in the United States of America, or (3) an acquisition, whether by merger, reorganization, consolidation or
other form of business combination, of which the Corporation is substantively the surviving corporation and operates as a going
concern, of another corporation and which does not involve a recapitalization or reorganization of the Series A Preferred Stock
or Common Stock, and does not involve (in a single transaction or series of interrelated transactions) a transfer of more than
51 % of the voting power of the Corporation in
a business combination transaction.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(e)
Allocation of Liquidation Preference in a Merger or Sale. The Series Preferred Liquidation Preference shall in all events
be paid in cash: provided, however, that if the Series Preferred Liquidation Preference is payable in connection with a
merger, consolidation or sale of capital stock, then the consideration
(including any shares of capital stock to be delivered by the acquiring entity) payable to the holders of Common Stock and all
series of Series Preferred Stock in connection with such event shall be allocated or reallocated, as applicable, among the holders
of Common Stock and Series Preferred Stock in an appropriate and equitable manner to give economic effect to the priority of distributions
among the holders of Common Stock and all series of Series Preferred Stock. The foregoing allocation to the holders of Series Preferred
Stock and Common Stock shall apply notwithstanding that, pursuant to the terms of the merger, consolidation or sale of capital
stock, consideration is only allocated to the holders of Common Stock, it being the intention of this Section 3 that, if a business
combination is to be treated as a Deemed Liquidity Event or Liquidation Event, holders of Common Stock shall not be entitled to
any payment until the holders of outstanding Series Preferred Stock have received the respective Series Preferred Liquidation Preference.
If there is more than one form of consideration payable in connection with the business combination, such consideration shall be
allocated proportionately to the holders of the Series Preferred Stock and Common Stock based on the amount to which each such
holder of each class or series is entitled, and in accordance with the provisions of this Section 3.
(a)
General Voting with Common Stock. Each holder of Series Preferred Stock shall be
entitled to vote on all matters submitted to the general vote of all stockholders. Each holder of Series Preferred Stock shall
be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder's shares
of Series Preferred Stock could be converted, pursuant to the provisions of Section 5 hereof,
at the record date for the determination of stockholders entitled to vote on any matter or, if no such record date is established,
at the date such vote is taken or any written consent of stockholders is solicited. The number of shares of Common Stock to which
a holder of each series of the Series Preferred Stock shall be entitled to receive upon conversion shall be tl1e product obtained
by multiplying tl1e conversion rate for each series of the Series Preferred Stock by the number of shares of each series of Series
Preferred Stock held by such holder. Except as otherwise provided in this Third Amended &
Restated Certificate of Incorporation, as amended from time to time after the date of filing
of this instrument, with respect to the rights of the Senior Preferred Stock, the holders of shares of Series Preferred Stock and
Common Stock shall vote together (or render written consents in lieu of a vote) as a single class on all matters submitted to the
stockholders of the Corporation. Such determination of "whole shares" shall be based upon the aggregate number of shares
of Series Preferred Stock held by each holder. On the date of filing of this instrument, the holders of Series Preferred Stock
vote witl1 the holders of Common Stock on the basis of one (]) share of Common Stock for each one (]) share of each series of the
Series Preferred Stock so held.
(b) General
Election of Directors. The holders of the Series A Preferred Stock shall be entitled to
vote with the holders of the Common Stock (in the manner set forth above based on voting value) for the election of the
directors of the Corporation. The authorized size of the Board shall be initially set at five (5) members. The Board shall be
comprised of: (i) the Chief Executive Officer: (ii) one (1) individual
designated by the Chief Executive Officer and elected by the holders of a majority of the outstanding shares of Common Stock;
(iii) one(]) individual elected by the holders of a majority of the outstanding shares of Series A/A-1 Preferred Stock; (iv)
one (I) individual elected by the holders of a majority of the outstanding shares of Series B Preferred Stock: and (v) one
(I) individual to be designated by the Board and elected as an independent director by the holders of the Series Preferred
Stock and Common Stock, voting together as a single class on an "as converted" basis.
iSpecimen Inc.
Third Amended & Restated Certificate of Incorporation
(c)
Right o(the Series AIA-l Preferred Stock to Designate and Elect a Director. The
holders of a majority of the outstanding shares of the Series A/A-1 Preferred Stock, voting together as a single class, shall be
entitled to elect one (l) director of the Corporation (the "Series A Director''). At any annual or special meeting
of the Corporation (or in a written consent in lieu thereof) held for the purpose of electing directors.,
the presence in person or by proxy (or by written consent) of the holders of a majority of the outstanding shares of Series A/A-l
Preferred Stock shall constitute a quorum for the election of the Series A Director. The holders of a majority of the shares of
Series A/A-1 Preferred Stock present in person or by proxy at any meeting relating to the election of directors (calculated after
the determination of a quorum of the Series A/A-l Preferred Stock) shall then be entitled to elect the Series A Director as set
forth above, and in the manner set forth above. The Series A Director may be removed during his or her term of office, with or
without cause, by and only by the affirmative vote or written consent of holders of a majority of the outstanding shares of Series
A/A-1 Preferred Stock. Any vacancy in the office of the Series A Director shall be filled by a person appropriately designated
by the holders of a majority of the outstanding shares of Series A/A-1 Preferred Stock.
(d)
Protective Provisions of the Series AIA-1 Preferred Stock. So long as the Series A/A-1 Preferred Stock represents
a minimum of twenty percent (20%) of the outstanding voting capital stock of the Corporation, the Corporation shall not, (in any
case, by merger, consolidation, operation of law or otherwise), without first having obtained the prior approval of the holders
of a majority of the then outstanding shares of Series A/A-I Preferred Stock (voting together as a single class on an as converted
basis), given in writing or by consent or vote at a meeting:
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(1) altering, changing or amending the preferences, privileges or rights
of the Series A Preferred Stock or Series A-1 Preferred Stock or this Third Amended & Restated Certificate of
Incorporation or Bylaws in a manner which is adverse to the holders of the Series A Preferred Stock or Series A-l Preferred
Stock;
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(2) increase or decrease the authorized number of shares of any series of Series Preferred
Stock;
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(3) approve any transaction or series of transactions deemed to be a
liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary;
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(4) approve any Deemed Liquidity Event or other corporate reorganization or acquisition;
or
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(5) declare or pay any cash dividend or distribution or approve any
repurchase with respect to the Series A/A-l Preferred Stock (except as otherwise provided in Section 2 above) or the Common
Stock (other than required redemptions and repurchases under restricted stock agreements or stock option agreements with
employees, advisors, consultants and others and other arrangements approved by the Board).
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Further,
the Corporation shall not, by amendment, alteration or repeal of this Third Amended &
Restated Certificate of Incorporation (whether by merger, consolidation, operation of law, or otherwise) or through any
Deemed Liquidity Event, or any other reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities, agreement or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation and shall at all times in good faith assist in the carrying
out of all the provisions of this Section 4(d) and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holders of the Series A/A-1 Preferred Stock against impairment.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(e)
Right of the Series B Preferred Stock to Designate and Elect a Director. The holders of a majority of the outstanding
shares of the Series B Preferred Stock, voting together as a single class, shall be entitled to elect one (l) director of the
Corporation (the "Series B Director"). At any annual or special meeting of the Corporation (or in a written
consent in lieu thereof) held for the purpose of electing directors, the presence in person or by proxy (or by written consent)
of the holders of a majority of the outstanding shares of Series B Preferred Stock shall constitute a quorum for the election
of the Series B Director. The holders of a majority of the shares of Series B Preferred Stock present in person or by proxy at
any meeting relating to the election of directors (calculated after the determination of a quorum of the Series B Preferred Stock)
shall then be entitled to elect the Series B Director as set forth above, and in the manner set forth above. The Series B Director
may be removed during his or her term of office, with or without cause, by and only by the affirmative vote or written consent
of holders of a majority of the outstanding shares of Series B Preferred Stock. Any vacancy in the office of the Series A Director
shall be filled by a person appropriately designated by the holders of a majority of the outstanding shares of Series B Preferred
Stock. The Series A Director and Series B Director are referred to herein as the Investor Directors".
(!)
Protective Pro1•isions o( the Series B Preferred Stock. So long as the Series B Preferred Stock
represents a minimum of fifty percent (50%) of the shares of Series B Preferred Stock as originally issued by the Corporation,
the Corporation shall not (in any case, by merger, consolidation, operation of Jaw or otherwise), without first having obtained
the prior approval of the holders of a majority of the then outstanding shares of Series B Preferred Stock (voting as a single
class on an as converted basis), given in writing or by consent or vote at a meeting:
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(1) altering, changing or amending the preferences, privileges or rights
of the Series B Preferred Stock or this Third Amended & Restated Certificate of Incorporation or Bylaws in a manner which
is adverse to the holders of the Series B Preferred Stock;
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(2) increase or decrease the authorized number of shares of any series
of the Series Preferred Stock;
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(3) approve any transaction or series of transactions deemed to be a
liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary;
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(4)
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approve any Deemed Liquidity Event or other corporate reorganization or acquisition;
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(5) declare or pay any cash dividend or distribution or approve any repurchase
with respect to the Series B Preferred Stock (except as otherwise provided in Section 2 above) or the Common Stock (other
than required redemptions and repurchases under restricted stock agreements or stock option agreements with employees,
advisors, consultants and others and other arrangements approved by the Board);
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(6) incur indebtedness for borrowed money of greater than $I.0
million (other than working capital lines of credit and term loans from commercial banks or institutional lenders and
approved by the Board), unless otherwise approved by the Board, including one of the two Investor Directors;
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(7) seek to enter any interested transaction (or transaction involving a
conflict of interest) involving a director, officer or employee of the Corporation (other than temporary loans or advances to
any director, officer or employee for travel advances and expenses, consistent with the Corporation's policy), unless
approved by the Board, including one of the two Investor Directors; or
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(8) issue any series of preferred stock senior to or on a parity with
the Series B Preferred Stock, unless approved by the Board, including the two Investor Directors.
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iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
Further,
the Corporation shall not, by amendment, alteration or repeal of this Third Amended & Restated Certificate of
Incorporation (whether by merger, consolidation. operation of law, or otherwise) or through any Deemed Liquidity
Event, or any other reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of
securities, agreement or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation and shall at all times in good faith assist in the carrying out of all the
provisions of this Section 4(t) and in the taking of all such action as may be necessary or appropriate in order to protect the
rights of the holders of the Series B Preferred Stock against impairment.
5, Conversion
Rights. The holders of the Series Preferred Stock shall have the following rights with respect to the conversion
of such shares into shares of Common Stock:
(a)
General. Subject to and in compliance with the provisions of this Section 5, any shares of the Series
Preferred Stock may, at the option of any holder, be converted at any time into fully-paid and non-assessable shares of Common
Stock. The number of shares of Common Stock to which a holder of the Series A Preferred Stock shall be entitled to receive upon
conversion shall be the product obtained by multiplying the Series A Conversion Rate by the number of shares of Series A Preferred
Stock held by such holder. The conversion rate in effect at any time for the Series A Preferred Stock shall be the quotient obtained
by dividing the Series A Original Issue Price by the Series A Conversion Value, calculated as provided below (the "Series
A Conversion Rate"). The Series A Conversion Value in effect from time to time, except as adjusted in accordance with
this Section 5, shall be $0.762 per share (the "Series A Conversion Value").
The
number of shares of Common Stock to which a holder of the Series A-I Preferred Stock shall be entitled to receive upon conversion
shall be the product obtained by multiplying the Series A-1
Conversion Rate by the number of shares of Series A-1
Preferred Stock held by such holder. The conversion rate in effect at any time for the Series A-I Preferred Stock shall
be the quotient obtained by dividing the Series A-I Original Issue Price by the Series A-I Conversion Value, calculated as provided
below (the "Series A-1 Conversion Rate"). The Series A-I Conversion
Value in effect from time to time, except as adjusted in accordance with this Section 5, shall be $1.00808
per share (the "Series A-1 Conversion Value").
The
number of shares of Common Stock to which a holder of the Series B Preferred Stock shall be entitled to receive upon conversion
shall be the product obtained by multiplying the Series B Conversion Rate by the number of shares of Series B Preferred Stock held
by such holder. The conversion rate in effect at any time for the Series B Preferred Stock shall be the quotient obtained by dividing
the Series B Original Issue Price by the Series B Conversion Value, calculated as provided below (the "Series
B Conversion Rate"). The Series B Conversion Value in effect from time to time, except as adjusted in accordance
with this Section 5, shall be $2.52019 per share (the "Series
B Conversion Value").
Each
of the Series A Conversion Rate, Series A-1
Conversion Rate and Series B Conversion Rate, as it may apply to the particular series of tl1e Series Preferred Stock so
affected, are referred to herein as the "Applicable Series Preferred Conversion Rate".
Each of the Series A Conversion Value, Series A-I Conversion Value and Series B Conversion Value, as it may apply to the particular
series of the Series Preferred Stock so affected, are referred to herein as the "Applicable
Series Preferred Conversion Value".
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(b)
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Adjustments to Applicable Series Preferred Conversion Value Due to Dilutive Issuances.
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iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(i)
Dilutive Issuances of Common Stock or Common Stock Equivalents. From and after the date of filing of this instrument,
if the Corporation shall, while there are any shares of any series of Series Preferred Stock outstanding, issue or sell any shares
of its Common Stock or Common Stock Equivalents (as
defined below) without consideration or at a price per share less than the Applicable Series Preferred Conversion Value
in effect immediately prior to such issuance or sale, then in each such case such Applicable Series Preferred Conversion Value
upon any such issuance or sale at less than the Applicable Series Preferred Conversion Value, except as hereinafter provided in
Section 5(b)(iv), shall be lowered so as to be equal to an amount determined by multiplying the Applicable Series Preferred Conversion
Value by a fraction:
(I) the
numerator of which shall be (a) the number of shares of Common Stock and Common Stock Equivalents outstanding immediately
prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully diluted
basis assuming the exercise or conversion of all outstanding Common Stock Equivalents, but excluding any options or other
Common Stock Equivalents reserved but not yet granted), plus (b) the number of shares of Common Stock which the aggregate
consideration, if any, received by the Corporation in connection with the total number of such additional shares of Common
Stock {or Common Stock Equivalents) so issued would purchase at the Applicable Series Preferred Conversion Value in effect
immediately prior to such issuance, and
(2)
the denominator of which shall be (a) the number of shares of Common Stock and Common Stock Equivalents outstanding
immediately prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully
diluted basis assuming the exercise or conversion of all outstanding Common Stock Equivalents, but excluding any options or other
Common Stock Equivalents reserved but not yet granted), plus (b) the number of such additional shares of Common Stock or Common
Stock Equivalents so issued.
With
respect to potential adjustments of the Series A Conversion Value of the Series A Preferred Stock, the anti-dilution adjustment
provisions of this Section 5(b)(i) may be waived in any instance (without the necessity of convening any separate meeting of stockholders
of other classes or series) upon the written approval of the holders of a majority of the outstanding shares of Series A Preferred
Stock. With respect to potential adjustments of the Series A-1 Conversion Value of the Series A-1 Preferred Stock, the anti-dilution
adjustment provisions of this Section 5(b)(i) may be waived in any instance (without the necessity of convening any separate meeting
of stockholders of other classes or series) upon the written approval of the holders of a majority of the outstanding shares of
Series A-l Preferred Stock. With respect to potential adjustments of the Series B Conversion Value of the Series B Preferred Stock,
the anti-dilution adjustment provisions of this Section 5(b)(i) may be waived in any instance (without the necessity of convening
any separate meeting of stockholders of other classes or series) upon the written approval of the holders of a majority of the
outstanding shares of Series B Preferred Stock.
(ii) Treatment of Warrants. Options
and Purchase Rights to Common Stock or Convertible Securities.
(])
Common Stock Equivalents. For the purposes of determining the anti-dilution adjustments under this Section 5(b), the
issuance of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any
securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription
or purchase rights with respect to such convertible or exchangeable securities (collectively, "Common
Stock Equivalents," and individually, a "Common Stock Equivalent"),
shall be deemed an issuance of Common Stock with respect to adjustments in the Applicable Series Preferred Conversion Value, if
the "Net Consideration Per Share" which may be received by the Corporation for such Common Stock or Common Stock Equivalents
shall be less than the Applicable Series Preferred Conversion Value in effect at the time of such issuance. Any obligation,
agreement or undertaking to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance at the time
such obligation, agreement
or undertaking is made or arises. No anti-dilution adjustment of the Applicable Series Preferred Conversion Value shall be made
under this Section 5(b) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or
exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the original issuance of any such
Common Stock Equivalents.
iSpecimen Inc.
Third Amended & Restated Certificate of incorporation
(2)
Decreases in Net Consideration Per Share and Retroactive Adh1stment upon Expiration of Common Stock Equivalents.
Should the Net Consideration Per Share of any such Common Stock or Common Stock Equivalents be decreased at any time, then upon
the effectiveness of each such change, the Applicable Series Preferred Conversion Value will be that which would have been obtained
(I) had the adjustments made upon the issuance of such Common Stock
Equivalents been made upon the basis of the actual Net Consideration Per Share of such securities, and (2) had the adjustments
made to the Applicable Series Preferred Conversion Value since the date of issuance of such Common Stock Equivalents been made
to such Applicable Series Preferred Conversion Value, as adjusted pursuant to clause (1) above. Any adjustment of the Applicable
Series Preferred Conversion Value with respect to this paragraph which relates to any Common Stock Equivalent shall be disregarded
if. as, and when such Common Stock Equivalent expires or is cancelled without being exercised, so that the Applicable Series Preferred
Conversion Value effective immediately upon such cancellation or expiration shall be equal to the Applicable Series Preferred Conversion
Value that would have been in effect had the expired or cancelled Common Stock Equivalent not been issued.
(3)
Definition of Net Consideration Per Share. For purposes of calculating the anti-dilution provisions of this Section
5(b), the "Net Consideration Per Share" which may be received by the Corporation shall mean the amount
equal to the total amount of consideration, if any. received by the Corporation for the issuance of such Common Stock Equivalents
(including the gross proceeds received from any convertible debt financing, or the proceeds received in connection with the issuance
of Common Stock Equivalents in the event of any debt financing in which Common Stock or Common Stock Equivalents are issued), plus
the minimum amount of consideration, if any, payable to the Corporation upon exercise, or conversion or exchange thereof, divided
by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged
or converted. The Net Consideration Per Share which may be received by the Corporation shall be determined in each instance as
of the date of issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate
adjustments which may be applicable with respect to such Common Stock Equivalents.
(iii)
Consideration Other than Cash. For purposes of this Section 5(b), if a part or all of the consideration received
by the Corporation in connection with the issuance of shares of the Common Stock or Common Stock Equivalents consists of property
other than cash. such consideration shall be deemed to have a fair market value as is reasonably determined in good faith by the
Board, including the vote of the Series A Director and the Series B Director.
(iv)
Exceptions to Anti-Dilution Adjustments. The anti-dilution adjustments provided for in this Section 5(b) shall
not apply under any of the circumstances with respect to the grant, issuance, transfer, disposition, offer or sale
of: (i) shares of Common Stock issued upon conversion of the Series Preferred Stock (or any other series of Preferred Stock hereafter
created); (ii) shares, options, warrants, or other rights issued to employees, officers, advisors, consultants or directors in
accordance with plans, agreements, or similar arrangements approved by the Board; (iii) shares issued upon exercise of options,
warrants, or convertible securities; (iv) shares issued as a dividend or distribution on the Series Preferred Stock or for which
adjustment is otherwise made pursuant to this Third Amended & Restated Certificate of
Incorporation (e.g., stock dividends and stock splits or combinations or subdivisions); (v) shares of Common Stock issued
in connection with a public offering on a registration statement filed under the Securities
Act of 1933 and the rules and regulations issued thereunder; (vi) shares issued or issuable pursuant to an acquisition of another
corporation, a joint venture agreement or license or collaboration agreement approved by the Board; (vii) shares of equity securities
issued or issuable to banks, commercial lenders, equipment lessors, venture debt organizations or otl1er financial institutions
pursuant to debt financing or commercial transactions approved by the Board; (viii) shares issued or issuable in connection with
any settlement approved by the Board; (ix) shares issued or issuable in connection with sponsored research, collaboration, technology
license, development, OEM, collaboration, joint venture, marketing or other similar arrangements or strategic partnerships approved
by the Board; (x) shares issued to suppliers of goods or services in connection with the provision of goods or services pursuant
to transactions approved by the Board; {xi) shares issued pursuant to other transactions approved by the Board; and (xii) shares
that are otherwise excluded by the consent of holders of a majority of the outstanding Series Preferred Stock (voting together
as a single class on an as converted basis).
iSpecimen Inc.
Third Amended &
Restated Certificate of incorporation
(c)
Adjustments to Conversion Value Due to Subdivision or Combination of Common Stock. In case the Corporation shall
at any time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number
of shares of Common Stock, the Applicable Series Preferred Conversion Value in effect immediately prior to such subdivision shall
be proportionately reduced. Conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number
of shares of Common Stock, the Applicable Series Preferred Conversion Value in effect immediately prior to such combination shall
be proportionately increased.
(d)
Dividend, Other Than Common Stock Dividends. In the event the Corporation shall make or issue, or shall fix a
record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other assets (excluding cash dividends or distributions),
then and in each such event provision shall be made so that the holders of the Series Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation which they would have received had their shares of Series Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date of such event to and including tl1e Conversion
Date (as that term is hereafter defined), retained such securities or such other assets receivable by them during such period,
giving application to all other adjustments called for during such period under all provisions of this Section 5 with respect to
the rights of the holders of the Series Preferred Stock.
(e)
Capital Reorganization or Reclassification. If the Common Stock issuable upon the conversion of the Series Preferred
Stock shall be changed into the same or different number of shares of any class or classes of capital stock, whether by capital
reorganization, recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in Section 5(c) and (d), or the sale of all or substantially all of the Corporation's capital stock or assets
to any other person), then and in each such event the holders of Series Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of capital stock and other securities and property receivable upon such reorganization,
recapitalization, reclassification or other change by the holders of the number of shares of Common Stock into which such shares
of Series Preferred Stock might have been converted immediately prior to such reorganization, recapitalization, reclassification
or change, all subject to further adjustment as provided herein.
iSpecimen Inc.
Third Amended & Restated Certificate of Incorporation
(/) Capital
Reorganization, Merger or Sale of Assets. Subject to the provisions of Section 3(d), if at any time or from time to
time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, recapitalization,
reclassification or exchange of shares provided for elsewhere in Sections 5(c), (d) and (e)) or
a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the
Corporation's capital stock or assets to any other person (any of which events is herein referred to as a "Reorganization"), then,
as a part of such Reorganization, provision shall be made so that the holders of the Series Preferred Stock shall thereafter
be entitled to receive upon conversion of tl1e Series Preferred Stock the number of shares of stock or other securities or
property (including cash) of the Corporation (or of the successor corporation resulting from such merger, consolidation or
sale), to which such holder would have been entitled if such holder had converted its shares of Series Preferred Stock
immediately prior to such Reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5(f) to the end that the provisions of this
Section 5(f) (including adjustment of the Applicable Series Preferred Conversion Value then in effect) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
As
provided in Section 3, upon tl1e occurrence of a Reorganization under circumstances which make the preceding paragraph applicable,
the holders of at least a majority of the outstanding shares of Series Preferred Stock shall have the option of electing treatment
of the shares of the Series Preferred Stock under either this Section 5(f) or Sections 3(a)-(e) hereof, notice of which election
shall be submitted in writing to the Corporation at its principal offices no later than five (5) business days before the effective
date of such event.
For
purposes hereof, a Reorganization shall not include any reorganization, merger or consolidation involving (I) only a change
in the state of incorporation of the Corporation, (2) a merger of the Corporation with or into a wholly-owned subsidiary of the
Corporation that is incorporated in the United States of America, or (3) an acquisition, whether by merger, reorganization, consolidation
or other fom1 of business combination, of which the Corporation is substantively the surviving corporation and operates as a going
concern, of another corporation and which does not involve a recapitalization or reorganization of the Preferred Stock or Common
Stock, and does not involve (in a single transaction or series of interrelated transactions) a transfer of more than 50% of the
voting power of the Corporation in a business combination.
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(g)
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Automatic Conversion Upon Public Offering, Equity Financing or Election o(Preferred
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(i) Mandatory
Conversion of Preferred Stock. Immediately (1) upon the effectiveness of an underwritten public offering on a firm
commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation and/or selling stockholders in which the
Corporation and/or selling stockholders receive gross proceeds equal to or greater than $25 million (a "Qualified
Public Offering"), or (2) upon the approval, set forth in a written notice to the
Corporation, oftl1e holders of a majority of the outstanding shares of Series A/A-1Preferred Stock of an election to
convert the Series A/A-1 Preferred Stock into Common Stock, or (3) upon the approval, set forth in a written notice to the
Corporation, of the holders of a majority of tl1e outstanding shares of Series B Preferred Stock of an election to convert
the Series B Preferred Stock into Common Stock, then all outstanding shares of the relevant series of Series Preferred Stock
(as the case may be) shall be converted automatically into the number of shares of Common Stock into which such shares of
Series Preferred Stock are then convertible pursuant to this Section 5 hereof as of the closing and consummation of such
underwritten public offering, or the stated date of approval of such holders of Series Preferred Stock, without any further
action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent. For the avoidance of doubt, the holders of the Series A/A-1 Preferred Stock cannot compel
conversion of the Series B Preferred Stock, and the holders of the Series B Preferred Stock cannot compel conversion of the
Series A/A-1 Preferred Stock.
iSpecimen Inc.
Third Amended & Restated Certificate of
Incorporation
The
automatic conversion of the Series Preferred Stock into shares of Common Stock as provided in clause (I) above shall be subject
in all circumstances to the closing and consummation of the offer and sale of shares of Common Stock pursuant to any Qualified
Public Offering.
{ii) Surrender
o( Certificates Upon Mandatory Conversion. Upon the occurrence of the conversion events specified in the preceding paragraph
(i), the holders of the Series Preferred Stock shall, upon notice from the Corporation, surrender the certificates representing
such shares at the office of the Corporation or of its transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to such holder a certificate or certificates for the number of shares of Common Stock into which the shares of Series
Preferred Stock so surrendered were convertible on the date on which such conversion occurred. The Corporation shall not be obligated
to issue such certificates unless certificates evidencing the shares of Series Preferred Stock being converted are either delivered
to the Corporation or any such transfer agent, or the holder notifies the Corporation that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it
in connection therewith.
(h) Certificate as to Adjustments: Notice bl' Corporation. Upon any adjustment of the Series A Applicable Conversion
Rate, then and in each such case the Corporation shall give written notice thereof, by delivery in person, first class mail, postage
prepaid, electronic mail, overnight courier service, telecopy or telex, to the holders of the Series Preferred Stock, which notice
shall state the Applicable Series Preferred Conversion Rate resulting from such adjustment, setting forth in reasonable, itemized
detail the method upon which such calculation is based.
(i) Exercise of Conversion Privilege. To exercise its conversion privilege, a holder of Series Preferred Stock shall
surrender the certificate(s) representing the shares being converted to the Corporation at its principal office, and shall give
written notice to the Corporation at that office that such holder elects to convert such shares. Such notice shall also state the
name or names (with address or addresses) in which the certificate(s) for shares of Common Stock issuable upon such conversion
shall be issued. The certificate(s) for shares of Series Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation, together with
the certificate(s) representing the shares of Series Preferred Stock being converted, shall be the "Conversion Date."
As promptly as practicable after the Conversion Date, the Corporation shall issue and shall deliver to the holder of the shares
of Series Preferred Stock being converted, or on its written order, such certificate(s) as it may request for the number of whole
shares of Common Stock issuable upon the conversion of such shares of Series Preferred Stock in accordance with the provisions
of this Section 5, and cash, as provided in Section 5(j), in respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion
Date, and at such time the rights of the holder as holder of the converted shares of Series Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed
to have become the holder(s) of record of the shares of Common Stock represented thereby. In the event some but not all of the
shares of Series Preferred Stock represented by a certificate(s) surrendered by a holder are converted, the Corporation shall execute
and deliver to or on the order of the holder, at the expense of the Corporation, a new certificate representing the number of shares
of Series Preferred Stock which were not converted.
O) Cash
in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon the conversion of shares of Series Preferred Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon conversion of Series Preferred Stock, the
Corporation shall pay to the holder of the shares of Series Preferred Stock which were converted a cash adjustment in respect
of such fractional shares in an an1ount equal to the same fraction of the market price per share of the Common Stock
(as determined in a reasonable manner prescribed by the Board) at the close of business on the Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be based upon the aggregate number of shares of
Series Preferred Stock being converted at any one time by any holder thereof, not upon each share of Series Preferred Stock
being converted.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(k}
Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series Preferred Stock,
such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding
shares of the Series Preferred Stock (including any shares of Series Preferred Stock represented by any warrants, options, subscription
or purchase rights for the Series Preferred Stock), and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares of the Series Preferred Stock (including any shares
of Series Preferred Stock represented by any warrants, options, subscriptions or purchase rights for the Series Preferred Stock),
the Corporation shall use all reasonable efforts and take such action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such purpose.
(/)
Forced Conversion on Failure of a Holder of Series B Preferred Stock to Finance a Tranche Closing. The holders of Series
B Preferred Stock are required to make additional investments in the Corporation in accordance with milestones (a "Tranche
Closing") set forth in a certain Series B Preferred Stock Purchase Agreement (the "Series
B Purchase Agreement") pursuant to which the shares of Series B Preferred Stock were originally issued. If
any holder of Series B Preferred Stock fails to participate fully for its complete pro rata commitment in any Tranche Closing (a
"Defaulting Holder"), the shares of Series B Preferred Stock then
held by such Defaulting Holder shall automatically, and without any further action on the part of such Defaulting Holder, be converted
into shares Common Stock at the Series B Conversion Rate in effect immediately prior to such conversion. Such Defaulting Holder
shall forfeit all of its rights related to the Series B Preferred Stock as set forth herein and in the investment documents set
forth in the Series B Purchase Agreement as to such shares of Series B Preferred Stock so converted, and such Defaulting Holder
shall be afforded only such rights as are afforded to holders of Common Stock. Notwithstanding the foregoing and for the avoidance
of doubt, a holder of Series B Preferred Stock may satisfy its obligation to make additional investments in the Corporation pursuant
to the Series B Purchase Agreement by assigning, transferring or otherwise substituting other investor(s) approved in
advance by the Board to satisfy such holder's commitment to make additional investments in the Corporation pursuant to the
Series B Purchase Agreement. Notwithstanding the foregoing and for the avoidance of doubt, if a holder of Series B Preferred Stock
invests less than all of such holder's required commitment in any Tranche Closing (whether the investment commitment for a Tranche
Closing is funded by that holder and/or its substituted investor(s)), a number of shares of Series B Preferred Stock previously
or to be concurrently issued to such holder equivalent in value to that portion of the investment amount which was not funded by
such holder (whether directly by such holder or in conjw1ction with such holder's substituted investor(s)) shall be converted into
shares of Common Stock. By way of illustration and example, if a holder of Series B Preferred
Stock were required to purchase 300,000 shares of Series B Preferred Stock at a Tranche Closing, and such holder only purchases
200,000 shares (whether directly by such holder or in conjunction with such holder's substituted investor(s)), then 100,000 shares
of Series B Preferred Stock previously issued to any such holder shall be converted into Common Stock.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
6, Notices
of Record Date. In case at any time: (i) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the Corporation with or into another entity or entities, or
a sale, lease, abandonment, transfer or other disposition of all or iSpecimen Inc. substantially all its assets; or (ii)
there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then, in any one or more
of said cases, the Corporation shall give, by delivery in person, first class mail, postage pre-paid, electronic mail,
overnight courier service, telecopy or telex, addressed to each holder of any shares of each series of the Series Preferred
Stock at the address of such holder as shown on the books of the Corporation, in the case of any such event, at least ten
(IO) days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing
clause shall also specify, the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, as the case may be.
7,
No Impairment. The Corporation shall not, by amendment, alteration or repeal of this Third Amended &
Restated Certificate of Incorporation (whether by merger, consolidation, operation of law, or otherwise) or through any
Deemed Liquidity Event, any event described in Section 3 hereof, or any other reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, agreement or any other voluntary action, avoid or seek to avoid
the observance or performance of any oftl1e terms to be observed or performed hereunder by the Corporation and shall at all times
in good faith assist in the carrying out of all the provisions of this Part A, Sections 1-7
hereof, and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of
the Series Preferred Stock against impairment.
1. Relative Rights of Preferred Stock and Common Stock. All preferences, voting powers,
relative, participating, optional or other special rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be fixed with respect to any series of the Preferred
Stock whether issued and outstanding as of the date of this instrument or hereafter designated.
2. Voting Rights. Except as otherwise required by law, this Third Amended &
Restated Certificate of Incorporation or the terms of any series of Preferred Stock outstanding or
hereafter created, each holder of Common Stock shall have one vote in respect of each share of stock held by the stockholder of
record on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of
the Corporation. Irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware, the number of
authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding and
required to be reserved for issuance upon conversion or exchange of, or acquisition of rights to acquire, any outstanding shares
of capital stock, and rights to purchase, acquire or subscribe for shares of capital stock, including options, warrants and other
Common Stock equivalents) by the affirmative vote of the holders of a majority of the outstanding shares of capital stock of all
classes and series entitled to vote thereon, voting together as a single class.
3. Election
of Directors. As provided in Section 4 of Part A hereof, the holders of a majority of
the outstanding shares of the Common Stock, voting as a single class, shall be entitled to elect one (I) director. At any
annual or special meeting of the Corporation (or in a written consent in lieu thereof) held for the purpose of electing
directors, the presence in person or by proxy (or by written consent) of the holders of a majority of the outstanding shares
of Common Stock shall constitute a quorum for the election of the designated Director. The holders of a majority of the
outstanding shares of Common Stock present in person or by proxy at any meeting relating to tl1e election of directors
(calculated after the determination of a quorum) shall then be entitled to elect the Director who serves as the designated
representative of the Common Stock as set forth above and in the maimer set forth above. Any such Director may be
removed during his or her tenure of office, with or without cause, by and only by the affirmative vote or written consent of
holders of a majority of the outstanding shares of Common Stock. Any vacancy in the office of such Director shall be filled
by a person appropriately designated by the holders of a majority of the outstanding shares of Common Stock.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
4. Dividends. Subject to the preferential rights of any series of the Preferred Stock,
if any, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board, out of the assets
of the Corporation which are by law available therefor, dividends payable either in cash, in property or in shares of capital stock.
5. Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation. after distribution in full of the preferential amounts, if any, to be distributed
to the holders of shares of the Preferred Stock, holders of Common Stock shall be entitled, unless otherwise provided by this Third
Amended & Restated Certificate of Incorporation, to receive all of the remaining assets
of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively, and subject to the preferential or participating rights of the Preferred Stock.
6. Redemption. The shares of Common Stock are not redeemable except by a contract
or agreement approved by the Board, including the Investor Directors.
ARTICLE FIFTH. The
Corporation is to have perpetual existence.
ARTICLE
SIXTH. In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware: (A) the Board
is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation; (B) elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide; and (C) The books of the Corporation may be kept at such place within
or without the State of Delaware as the Bylaws of the Corporation may provide or as may be designated from time to time by the
Board.
ARTICLE
SEVENTH. The Corporation eliminates the personal liability of each member of its Board to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director, provided, however, that, to the extent provided by applicable
law, the foregoing shall not eliminate the liability of a director (i) for any breach of such director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section l 74 of Title 8 of the Delaware Code or (iv) for any transaction from which such director
derived an improper personal benefit. No amendment to or repeal of this provision shall apply to or have any effect on the liability
or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment
or repeal.
If
the Delaware General Corporation Law is amended in the future to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time.
Any
repeal or modification of this Article shall not increase the personal liability of any director of this Corporation for any act
or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
ARTICLE EIGHTH. Indemnification
of Directors and Officers.
(a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or officer of the Corporation or is or was serving at the request
of the Corporation as a director, officer or agent of another corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans (hereinafter an "indemnitee"), whether the basis
of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity
while serving as a director, officer or agent, shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection
therewith. Such indemnification shall continue as to an indemnitee who has ceased to be a director, officer or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators; provided, however, that except as provided
in paragraph (b) hereof with respect to proceedings to enforce tights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was auth01ized by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation
Law so requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such indemnitee, including without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section, the Delaware General Corporation
Law or otherwise (hereinafter an "undertaking").
(b) Right
of Indemnitee to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation
within ninety days after a written claim has been received by the Corporation, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such
suit or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking,
the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought
by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a
right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware
General Corporation Law. Neither the failure of the Corporation (including its Board, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation (including its Board, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that tl1e
indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a right hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is entitled to be
indemnified or to such advancement of expenses under this Section or otherwise shall be on the indemnitee. No potential
indemnitee shall be entitled to advancement of expenses under this Third Amended & Restated
Certificate of lncorporation or the By-Laws in any action involving a proceeding by the Corporation against the indemnitee
for any claim by the Corporation involving a breach of fiduciary duty of the indemnitee to the Corporation, gross negligence,
bad faith, intentional misconduct or unlawful conduct.
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
(a) Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this
Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Third
Amended & Restated Certificate of Incorporation, By-law, contract or agreement, vote of
stockholders or disinterested directors or otherwise.
(b) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(c) Indemnification of Employees or Agents of the Corporation. The Corporation may, to the extent authorized from
time to time by the Board, grant rights to indemnification and to the advancement of expenses, to any employee or agent of the
Corporation to the fullest extent of the Provisions of this Section with respect to the indemnification and advancement of expenses
of directors, and officers of the Corporation.
ARTICLE
NINTH. The Corporation reserves the right to amend or repeal any prov1S1on contained in this Third Amended &
Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon
a stockholder herein are granted subject to this reservation.
ARTICLE
TENTH. In the event that a director of the Corporation who is also a partner or employee of an entity that is a holder of
Preferred Stock and that is in the business of investing and reinvesting in other companies or entities, or an employee or principal
of an entity that manages or controls such an entity (each, a "Fund"), acquires knowledge of a potential
transaction or matter in such person's capacity as a partner, principal or employee of the Fund or the manager or general partner
of the Fund and that may be a corporate opportunity for both the Corporation and such Fund (a "Corporate Opportunity").
then (i) such Corporate Opportunity shall belong to such Fund, (ii) by providing such Corporate Opportunity to the Fund such
director shall, to the extent permitted by law, have fully satisfied and fulfilled his fiduciary duty to the Corporation and its
stockholders with respect to such Corporate Opportunity, and (iii) the Corporation, to the extent permitted by law, waives any
claim that such Corporate Opportunity constituted a corporate opportunity that should have been presented to the Corporation;
provided, however, that such director acts in good faith and such opportunity was not offered to such director in his or her capacity
as a director of the Corporation.
*******
iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
iS1lccimcn Inc.
THIRD
AMENDED & RESTATED CERTIFICATE OF INCORPORATION
I, THE UNDERSIGNED, being the President
and Chief Executive Officer of the Corporation, do make this certificate, hereby declaring and certifying that this is my act
and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 21 day of August, 2014, on
behalf of the Corporation.
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iSpecimen Inc.
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By:
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Name:
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Dr. Christopher Ianelli
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Title:
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President &
Chief Executive Officer
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iSpecimen Inc.
Third Amended &
Restated Certificate of Incorporation
Exhibit 3.2
FOURTH AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
OF
ISPECIMEN, INC.
ARTICLE I
iSpecimen Inc., a corporation
organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the
Corporation is “iSpecimen Inc.” The original certificate of incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on [______] (the “Original Certificate”).
2. This Fourth Amended
and Restated Certificate of Incorporation (the “Amended and Restated Certificate”), which both restates and
amends the provisions of the Original Certificate, was duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”).
3. This Amended and
Restated Certificate shall become effective on the date of filing with Secretary of State of Delaware.
4. The text of the
Original Certificate is hereby restated and amended in its entirety to read as follows:
NAME OF THE CORPORATION
The name of the corporation
is iSpecimen, Inc. (the “Corporation”).
ARTICLE II
REGISTERED AGENT
The address of the
registered office of the Corporation in the State of Delaware is c/o [_______]. The name of the registered agent of the Corporation
at such address is The Corporation Trust Company.
ARTICLE III
BUSINESS PURPOSE
The nature of the business
or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware (the “DGCL”).
ARTICLE IV
CAPITAL STOCK
Section 4.01 Authorized
Classes of Stock. The total number of shares of stock of all classes of capital stock that the Corporation is authorized to
issue is 250,000,000 shares, of which:
(a) 200,000,000
shares shall be shares of common stock having a par value of $0.0001 per share (“Common Stock”); and
(b) 50,000,000
shares shall be shares of preferred stock having a par value of $0.0001 per share (“Preferred Stock”).
Section 4.02 Common
Stock. Except as otherwise required by law, as provided in this Certificate of Incorporation, and as otherwise provided in
the resolution or resolutions, if any, adopted by the board of directors of the Corporation (the “Board of Directors”)
with respect to any series of the Preferred Stock, the rights, preferences, and privileges of the Common Stock shall be as follows:
(a) Voting
Rights. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock held of record by such
holder. The holders of shares of Common Stock shall not have cumulative voting rights.
(b) Dividends.
Subject to any other provisions of this Certificate of Incorporation, as it may be amended from time to time, and the rights of
holders of any series of outstanding Preferred Stock, holders of Common Stock shall be entitled to receive ratably, in proportion
to the number of shares held by them, such dividends and other distributions in cash, stock, or property of the Corporation when,
as, and if declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available
therefor.
(c) Liquidation;
Dissolution. In the event of any liquidation, dissolution, or winding up (either voluntary or involuntary) of the Corporation,
after payments to creditors of the Corporation that may at the time be outstanding and subject to the rights of holders of any
series of outstanding Preferred Stock, the holders of shares of Common Stock shall be entitled to receive all remaining assets
and funds of the Corporation available for distribution, ratably in proportion to the number of shares held by them.
(d) No
Preemptive or Subscription Rights. No holders of shares of Common Stock shall be entitled to preemptive or subscription rights.
Section 4.03 Preferred
Stock. The Board of Directors is hereby authorized to provide, out of the unissued shares of Preferred Stock, for one or more
series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation
of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional,
or other special rights, if any, and any qualifications, limitations, or restrictions thereof, of the shares of such series, as
shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors. The
authority of the Board with respect to each series of Preferred Stock shall include, but not be limited to, determination of the
following:
(a) the designation
of the series;
(b) the number
of shares of the series;
(c) the dividend
rate or rates on the shares of that series, whether dividends will be cumulative, and if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that series;
(d) whether
the series will have voting rights in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(e) whether
the series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(f) whether
or not the shares of that series shall be redeemable, in whole or in part, at the option of the Corporation or the holder thereof,
and if made subject to such redemption, the terms and conditions of such redemption, including the date or dates upon or after
which they shall be redeemable, and the amount per share payable in case of redemptions, which amount may vary under different
conditions and at different redemption rates;
(g) the terms
and amount of any sinking fund provided for the purchase or redemption of the shares of such series;
(h) the rights
of the shares of that series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of that series;
(i) the restrictions,
if any, on the issue or reissue of any additional Preferred Stock; and
(j) any other
relative rights, preferences, and limitations of that series.
Section 4.04 Options,
Warrants & Rights.
(a) The Corporation
may issue options, warrants and rights for the purchase of shares of any class or series of the Corporation. The Board of Directors,
in its sole discretion, shall determine the terms and conditions on which the options, warrants or rights are issued, their form
and content and the consideration for which, and terms and conditions upon which, such securities or any underlying class or series
of shares of the Corporation are to be issued.
(b) The terms
and conditions of rights or options to purchase shares of any class or series of the Corporation may include, without limitation,
restrictions or conditions that preclude or limit the exercise, transfer, receipt or holding of such rights or options by any person
or persons, including any person or persons owning (beneficially or of record) or offering to acquire a specified number or percentage
of the outstanding shares of any class or series, or any transferee or transferees of any such person or persons, or that invalidate
or void such rights or options held by any such person or persons or any such transferee or transferees.
ARTICLE V
BOARD OF DIRECTORS
Section 5.01 General
Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
Section 5.02 Number. Subject
to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the
number of directors of the Corporation which shall constitute the entire Board of Directors shall be as fixed from time to time
in accordance with the by-laws of the Corporation (the “By-Laws”).
Section 5.03 Newly
Created Directorships and Vacancies. Except as otherwise required by law and subject to any rights of the holders of any series
of Preferred Stock to elect directors under specified circumstances, any newly created directorships resulting from an increase
in the authorized number of directors and any vacancies occurring in the Board of Directors, shall be filled solely by the affirmative
votes of a majority of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director.
A director so elected shall be elected to hold office until the earlier of the expiration of the term of office of the director
whom he or she has replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation,
or removal.
Section 5.04 Written
Ballot. Unless and except to the extent that the By-Laws shall so require, the election of directors of the Corporation
need not be by written ballot.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.01 Limitation
of Liability. To the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for any breach
of fiduciary duty as a director. No amendment to, modification of, or repeal of this Section 6.01 shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
Section 6.02 Indemnification.
The Corporation shall indemnify to the fullest extent permitted by law as it presently exists or may hereafter be amended any person
made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative, or investigative, by
reason of the fact that such person, or such persons testator or intestate, is or was a director or officer of the Corporation
or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the
Corporation or any predecessor to the Corporation. Any amendment, repeal, or modification of this Section 6.02 shall not adversely
affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal
or modification.
ARTICLE VII
STOCKHOLDER ACTION BY WRITTEN CONSENT
Subject to the rights
of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation
at a duly called annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents, setting forth the action so taken, shall be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
ARTICLE VIII
BY-LAWS
Section 8.01 Board
of Directors. In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly
authorized and empowered to adopt, amend, alter, or repeal the By-Laws without any action on the part of the stockholders.
Section 8.02 Stockholders.
The stockholders shall also have the power to adopt, amend, alter, or repeal the By-Laws.
ARTICLE IX
CERTAIN GOVERNANCE MATTERS
Section 9.01 The
following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(a) The Corporation
expressly elects not to be governed by Section 203 of the DGCL.
(b) No contract
or other transaction between the Corporation and one or more of its directors, or between the Corporation and any other corporation,
firm, association or other entity in which one or more of the directors are directors or officers, or are financially interested,
shall be either void or voidable because of such relationship or interest or because such director or directors are present at
the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transaction
or because his or her votes are counted for such purpose, if:
(i) The fact
of such relationship or interest is disclosed or known to the Board of Directors, or a duly empowered committee thereof, which
authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for such purpose without counting
the vote or votes of such interested director or directors; or
(ii) The fact
of such relationship or interest is disclosed or known to the stockholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(iii) The contract
or transaction is fair and reasonable as to the Corporation at the time it is authorized by the Board of Directors, committee or
the stockholders.
(c) Common
or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies a contract or transaction described in paragraph (d) of this Article IX.
(d) A director
of the Corporation may transact business, borrow, lend, or otherwise deal or contract with the Corporation to the fullest extent
and subject only to the limitations and provisions of the laws of the State of Delaware and the laws of the United States.
(e) The Board
of Directors in its sole discretion may (but shall not be required to) submit any contract or act for approval or ratification
at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such
act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the
stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that
a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and binding upon the Corporation
and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not
the contract or act would otherwise be open to legal attack because of directors’ interests, or for any other reason.
(f) In addition
to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions
of the statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however,
that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been
made.
(g) Whenever
a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation
and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application
in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers
appointed for the Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under Section 279 of Title 8 of the Delaware Code order a meeting
of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree
to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement,
the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders,
of the Corporation, as the case may be, and also on the Corporation.
ARTICLE X
AMENDMENTS
The Corporation reserves
the right to amend, alter, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.
IN WITNESS WHEREOF,
iSpecimen Inc. has caused this Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf
by an authorized officer as of the date first set forth above.
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Christopher Ianelli, Chief Executive Officer
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Exhibit 3.4
ISPECIMEN INC.
AMENDED & RESTATED BYLAWS
(the “Corporation”)
These Amended &
Restated Bylaws have been approved by the Sole Director and adopted and
confirmed by the stockholders of the Corporation as of
August 31, 2012.
ARTICLE I
Stockholders
1. Annual
Meeting. The annual meeting of stockholders shall be held each year at the place, date and time determined by the Board
of Directors or the President. The purposes for which the annual meeting is to be held, in addition to those prescribed by
law, by the Certificate of Incorporation (as may be amended or restated from time to time, the “Certificate of
Incorporation”) or by these Bylaws, may be specified by the Board of Directors or the President. If no annual
meeting has been held in any fiscal year, a special meeting in lieu thereof may be held or there may be action by written
consent of the stockholders on matters to be voted on at the annual meeting, and such special meeting or written consent
shall have for the purposes of these Bylaws or otherwise all the force and effect of an annual meeting.
2. Special
Meetings. Special meetings of stockholders may be called by the President or by the Board of Directors, or by the
holder or holders of twenty percent (20%) or more of any class (or series of a class) of capital stock of the Corporation.
Special meetings shall be called by the Secretary, or in case of death, absence, incapacity or refusal of the Secretary, by
any other officer, upon written application of one or more stockholders who hold at least a majority in interest of the
capital stock entitled to vote at such meeting. The call for the meeting shall state the place (if any), date, hour and
purposes of the meeting. Only the purposes specified in the notice of special meeting shall be considered or dealt with at
such special meeting.
3. Place
of Meeting. Meetings of stockholders may be held at such place, either within or without the State of Delaware, as may
be determined by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall
not be held at any place, but may instead be held solely by means of remote communication. The Board of Directors may also,
in its sole discretion, determine that stockholders and proxy holders may attend and participate by means of remote
communication in a stockholder meeting held at a designated place. As to any meeting where attendance and participation by
remote communication authorized by the Board of Directors in its sole discretion (including any meeting held solely by remote
communication), and subject to such guidelines and procedures as the Board of Directors may adopt for any meeting,
stockholders and proxy holders not physically present at such meeting of the stockholders shall be entitled to: (i)
participate in any meeting of the stockholders; and (ii) be deemed present in person and vote at such meeting of the
stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided
that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote
at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation shall implement
reasonable measures to provide stockholders and proxy holders a reasonable opportunity to participate in the meeting and to
vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings substantially
concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by
means of remote communication, a record of such vote or other action shall be maintained by the Corporation.
4. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation,
notice given in writing or by electronic transmission of each meeting of stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, if any, date and hour and purpose or purposes of the meeting and the means of remote
communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such
meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if
given by a form of electronic transmission consented to (in a manner consistent with the Delaware General Corporation Law
(the “DGCL”)) by the stockholder to whom the notice is given, and such notice shall be deemed to be given
at the time, if delivered by electronic mail when directed to an electronic mail address at which the stockholder has
consented to receive notice, and if delivered by any other form of electronic transmission when directed to the stockholder.
Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived (i) in writing signed by the
person entitled to notice thereof or (ii) by electronic transmission made by the person entitled to notice, either before or
after such meeting. Notice will be waived by any stockholder by his attendance thereat in person, by remote communication, or
by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof
had been given.
5. Quorum. The holders of a majority of the voting power of all shares of capital stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum. Any meeting may be adjourned from time to time by
the holders of a majority of the votes properly cast upon the question, whether or not a quorum is present. The stockholders
present at a duly constituted meeting may continue to transact business until adjournment notwithstanding the withdrawal of
enough stockholders to reduce the voting shares below a quorum.
6. Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote
owned by them of record according to the books of the Corporation unless otherwise provided by law or by the Certificate of
Incorporation. Stockholders may vote either in person or by written proxy or express directly or by written proxy their
consent or dissent to a corporate action taken without a meeting, but no proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period or is irrevocable and coupled with an interest. Proxies shall be
filed with the secretary of the meeting, or of any adjournment thereof. Except as otherwise limited therein, proxies shall
entitle the persons authorized thereby to vote at any adjournment of such meeting.
Amended & Restated By-Laws
iSpecimen Inc.
7. Action at a Meeting. When a quorum is present, any matter before the meeting shall be decided by vote of the holders
of a majority of the voting power of the shares of stock voting on such matter except where a larger vote is required by law, by
the Certificate of Incorporation or by these Bylaws. Any election of Directors by stockholders shall be determined by a plurality
of the votes cast, except where a larger vote or different vote is required by law, by the Certificate of Incorporation or by these
Bylaws. The Corporation shall not directly or indirectly vote any share of its own stock; provided, however, that
the Corporation may vote shares which it holds in a fiduciary capacity to the extent permitted by law.
8. Action without a Meeting. Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, any action required or permitted by law to be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote (a) if a consent or consents thereto in writing setting
forth the action so taken, shall be signed by the holders of all of the outstanding shares of stock having not less than the
minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office, by hand
or by certified mail, return receipt requested or to the Corporation’s principal place of business or to the officer of
the Corporation having custody of the minute book or (b) by electronic transmission setting forth the action so taken made by
the holders of all of the outstanding shares of stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Every written consent or electronic transmission shall bear the date of signature or proper identity of the stockholder,
respectively, and no written consent or electronic transmission shall be effective unless, within sixty (60) days of the
earliest dated consent or electronic transmission delivered pursuant to these Bylaws, written consents signed, or electronic
transmissions made, by a sufficient number of stockholders entitled to take action are delivered to the Corporation in the
manner set forth in these Bylaws. Prompt notice of the taking of corporate action without a meeting by less than unanimous
written consent or electronic transmission shall be given to those stockholders who have not consented in writing.
9. Stockholder Lists. The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder; provided that such list shall not be required to contain the electronic mail
address or other electronic contact information of any stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, either (i)
on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided
with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the
Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held
solely by means of electronic communication or if attendance at and participation in the meeting is permitted by means of
remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the
meeting on or a reasonably acceptable electronic network, and the information required to access such list shall be provided
with the notice of the meeting.
Amended & Restated By-Laws
iSpecimen Inc.
ARTICLE II
Directors
1. Powers. The business of the Corporation shall be managed by or under the direction of a
Board of Directors who may exercise all the powers of the Corporation except as otherwise provided by law, by the Certificate
of Incorporation or by these Bylaws. In the event of a vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled.
2.
Election and Qualification. Unless otherwise provided in the Certificate of Incorporation, the number of Directors which
shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors or by the
stockholders at an annual meeting of the stockholders. Directors need not be stockholders.
3.
Vacancies: Reduction of Board. Subject to the provisions of the Certificate of Incorporation
and any stockholders agreement to which the Corporation is a party, a majority of the Directors then in office, although less
than a quorum, or a sole remaining Director, may fill vacancies in the Board of Directors occurring for any reason and newly
created directorships resulting from any increase in the authorized number of Directors.
4.
Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these
Bylaws, Directors shall hold office until their successors are duly elected and qualified or until their earlier resignation
or removal. Any Director may resign by delivering his written resignation to the Corporation. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other
event.
5.
Removal. Subject to the provisions of the Certificate of Incorporation and any stockholders
agreement to which the Corporation is a party, to the extent permitted by law, a Director may be removed from office with or
without cause by vote of the holders of a majority of the shares of stock entitled to vote in the election of such
Director.
6.
Meetings. Regular meetings of the Board of Directors may be held without notice at such time,
date and place (if any) as the Board of Directors may from time to time determine. Special meetings of the Board of Directors
may be called, in writing, by the President, the Chief Executive Officer, or two or more Directors (or the sole Director, if
applicable), and designating the time, date and place (if any) thereof. Directors may participate in meetings of the Board of
Directors by means of conference telephone or similar communications equipment by means of which all Directors participating
in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person
at such meeting.
Amended & Restated By-Laws
iSpecimen Inc.
7.
Notice of Meetings. Notice of the time, date and place (if any) of all special meetings of the Board of Directors
shall be given to each Director by the Secretary, or Assistant Secretary, or in case of the death, absence, incapacity or refusal
of such persons, by the officer or one of the Directors calling the meeting. Notice shall be given to each Director in person or
by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile,
telegraph, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours in advance
of the meeting, or by written notice mailed to his business or home address at least forty-eight (48) hours in advance of the meeting.
Notice need not be given to any Director if a written waiver of notice is executed by him before or after the meeting, or if communication
with such Director is unlawful, and will be waived by any director by attendance thereat, except when the director attends the
meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes
of the meeting.
8.
Quorum. At any meeting of the Board of Directors, a majority of the Directors then in office
shall constitute a quorum. Less than a quorum may adjourn any meeting from time to time and the meeting may be held as
adjourned without further notice.
9.
Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, a
majority of the Directors present may take any action on behalf of the Board of Directors, unless a larger number is required
by law, by the Certificate of Incorporation or by these Bylaws.
10.
Action without a Meeting. Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or committee thereof
may be taken without a meeting if all members of the Board of Directors or committee thereof consent thereto in writing or by
electronic transmission, and such writings or electronic transmissions are filed with the records of the meetings of the
Board of Directors or committee thereof. Such filing shall be in paper form if the minutes are maintained in paper form and
shall be in electronic form if the minutes are maintained in electronic form. Such consent shall be treated as a vote of the
Board of Directors or committee thereof for all purposes.
11.
Committees. The Board of Directors, by vote of a majority of the Directors then in office,
may establish one or more committees, each committee to consist of one or more Directors, and may delegate thereto some or
all of its powers except those which by law, by the Certificate of Incorporation, or by these Bylaws may not be delegated.
Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business,
but in the absence of such rules its business shall be conducted so far as possible in the same manner as is provided in
these Bylaws for the Board of Directors. All members of such committees shall hold their committee offices at the pleasure of
the Board of Directors, and the Board may abolish any committee at any time. Each such committee shall report its action to
the Board of Directors who shall have power to rescind any action of any committee without retroactive effect.
Amended & Restated By-Laws
iSpecimen Inc.
12.
Protection of Confidential Information; Recusal from Meetings. Each director acknowledges that as part of his or
her service to the Corporation, and the exercise of his or her fiduciary duties on behalf of the Corporation, the director may
receive confidential information of the Corporation (and its customers, strategic partners, vendors and suppliers). This confidential
information includes, without limitation, nonpublic financial information, business and market strategy reports and presentations,
pricing information, research and development activities, plans and strategies (including reports and presentations to the Board
of Directors), invention disclosures, patentable and unpatentable inventions, technical specifications and information, and other
scientific data, laboratory notebooks, unpublished patent or invention disclosures blueprints, biological and chemical compounds
and properties, scientific reports, technical specifications and data, whether in hard copy or electronic media. Each director
shall not use or disclose such confidential information for any purpose other than to promote and serve the best interests of the
Corporation and its stockholders. The executive officers and the Board of Directors may limit or restrict the information to be
provided to any director in order to protect sensitive or competitive information. A majority of the disinterested members of the
Board of Directors shall have the right to exclude any director from portions of meetings of the Board of Directors (or any Committee)
or omit to provide the director with certain information if such members of the Board of Directors believe in good faith and with
the exercise of due care that such exclusion or omission is necessary (a) in order to preserve the Corporation’s attorney-
client privilege, (b) in order to fulfill the Corporation’s obligations with respect to confidential or proprietary information
of third parties, or to protect the confidentiality of unpatentable information or competitive business information of the Corporation
(or its customers, strategic partners, vendors and suppliers), or (c) because such meeting or information would include information,
analyses or discussions which could pose a potential conflict of interest for the director or his or her affiliated organization
or entity and the prospects of the Corporation.
ARTICLE III
Officers
1.
Enumeration. The officers of the Corporation shall consist of a President, a Treasurer, a
Secretary, and such other officers, including one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries, as
the Board of Directors may determine.
2.
Election. The President, Treasurer and Secretary shall be elected bi-annually by the Board of
Directors at their first meeting following the annual meeting of stockholders. Other officers may be chosen by the Board of
Directors at such meeting or at any other meeting.
3.
Qualification. No officer need be a stockholder or Director. Any two or more offices may be
held by the same person.
4.
Tenure. Except as otherwise provided by the Certificate of Incorporation or by these Bylaws,
each of the officers of the Corporation shall hold his office until his successor is duly elected and qualified or until his
earlier resignation or removal. Any officer may resign by delivering his written resignation to the Corporation, and such
resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening
of some other event.
Amended & Restated By-Laws
iSpecimen Inc.
5.
Removal. The
Board of Directors may remove any officer with or without cause by a vote of a majority of the entire number of Directors then
in office.
6.
Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by
the Board of Directors.
7.
Chairman. The Chairman of the Board, if one is elected, shall preside, when present, at all
meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall have such other powers and
perform such other duties as the Board of Directors may from time to time designate.
8.
President and Vice Presidents. The President shall be the Chief Executive Officer of the
Corporation and shall have general charge of its business operations, subject to the direction of the Board of Directors. The
President shall preside, when present, at all meetings of stockholders and the Board of Directors. The Board of Directors
shall have the authority to appoint a temporary presiding officer to serve at any meeting of the stockholders or Board of
Directors if the President is unable to do so for any reason.
Any
Vice President shall have such powers and shall perform such duties as the Board of Directors may from time to time designate.
In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there be
more than one Vice President, the Vice Presidents in the order designated by the Directors, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers and
responsible of and be subject to all the restrictions upon the President.
9.
Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors, have
general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer
shall have custody of all funds, securities, and valuable documents of the Corporation, except as the Board of Directors may otherwise
provide.
Any Assistant Treasurer
shall have such powers and perform such duties as the Board of Directors may from time to time designate.
10.
Secretary and Assistant
Secretaries. The Secretary shall record the proceedings of all meetings of the stockholders and the Board of Directors in
books kept for that purpose. In his absence from any such meeting an Assistant Secretary, or if he is absent, a temporary secretary
chosen at the meeting, shall record the proceedings thereof.
The Secretary
shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation) and shall
have such other duties and powers as may be designated from time to time by the Board of Directors or the President.
Any Assistant Secretary shall
have such powers and perform such duties as the Board of Directors may from time to time designate.
Amended & Restated By-Laws
iSpecimen Inc.
11.
Other Powers and Duties. Subject to these Bylaws, each officer of the Corporation shall have in addition to the duties
and powers specifically set forth in these Bylaws, such duties and powers as are customarily incident to his office, and such duties
and powers as may be designated from time to time by the Board of Directors.
ARTICLE IV
Capital Stock
1.
Certificates of Stock. Unless the Board of Directors has provided by resolution that some or
all of any or all classes or series of stock of the Corporation shall be uncertificated shares, each stockholder shall be
entitled to a certificate of stock of the Corporation in such form as may from time to time be prescribed by the Board of
Directors. Such certificate shall be signed by the Chairperson or Vice-Chairperson of the Board of Directors or the President
or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Such
signatures may be delivered by facsimile signature. In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or
series of stock shall contain such legend with respect thereto as is required by law. The Corporation shall, at the option of
the Board of Directors or as otherwise stated in the Certificate of Incorporation, be permitted to issue fractional
shares.
2.
Transfers. Subject to any restrictions on transfer, shares of stock may be transferred on
the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly
endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary)
affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably
require.
3.
Record Holders. Except as may otherwise be required by law, by the Certificate of
Incorporation or by these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books
as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto,
regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these Bylaws. It shall be the duty of each stockholder to notify the
Corporation of his post office address.
4.
Record Date. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof, or to consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date on which it is
established, and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, more
than ten (10) days after the date on which the resolution fixing the record date for stockholder consent without a meeting is
established, nor more than sixty (60) days prior to any other action. In such case only stockholders of record on such record
date shall be so entitled notwithstanding any transfer of stock on the books of the Corporation after the record date.
Amended & Restated By-Laws
iSpecimen Inc.
If no
record date is fixed, (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held, (b) the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall
be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in this state, to its principal place of business, or to an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded, and (c) the record date
for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
5.
Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, a
duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.
ARTICLE V
Indemnification
1.
Indemnification of Directors and Officers. The Corporation shall indemnify, to the fullest
extent permitted by the DGCL, any person who was or is a party or is threatened to be made a party to or is otherwise
involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise, and whether by or in the right of the Corporation, its stockholders, a third party or otherwise
(a “Proceeding”), by reason of the fact that he is or was a Director or officer of the Corporation,
or is or was a Director or officer of the Corporation serving at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, against all expense (including, but not limited
to, attorneys’ fees), liability, loss, judgments, fines, excise taxes, penalties and amounts paid in settlement
actually and reasonably incurred by him in connection with such Proceeding, including expenses incurred in seeking such
indemnification. In addition, the Corporation shall grant such indemnification to each of its Directors and officers with
respect to any matter in a Proceeding as to which his liability is limited pursuant to the Certificate of Incorporation of
the Corporation. However, such indemnification shall exclude (i) indemnification with respect to any improper personal
benefit which a Director or officer is determined to have received and of the expenses of defending against an improper
personal benefit claim unless the Director or officer is successful on the merits in said defense, and (ii) indemnification
of present or former officers, directors, employees or agents of a constituent corporation absorbed in a merger or
consolidation transaction with this Corporation with respect to their activities prior to said transaction, unless
specifically authorized by the Board of Directors or stockholders of this Corporation. Such indemnification shall include
prompt payment of expenses reasonably incurred by a Director or officer in defending a Proceeding in advance of the final
disposition of such Proceeding, upon receipt of an undertaking by or on behalf of the Director or officer to repay such
amounts if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under this Article
V, which undertaking shall be an unsecured general obligation of the Director or officer and may be accepted without regard
to his or her ability to make repayment.
2.
Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to an advancement of expenses, pursuant to the provisions of this Article V,
to any person who was or is a party or is threatened to be made a party to or is otherwise involved in any Proceeding by reason
of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation, as
a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
Amended & Restated By-Laws
iSpecimen Inc.
3.
Nature of Indemnification Rights. The indemnification rights provided in this Article V
shall be a contract right and shall not be deemed exclusive of any other rights to which any person, whether or not entitled
to be indemnified hereunder, may be entitled by law or under any bylaw, agreement, vote of stockholders or Directors or
otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a Director, officer, employee or agent and inure to the benefit of the
heirs, executors and administrators of such a person. A Director or officer shall be entitled to the benefit of any amendment
of the DGCL which enlarges indemnification rights hereunder, but any such amendment which adversely affects indemnification
rights with respect to prior activities shall not apply to him without his consent unless otherwise required by law. Each
person who is or becomes a Director or officer of the Corporation shall be deemed to have served or to have continued to
serve in such capacity in reliance upon the indemnity provided for in this Article V.
4.
Amendment. The provisions of this Article V may be amended as provided in Article VI; provided, however,
no amendment or repeal of such provisions which adversely affects the rights of a Director or officer under this Article V
with respect to his acts or omissions prior to such amendment or repeal, shall apply to him without his consent.
ARTICLE VI
Miscellaneous Provisions
1.
Fiscal
Year. Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall end on December
31st of each year.
2.
Seal. The Board of
Directors shall have power to adopt and alter the seal of the Corporation.
3.
Notices and Waivers
Thereof. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, whenever by law or under the
provisions of the Certificate of Incorporation or these Bylaws notice is required to be given to any Director or stockholder,
it will not be construed to require personal notice, but such notice may be given in writing, by mail or courier service, addressed
to such Director or stockholder, at the address of such Director or stockholder as it appears on the records of the Company, with
postage thereon prepaid, and such notice will be deemed to be given at the time when the same is deposited in the United States
mail or upon delivery, if given by courier service. Notice to Directors or stockholders may also be given by telephone, telegram,
facsimile, electronic mail, electronic transmission or similar medium of communication or as otherwise may be permitted by these
Bylaws. If such notice is delivered to a Director or stockholder by electronic mail, such notice shall be deemed given when directed
to the electronic mail address provided by such Director or stockholder, and if such notice is delivered by any other electronic
transmission, such notice shall be deemed given when directed to such Director or stockholder.
Whenever
any notice is required to be given by law or under the provisions of the Certificate of Incorporation or these Bylaws, a waiver
thereof, in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person
entitled to such notice, whether before or after the time of the event for which notice is to be given, will be deemed equivalent
to such notice. Attendance of a person at a meeting will constitute a waiver of notice of such meeting, except when the person
attends a meeting for the sole and express purpose of objecting, at the time of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
4.
Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations authorized
to be executed by an officer of the Corporation in its behalf shall be signed by the President or Treasurer, or by any other officer
of the Corporation designated by the Board of Directors, except as the Board of Directors may generally or in particular cases
otherwise determine.
5.
Voting of Securities. Unless otherwise provided by the Board of Directors, the President or
Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or
attorney in fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of
stockholders or shareholders of any other corporation or organization, any of whose securities are held by this
Corporation.
6.
Resident Agent. The Board of Directors may appoint a resident agent in any jurisdiction
upon whom legal process may be served in any action or proceeding against the Corporation.
7.
Corporate Records. The original or attested copies of the Certificate of Incorporation,
Bylaws and records of all meetings of the incorporator, stockholders and the Board of Directors and the stock and transfer
records, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each,
shall be kept at the principal office of the Corporation, at the office of its counsel, or at an office of its transfer
agent.
Amended & Restated By-Laws
iSpecimen Inc.
8.
Certificate of Incorporation.
All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation
of the Corporation, as amended and in effect from time to time.
9.
Amendments. These Bylaws may be amended or repealed or additional Bylaws adopted by the
stockholders or by the Board of Directors; provided that (a) the Board of Directors may not amend or repeal Article V
or this Section 9 of Article VI or any provision of these Bylaws which by law, by the Certificate of Incorporation or by
these Bylaws requires action by the stockholders, and (b) any amendment or repeal of these Bylaws by the Board of Directors
and any Bylaw adopted by the Board of Directors may be amended or repealed by the stockholders.
10.
Conflicts. In the event of any conflict between these Bylaws or any stockholders, voting,
investor rights or other agreement to which the Corporation and the holders of shares of any class or series of capital stock
of the Corporation are a party, then such agreement shall govern. In the event of any conflict between these Bylaws and the
Certificate of Incorporation, the Certificate of Incorporation shall govern.
* * * * * * * * * * * * * * * *
Adopted by the Sole Incorporator: August 31,
2012
Adopted by the Board of Directors: August 31, 2012
Amended & Restated By-Laws
iSpecimen Inc.
Exhibit 3.5
SECOND AMENDED AND RESTATED
BY-LAWS OF ISPECIMEN, INC.
ARTICLE I
OFFICES
Section 1.01 Registered
Office. The registered office of iSpecimen, Inc. (the “Corporation”) will be fixed in the Certificate
of Incorporation of the Corporation, as may be amended from time to time (the “Certificate of Incorporation”).
Section 1.02 Other
Offices. The Corporation may have other offices, both within and without the State of Delaware, as the board of directors
of the Corporation (the “Board of Directors”) from time to time shall determine or the business of the Corporation
may require.
ARTICLE II
MEETINGS
OF THE STOCKHOLDERS
Section 2.01 Place
of Meetings. All meetings of the stockholders shall be held at such place, if any, either within or without the State
of Delaware, or by means of remote communication, as shall be designated from time to time by resolution of the Board of Directors
and stated in the notice of meeting.
Section 2.02 Annual
Meeting. The annual meeting of the stockholders for the election of directors and for the transaction of such other business
as may properly come before the meeting in accordance with these by-laws shall be held at such date, time, and place, if any, as
shall be determined by the Board of Directors and stated in the notice of the meeting.
Section 2.03 Special
Meetings.
(a) Purpose.
Special meetings of stockholders for any purpose or purposes shall be called only:
(i) by the Board of Directors; or
(ii) by the
Secretary (as defined in Section 4.01), following receipt of one or more written demands to call a special meeting of the stockholders
in accordance with, and subject to, this Section 2.03 from stockholders of record who own, in the aggregate, at least 15% of the
voting power of the outstanding shares of the Corporation then entitled to vote on the matter or matters to be brought before the
proposed special meeting.
(b) Notice.
A request to the Secretary shall be delivered to him or her at the Corporation’s principal executive offices and signed by
each stockholder, or a duly authorized agent of such stockholder, requesting the special meeting and setting forth:
(i) a brief
description of each matter of business desired to be brought before the special meeting;
(ii) the reasons
for conducting such business at the special meeting;
(iii) the text
of any proposal or business to be considered at the special meeting (including the text of any resolutions proposed to be considered
and in the event that such business includes a proposal to amend these by-laws, the language of the proposed amendment); and
(iv) the information
required in Section 2.12(b) of these by-laws (for stockholder nomination demands) or Section 2.12(c) of these by-laws (for all
other stockholder proposal demands), as applicable.
(c) Business. Business
transacted at a special meeting requested by stockholders shall be limited to the matters described in the special meeting request; provided,
however, that nothing herein shall prohibit the Board of Directors from submitting matters to the stockholders at any
special meeting requested by stockholders.
(d) Time
and Date. A special meeting requested by stockholders shall be held at such date and time as may be fixed by the Board of Directors; provided,
however, that the date of any such special meeting shall be not more than 120 days after the request to call the special
meeting is received by the Secretary. Notwithstanding the foregoing, a special meeting requested by stockholders shall not be held
if:
(i) the Board
of Directors has called or calls for an annual or special meeting of the stockholders to be held within 120 days after the Secretary
receives the request for the special meeting and the Board of Directors determines in good faith that the business of such meeting
includes (among any other matters properly brought before the meeting) the business specified in the request;
(ii) the stated
business to be brought before the special meeting is not a proper subject for stockholder action under applicable law;
(iii) an identical
or substantially similar item (a “Similar Item”) was presented at any meeting of stockholders held within 120
days prior to the receipt by the Secretary of the request for the special meeting (and, for purposes of this Section 2.03(d)(iii),
the election of directors shall be deemed a Similar Item with respect to all items of business involving the election or removal
of directors); or
(iv) the special
meeting request was made in a manner that involved a violation of Regulation 14A under the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder (the “Exchange Act”).
(e) Revocation. A
stockholder may revoke a request for a special meeting at any time by written revocation delivered to the Secretary at the Corporation’s
principal executive offices, and if, following such revocation, there are unrevoked requests from stockholders holding in the aggregate
less than the requisite number of shares entitling the stockholders to request the calling of a special meeting, the Board of Directors,
in its discretion, may cancel the special meeting.
Section 2.04 Adjournments. Any
meeting of the stockholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place,
if any, and notice need not be given of any such adjourned meeting if the time, place, if any, thereof and the means of remote
communication, if any, are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation
may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days,
a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment
a new record date is fixed for stockholders entitled to vote at the adjourned meeting, the Board of Directors shall fix a new record
date for notice of the adjourned meeting and shall give notice of the adjourned meeting to each stockholder of record entitled
to vote at the adjourned meeting as of the record date fixed for notice of the adjourned meeting.
Section 2.05
Notice of Meetings. Notice of the place (if any), date, hour, the record date for determining the stockholders
entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the
meeting), and means of remote communication, if any, of every meeting of stockholders shall be given by the Corporation not
less than ten days nor more than 60 days before the meeting (unless a different time is specified by law) to every
stockholder entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the
meeting. Notices of special meetings shall also specify the purpose or purposes for which the meeting has been called.
Notices of meetings to stockholders may be given by mailing the same, addressed to the stockholder entitled thereto, at such
stockholder’s mailing address as it appears on the records of the corporation and such notice shall be deemed to be
given when deposited in the U.S. mail, postage prepaid. Without limiting the manner by which notices of meetings otherwise
may be given effectively to stockholders, any such notice may be given by electronic transmission in the manner provided in
Section 232 of the General Corporation Law of the State of Delaware (the “DGCL”). Notice of any meeting
need not be given to any stockholder who shall, either before or after the meeting, submit a waiver of notice or who shall
attend such meeting, except when the stockholder attends for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of the meeting shall be bound by the proceedings of the meeting in all respects as if due notice thereof had
been given.
Section 2.06 List
of Stockholders. The Corporation shall prepare a complete list of the stockholders entitled to vote at any meeting of
stockholders (provided, however, if the record date for determining the stockholders entitled to vote is less than
ten days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the
meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares of capital
stock of the Corporation registered in the name of each stockholder at least ten days before any meeting of the stockholders. Such
list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days
before the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to
such list was provided with the notice of the meeting; or (b) during ordinary business hours, at the principal place of business
of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of
the meeting the whole time thereof and may be inspected by any stockholder who is present. If the meeting is held solely by means
of remote communication, the list shall also be open for inspection by any stockholder during the whole time of the meeting as
provided by applicable law. Except as provided by applicable law, the stock ledger of the Corporation shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger and the list of stockholders or to vote in person or by proxy
at any meeting of stockholders.
Section 2.07 Quorum. Unless
otherwise required by law, the Certificate of Incorporation or these by-laws, at each meeting of the stockholders, a majority in
voting power of the shares of the Corporation entitled to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the chair
of the meeting or the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power,
by the affirmative vote of a majority in voting power thereof, to adjourn the meeting from time to time, in the manner provided
in Section 2.04, until a quorum shall be present or represented. A quorum, once established, shall not be broken by the subsequent
withdrawal of enough votes to leave less than a quorum. At any such adjourned meeting at which there is a quorum, any business
may be transacted that might have been transacted at the meeting originally called.
Section 2.08 Organization.
The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of the stockholders as
it shall deem appropriate. At every meeting of the stockholders, the Chair of the Board, or in his or her absence or inability
to act, the Chief Executive Officer (as defined in Section 4.01), or, in his or her absence or inability to act, the officer or
director whom the Board of Directors shall appoint, shall act as chair of, and preside at, the meeting. The Secretary or, in his
or her absence or inability to act, the person whom the chair of the meeting shall appoint secretary of the meeting, shall act
as secretary of the meeting and keep the minutes thereof. Except to the extent inconsistent with such rules and regulations as
adopted by the Board of Directors, the chair of any meeting of the stockholders shall have the right and authority to prescribe
such rules, regulations, and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper
conduct of the meeting. Such rules, regulations, or procedures, whether adopted by the Board of Directors or prescribed by the
chair of the meeting, may include, without limitation, the following:
(a) the establishment
of an agenda or order of business for the meeting;
(b) the determination
of when the polls shall open and close for any given matter to be voted on at the meeting;
(c) rules
and procedures for maintaining order at the meeting and the safety of those present;
(d) limitations
on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted
proxies, or such other persons as the chair of the meeting shall determine;
(e) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(f) limitations
on the time allotted to questions or comments by participants.
Section 2.09 Voting; Proxies.
(a) General. Unless
otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote, in person
or by proxy, for each share of capital stock held by such stockholder.
(b) Election
of Directors. Unless otherwise required by the Certificate of Incorporation, the election of directors shall be by written
ballot. If authorized by the Board of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted
by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information
from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder. Unless otherwise
required by law, the Certificate of Incorporation, or these by-laws, the election of directors shall be decided by a majority of
the votes cast at a meeting of the stockholders by the holders of stock entitled to vote in the election; provided, however, that,
if the Secretary determines that the number of nominees for director exceeds the number of directors to be elected, directors shall
be elected by a plurality of the votes of the shares represented in person or by proxy at any meeting of stockholders held to elect
directors and entitled to vote on such election of directors. For purposes of this Section 2.09(b), a majority of the votes cast
means that the number of shares voted “for” a nominee must exceed the votes cast “against” such nominee’s
election. If a nominee for director who is not an incumbent director does not receive a majority of the votes cast, the nominee
shall not be elected.
(c) Other
Matters. Unless otherwise required by law, the Certificate of Incorporation, or these by-laws, any matter, other than
the election of directors, brought before any meeting of stockholders shall be decided by the affirmative vote of the majority
of shares present in person or represented by proxy at the meeting and entitled to vote on the matter.
(d) Proxies. Each
stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by
proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Such authorization may be a document executed by the stockholder or his or her authorized officer, director, employee, or agent.
To the extent permitted by law, a stockholder may authorize another person or persons to act for him or her as proxy by transmitting
or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization, or like agent duly authorized by the person who will be the holder of the proxy to receive
such transmission, provided that the electronic transmission either sets forth or is submitted with information from which it can
be determined that the electronic transmission was authorized by the stockholder. A copy, facsimile transmission, or other reliable
reproduction (including any electronic transmission) of the proxy authorized by this Section 2.09(d) may be substituted for or
used in lieu of the original document for any and all purposes for which the original document could be used, provided that such
copy, facsimile transmission, or other reproduction shall be a complete reproduction of the entire original document. A proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting
in person or by delivering to the Secretary a revocation of the proxy or a new proxy bearing a later date.
Section 2.10
Inspectors at Meetings of Stockholders. In advance of any meeting of the stockholders, the Board of Directors shall,
appoint one or more inspectors, who may be employees of the Corporation, to act at the meeting or any adjournment thereof and
make a written report thereof. The Board of Directors may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a meeting, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to
the best of his or her ability. The inspector or inspectors may appoint or retain other persons or entities to assist the
inspector or inspectors in the performance of their duties. In determining the validity and counting of proxies and ballots
cast at any meeting of stockholders, the inspector or inspectors may consider such information as is permitted by applicable
law. No person who is a candidate for office at an election may serve as an inspector at such election. When executing the
duties of inspector, the inspector or inspectors shall:
(a) ascertain
the number of shares outstanding and the voting power of each;
(b) determine
the shares represented at the meeting and the validity of proxies and ballots;
(c) count
all votes and ballots;
(d) determine
and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(e) certify
their determination of the number of shares represented at the meeting and their count of all votes and ballots.
Section 2.11 Fixing the Record Date.
(a) In order
that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than ten days before
the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new record date for the determination
of stockholders entitled to notice of or to vote at the adjourned meeting.
(b) In order
that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record
date for determining stockholders entitled to consent to corporate action in writing without a meeting: (i) when no prior action
by the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery (by hand, or by certified
or registered mail, return receipt requested) to its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded
and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking such prior action.
(c) In order
that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or
for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to
such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 2.12 Advance Notice of Stockholder
Nominations and Proposals.
(a) Annual
Meetings. At a meeting of the stockholders, only such nominations of persons for the election of directors and such other
business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting,
nominations or such other business must be:
(i) specified
in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or any committee thereof;
(ii) otherwise
properly brought before the meeting by or at the direction of the Board of Directors or any committee thereof; or
(iii) otherwise
properly brought before an annual meeting by a stockholder who is a stockholder of record of the Corporation at the time such notice
of meeting is delivered, who is entitled to vote at the meeting, and who complies with the notice procedures set forth in this
Section 2.12.
In addition, any proposal of business (other
than the nomination of persons for election to the Board of Directors) must be a proper matter for stockholder action. For business
(including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder pursuant
to Section 2.12(a)(iii), the stockholder or stockholders of record intending to propose the business (the “Proposing Stockholder”)
must have given timely notice thereof pursuant to this Section 2.12(a), in writing to the Secretary even if such matter is already
the subject of any notice to the stockholders or Public Disclosure from the Board of Directors. To be timely, a Proposing Stockholder’s
notice for an annual meeting must be delivered to the Secretary at the principal executive offices of the Corporation: (x) not
later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, in advance of the anniversary
of the previous year’s annual meeting if such meeting is to be held on a day which is not more than 30 days in advance of
the anniversary of the previous year’s annual meeting or not later than 60 days after the anniversary of the previous year’s
annual meeting; and (y) with respect to any other annual meeting of stockholders, including in the event that no annual meeting
was held in the previous year, not earlier than the close of business on the 120th day prior to the annual meeting and not later
than the close of business on the later of: (1) the 90th day prior to the annual meeting and (2) the close of business on the tenth
day following the first date of Public Disclosure of the date of such meeting. In no event shall the Public Disclosure of an adjournment
or postponement of an annual meeting commence a new notice time period (or extend any notice time period). For the purposes of
this Section 2.12, “Public Disclosure” shall mean a disclosure made in a press release disseminated by the Corporation
via a national news dissemination service or in a document filed by the Corporation with the Securities and Exchange Commission
(“SEC”) pursuant to Section 13, 14, or 15(d) of the Exchange Act.
(b) Stockholder
Nominations. For the nomination of any person or persons for election to the Board of Directors pursuant to Section 2.12(a)(iii)
or Section 2.12(d), a Proposing Stockholder’s notice to the Secretary shall set forth or include:
(i) the name,
age, business address, and residence address of each nominee proposed in such notice;
(ii) the principal
occupation or employment of each such nominee;
(iii) the class
and number of shares of capital stock of the Corporation which are owned of record and beneficially by each such nominee or the
affiliates (within the meaning of Rule 144 promulgated by the SEC) of such nominee, including any shares of the Corporation owned
or controlled via derivatives, synthetic securities, hedged positions and other economic and voting mechanisms (if any);
(iv) such other
information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election
of such nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required
to be disclosed, under Section 14(a) of the Exchange Act;
(v) a written
questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided
by the Secretary upon written request) and a written statement and agreement executed by each such nominee acknowledging that such
person:
(A) consents
to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected, and
(B) intends
to serve as a director for the full term for which such person is standing for election;
(vi) as to
the Proposing Stockholder:
(A) the name
and address of the Proposing Stockholder as they appear on the Corporation’s books and of the beneficial owner, if any, on
whose behalf the nomination is being made,
(B) the class
and number of shares of the Corporation which are owned by the Proposing Stockholder (beneficially and of record) and owned by
the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the Proposing Stockholder’s
notice, and a representation that the Proposing Stockholder will notify the Corporation in writing of the class and number of such
shares owned of record and beneficially as of the record date for the meeting within five business days after the record date for
such meeting,
(C) a description
of any agreement, arrangement, or understanding with respect to such nomination between or among the Proposing Stockholder or the
beneficial owner, if any, on whose behalf the nomination is being made and any of their affiliates or associates, and any others
(including their names) acting in concert with any of the foregoing, and a representation that the Proposing Stockholder will notify
the Corporation in writing of any such agreement, arrangement, or understanding in effect as of the record date for the meeting
within five business days after the record date for such meeting,
(D) a description
of any agreement, arrangement, or understanding (including any derivative or short positions, profit interests, options, hedging
transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder’s notice
by, or on behalf of, the Proposing Stockholder or the beneficial owner, if any, on whose behalf the nomination is being made and
any of their affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price
changes for, or increase or decrease the voting power of such person or any of their affiliates or associates with respect to shares
of stock of the Corporation, and a representation that the Proposing Stockholder will notify the Corporation in writing of any
such agreement, arrangement, or understanding in effect as of the record date for the meeting within five business days after the
record date for such meeting,
(E) a representation
that the Proposing Stockholder is a holder of record of shares of the Corporation entitled to vote at the meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and
(F) a representation
whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage
of the Corporation’s outstanding capital stock required to approve the nomination and/or otherwise to solicit proxies from
stockholders in support of the nomination.
The Corporation may require
any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such
proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable
stockholder’s understanding of the independence, or lack thereof, of such nominee. Any such update or supplement shall
be delivered to the Secretary at the Corporation’s principal executive offices no later than five business days after
the request by the Corporation for subsequent information has been delivered to the Proposing Stockholder.
If the Chairman of meeting in
which directors are to be elected determines that a nomination was not made in accordance with the foregoing procedures, such nomination
shall be void.
(c) Other
Stockholder Proposals. For all business other than director nominations, a Proposing Stockholder’s notice to the
Secretary shall set forth as to each matter the Proposing Stockholder proposes to bring before the annual meeting:
(i) a brief
description of the business desired to be brought before the annual meeting;
(ii) the reasons
for conducting such business at the annual meeting;
(iii) the text
of any proposal or business (including the text of any resolutions proposed for consideration and in the event that such business
includes a proposal to amend these by-laws, the language of the proposed amendment);
(iv) any substantial
interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such stockholder and the beneficial
owner (within the meaning of Section 13(d) of the Exchange Act), if any, on whose behalf the business is being proposed;
(v) any other
information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to
be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal
and pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;
(vi) a description
of all agreements, arrangements, or understandings between or among such stockholder, the beneficial owner, if any, on whose behalf
the proposal is being made, any of their affiliates or associates, and any other person or persons (including their names) in connection
with the proposal of such business and any material interest of such stockholder, beneficial owner, or any of their affiliates
or associates, in such business, including any anticipated benefit therefrom to such stockholder, beneficial owner, or their affiliates
or associates; and
(vii) the information
required by Section 2.12(b)(vi) above.
(d) Special
Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders called by the Board of Directors at which directors are to be elected
pursuant to the Corporation’s notice of meeting:
(i) by or at
the direction of the Board of Directors or any committee thereof; or
(ii) provided
that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation
who is a stockholder of record at the time the notice provided for in this Section 2.12(d) is delivered to the Secretary, who is
entitled to vote at the meeting, and upon such election and who complies with the notice procedures set forth in this Section 2.12.
In the
event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the
case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if such stockholder
delivers a stockholder’s notice that complies with the requirements of Section 2.12(b) to the Secretary at the
principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special
meeting and not later than the close of business on the later of: (x) the 90th day prior to such special meeting; or (y) the
tenth (10th) day following the date of the first Public Disclosure of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting. In no event shall the Public Disclosure of an adjournment
or postponement of a special meeting commence a new time period (or extend any notice time period).
(e) Effect
of Noncompliance. Only such persons who are nominated in accordance with the procedures set forth in this Section 2.12
shall be eligible to be elected at any meeting of stockholders of the Corporation to serve as directors and only such other business
shall be conducted at a meeting as shall be brought before the meeting in accordance with the procedures set forth in this Section
2.12. If any proposed nomination was not made or proposed in compliance with this Section 2.12, or other business was not made
or proposed in compliance with this Section 2.12, then except as otherwise required by law, the chair of the meeting shall have
the power and duty to declare that such nomination shall be disregarded or that such proposed other business shall not be transacted.
Notwithstanding anything in these by-laws to the contrary, unless otherwise required by law, if a Proposing Stockholder intending
to propose business or make nominations at an annual meeting or propose a nomination at a special meeting pursuant to this Section
2.12 does not provide the information required under this Section 2.12 to the Corporation, including the updated information required
by Section 2.12(b)(vi)(B), Section 2.12(b)(vi)(C), and Section 2.12(b)(vi)(D) within five business days after the record date for
such meeting or the Proposing Stockholder (or a qualified representative of the Proposing Stockholder) does not appear at the meeting
to present the proposed business or nominations, such business or nominations shall not be considered, notwithstanding that proxies
in respect of such business or nominations may have been received by the Corporation.
(f) Rule
14a-8. This Section 2.12 shall not apply to a proposal proposed to be made by a stockholder if the stockholder has notified
the Corporation of the stockholder’s intention to present the proposal at an annual or special meeting only pursuant to and
in compliance with Rule 14a-8 under the Exchange Act and such proposal has been included in a proxy statement that has been prepared
by the Corporation to solicit proxies for such meeting.
Section 2.13 Written
Consent of Stockholders Without a Meeting. Any action to be taken at any annual or special meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action
to be so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred
to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section 2.13, written
consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable
law, be given to those stockholders who have not consented in writing, and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were delivered to the Corporation.
ARTICLE III
BOARD
OF DIRECTORS
Section 3.01 General
Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
The Board of Directors may adopt such rules and procedures, not inconsistent with the Certificate of Incorporation, these by-laws,
or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation.
Section 3.02 Number;
Term of Office; Substitute Nominees. The Board of Directors shall consist of not less than three directors and not more
than nine directors as fixed from time to time solely by resolution of a majority of the total number of directors that the Corporation
would have if there were no vacancies. Each director shall hold office until a successor is duly elected and qualified or until
the director’s earlier death, resignation, disqualification, or removal. In the event that a person is validly designated
by the Board of Directors (or committee designated by the Board of Directors) as a nominee to serve as a director and shall thereafter
become unable or willing to stand for election to the Board of Directors, the Board of Directors (or committee designated by the
Board of Directors) may designate a substitute nominee who meets all applicable standards under these by-laws and any vote cast
by a stockholder for the original designee may be cast instead, at the discretion of the stockholder’s proxy, if any, for
the substitute designee.
Section 3.03 Newly
Created Directorships and Vacancies. Any newly created directorships resulting from an increase in the authorized number
of directors and any vacancies occurring in the Board of Directors, shall be filled solely by the affirmative votes of a majority
of the remaining members of the Board of Directors, although less than a quorum, or by a sole remaining director. A director so
elected shall be elected to hold office until the earlier of the expiration of the term of office of the director whom he or she
has replaced, a successor is duly elected and qualified, or the earlier of such director’s death, resignation, or removal.
Section 3.04 Resignation. Any
director may resign at any time by notice given in writing or by electronic transmission to the Corporation. Such resignation shall
take effect at the date of receipt of such notice by the Corporation or at such later effective date or upon the happening of an
event or events as is therein specified. A verbal resignation shall not be deemed effective until confirmed by the director in
writing or by electronic transmission to the Corporation.
Section 3.05 Removal. Except
as prohibited by applicable law or the Certificate of Incorporation, the stockholders holding a majority of the shares then entitled
to vote at an election of directors may remove any director from office with or without cause.
Section 3.06 Fees
and Expenses. Directors shall be entitled to receive such reasonable fees for their services on the Board of Directors
and any committee thereof and such reimbursement of their actual and reasonable expenses as may be fixed or determined by the Board
of Directors or a designated committee thereof.
Section 3.07 Regular
Meetings. Regular meetings of the Board of Directors may be held without notice at such times and at such places as may
be determined from time to time by the Board of Directors.
Section 3.08 Special
Meetings. Special meetings of the Board of Directors may be held at such times and at such places as may be determined
by the Chair of the Board or the Chief Executive Officer on at least 24 hours’ notice to each director given by one of the
means specified in Section 3.11 hereof other than by mail or on at least three days’ notice if given by mail. Special meetings
shall be called by the Chair of the Board or the Chief Executive Officer in like manner and on like notice on the written request
of any two or more directors. The notice need not state the purposes of the special meeting and, unless indicated in the notice
thereof, any and all business may be transacted at a special meeting.
Section 3.09 Telephone
and Remote Meetings. Board of Directors or Board of Directors committee meetings may be held by means of telephone conference
or other communications equipment by means of which all persons participating in the meeting can hear each other and be heard.
Participation by a director in a meeting pursuant to this Section 3.09 shall constitute presence in person at such meeting.
Section 3.10 Adjourned
Meetings. A majority of the directors present at any meeting of the Board of Directors, including an adjourned meeting,
whether or not a quorum is present, may adjourn and reconvene such meeting to another time and place. At least 24 hours’
notice of any adjourned meeting of the Board of Directors shall be given to each director whether or not present at the time of
the adjournment, if such notice shall be given by one of the means specified in Section 3.11 hereof other than by mail, or at least
three days’ notice if by mail. Any business may be transacted at an adjourned meeting that might have been transacted at
the meeting as originally called.
Section 3.11 Notices. Subject
to Section 3.08, Section 3.10, and Section 3.12 hereof, whenever notice is required to be given to any director by applicable law,
the Certificate of Incorporation, or these by-laws, such notice shall be deemed given effectively if given in person or by telephone,
mail addressed to such director at such director’s address as it appears on the records of the Corporation, facsimile, e-mail,
or by other means of electronic transmission.
Section 3.12 Waiver
of Notice. Whenever notice to directors is required by applicable law, the Certificate of Incorporation, or these by-laws,
a waiver thereof, in writing signed by, or by electronic transmission by, the director entitled to the notice, whether before or
after such notice is required, shall be deemed equivalent to notice. Attendance by a director at a meeting shall constitute a waiver
of notice of such meeting except when the director attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business on the ground that the meeting was not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special Board of Directors or committee meeting need be specified
in any waiver of notice.
Section 3.13 Organization. At
each regular or special meeting of the Board of Directors, the Chair of the Board shall preside. Subject to Section 4.04, in the
absence of the Chair of the Board, another director selected by the Board of Directors shall preside. The Secretary shall act as
secretary at each meeting of the Board of Directors. If the Secretary is absent from any meeting of the Board of Directors, an
assistant secretary of the Corporation shall perform the duties of secretary at such meeting; and in the absence from any such
meeting of the Secretary and all assistant secretaries of the Corporation, the person presiding at the meeting may appoint any
person to act as secretary of the meeting.
Section 3.14 Quorum
of Directors. Except as otherwise provided by these by-laws, the Certificate of Incorporation, or required by applicable
law, the presence of a majority of the total number of directors on the Board of Directors shall be necessary and sufficient to
constitute a quorum for the transaction of business at any meeting of the Board of Directors.
Section 3.15 Action
by Majority Vote. Except as otherwise provided by these by-laws, the Certificate of Incorporation, or required by applicable
law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of
Directors.
Section 3.16 Directors’
Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, any action required
or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if
all directors or members of such committee, as the case may be, consent thereto in writing or by electronic transmission.
Section 3.17 Committees
of the Board of Directors. The Board of Directors may designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee shall
be absent from any meeting, or disqualified from voting, the remaining member or members present at the meeting and not disqualified
from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted
by applicable law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require
it to the extent so authorized by the Board of Directors. Unless the Board of Directors provides otherwise, at all meetings of
such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business,
and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of
the committee. Each committee shall keep regular minutes of its meetings. Unless the Board of Directors provides otherwise, each
committee designated by the Board of Directors may make, alter and repeal rules and procedures for the conduct of its business.
In the absence of such rules and procedures each committee shall conduct its business in the same manner as the Board of Directors
conducts its business pursuant to this ARTICLE III.
ARTICLE IV
OFFICERS
Section 4.01 Positions
and Election. The officers of the Corporation shall be chosen by the Board of Directors and shall include a Chair of the
Board of Directors (the “Chair of the Board”), a Chief Executive Officer (the “Chief Executive Officer”),
a Chief Financial Officer (the “Chief Financial Officer”), a Treasurer (the “Treasurer”),
and a Secretary (the “Secretary”). The officers of the Corporation may include such other officers and agents
(including interim officers) with such titles as the Board of Directors may prescribe, including, without limitation, a President
(which may be the president of the Corporation as a whole or one or more divisions or segments of the Corporation’s business),
one or more Vice Presidents (any one or more of which may be designated Senior Executive Vice President, Executive Vice President
or Senior Vice President), Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers. All officers of the Corporation
shall hold their offices for such terms and shall exercise such powers and perform such duties as prescribed by these by-laws,
the Board of Directors or, if authorized by the Board of Directors, the Chief Executive Officer or President, as applicable. No
officer need be a director or a stockholder of the Corporation. The Board of Directors may delegate to any officer of the Corporation
the power to appoint other officers and to prescribe their respective duties and powers. Any two or more offices may be held by
the same person.
Section 4.02 Term. Each
officer of the Corporation shall hold office until such officer’s successor is elected and qualified or until such officer’s
earlier death, resignation, or removal. Any officer elected or appointed by the Board of Directors may be removed by the Board
of Directors at any time with or without cause by the majority vote of the members of the Board of Directors then in office. The
removal of an officer shall be without prejudice to his or her contract rights, if any. The election or appointment of an officer
shall not of itself create contract rights. Any officer of the Corporation may resign at any time by giving notice of his or her
resignation in writing, or by electronic transmission, to the President or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Should
any vacancy occur among the officers, the position shall be filled for the unexpired portion of the term by appointment made by
the Board of Directors.
Section 4.03 Chair
of the Board. The Board of Directors shall elect one of its members to be the Chair of the Board, and shall fill any vacancy
in the position of Chair of the Board at such time and in such manner as the Board of Directors shall determine. The office of
Chair of the Board (which is an officer position) may be held another officer of the Corporation, subject to the control of the
Board of Directors, and shall report directly to the Board of Directors. Except as otherwise provided in these by-laws, the Chair
of the Board shall preside at all meetings of the Board of Directors and of stockholders. The Chair of the Board shall perform
such other duties and services as shall be required by these by-laws or assigned to or required of the Chair of the Board by the
Board of Directors.
Section 4.04 Chief
Executive Officer; President. The Chief Executive Officer shall, subject to the provisions of these by-laws and the control
of the Board of Directors, have general supervision, direction, and control over the business of the Corporation and over its officers.
The Chief Executive Officer shall perform all duties customarily incident to the offices of the Chief Executive Officer, and any
other duties as may be from time to time assigned to the Chief Executive Officer by the Board of Directors, in each case subject
to the control of the Board of Directors. If the offices of Chair of the Board and Chief Executive Officer are not held by the
same person, and the Chief Executive Officer is also a director, then, in the absence of the Chair of the Board at a regular or
special meeting of the Board of Directors, the Chief Executive Officer shall preside. The Board of Directors may also elect a person
to serve in the office of President of the Corporation. If the office of Chief Executive Officer is not filled, the President shall
perform the duties of Chief Executive Officer as detailed herein. If the office of Chief Executive Officer is filled, the President
shall be subordinate to the Chief Executive Officer and shall perform all duties as may be from time to time assigned to the President
by the Board of Directors, in each case subject to the control of the Board of Directors and the Chief Executive Officer.
Section 4.05 Vice
Presidents. Each vice president of the Corporation (regardless of designation) shall have such powers and perform such
duties as may be assigned to him or her from time to time by the Board of Directors or the Chief Executive Officer, or that are
customarily incident to the particular office of vice president.
Section 4.06 Secretary. The
Secretary shall attend all sessions of the Board of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for committees of the Board of
Directors when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and meetings of
the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chair of the Board,
or the Chief Executive Officer. The Secretary shall keep in safe custody the seal of the Corporation and have authority to affix
the seal to all documents requiring it and attest to the same.
Section 4.07 Chief
Financial Officer. The Chief Financial Officer shall be the principal financial officer of the Corporation and shall have
such powers and perform such duties as may be assigned by the Board of Directors or the Chief Executive Officer.
Section 4.08 Treasurer. The
treasurer of the Corporation shall have the custody of the Corporation’s funds and securities, except as otherwise provided
by the Board of Directors, and shall keep full and accurate accounts of receipts and disbursements in records belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. The treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the
directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all his or her transactions
as treasurer and of the financial condition of the Corporation.
Section 4.09 Duties
of Officers May Be Delegated. In case any officer is absent, or for any other reason that the Board of Directors may deem
sufficient, the Chief Executive Officer or the President or the Board of Directors may delegate for the time being the powers or
duties of such officer to any other officer or to any director.
ARTICLE V
INDEMNIFICATION
Section 5.01 Indemnification. The
Corporation shall indemnify and hold harmless to the fullest extent permitted by applicable law as it presently exists or may hereafter
be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), by reason of the fact
that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation
or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, enterprise, or nonprofit entity, including service
with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees)
actually and reasonably incurred by such person. Notwithstanding the preceding sentence, the Corporation shall be required to indemnify
a person in connection with a Proceeding (or part thereof) commenced by such person only if the commencement of such Proceeding
(or part thereof) by the person was authorized in the specific case by the Board of Directors.
Section 5.02 Advancement
of Expenses. The Corporation shall pay the expenses (including attorneys’ fees) actually and reasonably incurred
by a director or officer of the Corporation in defending any Proceeding in advance of its final disposition, upon receipt of an
undertaking by or on behalf of such person to repay all amounts advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such person is not entitled to be indemnified for such expenses under
this Section 5.02 or otherwise. Payment of such expenses actually and reasonably incurred by such person, may be made by the Corporation,
subject to such terms and conditions as the general counsel of the Corporation in his or her discretion deems appropriate.
Section 5.03 Non-Exclusivity
of Rights. The rights conferred on any person by this ARTICLE V will not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these by-laws, agreement, vote
of stockholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or
all of its directors, officers, employees, or agents respecting indemnification and advances, to the fullest extent not prohibited
by the DGCL.
Section 5.04 Other
Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request
as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, enterprise, or nonprofit
entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise, or nonprofit entity.
Section 5.05 Insurance. The
Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of
the Corporation, or is or was serving at the request of Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, enterprise, or nonprofit entity against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions of the DGCL.
Section 5.06 Repeal,
Amendment, or Modification. Any amendment, repeal, or modification of this ARTICLE V shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE VI
STOCK
CERTIFICATES AND THEIR TRANSFER
Section 6.01 Certificates
Representing Shares. Each stockholder of the Corporation shall be entitled to a certificate or certificates showing the
number of shares of stock registered in his or her name on the books of the Corporation. In addition, the Board of Directors may
provide by resolution or resolutions that some or all of any class or series shall be uncertificated shares that may be evidenced
by a book-entry system maintained by the registrar of such stock. If shares are represented by certificates, such certificates
shall be in the form, other than bearer form, approved by the Board of Directors. The certificates representing shares of stock
shall be signed by, or in the name of, the Corporation by any two authorized officers of the Corporation. Any or all such signatures
may be facsimiles. In case any officer, transfer agent, or registrar who has signed such a certificate ceases to be an officer,
transfer agent, or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the
same effect as if the signatory were still such at the date of its issue.
Section 6.02 Transfers
of Stock. Stock of the Corporation shall be transferable in the manner prescribed by law and in these by-laws. Transfers
of stock shall be made on the books administered by or on behalf of the Corporation only by the direction of the registered holder
thereof or such person’s attorney, lawfully constituted in writing, and, in the case of certificated shares, upon the surrender
to the Corporation or its transfer agent or other designated agent of the certificate thereof, which shall be cancelled before
a new certificate or uncertificated shares shall be issued.
Section 6.03 Transfer
Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
Section 6.04 Lost,
Stolen, or Destroyed Certificates. The Board of Directors or the Secretary may direct a new certificate or uncertificated
shares to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed
upon the making of an affidavit of that fact by the owner of the allegedly lost, stolen, or destroyed certificate. When authorizing
such issue of a new certificate or uncertificated shares, the Board of Directors or the Secretary may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of the lost, stolen, or destroyed certificate, or the owner’s
legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate or uncertificated
shares.
ARTICLE VII
GENERAL PROVISIONS
Section 7.01 Seal. The
seal of the Corporation shall be in such form as shall be approved by the Board of Directors. The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise, as may be prescribed by law or custom or by the Board
of Directors.
Section 7.02 Fiscal
Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and if not so fixed by
the Board of Directors, the fiscal year of the Corporation shall be the calendar year.
Section 7.03 Contracts;
Checks, Notes, Drafts, Etc. The Board of Directors may authorize any officer, officers, agent or agents of the Corporation
to enter into any contract or execute and deliver an instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances. All checks, notes, drafts, or other orders for the payment of money of the Corporation
shall be signed, endorsed, or accepted in the name of the Corporation by such officer, officers, person, or persons as from time
to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such
designation.
Section 7.04 Conflict
with Applicable Law or Certificate of Incorporation. These by-laws are adopted subject to any applicable law and the Certificate
of Incorporation. Whenever these by-laws may conflict with any applicable law or the Certificate of Incorporation, such conflict
shall be resolved in favor of such law or the Certificate of Incorporation.
Section 7.05 Books
and Records. Any records administered by or on behalf of the Corporation in the regular course of its business, including
its stock ledger, books of account, and minute books, may be maintained on any information storage device, method, or one or more
electronic networks or databases (including one or more distributed electronic networks or databases); provided that the records
so kept can be converted into clearly legible paper form within a reasonable time, and, with respect to the stock ledger, the records
so kept comply with Section 224 of the DGCL. The Corporation shall so convert any records so kept upon the request of any person
entitled to inspect such records pursuant to applicable law.
Section 7.06 Forum for Adjudication of
Disputes.
(a) Unless
the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or,
if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole
and exclusive forum for:
(i) any derivative
action or proceeding brought on behalf of the Corporation;
(ii) any action
asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of the Corporation to the Corporation
or the Corporation’s stockholders;
(iii) any action
asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation, or these by-laws; or
(iv) any action
asserting a claim governed by the internal affairs doctrine;
in each case,
subject to said court having personal jurisdiction over the indispensable parties named as defendants therein. If any action the
subject matter of which is within the scope of this Section 7.06 is filed in a court other than a court located within the State
of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented
to: (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action
brought in any such court to enforce this Section 7.06 (an “Enforcement Action”); and (ii) having service of
process made upon such stockholder in any such Enforcement Action by service upon such stockholder’s counsel in the Foreign
Action as agent for such stockholder. Any person or entity purchasing or otherwise acquiring any interest in shares of capital
stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.06(a).
(b) Unless
the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States
of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities
Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation
shall be deemed to have notice of and consented to the provisions of this Section 7.06(b).
(c) Notwithstanding
any provision of these by-laws to the contrary, the federal district courts of the United States of America shall be the exclusive
forum for the resolution of any complaint for which such courts have exclusive jurisdiction, including, but not limited to, any
complaint asserting a cause of action arising under the Exchange Act of 1934.
Section 7.07 Dividends.
(a) Dividends
upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to the provisions of the Certificate of Incorporation.
(b) Before
payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the
Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE VIII
AMENDMENTS
These by-laws may be
adopted, amended, or repealed by the stockholders entitled to vote; provided, however, that the Corporation may, in
its Certificate of Incorporation, confer the power to adopt, amend, or repeal these by-laws upon the Board of Directors; and, provided
further, that any proposal by a stockholder to amend these by-laws will be subject to the provisions of ARTICLE II of these
by-laws except as otherwise required by law. The fact that such power has been conferred upon the Board of Directors will not divest
the stockholders of the power, nor limit their power to adopt, amend, or repeal by-laws.
Adopted: [_________]
# # #
Exhibit 10.1
ISPECIMEN INC.
2010 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 2010 Stock Incentive
Plan (the “Plan”) of iSpecimen Inc., a Delaware corporation (the “Company”), is to advance
the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons
who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities
and performance-based incentives that are intended to better align the interests of such persons with those of the Company’s
stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986,
as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including,
without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined
by the Board of Directors of the Company (the “Board”).
2. Eligibility
All of the Company’s employees, officers,
directors, consultants and advisors are eligible to be granted options, restricted stock, restricted stock units (“RSUs”)
and other stock-based awards (each, an “Award”) under the Plan. Each person who receives an Award under the
Plan is deemed a “Participant”.
3. Administration and Delegation
(a)
Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority
to grant Awards and to adopt, amend, and repeal such administrative rules, guidelines, and practices relating to the Plan as it
shall deem advisable. The Board may construe and interpret the terms of the Plan and any Award agreements entered into under the
Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency.
All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having
or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board
shall be liable for any action or determination relating to or under the Plan made in good faith.
(b)
Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers
under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the
Plan to the “Board” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or
authority under the Plan have been delegated to such Committee.
4. Stock Available for Awards
(a)
Number of Shares. Subject to adjustment under Section 8, Awards may be made under the Plan for up to 1,500,000 shares
of common stock, $.0001 par value per share, of the Company (the “Common Stock”). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised, is forfeited in whole or in part (including as the result
of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual
repurchase right), or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise
an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the
case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the
Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. At no
time while there is any Option (as defined below) outstanding and held by a Participant who was a resident of the State of California
on the date of grant of such Option, shall the total number of shares of Common Stock issuable upon exercise of all outstanding
options and the total number of shares provided for under any stock bonus or similar plan or agreement of the Company exceed the
applicable percentage as calculated in accordance with the conditions and exclusions of Section 260.140.45 of the California Code
of Regulations (the "California Regulations"), based on the shares of the Company which are outstanding at the
time the calculation is made.
(b)
Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition
by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or
stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board
deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall
not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related
provisions of the Code.
5. Stock Options
(a)
General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine
the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations
applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall
be designated a “Nonstatutory Stock Option”.
(b)
Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined
in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company,
any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and
any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject
to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to
a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an
Incentive Stock Option or for any action taken by the Board, including without limitation the conversion of an Incentive Stock
Option to a Nonstatutory Stock Option.
(c) Exercise Price. The Board shall establish the exercise price of each Option and specify the exercise price in the
applicable option agreement. The exercise price shall be not less than 100% of the Fair Market Value (as defined below) on the
date the Option is granted.
(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the
Board may specify in the applicable option agreement.
(e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by
the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full
as specified in Section 5(f) for the number of shares for which the Option is exercised. Shares of Common Stock subject to the
Option will be delivered by the Company as soon as practicable following exercise.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid
for as follows:
(1)
in cash or by check, payable to the order of the Company;
(2)
when the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), except
as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking
by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding
or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker
to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(3)
when the Common Stock is registered under the Exchange Act and to the extent provided for in the applicable option agreement
or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock
owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board (“Fair
Market Value”), provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if
acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established
by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements;
(4)
to the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board,
in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board,
or (ii) payment of such other lawful consideration as the Board may determine; or
(5)
by any combination of the above permitted forms of payment.
6. Restricted Stock; Restricted Stock Units
(a)
General. The Board may grant Awards entitling recipients to acquire shares of Common Stock (“Restricted
Stock”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated
or formula price from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards
for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered
at the time such Award vests (“Restricted Stock Units”) (Restricted Stock and Restricted Stock Units are each
referred to herein as a “Restricted Stock Award”).
(b)
Terms and Conditions for All Restricted Stock Awards. The Board shall determine the terms and conditions of a Restricted
Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price.
(c)
Additional Provisions Relating to Restricted Stock.
(1)
Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends
paid with respect to such shares, unless otherwise provided by the Board. Unless otherwise provided, by the Board, if any dividends
or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary
cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability
as the shares of Restricted Stock with respect to which they were paid.
(2)
Stock Certificates. The Company may require that any stock certificates issued in respect of shares of Restricted
Stock shall be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates
no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner
determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s
death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, “Designated
Beneficiary” shall mean the Participant’s estate.
7. Other Stock-Based Awards
Other Awards of shares of Common Stock,
and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other
property, may be granted hereunder to Participants (“Other Stock-Based Awards”), including without limitation
stock appreciation rights (“SARs”) and Awards entitling recipients to receive shares of Common Stock to be delivered
in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted
under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may
be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall
determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.
8. Adjustments for Changes in Common Stock and Certain Other Events
(a)
Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend
or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of securities and exercise price per share of each outstanding Option, (iii) the number
of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding Award shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in
the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split
of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option
are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an
optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to
receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(b) Reorganization Events.
(1)
Definition. A “Reorganization Event” shall mean: (a) any merger or consolidation of the
Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged
for the right to receive cash, securities or other property or is cancelled, (b) any exchange of all of the Common Stock of the
Company for cash, securities or other property pursuant to a share exchange transaction or (c) any liquidation or dissolution
of the Company.
(2)
Consequences of a Reorganization Event on Awards Other than Restricted Stock Awards. In connection with a
Reorganization Event, the Board may take any one or more of the following actions as to all or any (or any portion of) outstanding
Awards other than Restricted Stock Awards on such terms as the Board determines: (i) provide that Awards shall be assumed,
or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof),
(ii) upon written notice to a Participant, provide that the Participant’s unexercised Awards will terminate immediately
prior to the consummation of such Reorganization Event unless exercised by the Participant within a specified period following
the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions
applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event, (iv) in the event of a
Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for
each share surrendered in the Reorganization Event (the “Acquisition Price”), make or provide for a cash payment
to a Participant equal to the excess, if any, of (A) the Acquisition Price times the number of shares of Common Stock subject
to the Participant’s Awards (to the extent the exercise price does not exceed the Acquisition Price) over (B) the aggregate
exercise price of all such outstanding Awards and any applicable tax withholdings, in exchange for the termination of such Awards,
(v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive
liquidation proceeds (if applicable, net of the exercise price thereof and any applicable tax withholdings) and (vi) any combination
of the foregoing. In taking any of the actions permitted under this Section 8(b), the Board shall not be obligated by the Plan
to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.
For purposes of clause (i) above, an
Option shall be considered assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase,
for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration
(whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each
share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided,
however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring
or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration
received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.
(3)
Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization
Event other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding
Restricted Stock Award shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise,
apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization
Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon
the occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically
provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and
the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated
or satisfied.
9. General Provisions Applicable to Awards
(a)
Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be
sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation
of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant
to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant.
References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
(b)
Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine.
Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c)
Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation
to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d)
Termination of Status. The Board shall determine the effect on an Award of the disability, death, termination or
other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and
the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator,
guardian or Designated Beneficiary, may exercise rights under the Award.
(e)
Withholding. The Participant must satisfy all applicable federal, state, and local or other income and employment
tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock
under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages.
If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount,
if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding
obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company
so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an
Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery
of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value;
provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy
such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding
rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares
surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other
similar requirements.
(f) Amendment of Award.
(1)
The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to
a Nonstatutory Stock Option. The Participant’s consent to such action shall be required unless (i) the Board determines that
the action, taking into account any related action, would not materially and adversely affect the Participant’s rights under
the Plan or (ii) the change is permitted under Section 8 hereof.
(2)
The Board may, without stockholder approval, amend any outstanding Award granted under the Plan to provide an exercise price
per share that is lower than the then-current exercise price per share of such outstanding Award. The Board may also, without stockholder
approval, cancel any outstanding award (whether or not granted under the Plan) and grant in substitution therefor new Awards under
the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the
then-current exercise price per share of the cancelled award.
(g)
Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant
to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have
been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal
matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws
and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable
laws, rules or regulations.
(h)
Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in
part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
10. Miscellaneous
(a)
No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the
Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan, except as expressly provided in the applicable Award.
(b)
No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary
shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until
becoming the record holder of such shares.
(c)
Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board.
No Awards shall be granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the Plan was
adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted
may extend beyond that date.
(d)
Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided
that if at any time the approval of the Company’s stockholders is required as to any modification or amendment under Section
422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification
or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance
with this Section 10(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the
amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of
Participants under the Plan.
(e)
Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes
of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by
adopting supplements to this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems
necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall
deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall
apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement
to Participants in any jurisdiction which is not the subject of such supplement.
(f)
Compliance with Code Section 409A. No Award shall provide for deferral of compensation that does not comply with
Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply
with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended
to be exempt from, or compliant with, Section 409A is not so exempt or compliant or for any action taken by the Board.
(g)
Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application
of the laws of a jurisdiction other than such state.
Exhibit 10.2
ISPECIMEN INC.
2013
STOCK INCENTIVE PLAN
1. Purpose & Eligibility
The purpose of this
2013 Stock Incentive Plan (the “Plan”) of iSpecimen Inc., a Delaware corporation (the “Company”), is to
advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate
persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities
and/or performance-based incentives. Except where the context otherwise requires, the term “Company” shall include
any present or future subsidiary corporations of the Company, as defined in Section 424(e) or (f) of the Internal Revenue Code
of 1986, as amended, and any regulations promulgated thereunder (the “Code”) (a “Subsidiary”
or “Subsidiaries”) and, for purposes of Awards (as hereinafter defined) other than Incentive Stock Options (as hereinafter
defined), any other business venture (including, without limitation, joint venture or limited liability company) in which the Company
has a direct or indirect significant or controlling interest, as determined by the sole discretion of the Board of Directors of
the Company (the “Board”).
Under this Plan, all
of the Company’s Employees, officers, consultants, advisors, and directors (including directors who are not Employees or
officers of the Company (“Non-Employee Directors”) are eligible to be granted Incentive Stock Options and Nonqualified
Stock Options (as hereinafter defined) to purchase common stock in the Company (“Common Stock”), shares of restricted
stock, restricted stock units (“RSUs”), stock issuances, stock appreciation rights, equity interests, and other stock-based
awards (each, an “Award”) under the Plan. Any person to whom an Award has been granted, sold, or otherwise provided
or who receives an Award under the Plan is deemed a “Participant”. “Employee,” for purposes of eligibility
under the Plan, shall include a person to whom an offer of employment has been extended by the Company and who has actually accepted
and commenced employment with the Company, in accordance with the conditions set forth in the offer of employment.
2. Administration
(a) Administration by Board of Directors. The Plan will be administered by the Board of Directors of the Company (the
“Board”). The Board, in its sole discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan, and to interpret and correct the provisions of the Plan and any Award. The Board shall have
authority to construe, determine, and interpret the respective agreements, Awards and the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan and any Awards; to determine the terms and provisions of the respective agreements and
Awards, which need not be identical; and to make all other determinations that, in the judgment of the Board of Directors, are
necessary or desirable for the administration and interpretation of the Plan. The Board may correct any defect or supply any omission
or reconcile any inconsistency or ambiguity in the Plan or in any agreement or Award in the manner and to the extent it shall deem
expedient to implement the Plan, any agreement or Award and it shall be the sole and final judge of such expediency. All decisions
by the Board shall be final and binding on all interested persons. Neither the Company nor any member of the Board shall be liable
for any action or determination relating to the Plan.
The Board shall have
the full and final power and authority, in its discretion, without the need for shareholders approval, unless such approval is
required to comply with applicable laws: 1) to determine the persons to whom, and the time or times at which, Awards shall be granted
and to grant the Awards; 2) to designate the form of an Award and, in the case of any Options (as hereinafter defined), designate
such Options as Incentive Stock Options or Non-Qualified Stock Options; 3) to determine the Fair Market Value (as hereinafter defined)
of the Common Stock or other property; 4) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any Common Stock issued upon the exercise thereof, including, without limitation, (i) the exercise price
of any Award, (ii) the method of payment for shares purchased upon the exercise of any Award, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with any Award or the Common Stock issued upon the exercise thereof, including
by the withholding or delivery of Common Stock, (iv) the timing, terms and conditions of the exercisability of any Award and the
vesting schedule thereof, (v) the time of the expiration of any Award, Award eligibility, or Award restrictions, and (vi) all other
terms, conditions and restrictions applicable to any Award, not inconsistent with the terms of the Plan or applicable law; 5) to
prescribe the form or forms of the instruments evidencing Awards granted under the Plan; 6) to amend, modify, extend, cancel, or
renew any Award or to waive any restrictions or conditions applicable to any Awards; 7) to accelerate, continue, extend, or defer
the exercisability of any Awards or the vesting schedule thereof, including with respect to the period following a Participant’s
termination of employment or engagement; 8) to change, amend, or modify the exercise price of any Option, to re-price Options,
including following their grant; 9) to grant to the holder of an outstanding Option, in exchange for the surrender and cancellation
of such Option, a new Option having a purchase price equal to, lower than or higher than the exercise price provided in the Option
so surrendered and canceled, and containing such other terms and conditions as the Board may prescribe in accordance with the provisions
of the Plan; 10) to prescribe, amend, or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to,
or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the
laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Awards; and 11) to
correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award as the Board may deem advisable to the extent
not inconsistent with the provisions of the Plan or applicable law.
(b) Appointment of Committee. To the extent permitted by applicable law, the Board may delegate any or all of its powers
under the Plan to one or more committees or subcommittees of the Board (a “Committee”). Such Committee shall
be composed of at least two (2) members. All references in the Plan to the “Board” shall mean such Committee
or the Board.
(c) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more
officers of the Company the power to grant Awards and exercise such other powers under the Plan as the Board may determine; provided,
however, that the Board shall fix the maximum number of Awards to be granted and the maximum number of shares issuable to any
one Participant pursuant to Awards granted by such officer or officers. All such Awards shall be documented in the manner and fashion
as determined by the Board. The Board may, by a resolution adopted by the board, authorize one or more officers of the Company
to do one or both of the following: (i) designate officers, Employees, advisors and/or consultants of the Company or of any of
its Subsidiaries to be recipients of Awards created by the Company and (ii) determine the number of such Awards to be received
by such officers, Employees, advisors and/or consultants; provided, however, that the resolution so authorizing such persons
shall specify the maximum number of Awards such persons may so award. The Board may not authorize an officer to designate himself
or herself as a recipient of any such Awards.
The Board shall be
authorized to (i) delegate responsibility for Plan operation, management, and administration on such terms, consistent with the
Plan, as the Board may establish; (ii) delegate to other persons the responsibility for performing ministerial acts in furtherance
of the Plan's purpose; and (iii) engage the services of persons or organizations in furtherance of the Plan's purpose, including
but not limited to banks, insurance companies, brokerage firms and consultants.
(d) Applicability of Rule 16b-3. Those provisions of the Plan that expressly refer to Rule 16b-3 promulgated under
the Securities and Exchange Act of 1934 (the “Exchange Act”) or, any successor rules (“Rule 16b-3”)
or which are required in order for certain option transactions to qualify for exemption under Rule 16b-3 shall apply only to such
persons as are required to file reports under Section 16 (a) of the Exchange Act (a “Reporting Person”).
(e) Grant of Awards to Directors and Officers. If the Company is a reporting company under the Exchange Act, the selection
of a director or an officer (as the terms “director” and “officer” are defined for purposes of Rule 16b-3)
as a Participant, the timing of the grant of the Award, the exercise price or sale price of the Award and the number of shares
for which an Award may be granted to such director or officer shall be determined either (i) by the Board, of which all members
shall be “disinterested persons” (as hereinafter defined), or (ii) by a committee of two or more directors having full
authority to act in the matter, of which all members shall be “disinterested persons.” For the purposes of the Plan,
a director shall be deemed to be “disinterested” only if such person qualifies as a “disinterested person”
within the meaning of Rule 16b-3 of the Exchange Act, as such term is interpreted from time to time.
(f) Liability and Indemnification. The Board, the Committee, their members and any person designated above shall not
be liable for any action or determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable
law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it. To the maximum extent permitted by applicable law and
the Certificate of Incorporation and Bylaws of the Company and to the extent not covered by insurance, each officer and member
or former member of the Committee or of the Board shall be indemnified and held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement
of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the
fullest extent permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out
of such officer's, member's or former member's own fraud or bad faith. Such indemnification shall be in addition to any rights
of indemnification the officers, directors or members or former officers, directors or members may have under applicable law or
under the Certificate of Incorporation or Bylaws (or other organizational documents) of the Company. Notwithstanding anything else
herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Options granted
to him or her under this Plan.
3. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 7(a) the aggregate number of shares of Common Stock of the
Company (the “Common Stock”) that may be issued pursuant to the Plan is 1,713,570 shares of Common Stock.
If any Award expires or lapses, or is terminated, repurchased, surrendered or forfeited, or results in any Common Stock not being
issued, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under
the Plan, subject to the limitations set forth herein. If shares of Common Stock issued pursuant to the Plan are repurchased by,
are surrendered or forfeited to, or are otherwise tendered to the Company (including a surrender or forfeiture of shares to satisfy
any applicable tax withholding obligation), such shares of Common Stock shall again be available for the grant of Awards under
the Plan, subject to all applicable laws. Shares issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares. Subject to adjustment under Section 7(a), no Participant may be granted Awards, over the ten-year term
of this Plan, equating to more than an aggregate of 50% of the shares of Common Stock available under this Plan.
(b) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition
by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or
stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board
deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall
not count against the overall share limit set forth in Section 3(a), except as may be required by reason of Section 422 and related
provisions of the Code.
4. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each, an “Option”) and determine
the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations
applicable to the exercise of each Option and the Common Stock issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state securities laws and any provisions of the Code,
including but not limited to Section 409A of the Code, as it considers advisable.
(b) Incentive
Stock Options. An Option that the Board intends to be an “Incentive Stock Option” as defined in Section 422 of
the Code (an “Incentive Stock Option”) shall be granted only to Employees of the Company and shall be subject
to and shall be construed consistently with the requirements of Section 422 of the Code. The Board and the Company shall have
no liability if an Option or any part thereof that is intended to be an Incentive Stock Option does not qualify as such. An Option
or any part thereof that does not qualify as an Incentive Stock Option is referred to herein as a “Nonstatutory Stock
Option” or “Nonqualified Stock Option.” The Board shall establish the exercise price at the time
each Option is granted and specify it in the applicable agreement evidencing the grant of the Option. The strike price per share
of Common Stock, with respect to which each Incentive Stock Option is granted, shall not be less than the Fair Market Valueper
share at the time the Option is granted. No Employee who owns or is deemed to own more than 10% of the voting power of all classes
of the issued and outstanding stock of the Company or any Subsidiary (excluding Common Stock subject to the proposed Option and
Common Stock subject to Options previously granted but not yet exercised in full) shall be eligible for an Incentive Stock Option
grant under the Plan unless (a) the exercise price is equal to at least 110% of the Fair Market Value (at the time the Incentive
Stock Option is granted) of the Common Stock subject to the Incentive Stock Option and (b) the Incentive Stock Option is not exercisable
more than five (5) years from the date it is granted.
(c) Dollar Limitation. For so long as the Code shall so provide, Options granted to any Employee under the Plan (and
any other plans of the Company) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options
to the extent that such Options, in the aggregate, become exercisable for the first time in any one calendar year for shares of
Common Stock with an aggregate Fair Market Value of more than $100,000 (determined as of the respective date or dates of grant).
To the extent that any such Incentive Stock Options exceed the $100,000 limitation, such Options shall be deemed to be Nonstatutory
or Nonqualified Stock Options.
(d) Exercise Price; Duration; Exercise Mechanics. The Board shall establish the exercise price (or determine the method
by which the exercise price shall be determined) at the time each Option is granted and specify the exercise price in the applicable
option agreement and each grant by the Board. Such Option shall be granted at not less than Fair Market Value (or 110% of Fair
Market Value if an Incentive Stock Option is granted to any stockholder who owns beneficially more than 10% of the voting power
of all classes of the issued and outstanding stock of the Company). Options may be exercised only by delivery to the Company, or
to such representative as the Company shall designate, by the proper person of a notice of exercise, in writing or by electronic
transmission, together with payment in full as specified in Section 4(e) or the option agreement for the number of shares for which
the Option is exercised. Any Option must be exercised within three (3) months following termination of the relationship with the
Company, except as otherwise set forth in any applicable option agreement. An Incentive Stock Option may be permitted by its terms
to be exercised after three (3) months following the termination of a Participant’s employment with the Company (or twelve
(12) months in the case of termination due to death or disability (as defined in Section 22(e)(3) of the Code)), but if so exercised,
the Option shall be treated for tax and accounting purposes as a Nonstatutory or Nonqualified Stock Option.
(e) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option shall be paid for by one or any combination
of the following forms of payment:
(1)
by check or other good funds payable to the Company;
(2)
if the Common Stock is then publicly traded, to the extent permitted by applicable law and except as otherwise explicitly
provided in the applicable option agreement, by delivery of an irrevocable and unconditional undertaking by a creditworthy broker
to deliver promptly to the Company sufficient funds to pay the exercise price of the underlying Option being exercised, or delivery
by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price; or
(3)
to the extent explicitly provided in the applicable option agreement by (a) delivery of shares of Common Stock owned by
the Participant (including shares acquired pursuant to the then current exercise of an Option) valued at Fair Market Value or (b)
payment of such other lawful consideration as the Board may determine. The Fair Market Value of any other non-cash consideration
which may be delivered upon exercise of an Option shall be determined in such manner as may be prescribed by the Board. The Fair
Market Value shall be determined by the Board, using the guidelines set forth in Section 11(a).
5. Restricted Stock; Restricted Stock Units
(a)
General. The Board may grant Awards entitling recipients to acquire restricted shares of Common Stock (“Restricted
Stock”). In the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of
the applicable restriction period or periods established by the Board for such Award, the Company may cancel all or part of such
shares (without payment) or repurchase from the recipient all or part of such shares at the lower of(i) the original purchase or
issue price to the Participant, or (ii) Fair Market Value Instead of granting Awards for Restricted Stock, the Board may grant
Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests (“Restricted
Stock Units”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “Restricted Stock Award”).
(b)
Terms and Conditions for All Restricted Stock Awards. The Board shall determine the terms and conditions of any such
Restricted Stock Award, including any and all terms and conditions for vesting, repurchase, and forfeiture. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined
by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee).
After the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer
subject to such restrictions to the Participant or, if the Participant has died, to the beneficiary designated by the Participant,
in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant's
death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated
Beneficiary shall mean the Participant's estate.
(c)
Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with
respect to such shares, unless otherwise provided by the Board. Unless otherwise provided by the Board, if any dividends or distributions
are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the
shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of
Restricted Stock with respect to which they were paid.
(d)
Unvested Restricted Stock Awards. Within one hundred twenty (120) days of the termination of employment, for
any reason, of a Participant who holds Restricted Stock Awards, the Company shall have the right to purchase from any such Participant
any and all shares of unvested Restricted Stock Awards at the lower of the original purchase or issue price to the Participant,
or the Fair Market Value .
6. Other Stock-Based Awards
The Board shall have
the right to grant other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to,
or are otherwise based on, shares of Common Stock or other property (“Other Stock-Based Awards”), including without
limitation stock appreciation rights (“SARs”), bonus stock, phantom stock awards, stock units, and others Awards entitling
recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available
as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a
Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine.
Subject to the provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award.
7. Adjustments for Changes in Capital Stock and Certain Other Events
(a)
Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination of shares, reclassification of shares, exchange of shares, liquidation, spin-off,
split-up, or other similar change in capitalization or event, including the acquisition by the Company of property or stock of
an entity, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and
class of securities available for Awards under this Plan, (ii) the number and class of securities, vesting schedules, and exercise
price per share of each outstanding Option or Award, (iii) the number of shares subject to and the repurchase price per share subject
to each outstanding Award subject to repurchase, and (iv) the terms of each other outstanding Award may be equitably adjusted by
the Company (or substituted Awards may be made, if applicable) in a manner solely determined by the Board, subject to all applicable
laws. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of
a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date
of the distribution of the dividend (rather than as of the record date for such dividend), then any Participant who exercises an
Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution
date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact
that such shares were not outstanding as of the close of business on the record date for such stock dividend.
(b) Reorganization Events.
(1) Definition. A “Reorganization Event” shall mean: (a) any merger, business combination, consolidation
or purchase of outstanding capital stock of the Company with or into, or any acquisition by, another entity after which the voting
securities of the Company, outstanding immediately prior thereto, represent (either by remaining outstanding or by being converted
into voting securities of the surviving or acquiring entity) less than 50% of the combined voting power of the voting securities
of the Company or such surviving or acquiring entity outstanding immediately after such event (other than as a result of a financing
transaction); (b) any sale or exchange of all or substantially all of the capital stock or assets of the Company (other than in
a spin-off or similar transaction) for cash, securities or other property pursuant to a share exchange transaction; (c) any other
form of business combination or acquisition of the business of the Company in which the Company is the target of the acquisition,
as determined by the Board, whose determination shall be conclusive; or (d) any liquidation or dissolution of the Company.
(2) Consequences of a Reorganization Event on Awards. In connection with a Reorganization Event, unless otherwise
expressly provided in the applicable Award, the Board or the board of directors of the surviving, acquiring, or otherwise controlling
entity (as used in this Section 7(b), also the “Board”) may take any one or more of the following actions, notwithstanding
the effects of any combination of actions on the same basis or on different bases as the Board shall specify, as to all or any
(or any portion of) outstanding Awards other than Restricted Stock Awards on such terms as the Board determines:
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(i)
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The Board may make appropriate provision for the continuation of such Awards by the Company or
the assumption of such Awards by the surviving, acquiring, or otherwise controlling entity (or any affiliate thereof) and by substituting
on an equitable basis for the shares then subject to such Awards either: (i) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Reorganization Event (net of the exercise price, if applicable), (ii) shares
of stock of the surviving or acquiring corporation, or (iii) such other securities or consideration as the Board deems appropriate,
the Fair Market Value of which (as determined by the Board in its sole discretion) shall not materially differ from the Fair Market
Value of the shares of Common Stock subject to such Awards immediately preceding the Reorganization Event;
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For purposes of this section,
an Option or Award shall be considered assumed if, following consummation of the Reorganization Event, the Option or Award confers
the right to purchase, for each share of Common Stock subject to the Option or Award immediately prior to the consummation of the
Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization
Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization
Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization
Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options or
Awards to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value
(as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result
of the Reorganization Event.
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(ii)
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The Board may provide that one or more Awards then outstanding shall become exercisable, realizable,
or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event
within a specified number of days of the date of written notice of the Reorganization Event, at the end of which period such Awards
shall be terminated, cancelled, or forfeited;
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(iii)
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The Board may provide that one or more Awards then outstanding, in whole or in part, shall be terminated
in exchange for a cash payment equal to the excess of the Fair Market Value of the shares subject to such Awards over the exercise
price thereof; provided, however, that before terminating any portion of an Awards that is not vested or exercisable (other than
in exchange for cash payment), the Board may (in its sole discretion) also accelerate in full the exercisability of the portion
that is to be terminated;
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(iv)
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The Board may provide that, in connection with a liquidation or dissolution of the Company, Awards
shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof and any applicable
tax withholdings); or
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(v)
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The Board may provide any combination of the foregoing.
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In taking any of the actions permitted
under this Section 7 the Board shall not be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all
Awards of the same type, identically. Furthermore, unless otherwise determined by the Board (on the same basis or on different
bases as the Board shall specify), any repurchase rights or other rights of the Company that relate to an Award shall continue
to apply to consideration, including cash, that has been substituted, assumed or amended for an Award pursuant to this Section
7(b). The Company may hold in escrow all or any portion of any such consideration in order to effectuate any continuing restrictions.
Notwithstanding anything
in this Plan to the contrary, as to any Participant, unless the acceleration of such vesting is otherwise set forth in any employment
offer letter, employment agreement, or other agreement with such Participant (unless otherwise superseded by an agreement under
which an Award is granted under this Plan), or is otherwise set forth in any agreement which provides for the grant of additional
Awards to a Participant following commencement of employment, or is otherwise expressly set forth by a resolution of the Board,
any unvested portion of any Award shall be forfeited by the Participant in the event of a Reorganization Event.
8. General Provisions Applicable to Awards
(a)
Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be
sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation
of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only
by the Participant; provided, however, that only Nonstatutory Options may be transferred to a grantor-retained annuity trust
or a similar estate-planning vehicle in which the trust is bound by all provisions of the Option which are applicable to the Participant,
and subject to the prior written consent of the Board. References to a Participant, to the extent relevant in the context, shall
include references to authorized transferees.
(b)
Documentation. Each Award under the Plan shall be evidenced by a written instrument in such form as the Board
or Committee shall determine or as executed by an officer of the Company pursuant to authority delegated by the Board. Each Award
may contain terms and conditions in addition to those set forth in the Plan, provided that such terms and conditions do not contravene
the provisions of the Plan. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.
(c)
Additional Award Provisions. To the extent permitted by applicable law, the Board may, in its sole discretion, include
additional provisions in any Award granted under the Plan, including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guarantee loans, to transfer other property to a Participant upon the
exercise of an Award, or such other provisions as shall be determined by the Board; provided, however, that such additional
provisions shall not be inconsistent with any other term or condition of the Plan or applicable law.
(d)
Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized
leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during
which, the Participant, or the Participant's legal representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award, subject to applicable law and the provisions of the Code related to Incentive Stock Options; provided,
however, that if a Non-Employee Director shall cease to be a member of the Board for any reason other than for Cause (as hereinafter
defined) any Option granted to the Non-Employee Director shall remain exercisable (to the extent such Option was exercisable on
the date the Non-Employee Director ceased to be a member of the Board) until the earlier of: (i) three (3) years after termination
of status as a member of the Board or (ii) expiration of such Option in accordance with this Plan or the option agreement or (iii)
the consummation of a Reorganization Event. In the event that a Participant changes the capacity of his engagement with the Company
(i.e. ceases to be an Employee but becomes a consultant, an advisor, a contractor, or a director, or vice versa) the Board,
in its sole and absolute discretion, may determine that no termination of employment or engagement shall be deemed to occur until
such time as such Participant is no longer a director or otherwise suitably employed or contracted by the Company.
(e)
Parachute Payments and Parachute Awards. The Company may take reasonable and appropriate actions in its sole discretion,
or in the sole discretion of the Board, to minimize (or eliminate to the extent possible) the impact of any potential excise taxes
under Section 4999 of the Code or any similar provision. Without limiting the generality of the foregoing, the Company shall use
reasonable efforts to solicit in good faith a vote of stockholders so as to comply with the provisions of the stockholder approval
rules under Section 280G(b)(5)(B) of the Code.
(f)
Amendment of Awards. The Board may amend, modify or terminate any outstanding Award including, but not limited to,
substituting therefore another Award of the same or a different type, changing the date of exercise or realization, modifying the
exercise price, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that, except as otherwise
provided in Section 7, the Participant's consent to such action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely affect the Participant; provided, however, that no modification
of an Award shall, without the consent of the Participant, alter or impair any of the Participant’s rights or obligations
under such Award.
(g)
Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant
to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have
been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in
connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any
applicable stock exchange or stock market rules and regulations, (iii) the Participant has executed and delivered to the Company
such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws,
rules or regulations, and (iv) the Participant has undertaken arrangement and satisfaction of any applicable tax withholding obligation.
(h)
Acceleration, Extension. In accordance with Section 7(b), the Board, in its sole discretion, may at any time (including
upon consummation, completion, or closure of a Reorganization Event), (i) accelerate or extend the date or dates on which all or
any particular Options or Awards granted under the Plan may be exercised or (iii) accelerate or extend the date or dates on which
all or any restrictions may be either removed or satisfied for an Award. Such actions shall provide that any Options shall become
immediately exercisable in full or in part, that any Restricted Stock Awards shall be free of some or all restrictions, or that
any other stock-based Awards may become exercisable in full or in part or free of some or all restrictions or conditions, or otherwise
realizable in full or in part, as the case may be, despite the fact that the foregoing actions may (i) cause the application of
Sections 280G and 4999 of the Code if a change in control of the Company occurs, or (ii) disqualify all or part of the Option as
an Incentive Stock Option. In the event of the acceleration of the exercisability of one or more outstanding Awards, and pursuant
to Section 7, the Board may provide, as a condition of full exercisability of any or all such Options, that the Common Stock or
other substituted consideration, including cash, as to which exercisability has been accelerated shall be restricted and subject
to forfeiture back to the Company at the option of the Company at the cost thereof upon termination of employment or other relationship,
with the timing and other terms of the vesting of such restricted stock or other consideration being equivalent to the timing and
other terms of the superseded exercise schedule of the related Option.
(i)
Withholding. Prior to the issuance of any shares of Common Stock subject to an Award, the Company shall have the
right to deduct from payments of any kind otherwise due to the Participant of an Award any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon exercise of an Option or Award under the Plan or the
purchase or issuance of shares subject to an Award. Subject to the prior approval of the Company, which may be withheld by the
Company in its sole discretion, a Participant may elect to satisfy such tax obligations, in whole or in part, (i) by causing the
Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an Option or the purchase of shares subject
to an Award or (ii) by delivering to the Company shares of Common Stock already owned by the Participant. The shares so withheld
or delivered shall have an aggregate Fair Market Value equal to the amount of the withholding obligation. A Participant who has
made an election pursuant to this Section 8(i) may only satisfy his or her withholding obligation with shares of Common Stock which
are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. If the Company elects
not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding
or have a broker tender to the Company cash equal to the withholding obligations.
9. Company’s Right of Repurchase
(a)
Repurchase Option; Termination of Award. Unless otherwise set forth in any applicable Award, if, with respect to
a Participant, any of the events specified in Section 9(b) below occur then, with respect to those shares of Common Stock owned
by the Participant as of the date of the event specified in Section 9(b), regardless of when acquired, within 12 months after the
Company receives actual knowledge of the event (the “Repurchase Period”), the Company shall have the right, but not
the obligation, to repurchase from the Participant, or his or her legal representative, as the case may be, all or a portion of
the shares of Common Stock owned by the Participant, regardless of whether such Participant is then still employed or engaged by,
or otherwise has a relationship with the Company (the "Repurchase Option"). The Repurchase Option shall be exercised
by the Company by giving the Participant, or his or her legal representative, written notice of its intention to exercise the Repurchase
Option on or before the last day of the Repurchase Period.
In the event that the
Repurchase Option is triggered as a result of the termination of the Participant for Cause, the Company may exercise its Repurchase
Option by tendering to the Participant, or his or her legal representative, or delivering to an escrow account for the benefit
of the Participant, or his or legal representative, an amount equal to the price originally paid by the Participant to the Company,
subject to adjustment as provided in Section7(a), for each share of Common Stock to be repurchased by the Company hereunder. In
the event that the Repurchase Option is triggered as a result of the termination of the Participant for any reason other than Cause,
the Company may exercise its Repurchase Option by tendering to the Participant, or his or her legal representative, or delivering
to an escrow account for the benefit of the Participant, or his or legal representative, an aggregate cash amount, if positive,
equal to the difference between the Fair Market Value of each share of Common Stock sold or transferred by the Participant and
the price originally paid by the Participant to the Company for each such share of Common Stock so sold or transferred by the Participant,
as adjusted pursuant to Section 7(a). Upon timely exercise of the Repurchase Option in the manner provided in this Section 9(a),
the Participant, or his or her legal representative, shall deliver to the Company the stock certificate or certificates representing
the shares to be repurchased by the Company hereunder, duly endorsed and free and clear of any and all liens, charges and encumbrances.
Upon tendering of the purchase price by good funds, all rights of the Participant in the Shares subject to the Repurchase Option
shall automatically terminate and expire. If the Participant shall fail to deliver such stock certificate or certificates, the
Company shall be entitled to instruct its transfer agent to take such action as may be necessary to remove the requisite number
of shares of Common Stock registered in the name of the Participant from the books and records of the Company. The Repurchase Option
and any right of the Company to payment pursuant to Section 9 hereof shall be a right of the Company in addition to any and all
other rights of the Company and remedies available to the Company, whether at law or in equity. Furthermore, upon the Company receiving
actual knowledge of the occurrence of any of the events specified in Section 9(b) below, all Awards to acquire Common Stock granted
to such Participant shall immediately terminate and shall thereupon not be exercisable to any extent whatsoever.
(b)
Triggering Events. The Company shall have the Repurchase Option in the event that a Participant is terminated by
the Company or shall leave the employ of the Company, or cease to perform consulting or advisory services for the Company, regardless
of the reason or cause.
10. Termination of Awards upon Participant Termination
(a)
Termination of Participant for “Cause”. If a Participant’s employment, engagement or relationship
with the Company is terminated for “Cause,” any and all Awards shall terminate (unless otherwise determined
by the Board) on the date of such termination, and the Award shall thereupon not be exercisable to any extent whatsoever. Notwithstanding
anything to the contrary herein, upon the termination of employment or engagement of a Participant, for any reason whatsoever,
any Options or Awards granted to such Participant which are not vested at such time of termination shall immediately expire and
terminate, become null and void, and shall not entitle the Participant to any right in or to the Company or any Affiliate (as defined
in the Code) in connection with the same, and all interests and rights of the Participant, in and to the same, shall expire. Notwithstanding
anything to the contrary herein, upon the Termination of a Participant’s employment or engagement for Cause, all of such
Participant’s Options or Awards which have already vested but have not been exercised shall also immediately expire and terminate,
become null and void, and shall not entitle the Participant to any right in or to the Company or any Affiliate in connection with
the same, and all interests and rights of the Participant, in and to the same, shall expire.
(b)
Termination of Participant not for “Cause”. Notwithstanding anything to the contrary herein, following
termination of a Participant’s employment or engagement not for Cause, the Participant may exercise Awards which are
vested at such time of termination, as follows: if prior to the date of such termination, the Board shall authorize an extension
of the terms of all or part of the Awards which have already vested at such time, beyond the date of such termination for a period
not to exceed the term of the applicable Award, such Awards may be exercised within such extended period. If an Incentive Stock
Option is exercised more than ninety (90) days after the date on which the Participant ceased to be an Employee (other than by
reason of death or disability), such Option will be treated as a Non-Qualified Stock Option and not as an Incentive Stock Option,
and in such event a Participant whose period of exercise has been so extended should consult with its own tax advisor regarding
the tax effects of such extension; and if such termination is the result of death or disability of the Participant, the
Options which have already vested may be exercised within a period of twelve (12) months from the date of such termination.
11. Miscellaneous
(a)
Determination of Fair Market Value. “Fair Market Value” of the Company’s Common Stock on
any date means (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the NASDAQ National Market, if the Common Stock is not then traded
on a national securities exchange; or (iii) the average of the closing bid and asked prices last quoted (on that date) by
an established quotation service for over-the-counter securities, if the Common Stock is not reported on the NASDAQ National Market;
or (iv) if the Common Stock is not publicly traded, the fair market value of the Common Stock as determined by the Board after
taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of
the Common Stock in private transactions negotiated at arm's length, revenues and operating earnings of the Company for the most
recent twelve-month period, projected revenues and operating earnings of the Company for the next twelve-month period, discounted
positive cash flow of the Company, the nature and timing of any product releases and product shipments, generation of significant
orders, cash flow from operations, consummation, exclusivity, and/or durability of relationships with strategic partners and/or
suppliers, the book value of the Company’s assets as recorded on the most recently prepared balance sheet of the Company,
the price/earnings multiples of comparable publicly traded companies (and adjusted for any illiquidity associated with the Company’s
Common Stock), and appropriate consideration of the senior rights, preferences and privileges of classes of preferred stock outstanding,
and other pertinent factors determined by the Board. The Board’s determination shall be conclusive as to the Fair Market
Value of the Common Stock. Notwithstanding the foregoing, in all events Fair Market Value shall be determined pursuant to a method
permitted by Section 409A of the Code for determining the fair market value of stock subject to a stock right that does not provide
for a deferral of compensation within the meaning of Section 409A of the Code. The Fair Market Value of each share of Common Stock
sold or transferred by the Participant shall be determined as of the date of the event giving rise to such sale or transfer.
(b)
Determination of Cause. The term “Cause” is defined as, and shall apply in the event of, any one
or more of the of the following occurrences: (i) misconduct by the Participant which results in loss, damage or injury to the Company,
its goodwill, business or reputation, as reasonably determined by the Board or the failure of Participant to follow the reasonable
directives of the Board; (ii) the commission by the Participant of an act of embezzlement, fraud or breach of fiduciary duty; (iii)
the unauthorized disclosure or misappropriation by the Participant of any trade secret or confidential information of the Company;
(iv) the commission by the Participant of an act which induces any customer or prospective customer of the Company to breach a
contract with the Company or to decline to do business with the Company; (v) the conviction of the Participant of a felony; (vi)
the violation (or potential violation) by the Participant, in any material respect, of a non-competition, non-solicitation, non-disclosure
or assignment of inventions covenant between the Participant and the Company; (vii) the engagement, whether directly or indirectly,
by the Participant, during the period of his or her employment, engagement or relationship with the Company or for a period of
one (1) year after the termination of his or her employment, engagement or relationship (for any reason), in a business or other
commercial activity which is or may be competitive with the business being conducted by the Company at such time; (viii) the solicitation,
diversion or taking away by the Participant, or the attempted solicitation, diversion or taking away by the Participant, whether
directly or indirectly, during the period of his or her employment, engagement or relationship with the Company or for a period
of one (1) year after the termination of his or her employment, engagement or relationship (for any reason), of any of the customers,
business or prospective customers of the Company then in existence and with whom the Participant had contact or about whom the
Participant gained confidential information during the Participant’s employment, engagement or relationship with the Company
on behalf of a competitive enterprise (prospective customer shall mean any person or entity being solicited by the Company during
the time the Participant was employed or engaged by the Company); (ix) the solicitation, recruiting or hiring by the Participant,
or the attempted solicitation, recruiting, or hiring by the Participant, whether directly or indirectly, during the period of his
or her employment or for a period of one (1) year after the termination of his or her employment, engagement or relationship (for
any reason), engagement or relationship with the Company, of any current or former Employee of the Company; (x) the illegal use
of controlled substances, illicit drugs, alcohol or other substances by the Participant; (xi) the use of controlled substances,
illicit drugs, alcohol or other substances or behavior by the Participant, which interferes with the Participant’s ability
to perform his or her services for the Company or which otherwise results in loss, damage or injury to the Company, its goodwill,
business or reputation; or (xii) any conduct during the term of a Participant’s employment, engagement or relationship with
the Company that gives rise to the Company’s Repurchase Option, as set forth in Section 9(a) of this Plan, in each case,
as determined by the Board or, in the case of Employees or other persons (including consultants and advisors) who are not executive
officers, by the President or Chief Executive Officer.
(c)
No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the
Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan (except as otherwise set forth in any Award or other agreement with the Participant).
(d)
No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary
shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until
becoming the record holder thereof.
(e)
Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board.
No Awards shall be granted under the Plan after the completion of ten years from the date on which the Plan was adopted by the
Board, but Awards previously granted may extend beyond that date.
(f)
Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time subject,
in the case of amendments, to any applicable statutory or regulatory requirements to obtain stockholder approval when and if so
required; provided, however, to the extent that any Award (or a modification of an Award under this Plan results in the deferral
of compensation (for purposes of Section 409(A) of the Code), the terms and conditions of such Award shall comply with Section
409A of the Code.
(g)
Arbitration. Any dispute, controversy, or claim arising out of, in connection with this Plan or any agreement applicable
to an Award granted under this Plan, or relating to the performance of any such agreement, shall be settled by arbitration in the
Commonwealth of Massachusetts pursuant to the rules then obtaining of the American Arbitration Association. Any award shall be
final, binding and conclusive upon the parties and a judgment rendered thereon may be entered in any court having jurisdiction
thereof.
(h)
Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance
with the General Corporation Law of Delaware as to matters within the scope thereof, without regard to any applicable conflicts
of law. As to matters of contract law, the contract laws of the Commonwealth of Massachusetts shall apply.
(i)
Lock-up for Public Offerings. The Participant and each permitted transferee agrees that if the Company proposes to
offer for sale to the public any shares of Common Stock pursuant to a public offering and if requested by the Company and any underwriter
engaged by the Company, not to, directly or indirectly, offer, sell, pledge, contract to sell (including any short sale), grant
any option to purchase or otherwise dispose of any securities of the Company held by him, her or them (except for any securities
sold pursuant to such registration statement) or enter into any “Hedging Transaction” (as defined below) relating to
any securities of the Company (including, without limitation, pursuant to Rule 144 under the Securities Act of 1933, as amended,
or any successor similar exemptive rule hereinafter in effect) held by him, her or them for such period following the effective
date of the registration statement of the Company filed under the Act with respect to such offering, as the Company or such underwriter
shall specify reasonably and in good faith, not to exceed one hundred eighty (180) days in the case of the Company’s initial
public offering or ninety (90) days in the case of any other follow-on offering. For purposes of this Section 11(i), “Hedging
Transaction” means any short sale (whether or not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the Common Stock.
(j)
Compliance with Section 409A of the Code. The Plan is intended to comply with Section 409A of the Code to the extent
subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance
therewith. To the extent that the Board determines that any Award granted hereunder is subject to Section 409A of the Code, the
option agreement shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1)
of the Code. Notwithstanding the foregoing, the Company shall have no liability to any grantee hereunder or any other person if
an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the
Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code.
*************************
Adopted by the Board of Directors on:
April 12, 2013
Approved by the Stockholders on: April
12, 2013
Amended to correct and adjust the aggregate
number of shares of Common Stock that may be issued pursuant to this Plan from 991,785 to 1,713,570, by unanimous approval by the
Board of Directors on July 29, 2015.
Exhibit 10.3
ISPECIMEN INC.
INDEMNIFICATION AGREEMENT
This Indemnification
Agreement (this “Agreement”) is made and entered into on <date>,
by and between iSpecimen Inc.,
a Delaware corporation (the “Company”), and <name> (“Indemnitee”).
WITNESSETH THAT:
WHEREAS, highly
competent persons have become more reluctant to serve companies as directors, officers or in other capacities unless they are provided
with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the company;
WHEREAS, although
the furnishing of liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities has
been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes
that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and
with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally
would have been brought only against the Company or business enterprise itself. The Certificate of Incorporation of the Company,
as amended (the “Charter”) and the Bylaws of the Company, as amended (the “Bylaws”) require
indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the
General Corporation Law of the State of Delaware (“DGCL”). The Charter, Bylaws and the DGCL expressly provide
that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered
into between the Company and members of the Company’s board of directors (the “Board”), officers and other
persons with respect to indemnification;
WHEREAS, the
uncertainties relating to liability insurance and to indemnification have increased the difficulty of attracting and retaining
such persons;
WHEREAS, the
Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests
of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it
is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on
behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company
free from undue concern that they will not be so indemnified;
WHEREAS, this
Agreement is a supplement to and in furtherance of the Charter, Bylaws and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, Indemnitee
does not regard the protection available under the Charter, Bylaws and insurance as adequate in the present circumstances, and
may not be willing to serve as an officer and/or director without adequate protection, and the Company desires Indemnitee to serve
in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company
on the condition that Indemnitee be so indemnified; and
NOW, THEREFORE,
in consideration of Indemnitee’s agreement to serve as an officer and/or a director from and after the date hereof, the parties
hereto agree as follows:
1. Indemnity
of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law,
as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality
thereof:
(a) Proceedings
Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided
in this Section l(a) if, by reason of Indemnitee’s Corporate Status (as hereinafter defined), the Indemnitee
is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by
or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as
hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee,
or on Indemnitee’s behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted
in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company,
and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.
(b) Proceedings
by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section
1(b) if, by reason of Indemnitee’s Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant
in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with
such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses
shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be
liable to the Company unless and to the extent that the Delaware Court (as defined in Section 20) or other court of competent
jurisdiction shall determine that such indemnification may be made.
(c) Indemnification
for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to and is successful, on the merits or otherwise,
in any Proceeding, Indemnitee shall be indemnified to the maximum extent permitted by law, as such may be amended from time to
time, against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually
and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
2. Additional
Indemnity.
(a) Indemnification
of Indemnitee. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1
of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf if, by reason
of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding
(including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence
or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant
to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined
(under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.
3. Contribution.
(a) Whether
or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending
or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action,
suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action,
suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any
right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding
in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement
provides for a full and final release of all claims asserted against Indemnitee or the Indemnitee consents to such settlement in
writing.
(b) Without
diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee
shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action,
suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding),
the Company shall contribute to the amount of Expenses, judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors
or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action,
suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction(s) or event(s) from which such action,
suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent
necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors
or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action,
suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction(s) or event(s) that
resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable
law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other
than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one
hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions
were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and
the degree to which their conduct is active or passive.
(c) The
Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers,
directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.
(d) To
the fullest extent permissible under applicable law and without diminishing or impairing the obligations of the Company set forth
in the preceding subparagraphs of this Section 3, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred
by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses,
in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and
reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the
Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative
fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
4. Indemnification
for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason
of Indemnitee’s Corporate Status, a witness, or is made to (or asked to) respond to discovery requests, in any Proceeding
to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee
or on Indemnitee’s behalf in connection therewith.
5. Advancement
of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days
after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee
to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such
Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free and not
conditioned on Indemnitee’s ability to repay such advances.
6. Procedures
and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee
rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly,
the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee
is entitled to indemnification under this Agreement:
(a) To
obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and
to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request
for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing,
any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not
relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially
prejudices the interests of the Company.
(b) Upon
written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination
with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods,
which shall be at the election of the Board: (1) by a majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum, (2) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors,
even though less than a quorum, (3) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent
Counsel (as hereinafter defined) in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (4)
if so directed by the Board, by the stockholders of the Company. The Board shall notify Indemnitee on its election immediately
following such resolution.
(c) If
the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b)(3) hereof,
the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by
the Board and written notice of such selection shall be given to Indemnitee. Indemnitee may, within ten (10) days after such written
notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent
Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the
factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel.
If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless
and until such objection is withdrawn or a court has determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent
Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court or other
court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s
selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such
other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees
and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b)
hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c),
regardless of the manner in which such Independent Counsel was selected or appointed.
(d) In
making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination
shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption
shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company
(including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant
to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct,
nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable
standard of conduct.
(e) Indemnitee
shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise
(as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise
in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports
made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable
care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee
of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee
has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests
of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear
and convincing evidence.
(f) If
the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification
under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional
thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in
good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided,
further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt
by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit
such determination to the stockholders for their consideration at an annual meeting thereof to be held within forty-five (45) days
after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making such determination, such meeting is held for such purpose within thirty (30)
days after having been so called and such determination is made thereat.
(g) Indemnitee
shall reasonably and in good faith cooperate with the person, persons or entity making such determination with respect to Indemnitee’s
entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act
reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this
Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to
Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(h) The
Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that any Proceeding to which Indemnitee is a party
is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such
Proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on
the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion by clear and convincing evidence.
(i) The
termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself
adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and
in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect
to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.
7. Remedies
of Indemnitee.
(a) If
(i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination
of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within the applicable period of time
set forth in Section 6(f) after receipt by the Company of the request for indemnification, (iv) payment of indemnification
is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) payment
of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification
or such determination is deemed to have been made pursuant to Section 6 of this Agreement, or (vi) the Company or any other
person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding
designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided hereunder, then Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction,
of Indemnitee’s entitlement to such indemnification. Unless otherwise agreed by the Company, Indemnitee shall commence such
proceeding seeking an adjudication within one hundred eighty (180) days following the date on which Indemnitee first has the right
to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee’s right to seek
any such adjudication.
(b) In
the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled
to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a
de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).
(c) If
a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement
not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) In
the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of Indemnitee’s rights under,
or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance
policies maintained by the Company, the Company shall pay on Indemnitee’s behalf, in advance, any and all expenses (of the
types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by Indemnitee
in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification,
advancement of expenses or insurance recovery.
(e) The
Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company
is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested
by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not
prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee
for indemnification or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability
insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advancement of Expenses or insurance recovery, as the case may be.
(f) Notwithstanding
anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be
required to be made prior to the final disposition of the Proceeding.
8. Non-Exclusivity;
Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a) The
rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may
at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, vote of stockholders or resolution of directors
of the Company, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict
any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s
Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or
judicial decision, permits greater indemnification than would be afforded currently under the Charter, Bylaws and this Agreement,
it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.
No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy
shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity
or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion
or employment of any other right or remedy.
(b) To
the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees,
or agents or fiduciaries of the Company or of any other corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by
such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director,
officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant
to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c) In
the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(d) The
Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
(e) The
Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary of any other corporation, partnership, limited liability company,
joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received
as indemnification or advancement of expenses from such other corporation, partnership, limited liability company, joint venture,
trust, employee benefit plan or other enterprise.
9. Exception
to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this
Agreement to make any indemnity in connection with any claim made against Indemnitee:
(a) for
which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except
with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;
(b) for
an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within
the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory
law or common law; or
(c) in
connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of
any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless
(i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation, (ii) the Proceeding is initiated
by Indemnitee pursuant to Indemnitee’s rights under Section 7 of this Agreement, the Charter or Bylaws, or (iii) the
Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
10. Duration
of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is
an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee, agent
or fiduciary of another corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Indemnitee shall be or may be subject to any Proceeding (or any proceeding
commenced under Section 7 hereof) by reason of Indemnitee’s Corporate Status, whether or not Indemnitee is acting
or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under
this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their
respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially
all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.
11. Security.
To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security
to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral.
Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.
12. Enforcement.
(a) The
Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby
in order to induce Indemnitee to serve as an officer and/or director of the Company, and the Company acknowledges that Indemnitee
is relying upon this Agreement in serving as an officer and/or director of the Company.
(b) This
Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter
hereof; provided, however, that nothing in this Agreement shall affect any rights Indemnitee may have under the Charter
or Bylaws or under applicable laws.
(c) The
Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting
the Indemnitee’s rights to receive advancement of expenses under this Agreement.
13. Definitions.
For purposes of this Agreement:
(a) “Corporate
Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company
or of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise
that such person is or was serving at the express written request of the Company.
(b) “Disinterested
Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(c) “Enterprise”
shall mean the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer,
employee, agent or fiduciary.
(d) “Expenses”
shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements
or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating,
participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery
in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and
any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersede
as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee
or the amount of judgments or fines against Indemnitee.
(e) “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either
such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar
indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
(f) “Proceeding”
includes any threatened, pending or completed action, claim, issue, matter, demand, discovery request, subpoena, hearing, suit,
arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, regulatory,
administrative or investigative, or any other type whatsoever, including any appeal of the foregoing, in which Indemnitee was,
is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was an officer or director of the Company,
by reason of any action taken by Indemnitee or of any inaction on Indemnitee’s part while acting as an officer or director
of the Company, or by reason of the fact that Indemnitee is or was serving at the request of the Company (or by reason of any action
taken by Indemnitee or any inaction on Indemnitee’s part while acting) as a director, officer, employee, agent or fiduciary
of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise; in each case whether or not
Indemnitee is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification
can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated
by an Indemnitee pursuant to Section 7 of this Agreement to enforce Indemnitee’s rights under this Agreement.
14. Severability.
The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to
the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision
shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.
15. Modification
and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing
by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
16. Notice
By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any
summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may
be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation
which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially
prejudices the Company.
17. Notices.
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent
during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after
having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent:
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(a)
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To Indemnitee at the address set forth below Indemnitee
signature hereto.
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With a copy,
which shall not constitute notice, to:
Morse
CityPoint
480 Totten Pond
Rd 4th Floor
Waltham, MA 02451
Attention: John
Hession
iSpecimen Inc.
450 Bedford
Street, Suite 2050
Lexington,
MA 02420
Attention: Chief
Executive Officer
or to such other address
as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.
18. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile or other electronically
transmitted signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19. Headings.
The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
20. Governing
Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with
this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”),
and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to
submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection
with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and
(iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been
brought in an improper or inconvenient forum.
[Signature
Page Follows]
ISPECIMEN INC.
INDEMNIFICATION AGREEMENT
IN WITNESS WHEREOF,
the parties hereto have executed this Indemnification Agreement on and as of the day and year first above written.
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COMPANY:
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iSpecimen Inc.
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By:
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/s/
Christopher Ianelli, MD PhD
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Name:
Christopher Ianelli, MD PhD
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Title:
President and Chief Executive
Officer
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INDEMNITEE:
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Name: <name>
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Address:
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iSpecimen
Inc. Indemnification Agreement – Signature Page
Exhibit 10.4
CONFIDENTIALITY, NON-COMPETITION AND
ASSIGNMENT AGREEMENT
THIS Confidentiality,
Non-Competition and Assignment Agreement (“Agreement”) is entered into by iSpecimen, Inc., a Delaware corporation (the
“Company”) and _____________________ (“I” or “Employee”).
WHEREAS, the
Company, utilizing its proprietary technology including, but not limited to, software applications that link electronic medical
records and clinical laboratory specimens (the “Proprietary Technology”), is presently engaged in the business of the
collection of biospecimens from hospitals, clinical laboratories, and similar institutions (the “Partners”) for distribution
and sale to research organizations, academic institutions, government facilities, biopharmaceutical, and diagnostic companies and
similar organizations and entities (the “Customers”) ; and
WHEREAS, the
Company has and is devoting substantial time, effort, and expense to develop its reputation and goodwill in this industry through
repeated dealings with Partners and Customers and as the result of marketing efforts, referrals, advertising, and the like; and
WHEREAS, in
the course of performing his or her responsibilities for the Company, the Employee will receive and have access to the Proprietary
Technology and to Company and Customer Confidential Information, and will have access to and direct contact with the Company’s
Partners, Customers, and employees and, as a result, will develop relationships and goodwill with them; and
WHEREAS, in
return for signing this Agreement, the Employee is being employed by the Company, is receiving compensation, benefits, and other
privileges as an employee, and is receiving other good and valuable consideration, which is sufficient to induce the Employee to
sign the Agreement;
NOW, THEREFORE,
the Company and Employee acknowledge and agree as follows:
1.1. Review
of Agreement: I acknowledge that the Company has provided me with sufficient time and opportunity to review this Agreement
and obtain advice from an attorney, should I so desire. I further acknowledge that the Company has provided me with sufficient
opportunity to ask any questions that I may have about this Agreement, and, if I did ask any questions that the Company provided
answers to my satisfaction. As a result, I acknowledge that I understand the terms and effect of this Agreement.
1.2. Fiduciary
Relationship: I acknowledge that the Company is placing its trust and confidence in me in my role as an employee of the Company
by providing me with access to and entrusting me with knowledge of Company and Customer Confidential Information, with the expectation
that I will protect the Company’s relationships with Partners, Customers, employees, and the community. I also acknowledge
that, due to the nature of the Company’s business, the Company’s good reputation is one of its most import and valuable
assets. Thus, I understand and agree that I have a fiduciary duty to the Company, and will, during the Employment Period, act only
with the utmost good faith and loyalty to the Company.
1.3. At-Will
Employment: I acknowledge that this Agreement does not create a separate contract of employment; and I understand that I am
employed at will by the Company, and that this Agreement does not create an obligation of the Company or any other Person or entity
to continue my employment. As such, I understand that my employment may be terminated at any time, and for any reason, by me or
by the Company.
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2.
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Confidentiality and Company Property
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2.1. Ownership:
I agree that the Company owns and has all right, title, and interest to the Proprietary Technology, all Company Confidential Information,
and all Company Property, and that I have no right, title, or interest whatsoever in or to any of the Proprietary Technology, Company
Confidential Information, or Company Property, even if created or developed in whole or in part by me during the Employment Period.
2.2. Non-Disclosure:
During the Employment Period and thereafter, I will not, directly or indirectly, disclose, give to, make accessible, or assist
to disclose, give to, or make accessible to any Person who is not employed by the Company, any of the Proprietary Technology, Company
Confidential Information, or Company Property, unless expressly authorized to do so by the Company or except as may be required
by any applicable law or by order of a court of competent jurisdiction, a regulatory, or governmental body. During the Employment
Period and thereafter, I will not, directly or indirectly, disclose, give to, make accessible, or assist to disclose, give to,
or make accessible to any Person who is not employed by the Company any of the Proprietary Technology, Customer Confidential Information,
except in connection with the servicing of a Partner or Customer, or as otherwise authorized by the Company, or except as may be
required by any applicable law or by order of a court of competent jurisdiction, a regulatory, or governmental body.
2.3. Non-Use:
During the Employment Period, I will not use, implement, or assist in the use or implementation of any Proprietary Technology,
Company Confidential Information, Customer Confidential Information, or Company Property for any purpose other than the sole and
exclusive business purposes of the Company, unless expressly authorized to do so by the Company. After the Employment Period, I
will not, directly or indirectly, use, implement, or assist in the use or implementation of any Proprietary Technology, Company
Confidential Information, Customer Confidential Information, or Company Property for any purpose whatsoever, unless expressly authorized
to do so in writing by the Company.
2.4. Return/Destruction
of Materials: During the Employment Period, I will promptly return to the Company any and all documents, information, electronic
data, and any other materials that contain, constitute, or comprise the Proprietary Technology, Company Confidential Information,
Customer Confidential Information, or Company Property within my custody, possession, or control at any time the Company asks me
to do so. Within forty-eight (48) hours following the Employment Period, I will return to the Company any and all documents, information,
electronic data, and any other materials that contain, constitute, or comprise the Proprietary Technology, Company Confidential
Information, Customer Confidential Information, or Company Property within my custody, possession, or control, and I will provide
a signed certification to the Company that I have done so. Within forty-eight (48) hours following the Employment Period, I will
delete and erase any of the Proprietary Technology, Company Confidential Information, Customer Confidential Information, and Company
Property stored electronically on all personal electronic devices within my custody, possession, or control, and I will provide
a signed certification to the Company that I have done so, unless otherwise instructed by the Company to refrain from doing so.
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3.
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Non-Competition and Non-Solicitation
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3.1. Non-Competition
during the Employment Period: During the Employment Period, I will not Engage in Competition with the Company, and I will not
Prepare to Compete with the Company.
3.2. Non-Competition
during the Restricted Period: During the Restricted Period, (i) I will not Engage in Competition with the Company anywhere
within the Restricted Territory (the “Non-Competition Covenant”).
3.3. Non-Solicitation:
During the Employment Period and for the Restricted Period thereafter, I will not hire or in any manner assist any other Person
to hire any Employee of the Company, or solicit, induce, entice, or attempt to solicit, induce, or entice any employee of the Company
to become employed by or perform work for any Person other than the Company.
3.4. Prior
Agreements: I hereby represent that, except as I have fully disclosed previously in writing to Company, I am not bound by the
terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential
or proprietary information in the course of my employment with the Company. I further represent that my performance of all the
terms of this Agreement as an employee of Company does not and will not breach any agreement to keep in confidence proprietary
information, knowledge, or data acquired by me in confidence or in trust prior to my employment with Company. I will not disclose
to Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer
or others.
3.5. Subsequent
Employment: I will, within ten (10) calendar days after accepting any employment (other than with respect to the Company and/or
its affiliates) advise the Company of the identity of such employer. The Company may serve notice upon each such employer that
I am bound by this Agreement, and furnish each such employer with a copy of this Agreement or relevant portions thereof.
3.6. Consideration:
[OPTION 1] I agree and acknowledge
that mutually agreed upon consideration, in the form of a equity / options / signing bonus in the amount of $_______ to which I
would not otherwise be entitled, exists to support the Non-Competition Covenant.
[OPTION 2] As consideration for
the Non-Competition Covenant, the Company agrees to pay, and I agree to accept, garden leave for the duration of the Restricted
Period, equivalent to fifty percent (50%) of my highest annualized base salary paid by the Company within the two (2) years preceding
the termination of the Employment Period, paid on a pro-rata basis pursuant to the Company’s ordinary payroll practices (the
“Garden Leave”). If the Restricted Period has been increased beyond 12 months as a result of my breach of a fiduciary
duty to the Company or if I have unlawfully taken, physically or electronically, property belonging to the Company, the Company
shall not be required to provide Garden Leave to me during the extension of the Restricted Period. I agree that the Company may,
at the time of the termination of employment and at Company’s sole option, release me from the Non-Competition Covenant and
the Company shall have no obligation to pay Garden Leave. I acknowledge and agree that I may request to be released from the Non-Competition
Covenant at any time during the Restricted Period, which request may be allowed by the Company in its sole discretion. I agree
that this mutually agreed upon consideration supports the Non-Competition Covenant.
3.7. Right to Counsel:
I acknowledge that I am being advised in writing pursuant to this Agreement that I have the right to consult with an attorney of
my choosing, at my full expense, prior to entering into this Agreement, and at the time of signing have had the opportunity to
do so or not do so as I have chosen. I acknowledge that I have received a copy of this Non-Competition Covenant by the earlier
of the Company’s formal offer of employment or ten business days before the commencement of my employment.
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4.
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Assignment of Developments
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4.1. Ownership
of Developments: I agree that all Developments in which I was, am, or become involved in any way during the Employment Period
are, shall be, and remain the sole and exclusive property of the Company. I hereby assign to the Company any and all of my right,
title, and interest in and to all such Developments. To the extent that I was, am, or become involved in any Developments that
are copyrightable works, I agree that those works are specifically intended to be works made for hire and shall be the property
of the Company.
4.2. Disclosure
of Developments: I agree to disclose to the Company all Developments in which I was, am, or become involved no less than ten
(10) days after I learn or become aware of any Development, unless the Development is already known to the Company.
4.3. Actions
to Assign: During the Employment Period, I agree to take any and all actions to fully assign all Developments to the Company,
including, but not limited to, signing applications, assignments, and other documents reasonably requested by the Company to protect
the Company’s interests in Developments.
5.1. Company
Confidential Information: “Company Confidential Information” means any and all information that the Employee receives,
acquires, or learns, or that is provided to the Employee, that is related to the Company, and that is not generally known by Persons
who are not employed by or associated with the Company. This term includes, but is not limited to: (1) documents, information,
and electronic data related to client lists, business contact lists, employees, research, development, operations, sales, marketing,
promotions, advertising, client service, human resources, information technology, finance, administration, manuals, texts, publications,
instructions, agreements, costs, prices, processes, techniques, business plans, financial statements, tax returns, invoices, account
information, billing records, account statements, checks, drafts, computer printouts, software, source code, and firmware; (2)
documents and information that are marked or designated with a word or symbol indicating that the document or information should
be considered confidential, such as “Confidential”, “Proprietary”, “Privileged”, “Restricted”,
or “Trade Secret”; (3) documents and information that the Company informs the Employee, either in writing or orally,
are confidential, and (4) documents and information that are trade secrets or the confidential or proprietary information of a
third party, and that the Employee receives, acquires or learns from the Company or the Company provides to the Employee.
5.2. Company
Property: “Company Property” means any and all documents, information, electronic data, software, source code,
firmware, equipment, hardware, computer, electronic device, materials, goods, and any other thing of any kind or nature whatsoever
that the Employee receives, acquires, or learns from the Company or the Company provides to the Employee that is not generally
given or made accessible to Persons who are not Employed by the Company, unless the Company notifies the Employee in writing that
the property is not considered Company Property.
5.3. Customer
Confidential Information: “Customer Confidential Information” means any and all information that the Employee receives,
acquires, or learns, or that is provided to the Employee, that a Customer would consider to be sensitive, confidential, or proprietary,
and that is not generally known by Persons who are not employed by the Company or the Customer.
5.4. Development:
“Development” means any and all ideas, know-how, discoveries, inventions, improvements, creations, documents, manuals,
texts, publications, instructions, materials, methods, processes, techniques, formulas, designs, business plans, software, source
code, and firmware related to any Service provided by the Company. Such a thing is related to Service provided by the Company if
conceived of, created, generated, reduced to practice, or used by the Employee or any Person employed by the Company during the
Employment Period related to any work performed for the Company or for any Customer, whether such work takes place in whole or
in part at the Company’s facilities, at the Employee’s residence, or otherwise.
5.5. Employment
Period: “Employment Period” means any and all dates on which the Employee is employed by the Company.
5.6. Engage
in Competition: “Engage in Competition” means engaging in any activity that is or is intended to be, directly or
indirectly, of the specific types of services provided by the Employee to the Company within the last two years of the Employment
Period (the “Services”) and is related, directly or indirectly, to (i) the management, tracking or identification of
biospecimens for any institution or organization, (ii) the sale or distribution of biospecimens to any person, firm or entity,
or (iii) any other business or operations which are directly or indirectly competitive with business and operations of the Company.
This term includes participating in any manner whatsoever in a business related endeavor, including, but not limited to, acting
for oneself, including as a sole proprietor, principal, incorporator, contractor, member, Employee, partner, or owner of any entity;
acting in concert with others, including as an employee, officer, director, agent, representative, principal, lender or holder
of one percent (1%) or more of the equity interests of any Person; and making loans, gifts, or financial assistance to any Person
who engages in competition with the Company. This term also includes providing Services, directly or indirectly, for or on behalf
of any Partner or Customer, including, but not limited to, as an employee, consultant, or in any other capacity.
5.7. Person:
“Person” means any individual, governmental body, agency, or entity, including but not limited to, a sole proprietorship,
partnership, corporation, limited liability company, limited liability partnership, professional association, professional corporation,
S corporation, and any other entity whatsoever.
5.8. Prepare
to Compete: “Prepare to Compete” means to engage in activities related to starting or operating a business that
would or does Engage in Competition, such as forming an entity, securing financing, leasing or purchasing real estate, leasing
or purchasing equipment, interviewing, or hiring employees, or advertising; provided, however, that this term does not include
activities such as interviewing for employment with an existing business.
5.9. Prospective
Customer: “Prospective Customer” means any Person to whom the Company offers or proposes to sell any service provided
by the Company, including any Person who was identified by the Company as a potential Customer and to whom the Company attempted
to propose, market, or sell services.
5.10. Prospective
Partner: “Prospective Partner” means any Person to whom the Company offers or proposes to sell any service provided
by the Company, including any Person who was identified by the Company as a potential Partner and to whom the Company attempted
to propose, market, or sell services.
5.11. Restricted
Period: “Restricted Period” means the one (1) year immediately after the Employment Period, subject to extension
as provided below. The Restricted Period shall be extended to two (2) years immediately after the Employment Period in the event
the Employee has breached his or her fiduciary duty to the Company or the Employee has unlawfully taken, physically or electronically,
property belonging to the Company.
5.12. Restricted
Territory: “Restricted Territory” means the means the geographic areas in which the Employee, at any time within
the last two (2) years of the Employment Period, provided services or had a material presence or influence. To the extent Employee
has no assigned or discernable geographic area during the relevant period, the Restricted Area means anywhere in the United States
of America.
6.1. Severability,
Separability and Reformation: To the extent that any term of this Agreement is found by any court or other judicial body to
be void, voidable, or unenforceable, in whole or in part, the Employee agrees that the affected term shall be modified so as to
render that term and this Agreement enforceable to the fullest extent possible, without affecting the parties’ remaining
rights and obligations under this Agreement. If such term cannot be modified, the Employee agrees that it shall be severed from
this Agreement or separated from the other terms of the Agreement, and the remaining terms of the Agreement shall be enforced to
the fullest extent possible, without affecting the parties’ remaining rights and obligations hereunder.
6.2. Right
to Injunctive Relief: I acknowledge that a violation or threatened violation of any term of this Agreement by me will cause
an immediate threat of irreparable harm to the Company. As a result, I agree that, in the event of a violation or threatened violation
of any term of this Agreement by me, the Company is entitled to seek and obtain any and all types of injunctive and equitable relief
to specifically enforce this Agreement, including, but not limited to, a temporary restraining order, preliminary injunction, permanent
injunction, accounting, and recovery of all benefits derived from the violation of this Agreement.
6.3. Attorneys’
Fees, Expenses, Costs, and Interest: In the event of any violation of any term of this Agreement by me or any Person with whom
I am employed by or associated with other than the Company, I agree that the Company has the right to recover from me any and all
attorneys’ fees, expenses, and costs incurred by the Company in a successful effort to obtain a remedy for such violation,
including fees, expenses, and costs associated with any judicial action that is favorable to the Company.
6.4. Governing
Law, Jurisdiction, and Venue: This Agreement is governed by the law of the Commonwealth of Massachusetts regardless of the
choice of law rules of that state or any other state. I agree that I am subject to personal jurisdiction in the Commonwealth of
Massachusetts, and I hereby waive any right to assert that I am not subject to jurisdiction in that state. I also agree that the
sole and exclusive jurisdiction and venue for any action arising out of or related in any way to this agreement is in the state
or federal courts for the Commonwealth of Massachusetts.
6.5. Survival:
I agree that the obligations imposed on me in this Agreement will survive termination of my employment by the Company.
6.6. Binding
Effect and Assignment: I agree that this Agreement is binding on my agents, representatives, heirs, and assigns, and will be
for the benefit of the Company and its successors and assigns. I further agree that, in the event that the assets or stock of the
Company are sold or transferred, the Company’s successors or assigns will succeed to the Company’s rights under this
Agreement, unless otherwise agreed by the Company and its successors or assigns, and that the continuation of my employment by
the Company’s successors or assigns will continue to be subject to the terms of this Agreement, unless otherwise agreed by
the Company’s successors or assigns.
6.7. Entire
Agreement: This Agreement contains and comprises all of the promises, undertakings, and representations and the entire agreement,
understanding, and arrangement by and between the parties with respect to the subject matter addressed herein, and supersedes all
prior agreements between the Employee and Company on the same subject matter.
6.8. Modification
and Amendments: This Agreement may only be modified or amended in a writing signed by the Employee and Company (or Company’s
successors or assigns).
SIGNATURES ON FOLLOWING PAGE.
For
purposes of this AGREEMENT, the parties intend and agree that a signed copy delivered by facsimile or SCANNED electronically AND
SENT VIA E-MAIL shall be treated as an original of this AGREEMENT and shall be given the same force and effect. In witness whereof,
the parties hereto have ENTERED INTO this AGREEMENT as of the EFFECTIVE date.
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iSpecimen, Inc.
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Dated:
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By:
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Exhibit 10.5
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02024 Lease To iSPECIMEN, INC. THE SUBMISSION OF THIS LEASE FOR EXAMINATION, REVIEW, NEGOTIATION AND/OR SIGNATURE SHALL NOT CONSTITUTE AN OFFER OR AN OPTION TO LEASE OR A RESERVATION OF THE PREMISES AND IS SUBJECT TO WITHDRAWAL OR MODIFICATION AT ANY TIME BY EITHER PARTY. THIS LEASE SHALL BECOME EFFECTIVE AND BINDING ONLY IF AND WHEN IT SHALL BE EXECUTED AND DELIVERED BY BOTH LANDLORD AND TENANT.
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 Office Lease Table Of Contents By Articles And Sections ARTICLE SECTION PAGE I. Reference Data and Definitions. 1.01 Reference Data .......................................1 1.02 General Provisions...................................3 1.03 Terms Defined.........................................3 2. Premises. 2.01 Premises.................................................. 9 2.02 Appurtenances.........................................9 2.03 Reservations By Landlord.................9 3. Term. 3.01 Term Commencement.............................9 3.02 Termination.............................................9 4. Rent. 4.01 Basic Rent...............................................10 4.02 Computation of Basic Rent.....................10 4.03 Annual Adjustment of Basic Rent........10 5. Use of Premises. 5.01 Use Restricted..........................................10 5.02 Rules and Regulations.............................10 6. Taxes; Operating Expenses; Estimated Cost of Electrical Services. 6.01 Expenses and Taxes.................................10 6.02 Annual Statement of Additional Rent Due..................................................11 6.03 Monthly Payments of Additional Rent....11 6.04 Accounting Periods..................................11 6.05 Abatement of Taxes..................................11 6.06 Electric Service; Payment of Additional Rent.........................................12 6.07 Change in Rates or Usage.........................12 6.08 Late Payment of Rent................................13 ARTICLE SECTION PAGE
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7. Improvements, Repairs, Additions, Replacements. 7.01 Preparation of the Premises.....................14 7.02 Alterations and Improvements................14 7.03 Maintenance by Tenant...........................15 7.04 Redelivery...............................................15 8. Building Services. 8.0I Building Services.....................................15 8.02 Other Janitors...........................................15 8.03 Additional Services..................................16 8.04Limitation on Landlord's Liability........16 8.05 Electric Service........................................16 9. Tenant's Particular Covenants. 9.01 Pay Rent...................................................17 9.02 Occupancy of the Premises......................17 9.03 Safety.......................................................17 9.04 Equipment...............................................17 9.05 Electrical Equipment...............................17 9.06 Pay Taxes................................................18 10. Requirements of Public Authority. 10.01 Legal Requirements................................18 10.02 Contests..................................................19 11. Covenant Against Liens. 11.01 Mechanics' Liens.....................................19 11.02 Right to Discharge..................................19 12. Access to Premises. 12.01 Access....................................................19 13. Assignment and Subletting: Company Arrangements. 13.01 Subletting and Assignments..................20 14. Indemnity. 14.01 Tenant's Indemnity..................................21 14.02 Landlord's Liability.................................21
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ARTICLESECTION 15. lnsurance. PAGE 15.01 Liability Insurance..................................22 15.02 Casualty Insurance..................................22 15.03 Certificates...................................22 16. Waiver of Subrogation. 16.01 Waiver of Subrogation............................22 16.02 Waiver of Rights.....................................23 17. Damage or Destruction. 17.01 Substantial Damage.................................23 17.02 Restoration..............................................23 18. Eminent Domain. 18.01 Total Taking............................................24 18.02 Partial Taking..........................................24 18.03 Awards and Proceeds..............................24 19. Quiet Enjoyment. 19.01 Landlord's Covenant...............................24 19.02 Superiority of Lease: Option to Subordinate.............................24 19.03 Notice to Mortgage.................................25 19.04 Other Provisions Regarding Mortgages...............................................25 20. Defaults; Events of Default. 20.01 Defaults...................................................25 20.02 Tenant's Best Efforts...............................26 21. Insolvency. 21.01 Insolvency.................................................26 22. L:mdl()J:<l's Remedies; Damages on Default. 22.01 Landlord's Remedies...............................26 22.02 Surrender.................................................27 22.03 Right to Relet..........................................27 22.04 Survival of Covenants.............................27 22.05 Right to Equitable Relief.........................28
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ARTICLE 22. SECTION PAGE Landlord's Remedies; Damages on Default (continued). 22.06 Right to Self Help; Interest on Overdue Rent...........................................28 22.07 Payment of Landlord's Cost of Enforcement........................ 28 22.08 Further Remedies....................................28 23. Waiver.<;. 23.01 No Waivers.............................................29 24. Security Deposit. 24.01 Security Deposit.....................................29 25. General Provisions. 25.01 Force Majeure........................................31 25.02 Notices and Communications................31 25.03 Certificates, Estoppel Letter..................32 25.04 Renewal.................................................32 25.05 Governing Law......................................32 25.06 Partial Invalidity....................................32 25.07 Notice of Lease......................................33 25.08 Interpretation; Consents.........................33 25.09 Bind and Inure; Limitation of Landlord's Liability...............................33 25.10 Parties....................................................33 26. Miscellaneous. 26.01 Extended Hours - HVAC.......................33 26.02 Holdover Clause.....................................34 26.03 Relocation...............................................34 26.04 Brokerage................................................34 26.05 Landlord's Expenses ...................... Regarding Consents. ...................... 34 26.06 Signage......................................34 26.07 Financial Statements......................34 26.08 Anti-Terrorism Representation..........34 26.09 Furniture.................................... 35 27. Entire Agreement. 27.01 Entire Agreement....................................36
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 LEASE EXHIBITS PAGE Exhibit A: Legal Description 37 Exhibit B: Plan Showing Tenant's Space 38 Exhibit C: Memorandum of Work and Installations to be Initially Performed and Furnished in the Premises 40 Exhibit D: Services to be Provided by Landlord as Operating Expenses 41 Exhibit E: Rules and Regulations 43 Exhibit F: Tenant's Estoppel Certificate 45 Exhibit G: Agreement of Subordination Nondisturbance And Attornment 48 Exhibit H: Guaranty - Intentionally Omitted Exhibit I: Exhibit J: Certificate of Vote (If Applicable) 51 Parking52 Exhibit L/C Form of Letter of Credit 53 V
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 OFFICE LEASE STANDARD FORM THIS LEASE by and between BEDFORD STREET LLC a Massachusetts limited liability company ("Landlord") having a principal place of business at 116 Flanders Road, Suite 2000, Westborough, Massachusetts 01581, and iSPECIMEN, INC., a duly organized and existing Delaware C corporation ("Tenant") having a principal place of business at 275 Grove Street, Suite 2-400, Newton, Massachusetts 02466. WITNESS ETH: ARTICLE 1 Reference Data and Definitions 1.01 Reference Data LANDLORD: LANDLORD'S REPRESENTATIVE: LANDLORD'S ADDRESS: (FOR PAYMENT OF RENT) LANDLORD'S ADDRESS (FOR NOTICE): Bedford Street LLC Mr. Marc R. Verreault Senior Vice President, Finance Bedford Street LLC Bedford Street LLC 116 Flanders Road, Suite 2000 Westborough, Massachusetts 01581 Mr. Christopher F. Egan and Mr. Marc R. Verreault Bedford Street LLC 116 Flanders Road, Suite 2000 Westborough, MA 01581 With a copy to: Joseph Jenkins, Esquire 116 Flanders Road, Suite 1100 Westborough, MA 01581 Telephone: 508-898-3900 Facsimile: 508-898-9777 LANDLORD'S PHONE NUMBER: 508-898-3800 LANDLORD'S FACSIMILE NUMBER: 508-898-3005
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TENANT: TENANT'S ADDRESS (FOR NOTICE): iSpecimen, Inc. Mr. Christopher Ianelli President iSpecimen, Inc. 275 Grove Street, Suite 2-400 Newton, MA 02466 Telephone: 617-279-2488 X 701 Facsimile: 617-279-2488 Mobile: 617-438-0194 With a copy to: Email: None cianelli@ispecimen.com TENANT'S REPRESENTATNE: TENANT'S PHONE NUMBER: TENANT'S FACSIMJLE NUMBER: PREMISES: RENTABLE AREA OF PREMISES: TERM COMMENCEMENT DATE: STATED EXPIRATION DATE: RENTABLE AREA OF THE BUJLDING: BASIC RENT (subject to Section 4.03): Mr. Christopher Ianelli President 617-279-2488 617-279-2488 The portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. Approximately 2,142 Square Feet The Term Commencement Date is October 1, 2012. The Stated Expiration Date is December 31, 2013. Approximately 41,411 Square Feet. SEE SCHEDULE BELOW: FROM October 1, 2012 TO December 31, 2013 MONTHLY RENT $3,543.23 ANNUAL RENT $42,518.70 ESTIMATED COST OF ELECTRICAL SERVICE: Tenant may be separately metered for electricity. If not, Tenant shall reimburse Landlord at the estimated rate of $1.50 per square foot per year, subject to Sections 6.06 and 6.07.
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INITIAL MONTHLY PAYMENT (Basic Rent): TAX BASE: OPERATING EXPENSE BASE: TENANT'S SHARE: SECURITY DEPOSIT: GUARANTOR: PERMITTED USES: $3,543.23 The Taxes for the fiscal tax year ending 2013. The Operating Expenses for Calendar Year 2013. 5.44% $7,086.46 (equal to two [2] months Basic Rent) None General office uses consistent with a first class office building. 1.02 General Provisions. For all purposes of the Lease unless otherwise expressed and provided herein or therein or unless the context otherwise requires: (a) The words herein, hereof, hereunder and other words of similar import refer to the Lease as a whole and not to any particular article, section or other subdivision of this Lease. (b)A pronoun in one gender includes and applies to the other genders as well. (c) Each definition stated in Section 1.01 or 1.03 of this Lease applies equally to the singular and the plural forms of the term or expression defined. (d) Any reference to a document defined in Section 1.03 of this Lease is to such document as originally executed, or, if modified, amended or supplemented in accordance with the provisions of this Lease, to such document as so modified, amended or supplemented and in effect at the relevant time of reference thereto. (e) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles. (f)All references in Section 1.01 hereof are subject to the specified definitions thereof (if any) in Section 1.03 hereof. 1.03 Terms Defined. Each term or expression set forth above in Section 1.01 hereof or below in this Section 1.03 has the meaning stated immediately after it. Additional Rent. All sums which Tenant shall be obligated to pay hereunder other than Basic Rent. Additional Services. Services provided to Tenant or in respect to the Premises which are in addition to the services described in Exhibit D hereto.
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Adjusted Operating Expense Base. The amount determined by multiplying the Operating Expense Base by the Adjustment Factor. Adjusted Tax Base. The amount determined by multiplying the Tax Base by the Adjustment Factor. Adjustment Factor. With respect to the First Calendar Year and the Last Calendar Year, the percentage computed by dividing the number of days of each such period falling within the Lease term by 365. For all other calendar years, the Adjustment Factor shall be 100%. Affiliate. With respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, the term "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled by" have meanings correlative to the foregoing. Authorizations. All franchises, licenses, permits and other governmental consents issued by Governmental Authorities pursuant to Legal Requirements which are or may be required for the use and occupancy of the Premises or the conduct or continuation of a Permitted Use therein. Basic Services. The services described in Exhibit D hereto. Building. The building located at 450 Bedford Street, Lexington, Massachusetts. Business Day. A day which is not a Saturday, Sunday or other day on which banks in Boston, Massachusetts, are authorized or required by law or executive order to remain closed. Calendar Year. The First Calendar Year, the Last Calendar Year and each full calendar year (January 1 through December 31) occurring during the Lease Term. C.P.I. "Consumer Price Index - All Urban Consumers - (CPI-U) - U.S. City Average - All Items (1982-1984=100)" as published by the U.S. Department of Labor. Common Areas. All interior and exterior areas devoted to the common use of occupants of the Building or the provision of Services to the Building, including but not limited to the atrium, all corridors, elevator foyers, air shafts, elevator shafts, and elevators, stairwells and stairs, mechanical rooms, janitor closets, vending areas, driveways, parking areas and other similar facilities for the provision of Services or for the use of all occupants of multi-tenant floors or all occupants of the Building. Control. As defined in the definition of Affiliate. Corporation. A corporation, company, association, limited partnership, limited liability company, business trust or similar organization wherever formed.
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Default. Any event or condition specified in Article 20 hereof so long as any applicable requirement for the giving of notice or lapse of time or both have not been fulfilled. Event of Default. Any event or condition specified in (a) Article 20 hereof (if all applicable periods for the giving of notice or lapse of time or both have expired) or (b) in Article 21 hereof. First Calendar Year. The partial Calendar Year period commencing on the Term Commencement Date and ending on the next succeeding December 31. Force Majeure. Acts of God, strikes, lockouts, labor troubles, inability to procure materials, failure of power, restrictive Legal Requirements, riots and insurrection, acts of public enemy, wars, earthquakes, hurricanes and other natural disasters, fires, explosions, other causes beyond a party's reasonable control, or any act, failure to act or Default of the other party to this Lease; provided, however, lack of money shall not be deemed such a cause. Governmental Authority. United States of America, the Commonwealth of Massachusetts, the Town of Lexington, County of Middlesex, and any political subdivision thereof and any agency, department, commission, board, bureau or instrumentality of any of them. Insolvency. The occurrence with respect to any Person of one or more of the following events: the death, dissolution, termination of existence (other than by merger or consolidation), insolvency, appointment of a receiver for all or substantially all of the property of such Person, the making of a fraudulent conveyance or the execution of an assignment or trust mortgage for the benefit of creditors by such Person, or the filing of a petition in bankruptcy or the commencement of any proceedings by or against such Person under a bankruptcy, insolvency or other law relating to the relief or the adjustment of indebtedness, rehabilitation or reorganization of debtors; provided that if such petition or commencement is involuntarily made against such a Person and is dismissed within sixty (60) days of the date of such filing or commencement, such events shall not constitute an Insolvency hereunder. Insurance Requirements. All terms of any policy of insurance maintained by Landlord or Tenant and applicable to (or affecting any condition, operation, use or occupancy of) the Building or the Premises or any part or parts of either and all requirements of the issuer of any such policy and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions). Land. The land located at 450 Bedford Street, Lexington, Massachusetts, County of Middlesex, Commonwealth of Massachusetts, described in Exhibit A. Landlord's Work. The work to be done by Landlord with respect to the Premises described in Section 7.01 and Exhibit C. Last Calendar Year. The partial Calendar Year commencing on January 1 of the Calendar Year in which the Lease Termination Date occurs and ending on the Lease Termination Date. Lease Term. The period commencing on the Term Commencement Date and ending on the Lease Termination Date.
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Lease Termination Date. The earliest to occur of (1) the Stated Expiration Date, (2) the termination of this Lease by Landlord as the result of an Event of Default, or (3) the termination of this Lease pursuant to Article 17 (Damage or Destruction) or 18 (Eminent Domain) hereof. Legal Requirements. All laws, statutes, codes, ordinances (and all rules and regulations thereunder), all executive orders and other administrative orders, judgments, decrees, injunctions and other judicial orders of or by any Governmental Authority which may at any time be applicable to the Land, the Building or the Premises or to any condition or use thereof and the provisions of all Authorizations. Occupancy Arrangement. With respect to the Premises or any portion thereof, and whether (a) written or unwritten or (b) for all or any portion of the Lease Term, an assignment, a sublease, a tenancy at will, a tenancy at sufferance, or any other arrangement (including but not limited to a license or concession) pursuant to which a Person occupies, or shall have the right to occupy, the Premises for any purpose. Operating Expenses. All expenses, costs, and disbursements of every kind and nature which Landlord shall pay or become obligated to pay in connection with the ownership, operation and maintenance of the Land and the Building (including all facilities in operation on the Term Commencement Date and such additional facilities which are necessary or beneficial for the operation of the Land and Building) and the provision of Basic Services, including, but not limited to (a) wages, salaries, fees and costs to Landlord of all Persons engaged in connection therewith, including taxes, insurance, and benefits relating thereto; (b) the cost of (i) all supplies and materials, electricity and lighting, (ii) water, heat, air conditioning, and ventilating, (iii) all maintenance, janitorial, and service agreements, (iv) all insurance, including the cost of casualty and liability insurance, (v) repairs, replacements and maintenance, including, without limitation, Landlord's costs and expenses of performing its obligations under Section 8.01 (including, without limitation, costs and expenses which may be capital in nature), (vi) capital items which are primarily for the purpose of reducing Operating Expenses or which may be required by a Governmental Authority, amortized over the reasonable life of the capital items with the reasonable life and amortization schedule being determined by Landlord in accordance with generally accepted accounting principles (provided that in the event the reasonably estimated annual savings arising from the installation of any such capital improvement intended to reduce Operating Expenses shall exceed such annual amortization, Operating Expenses shall include, in lieu of such amortization, such estimated annual savings until the cost of such improvement shall have been completely amortized), (vii) pursuing an application for an abatement oftaxes pursuant to Section 6.05 hereof to the extent not deducted from the abatement, if any, received, (viii) independent auditors, (ix) Landlord's central accounting functions, and (x) providing office space for the manager of the Building; (c) management fees; and (d) the cost to Landlord of operating, repairing and maintaining exterior common areas and facilities which may not be located entirely on the Land but which may be used for parking or for landscaping, security and maintenance for common roadways and open areas. Operating Expenses shall notinclude specific costs billed to and paid by specific tenants. Operating Expenses shall be determined using the accrual basis of accounting. If at any time during the Term, less than ninety-five percent (95%) of the Rentable Area of the Building is occupied, Operating Expenses shall be
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adjusted by the Landlord to reasonably approximate the Operating Expenses which would be incurred if the Building had been at least ninety-five percent (95%) occupied. Partial Taking.,_ Any Taking which is not a Total Taking. Permitted Exceptions. Any liens or encumbrances on the Premises in the nature of (a) liens for Taxes assessed but not yet due and payable, (b) easements, reservations, restrictions and rights of way encumbering or affecting the Land on the date of this Lease, (c) the rights of Landlord, Tenant and any other Person to whom Landlord has granted such rights to exercise in common with respect to the Land and the Common Areas the rights granted to Tenant hereunder, (d) mortgages of record, and (e) Title Conditions. Person. An individual, a Corporation, a company, a voluntary association, a partnership, a trust, an unincorporated organization or a government or any agency, instrumentality or political subdivision thereof. Premises. The space in the Building shown on Exhibit B hereto. Proceeds. With respect to any Taking or occurrence described in Article 17 hereof, with respect to which any Person is obligated to pay any amount to or for the account of Landlord, the aggregate of (i) all sums payable or receivable under or in respect of any insurance policy, and (ii) all sums or awards payable in respect to a Taking. Rent. Basic Rent and all Additional Rent. Rentable Area of the Premises. The number of square feet stated in Section 1.01, whether the same should be more or less as a result of minor variations resulting from actual construction and completion of the Building or Premises so long as such work is done in accordance with the terms and provisions hereof. The calculation was made according to the following formula: (i) On single tenant floors, the usable area measured from the inside surfaces of the outer glass of the Building, plus Tenant's Share of interior Common Areas. (ii) On multi-tenant floors, the usable area measured from the inside surface of the outer glass of the Building to the midpoint of all demising walls of the space being measured plus the area of each corridor adjacent to and required as the result of the layout of the space being measured, measured from the midpoint of the adjacent demising walls, plus Tenant's Share of interior Common Areas. Rules and Regulations. Reasonable rules and regulations promulgated by Landlord and uniformly applicable to Persons occupying the Building regulating the details of the operation and use of the Building. The initial Rules and Regulations are attached hereto as Exhibit E. Services. Basic Services and Additional Services. Stated Expiration Date. The Stated Expiration Date set forth in Section 1.01.
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Taking. The taking or condemnation of title to all or any part of the Land or the possession or use of the Building or the Premises by a Person for any public use or purpose or any proceeding or negotiations which might result in such a taking or any sale or lease in lieu of or in anticipation of such a taking. Taxes. All taxes, special or general assessments, water rents, rates and charges, sewer rents and other impositions and charges imposed by Governmental Authorities of every kind and nature whatsoever, extraordinary as well as ordinary, and each and every installment thereof which shall or may during the term of this Lease be charged, levied, laid, assessed, imposed, become due and payable or become liens upon or for or with respect to the Land or any part thereof or the Building or the Premises, appurtenances or equipment owned by Landlord thereon or therein or any part thereof or on this Lease under or by virtue of all present or future Legal Requirements or a tax based on a percentage, fraction or capitalized value of the Rent (whether in lieu of or in addition to the taxes hereinbefore described). Taxes shall not include inheritance, estate, excise, succession, transfer, gift, franchise, net income, gross receipt, or profit taxes except to the extent such are in lieu of or in substitution for Taxes as now imposed on the Building, the Land, the Premises or this Lease. If for any year, including the Tax Base Year, Taxes have been reduced or abated, or are subsequently reduced or abated, because of vacancies in the Building, Taxes for such year shall be adjusted by Landlord to reasonably approximate the amount Taxes would have been had such vacancies not existed. Tenant. As defined in the preamble hereof. Tenant's Share.Tenant's Share is specified in Section 1.01 and is equal to the Rentable Area of the Premises divided by 95% of the Rentable Area of the Building. Term Commencement Date. The Term Commencement Date stated in Section 1.01. Title Conditions. All covenants, agreements, restrictions, easements and declarations of record on the date hereof so far as the same may be from time to time in force and applicable. Total Taking. (i) a Taking of: (a) the fee interest in all or substantially all of the Land or Building or (b) such title to, easement in, over, under or such rights to occupy and use any part or parts of the Land or Building to the exclusion of Landlord as shall have the effect, in the good faith judgment of the Landlord, of rendering the portion of the Land or Building remaining after such Taking (even if restoration were made) unsuitable for the continued use and occupancy of the Building for the Permitted Uses or (ii) a Taking of all or substantially all of the Premises or such title to or easement in, on or over the Premises to the exclusion of Tenant which in the good faith judgment of the Landlord prohibits access to the Premises or the exercise by Tenant of any rights under this Lease.
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ARTICLE2 Premises 2.01Premises. Landlord hereby leases and lets to Tenant, and Tenant hereby takes and hires from Landlord, upon and subject to the terms, conditions, covenants and provisions hereof, the Premises subject to the Permitted Exceptions. Landlord reserves the right to install within or without the Premises pipes, ducts, vents, flues, conduits, wires and appurtenant fixtures which service the Premises and/or other parts of the Building; provided that such work is done in such a manner that it does not unreasonably interfere with Tenant's use of the Premises. 2.02Appurtenances. Tenant, in common with others entitled thereto from time to time, may use the Common Areas for the purposes for which they were designed. Landlord reserves the right, from time to time, to grant easements affecting the Land, to change or alter the boundaries of the Land and to alter, and grant to others the right to use, the entrances, parking areas and driveways on the Land, all for purposes of developing and using properties adjacent to the Land, so long as the same do not unreasonably interfere with Tenant's use of the Common Areas or reduce the number of parking spaces available for Tenant. 2.03Reservations By Landlord. Landlord reserves the right, exercisable at any time and from time to time without the same constituting an actual or constructive eviction and without incurring any liability therefor or otherwise affecting Tenant's obligations under this Lease, to make changes, alterations, additions, improvements, repairs or replacements to the Building and the Common Areas as long as such work does not unreasonably interfere with Tenant's business, including, without limitation, elimination of Common Areas and changing the size, arrangement and location of, and eliminating, entrances, lobbies, driveways, parking areas, doors, corridors, elevators, stairs and restrooms. ARTICLE3 Term 3.01Term Commencement. The Lease Term shall commence on the Term Commencement Date. 3.02Termination. The Lease Term shall end on the Lease Termination Date.
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ARTICLE4 Rent 4.01Basic Rent. Tenant shall pay Landlord for the Premises, without offset or deduction and without previous demand therefor, the Basic Rent as annual rent for each Lease Year. Basic Rent shall be paid in equal monthly installments in advance on the first day of each calendar month during the Lease Term. The first installment of Basic Rent shall be paid simultaneously with the execution of this Lease by Tenant. Basic Rent for partial months at the beginning or end of the Lease Term shall be pro-rated. 4.02Computation of Basic Rent. The Basic Rent for each Lease Year shall be stated in Article 1.01 hereof. Basic Rent shall be exclusive of (and in addition to) amounts due hereunder for Taxes, Operating Expenses and Estimated Cost of Electrical Service. 4.03Annual Adjustment of Basic Rent - Intentionally deleted. ARTICLES Use of Premises 5.01Use Restricted. The Premises may be used for the Permitted Uses and for no other purpose. No improvements may be made in or to the Premises except as otherwise provided in this Lease. 5.02Rules and Regulations. Tenant shall comply with the Rules and Regulations established from time to time by Landlord. Landlord shall not be liable to Tenant for (a) the failure of other tenants to comply with such Rules and Regulations, (b) the failure of other tenants to comply with any term or provision of their respective leases or (c) any nuisance or wrongful, negligent, improper, offensive or unlawful act or omission of any such other tenant. ARTICLE6 Taxes; Operating Expenses; Estimated Cost of Electrical .Services 6.01Expenses and Taxes. If with respect to any Calendar Year, Tenant's Share of (a) Operating Expenses exceed the Adjusted Operating Expense Base or (b) Taxes exceed the Adjusted Tax Base (whether as the result of an increase in rate or assessment or both), Tenant shall pay to Landlord the amount of
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each such excess. Any amount due with respect to this Section 6.01 shall be due on the date which is thirty (30) days after receipt by Tenant of the statement described in Section 6.02 hereof. 6.02Annual Statement of Additional Rent Due. Landlord shall render to Tenant a statement, showing (i) for the Calendar Year so indicated (a) Taxes and (b) Operating Expenses and (ii) for the then current Calendar Year, an estimate for (a) Operating Expenses (b) Taxes and (c) Tenant's obligation under Section 6.01. 6.03Monthly Payments of Additional Rent. Tenant shall pay to Landlord in advance for each calendar month of the Lease Term falling between receipt by Tenant of the statement described in Section 6.02 and receipt by Tenant of the next such statement, as Additional Rent an amount equal to l/l2th of Tenant's estimated obligation under Section 6.01 shown thereon. The amount due under this Section 6.03 shall be paid with Tenant's monthly payments of Basic Rent and shall be credited by Landlord to Tenant's obligations under Section 6.01. If the total amount paid hereunder exceeds the amount due under such Section, such excess shall be credited by Landlord against the monthly installments of Additional Rent next falling due or shall be refunded to Tenant upon the expiration or termination of this Lease (unless such expiration or termination is the result of an Event of Default). 6.04Accounting Periods. Landlord shall have the right from time to time to change the periods of accounting hereunder to any other annual period than a Calendar Year, and upon any such change, all items referred to in this Article 6 shall be appropriately apportioned. In all statements rendered under Section 6.02, amounts for periods partially within and partially without the accounting periods shall be appropriately apportioned, and any items which are not determinable at the time of a statement shall be included therein on the basis of Landlord's estimate and with respect thereof Landlord shall render to Tenant promptly after determination a supplemental statement and appropriate adjustment shall be made according thereto. 6.05Abatement of Taxes. Landlord may at any time and from time to time make application to the appropriate Governmental Authority for an abatement of Taxes. If (i) such an application is successful for reasons other than the existence of vacancies in the Building and (ii) Tenant has made any payment in respect of Taxes pursuant to this Article 6 for the period with respect to which the abatement was granted, Landlord shall (a) deduct from the amount of the abatement all expenses incurred by it in connection with the application (b) recompute Tenant's obligation with respect to Taxes under Section 6.01 and refund any overpayment to Tenant and (c) retain the balance, if any.
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6.06Electric Service; Payment as Additional Rent. If applicable, the Estimated Cost of Electrical Service is Landlord's estimate of the cost (on the date hereof) of lighting the Premises and operating Tenant's office equipment. This estimate is based on information supplied to Landlord by Tenant and shall be subject to adjustment as hereinafter set forth. Tenant shall reimburse Landlord for the cost of providing such electrical energy by paying to Landlord the Estimated Cost of Electrical Service. Tenant shall pay Landlord (without previous demand therefor) such amount in monthly installments on the same day on which Basic Rent is due. If Tenant (a) connects equipment (i) other than normal office equipment or (ii) which operates in excess of 120 volts nominal to the Building distribution system or (b) operates any such equipment beyond normal operating hours, the Estimated Cost of Electrical Service shall be increased by an amount which will reflect the cost to Landlord of the additional electrical service to be furnished by Landlord. If Landlord and Tenant cannot agree on the amount of such increase, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties. All additional risers or other equipment required for equipment other than normal office equipment or equipment which operates on 120 volts nominal shall be provided by Landlord, and the cost thereof shall be paid by Tenant. Landlord shall have the right to install, at Tenant's expense, a so-called check meter which shall measure the amount of electricity actually used in the Premises. If Landlord exercises such right, then from and after the effective date of such new metering, Landlord may bill Tenant periodically for electricity usage as shown by such meter. If at any time Landlord provides electricity which it or an Affiliate has generated, whether by solar panels or otherwise ("Landlord-generated Electricity"), Landlord may (a) charge Tenant therefor if Tenant pays for electricity by metering , by the payment of the Estimated cost of Electrical Service or otherwise and (b) to the extent electricity may be included in Operating Expenses, Landlord may include a charge for such Landlord-generated Electricity in Operating Expenses, in each case at the same rate which the electric utility provider charges for the same amount of electricity. If Landlord or an Affiliate generates Landlord-generated Electricity at another property which results in Landlord obtaining a credit against the electric utility provider's charges for electricity at the Building, the cost of electricity at the Building shall be determined as if such credit had not been obtained. 6.07Change in Rates or Usage. The Estimated Cost of Electrical Service is based on current rates for such service and Landlord's good faith estimate of the usage of electricity by Tenant. If at any time after the date of this Lease, (i) the rates at which Landlord purchases electrical energy, or any charges incurred or taxes payable by Landlord in connection therewith shall be increased or (ii) the usage by Tenant exceeds Landlord's estimate thereof, the Estimated Cost of Electrical Service shall be increased by an amount equal to the estimated increase in Landlord's cost of furnishing the electricity referred to above as a result of such increase in rates, charges, taxes or usage.
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6.08Late Payment of Rent and Late Charges. Tenant's failure to pay Rent, Additional Rent, or any other Lease costs when due under this Lease may cause Landlord to incur unanticipated costs. The exact amount of such costs are impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges and late charges that may be imposed on Landlord by any ground lease, mortgage, or deed of trust encumbering the Land or Building. Therefore, if Landlord does not receive the Rent, Additional Rent, or any other Lease costs in full within five (5) days of its due date, Tenant shall pay Landlord a late charge, which shall constitute liquidated damages, equal to ten percent (10%) of each unpaid portion ("Late Charge"), which shall be paid to Landlord together with such Rent, Additional Rent, or other Lease costs then in arrears. The parties agree that such Late Charge represents a fair and reasonable estimate of the cost Landlord will incur by reason of such late payment. For each Tenant payment check to Landlord that is returned by a bank for any reason, Tenant shall pay both a Late Charge (if applicable) and a returned check charge ("Returned Check Charge") in an amount equal to that charged by Landlord's bank at the time. All Late Charges and any Returned Check Charge shall then become Additional Rent and shall be due and payable immediately along with such other Rent, Additional Rent, or other Lease costs then in arrears. Money paid by Tenant to Landlord shall be applied to Tenant's account in the following order: (i) to any unpaid Additional Rent, including, without limitation, Late Charges, Returned Check Charges, legal fees and/or court costs legally chargeable to Tenant, Operating Expenses and Taxes; and then (ii) to unpaid Basic Rent. Nothing herein contained shall be construed so as to compel Landlord to accept any payment of Rent, Additional Rent, or other Lease costs in arrears or Late Charge or Returned Check Charge should Landlord elect to apply its rights and remedies available under this Lease or at law or in equity in the case of an Event of Default hereunder by Tenant. Landlord's acceptance of Rent, Additional Rent, or other Lease costs in arrears or Late Charge or Returned Check Charge pursuant to this clause shall not constitute a waiver of Landlord's rights and remedies available under this Lease at law or in equity. In the event that Tenant makes three or more late payments of Rent during the Term, Landlord may deem such action, without further notice, to constitute an Event of Default sufficient to terminate (i) the Lease (ii) any provision for exercise by Tenant of any option rights under the Lease or (iii) both.
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ARTICLE7 Improvements, Repairs, Additions, Replacements 7.01Preparation of the Premises. Except as provided in Exhibit C, the Premises shall be leased in its present "as is" condition, and Landlord shall have no obligation to perform any work or construction in the Premises to prepare it for Tenant's occupancy. 7.02Alterations and Improvements. Tenant shall not make alterations or additions to the Premises without Landlord's prior written approval and then only in accordance with plans and specifications therefor first approved by Landlord. Tenant shall not hang shades, curtains, signs, awnings or other materials to or make any change in the appearance of any glass visible from outside of the Premises, add any window treatments of any kind or install furniture visible from outside of the Premises, without Landlord's prior written consent. Without limitation, Landlord may withhold approval of any alterations or additions which would (a) delay completion of the Premises or the Building, or (b) require unusual expense to readapt the Premises to normal office use upon termination of this Lease or increase (i) the cost of (a) construction or (b) insurance or (ii) Taxes. All alterations and additions shall be part of the Premises unless and until Landlord shall specify the same for removal in a notice delivered to Tenant on or before the Lease Termination Date. All of Tenant's alterations and additions and installation of furnishings shall be coordinated with any work being performed by Landlord and in such manner as to maintain harmonious labor relations and not to damage the Building or the Premises or interfere with Building operation and, except for installation of furnishings, shall be performed by contractors or workmen first approved by Landlord. Except for work done by or through Landlord, Tenant before its work is started shall: secure all licenses and permits necessary therefor; deliver to Landlord a statement of the names of all its contractors and subcontractors and the estimated cost of all labor and material to be furnished by them; provide to Landlord such payment, performance and lien bonds or other security as Landlord shall reasonably require; and cause each contractor to carry workers' compensation insurance in statutory amounts covering all the contractor's and subcontractor's employees and commercial general liability insurance with limits as Landlord may reasonably require, but in no event less than $1,000,000.00 and property damage insurance with limits of not less than $1,000,000.00 and have deductibles of no more than $5,000.00 (all such insurance to be written by companies approved by Landlord and insuring Tenant and Landlord and its managing agent and its mortgagees, as well as the contractors), and to deliver to Landlord certificates of all such insurance. Tenant agrees to pay promptly when due the entire cost of any work done in the Premises by Tenant, its agents, employees or independent contractors, and not to cause or permit any liens therewith to attach to the Premises and immediately to discharge any such liens which may so attach. All construction work done by Tenant, its agents, employees or independent contractors shall be done in a good and workmanlike manner and in compliance with all Legal Requirements and Insurance Requirements.
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7.03Maintenance. Except for Landlord's obligations under Section 8.01, Tenant shall, at all times during the Lease Term, and at its own cost and expense, (i) keep and maintain the Premises in good repair and condition (ordinary wear and tear and damage by fire or casualty only excepted) and (ii) use all reasonable precautions to prevent waste, damage or injury thereto. 7.04Redelivery. On the Lease Termination Date, without limiting its other obligations under this Lease (including under Section 7.02), Tenant shall surrender all keys to the Premises, remove all of its trade fixtures, equipment and personal property in the Premises and all of Tenant's signs and quit and surrender the Premises free and clear of all tenants, occupants, liens, and encumbrances whatsoever. Tenant shall, subject to the provisions of Articles 17 and 18 hereof, surrender the Premises to Landlord broom clean and in good condition and repair (ordinary wear and tear and damage by fire or casualty only excepted) with all damage occasioned by Tenant's removal of Tenant's trade fixtures, equipment or equipment repaired at Tenant's cost to Landlord's satisfaction. Any property not so removed shall be deemed abandoned and may be removed and disposed of by Landlord in such manner as it shall determine. Tenant shall pay Landlord the entire cost and expense incurred by it in effecting such removal and disposition and in making any incidental repairs and replacements. ARTICLES Building Services 8.01Building Services; Maintenance. Landlord shall furnish, or cause to be furnished, during the Lease Term the Basic Services. Subject to Articles 17 and 18, Landlord shall maintain the Common Areas, exterior walls (exclusive of glass and doors and exclusive of the interior surface of the exterior walls, all of which Tenant shall maintain and repair), roof, foundation, structural supports of the Building and the heating, plumbing, electrical, air-conditioning and mechanical systems, provided that Landlord shall not be required to repair or maintain any specialized systems installed by or for Tenant unless Landlord otherwise elects. 8.02Other Janitors. No persons shall be employed by Tenant to do janitorial work in the Premises and no persons other than the janitors of the Building shall clean the Premises unless Landlord shall give its written consent thereto. Any person employed by Tenant with Landlord's consent to do janitorial work shall, while in the Building, either inside or outside the Premises, be subject to and under the control and direction of the superintendent of the Building (but not as agent or servant of said superintendent or of Landlord).
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8.03Additional Services. Tenant will pay the Landlord a reasonable charge for any extra cleaning of the Premises required because of the carelessness or indifference of Tenant and for any Additional Services rendered at the request of Tenant. If the cost of cleaning the Premises shall be increased due to the installation in the Premises, at Tenant's request, of any unique or special materials, finish or equipment, Tenant shall pay the Landlord an amount equal to such increase in cost. All charges for Additional Services shall be due and payable within ten (10) days of the date on which they are billed. 8.04Limitations on Landlord’s Liability. Landlord shall not be liable for damages, and not in default hereunder, for any failure or delay in complying with its obligations hereunder, including, without limitation, furnishing electricity, any Basic Service or Additional Service, when such failure or delay is occasioned by Force Majeure or by the act or Default of Tenant. No such failure or delay shall be held or pleaded as eviction or disturbance in any manner whatsoever of Tenant's possession or give Tenant any right to terminate this Lease or give rise to any claim for set-off or any abatement of Rent of any of Tenant's obligations under this Lease. 8.05Electric Service. If electricity is separately metered for the Premises, Tenant, at its expense, shall obtain electricity from such source or sources as Landlord shall designate from time to time as the electricity source or sources for the Building, and Landlord shall have no obligation to furnish electricity to the Premises. If electricity is not separately metered to the Premises, Landlord shall furnish electrical energy required for lighting the Premises and operating Tenant's office equipment used in the Premises and Section 6.06 shall be applicable thereto, provided, however, Landlord may, at any time, elect to discontinue the furnishing of electrical energy. In the event of any such election by Landlord: (1) Landlord shall give reasonable advance notice of any such discontinuance to Tenant; (2) Landlord shall permit Tenant to receive electrical service directly from such source or sources as Landlord shall designate as the electricity source or sources for the Building from time to time and to use (in common with others) the existing feeders, risers, wiring and other electrical facilities serving the Premises for such purpose to the extent they are suitable and safely capable; (3) Landlord shall pay such charges and costs, if any, as such sources(s) may impose in connection with the installation of Tenant's meters and pay for such other installations as such public utility may require as a condition to providing comparable electrical service to Tenant; (4) Tenant's obligations under Section 6.06 to pay the Estimated Cost of Electrical Service shall end; and (5) Tenant shall thereafter pay, directly to the sources(s) furnishing the same, all charges for electrical services to the Premises promptly when due. Landlord shall not be liable for any interruption or failure in the supply of electricity or other utilities to the Premises.
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ARTICLE9 Tenant's Particular Covenants 9.01Pay Rent. Tenant shall pay when due all Rent and all charges for utility services rendered to the Premises not included in Rent and, as further Additional Rent, all charges charged by Landlord for Additional Services. 9.02Occupancy of the Premises. Tenant shall occupy the Premises continuously during the Lease Term from the Term Commencement Date for the Permitted Uses only. Tenant shall not (i) injure or deface the Premises or the Building, (ii) install any sign in or on any window, demising wall or Common Area, (iii) permit in the Premises any flammable fluids or chemicals not reasonably related to the Permitted Uses nor (iv) permit nuisance or any use thereof which is improper, offensive, contrary to any Legal Requirement or Insurance Requirement or liable to render necessary any alteration or addition to the Building. Tenant shall not permit any noise, vibration or odor to emit from the Premises which in Landlord's sole discretion is offensive or inappropriate for a first class office Building. In the event any direct, indirect or consequential loss is incurred by Landlord as a result of said offensive or inappropriate noise, odor or vibration, Tenant shall indemnify Landlord for such loss. 9.03Safety. Tenant shall keep the Premises equipped with all safety appliances required by Legal Requirements or Insurance Requirements because of any use made by Tenant. Tenant shall procure all Authorizations so required because of such use and, if requested by Landlord, shall do any work so required because of such use, it being understood that the foregoing provision shall not be construed to broaden in any way the Permitted Uses. 9.04Equipment. Tenant shall not place a load upon the floor of the Premises exceeding the live load for which the floor has been designed for fifty (50) pounds per square foot; and shall not move any safe or other heavy equipment in, about or out of the Premises except in such a manner and at such a time as Landlord shall in each instance authorize. Tenant shall isolate and maintain all of Tenant's machines and mechanical equipment which cause or may cause air-borne or structure-borne vibration or noise, whether or not it may be transmitted to any other premises so as to eliminate such vibration or noise. 9.05Electrical Equipment. Tenant shall not, without prior written notice to Landlord in each instance (i) connect to the Building electric distribution system anything other than normal office equipment or (ii) operate
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such equipment on a regular basis beyond normal Building operating hours. Tenant's use of electrical energy in the Premises shall not at any time exceed the capacity of any of the electrical conductors or equipment in or otherwise serving the Premises. Tenant shall not, without prior written notice to Landlord in each instance, connect to the Building electric distribution system any fixtures, appliances or equipment which operate on a voltage in excess of 120 volts nominal or make any alteration or addition to the electric system of the Premises. 9.06Pay Taxes. Tenant shall pay promptly when due all taxes upon personal property (including, without limitation, fixtures and equipment) in the Premises to whomsoever assessed. ARTICLE IO Requirements of Public Authority 10.01 Legal Requirements. Tenant shall, at its own cost and expense, promptly observe and comply with all Legal Requirements. Tenant shall pay all costs, expenses, liabilities, losses, damages, fines, penalties, claims and demands, that may in any manner arise out of or be imposed because of the failure of Tenant to comply with the covenants of this Article 10. Landlord shall not be responsible or liable for any loss or interruption of Tenant's business, or any costs of compliance, caused by the enforcement of any Legal Requirements which are related to Tenant's use of the Premises or the Common Areas. Tenant shall not dump, flush, or in any way introduce any Hazardous Substances or any other toxic substances into the septic, sewage or other waste disposal system or generate, store or dispose of Hazardous Substances in or on the Premises or the Land, or dispose of Hazardous Substances from the Premises or the Land to any other location without the prior written consent of Landlord and then only in compliance with the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.§6901 et seq., the Massachusetts Hazardous Waste Management Act, M.G.L. c.21C., as amended, the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, M.G.L. c.21E, as amended, and all other applicable codes, regulations, ordinances and laws. Tenant shall notify Landlord of any incident which would require the filing of a notice under M.G.L. c.21E and shall comply with the orders and regulations of all governmental authorities with respect to zoning, building, fire, health and other codes, regulations, ordinances or laws applicable to the Premises or the Land. "Hazardous Substances" as used in this Section shall mean "hazardous substances" as defined in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 and regulations adopted pursuant to such Act. Landlord may, if it so elects, make any of the repairs, alterations, additions or replacements which otherwise would be Tenant's responsibility under this Section which affect the Building structure or the Building systems, and Tenant shall reimburse Landlord for the cost thereof within twenty (20) days of Landlord's invoice therefor.
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Tenant will provide Landlord, from time to time upon Landlord's request, with all records and information regarding any Hazardous Substance maintained on the Premises by Tenant. Landlord shall have the right, at Tenant's expense, to make such inspections as Landlord shall reasonably elect from time to time to determine if Tenant is complying with this Section or with Tenant's obligations elsewhere under this Lease. 10.02 Contests. Tenant shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of the Tenant or Landlord (if legally required), or both (if legally required), without cost, expense, liability or damage to Landlord, the validity or application of any Legal Requirement and, if compliance with any of the terms of any such Legal Requirement may legally be delayed pending the prosecution of any such proceeding, Tenant may delay such compliance therewith until the final determination of such proceeding. ARTICLE 11 Covenant Against Liens 11.01 Mechanics' Liens. Landlord's right, title and interest in the Premises, the Land or the Building shall not be subject to or liable for liens of mechanics or materialmen for work done on behalf of Tenant in connection with improvements to the Premises. Notwithstanding such restriction, if because of any act or omission of Tenant, any mechanics' lien or other lien, charge or order for payment of money shall be filed against any portion of the Premises or the Land or the Building, Tenant shall, at its own cost and expense, cause the same to be discharged of record within fifteen (15) days after the filing thereof. 11.02 Right to Discharge. Without otherwise limiting any other remedy of Landlord for default hereunder, if Tenant shall fail to cause such liens to be discharged of record within the aforesaid fifteen (15) day period, then Landlord shall have the right to cause the same to be discharged. All amounts paid by Landlord to cause such liens to be discharged shall constitute Additional Rent. ARTICLE 12 Access to I>_remises 12.01 Access. Landlord or Landlord's agents and designees shall have the right, but not the obligation, to enter upon the Premises at all reasonable times during ordinary business hours to examine same and to exhibit the Premises to prospective purchasers, mortgagees, tenants or other persons or agents as Landlord shall designate from time to time.
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ARTICLE 13 Assignment and Subletting: Occupancy Arrangements 13.01 Subletting and Assignment. Tenant shall not enter into any Occupancy Arrangement, either voluntarily or by operation of law without the prior consent of Landlord, which consent will not be unreasonably withheld. Without limiting the generality of the foregoing, in no event shall Tenant enter into negotiations to sublet all or any part of the Premises or to assign this Lease, offer to so sublet or assign or so sublet or assign to any tenant or occupant of the Building or the complex in which the Building located or to any party with whom Landlord is then negotiating with respect to space in the Building or the complex in which the Building located. If Tenant intends to enter into an Occupancy Arrangement, Tenant shall so notify Landlord in writing, stating the name of (and providing a financial statement with respect to) the Person whom Tenant intends to enter into such Arrangement, the exact terms of the Occupancy Arrangement and a precise description of the portion of the Premises intended to be subject thereto. Within thirty (30) days of receipt of such writing, Landlord shall either (i) consent to such Occupancy Arrangement, (ii) terminate this Lease with respect to so much of the Premises as is intended to be subject thereto, or (iii) deny consent to such Occupancy Arrangement. The Landlord shall not be deemed to be unreasonable in denying its consent to any proposed assignment or subletting by the Tenant based on any of the following factors, without limitation: (a) The business of the proposed tenant is not consistent with the image and character which the Landlord desires to promote for the Building; (b) The proposed assignment or subletting could adversely affect the ability of the Landlord and its affiliates to lease space in the Building, including leasing space to any proposed assignee or subtenant; and (c) The credit worthiness of the proposed tenant is unsatisfactory to the Landlord, as the Landlord may determine in its reasonable discretion. If the Landlord consents to such Occupancy Arrangement, Tenant shall (i) enter into such Arrangement on the exact terms described to Landlord within fourteen (14) days of Landlord's consent or comply again with the terms of this Section and (ii) remain liable for the payment and performance of the terms and covenants of this Lease. If Tenant enters into such an Occupancy Arrangement, Tenant shall pay to Landlord when received the excess, if any, of amounts received in respect of such Occupancy Arrangement over the Rent. For the purpose of the preceding sentence, amounts received by Tenant in respect of such Occupancy Arrangement shall be deemed to include (a) any costs assumed or paid by the subtenant thereunder (such as brokerage commissions, tenant improvements and other expenses) which normally are paid by landlords or sub-landlords in comparable transactions and (b) any sums paid for the sale, rental or use of any of Tenant's personal property (in the case of a sale only, reduced by Tenant's depreciated basis thereof for federal income tax purposes).
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If Landlord terminates this Lease pursuant to this Section, all Rent due shall be adjusted as of the day the Premises (or portion thereof) are redelivered to Landlord. Any portion of the Premises so redelivered shall be in the condition specified in Section 7.04 hereof. If Tenant's stock is not publicly held, the provisions of this Section 13.01 shall apply to a transfer (by one or more transfers) of a majority of the stock or other ownership interests of Tenant as if Tenant had entered into an Occupancy Arrangement. Such provisions shall not apply to transactions with an entity into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred or to any entity which controls or is controlled by Tenant or is under common control with Tenant, provided that in any of such events (i) the successor to Tenant has a tangible net worth computed in accordance with generally accounting principles at least equal to the tangible net worth of Tenant immediately prior to such merger, consolidation or transfer, (ii) proof satisfactory to Landlord of such tangible net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction, and (iii) the assignee agrees directly with Landlord, by written instrument in form satisfactory to Landlord, to be bound by all the obligations of Tenant hereunder including, without limitation, the covenant against further assignment or subletting. ARTICLE 14 Indemnity 14.01 Tenant's Indemnity. To the fullest extent permitted by law, Tenant shall indemnify and save harmless Landlord from and against any and all liability, damage, penalties or judgments and from and against any claims, actions, proceedings and expenses and costs in connection therewith, including reasonable counsel fees, arising from injury to person or property sustained by anyone in and about the Building or the Premises or the Land by reason of an act or omission of Tenant, or Tenant's officers, agents, servants, employees, contractors, sublessees or invitees. Tenant shall, at its own cost and expense with counsel approved by Landlord, defend any and all suits or actions (just or unjust) in which Landlord may be impleaded with others upon any such above mentioned matter, claim or claims, except as may result from the acts as set forth in Section 14.02. All merchandise, furniture, fixtures and property of every kind, nature and description of Tenant or Tenant's employees, agents, contractors, invitees, visitors, or guests which may be in or upon the Premises, the Land or the Building during the Lease Term shall be at the sole risk and hazard of Tenant, and if the whole or any part thereof shall be damaged, destroyed, stolen or removed by reason of any cause or reason whatsoever, other than the negligence or willful misconduct of Landlord, no part of said damage or loss shall be charged to or borne by Landlord. 14.02 Landlord's Liability. Except for wrongful acts or negligence or the wrongful acts or negligence of its officers, agents, servants, employees or contractors, Landlord shall not be responsible or liable for any damage or injury to any property, fixtures, buildings or improvements, or to any person or
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persons, at any time in the Premises, including any damage or injury to Tenant or to any of Tenant's officers, agents, servants, employees, contractors, invitees, customers or sublessees. ARTICLE 15 Insurance 15.01 Liability Insurance. Tenant shall maintain, at its expense, in force during the Lease Term, commercial general liability insurance in a good and solvent insurance company or companies licensed to do business in the Commonwealth of Massachusetts, selected by Tenant, and reasonably satisfactory to Landlord, and in an amount reasonably required by Landlord from time to time but in any event not less than One Million Dollars ($1,000,000.00) with respect to injury or death to any one person and One Million Dollars ($1,000,000.00) with respect to injury or death to more than one person in any one accident or other occurrence and One Million Dollars ($1,000,000.00) with respect to damage to property. Such policy or policies shall include Landlord and Landlord's managing agent and mortgagees as additional insureds and have deductibles of no more than $5,000.00. Tenant shall also maintain in force during the Lease Term (a) worker's compensation insurance with statutory limits covering all of Tenant's employees working at the Premises and (b) all risk insurance covering all of its equipment and personal property in the Premises in an amount equal to the full replacement cost thereof. 15.02 Casualty Insurance. Unless Landlord shall not elect to insure the same, Tenant shall cause all alterations and improvements to the Premises made by or for Tenant to be insured for the benefit of Landlord and Tenant, as their respective interests may appear, against loss or damage under all risk coverage satisfactory to Landlord in an amount equal to the replacement value thereof. Certificates thereof shall be delivered to Landlord. 15.03 Certificates. Tenant agrees to deliver to Landlord certificates of the insurance required under Sections 15.01 and 15.02 as of the date hereof and thereafter not less than thirty (30) days prior to the expiration of any such policy. Such insurance shall not be cancelable without thirty (30) days' written notice to Landlord. ARTICLE 16 Waiver of Subrogation 16.01 Waiver of Subrogation. All property insurance policies carried by either party covering the Premises, including but not limited to contents, fire and casualty insurance, shall expressly waive any right on the part of
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the insurer to make any claim against the other party. The parties hereto agree that their policies will include such waiver clause or endorsement. 16.02 Waiver of Rights. Notwithstanding any other terms or provisions of this Lease, each Landlord and Tenant, on behalf of itself and its insurers, hereby waives all claims, causes of action and rights of recovery against the other and the other's respective partners, agents, officers and employees, for any damage to or destruction of property or business which shall occur on or about the Land or the Building and shall result from any of the perils insured under any and all policies of insurance maintained by the waiving party, regardless of cause, including the negligence and intentional wrongdoing of either party and their respective agents, officers and employees but only to the extent of recovery, if any under such policy or policies of insurance; provided however, that this waiver shall be ineffective in the event any such insurer would be relieved from the obligation to make payment pursuant to a policy of insurance by reason of this waiver. ARTICLE 17 Damage or Destruction 17.01 Substantial Damage. If the Building or any part thereof shall be damaged by fire or other casualty to the extent that substantial alteration or reconstruction of the Building shall, in Landlord's sole opinion, be required (whether or not the Premises shall have been damaged) or if all or any portion of the insurance proceeds are applied to the mortgage debt or if the net insurance proceeds available to Landlord are insufficient to restore, Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of such damage. If this Lease is so terminated, Rent shall be abated as of the date of such damage. 17.02 Restoration. If Landlord does not terminate this Lease pursuant to Section 17.01, Landlord shall, after receipt by Landlord of the Proceeds payable in respect of such fire or other casualty, proceed with reasonable diligence to repair and restore the Building (subject to Force Majeure) to substantially the same condition in which it was immediately prior to the occurrence of the casualty. Landlord may, but shall not be required to, repair or restore any alterations or improvements made by Tenant, and, if Landlord elects to do so, Tenant shall make available to Landlord all insurance proceeds relating thereto. Landlord shall not be required to rebuild, repair, or replace any part of Tenant's furniture, furnishings or fixtures or equipment. Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent the Premises are unfit for occupancy.
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ARTICLE 18 Eminent Domain 18.01 Total Taking. If the Premises or the Building should be the subject of a Total Taking, then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. 18.02 Partial Taking. If there shall occur a Partial Taking, Rent shall be abated by an amount representing that part of the Rent properly allocable to the portion of the Premises so taken and Landlord shall, at Landlord's sole expense, restore and reconstruct the Building (to the extent of the net proceeds made available to Landlord) and the Premises to substantially their former condition to the extent that the same, in Landlord's judgment, may be feasible. The Landlord shall have no liability for interruption of Tenant's business. 18.03. Awards and Proceeds. All Proceeds payable in respect of a Taking shall be the property of Landlord. Tenant hereby assigns to Landlord all rights of Tenant in or to such Proceeds, provided that Tenant shall be entitled to separately petition the condemning authority for a separate award for its moving expenses and trade fixtures but only if such a separate award will not diminish the amount of Proceeds payable to Landlord. ARTICLE 19 Quiet Enjoyment 19.01 Landlord's Covenant. Provided that an Event of Default has not occurred and is not then continuing, Tenant shall, subject to the Permitted Exceptions, quietly have and enjoy the Premises during the Lease Term, without hindrance or molestation from any Person lawfully claiming by, through or under Landlord. 19.02 Superiority of Lease: Option to Subordinate. At any time and from time to time, Landlord shall have the option to subordinate this Lease to any mortgage of the Premises provided that the holder of record thereof enters into a non-disturbance agreement with Tenant in such holder's customary form or, if specified by Landlord, in the form of Exhibit G hereto. Tenant agrees to execute and deliver any appropriate instruments necessary to carry out the agreements contained in this Section 19.02.
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19.03 Notice to Mortgagee. No act or failure to act on the part of Landlord which would entitle Tenant under the terms of this Lease, or by law, to be relieved of Tenant's obligations hereunder or to terminate this Lease, shall result in a release or termination of such obligations or a termination of this Lease unless (i) Tenant shall have first given written notice of Landlord's act or failure to act to Landlord's mortgagees of record, if any, specifying the act or failure to act on the part of Landlord which could or would give rise to Tenant's rights, and (ii) such mortgagees, after receipt of such notice, have had the opportunity to cure such default within a reasonable time thereafter; but nothing contained in this Section 19.03 shall be deemed to impose any obligation on any such mortgagees to correct or cure any such condition. "Reasonable time" as used above shall mean a period of not less than thirty (30) Business Days and shall include (but not be limited to) a reasonable time to obtain possession of the Building if the mortgagee elects to do so and a reasonable time to correct or cure the condition if such condition is determined to exist. 19.04 Other Provisions Regarding Mortgagees. If this Lease or the Rent due hereunder is assigned to a mortgagee as collateral security for a loan, no such mortgagee shall be deemed to have assumed any of Landlord's obligations hereunder solely as a result of said assignment. A mortgagee to whom this Lease has been so assigned shall be deemed to have assumed such obligations only if (i) by the terms of the instrument of assignment such mortgagee specifically elects to assume such obligations or (ii) such mortgagee has (a) foreclosed its mortgage, (b) accepted a deed in lieu thereof, or (c) taken possession of the Premises by entry or otherwise. Even if such mortgagee assumes the obligations of Landlord hereunder, (i) any such obligation under Section 24.01 to return the Security Deposit to the Tenant shall be limited to the amount actually received by the mortgagee with respect thereto, and (ii) such mortgagee will be liable for breaches of any of Landlord's obligations hereunder only to the extent such breaches occur during the period of ownership by the mortgagee after foreclosure (or any conveyance by a deed in lieu thereof), all as set forth in Section 25.09 hereof. Tenant shall from time to time, at the request of Landlord or any of Landlord's mortgagees, provide Landlord and such mortgagee with financial information pertaining to Tenant as Landlord or such mortgagee may reasonably request. ARTICLE20 Defa11lts;_ Events of Default 20.01 Defaults. The following shall, if any requirement for notice or lapse of time or both has not been met, constitute Defaults, and, if such requirement for notice or lapse of time have been met, constitute Events of Default hereunder: (1)Occurrence of any event set forth in Article 21 hereof; (2) The failure of Tenant to pay Rent when the same shall be due and payable and the continuance of such failure for a period of five (5) days after receipt by Tenant of notice in writing from Landlord specifying such failure;
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(3) The failure of Tenant to observe any covenant made by it in Sections 13.01, 15.01 and 25.03 hereof; (4) The failure of Tenant to keep, observe or perform any of the other covenants, conditions and agreements herein contained on Tenant's part to be kept, observed or performed and the continuance of such failure without the curing of same for a period of twenty (20) days after receipt by Tenant of notice in writing from Landlord specifying in reasonable detail the nature of such failure. 20.02 Tenant's Best Efforts. In the event that the Default under Section 20.01(4) is of such a nature that it cannot be cured within such twenty (20) day period, then such Default shall not be deemed to be an Event of Default so long as Tenant, after receiving such notice, proceeds to cure the Default as soon as reasonably possible and continues to take all steps necessary to complete the same within a period of time which, under all prevailing circumstances, shall be reasonable. No such Default under Section 20.01(4) shall be deemed to be an Event of Default if and so long as Tenant shall be so proceeding to cure the same in good faith or be delayed in or prevented from curing the same by reason of Force Majeure. ARTICLE21 Insolvency 21.01 Insolvency. If (1) there occurs with respect to Tenant an Insolvency or (2) any execution or attachment is issued against Tenant or any of its property and as a result thereof the Premises are taken or occupied by some Person other than the Tenant, except as may herein be permitted, then an Event of Default hereunder shall be deemed to have occurred so that the provisions of Article 22 hereof shall become effective and Landlord shall have the rights and remedies provided for therein. ARTICLE22 Landlord's Remedies; Damages on Default 22.01 Landlord's Remedies. If an Event of Default shall occur and be continuing, Landlord may, at its option, give to Tenant a notice terminating this Lease upon a date specified in such notice, or Landlord may enter the Premises for the purpose of terminating this Lease, and upon the date specified in said notice or upon such entry the term and estate hereby vested in Tenant shall cease and any and all other right, title and interest of Tenant hereunder shall likewise cease without further notice or lapse of time, as fully and with like effect as if the entire Lease Term had lapsed, but Tenant shall continue to be liable to Landlord as hereinafter provided.
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If such Event of Default results from Tenant's failure to pay any sums payable under Section 7.01, Landlord may, at its option, in addition to or in lieu of the other remedies available to Landlord, refuse Tenant access to the Premises. If such Event of Default results from Tenant's failure to pay a charge for an Additional Service pursuant to Section 8.03 hereof, Landlord may, without further notice to Tenant, discontinue any or all of such Additional Services. 22.02 Surrender. Upon any termination of this Lease as the result of an Event of Default, Tenant shall quit and peacefully surrender the Premises to Landlord. Upon or at any time after any such termination, Landlord may without further notice enter the Premises and possess itself thereof by summary proceedings or otherwise, and may dispossess Tenant and remove Tenant and all other Persons and property from the Premises and may have, hold and enjoy the Premises and the right to receive all rental income of and from the same. 22.03 Right to Relet. At any time from time to time after any such termination, Landlord may relet the Premises or any part thereof, in the name of Landlord or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Lease Term) and on such conditions (which may include concessions or free rent) as Landlord, in its reasonable discretion, may determine and may collect and receive the rents therefor. Landlord shall in no way be responsible or liable for any failure to relet the Premises or any part thereof, or for any failure to collect any rent due upon any such reletting. 22.04 Survival of Covenants. No such termination of this Lease shall relieve Tenant of its liability and obligations under this Lease and such liability and obligations shall survive any such termination. Tenant shall indemnify and hold Landlord harmless from all loss, cost, expense, damage or liability arising out of or in connection with such termination. In the event of any termination, Landlord shall make reasonable efforts to rrut1gate damages and Tenant shall pay the Basic Rent, Additional Rent and other sums payable hereunder up to the time of such termination, and. thereafter Tenant, until the end of what would have been the Term of this Lease in the absence of such termination, and whether or not the Premises shall have been relet, shall be liable to Landlord for, and shall pay to Landlord, as current damages, the Basic Rent, Additional Rent and other sums which would be payable hereunder if such termination had not occurred, less the net proceeds, if any, of any reletting of the Premises , after deducting all expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of employees, alteration costs and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days which the Basic Rent would have been payable hereunder if this Lease had not been terminated.
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At any time after such termination, whether or not Landlord shall have collected any such current damages and in lieu of all such current damages beyond the date of such demand, at Landlord's election Tenant shall pay to Landlord an amount equal to the excess, if any of the Basic Rent, Additional Rent and other sums as hereinbefore provided which this paragraph would be payable hereunder from the date of such demand (assuming that for the purposes of this paragraph, annual payments by Tenant on account of Taxes and Operating Expenses would be the same as the payments required for the immediately preceding Calendar Year) for what would be the then unexpired Term of this Lease if the same had remained in effect, over the then fair net value of the Premises for the same period. 22.05 Right to Equitable Relief. If there shall occur a Default or threatened Default, Landlord shall be entitled to enjoin such Default or threatened Default and shall have the right to invoke any right and remedy allowed at law or in equity or by statute or otherwise as though re-entry, summary proceedings, and other remedies were not provided for in this Lease. 22.06 Right to Self Help; Interest on Overdue Rent. If an Event of Default shall occur and be continuing, Landlord shall have the right, but shall not be obligated, to enter upon the Premises and to perform the defaulted obligation notwithstanding the fact that no specific provision for such substituted performance by Landlord is made in this Lease with respect to such Event of Default. In performing such obligation, Landlord may make any payment of money or perform any other act. The aggregate of (i) all sums so paid by Landlord, (ii) interest (at the rate of 1 1/2% per month or the highest rate permitted by law, whichever is less) on such sums and (iii) all necessary incidental costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be Rent under this Lease and shall be payable to Landlord immediately upon demand. Landlord may exercise the foregoing rights without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease. All Rent not paid when due shall bear interest at the rate provided in the preceding paragraph, payable on demand. 22.07 Payment of Landlord's Cost of Enforcement Tenant shall pay, on demand, Landlord's expenses, including reasonable attorney's fees, incurred in enforcing any obligation of Tenant under this Lease or in curing any default by Tenant under this Lease as provided in Section 22.06. 22.08 F11I"ther Remedies. Upon any termination of this Lease pursuant to Section 22.01, or at any time thereafter, Landlord may, in addition to and without prejudice to any other rights and remedies Landlord shall have at law or in equity, re-enter the Premises, and recover possession thereof and may dispossess any or all occupants of the Premises in the manner prescribed by the statute relating to summary proceedings, or similar statute(s); but Tenant in such case shall remain liable to Landlord as hereinbefore provided.
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ARTICLE23 Waivers 23.01 No Waivers. Failure of Landlord to complain of any act or omission on the part of Tenant no matter how long the same may continue, shall not be deemed to be a waiver by said Landlord of any of its rights hereunder. No waiver by Landlord of any provision of this Lease shall be deemed a waiver of a breach of the same or any other provision. No acceptance by Landlord of any partial payment shall constitute an accord or satisfaction but shall only be deemed a partial payment on account. ARTICLE24 Security Deposit 24.01 Security Deposit. Simultaneously with the execution and delivery of this Lease, Tenant shall deliver the Security Deposit to Landlord, either in cash or in the form of a letter of credit. If any portion of the Security Deposit is a letter of credit, the applicable letter of credit shall be an irrevocable standby letter of credit (the "Letter of Credit") in the amount of the Security Deposit issued in the form attached hereto as Exhibit L/C by a bank satisfactory to Landlord (the "Bank"). Without limiting the generality of the foregoing, the Letter of Credit shall name Landlord as the beneficiary and provide that is may be drawn against upon the furnishing of a statement to the Bank, from an individual who purports to be an authorized officer or agent of Landlord, that the Letter of Credit is being drawn upon in accordance with the terms of this Lease. Landlord shall hold the Letter of credit as security for the performance by Tenant of all obligations on the part of Tenant to be kept and performed under this Lease. The Security Deposit may not be deemed by Tenant to constitute rent for any month. Landlord shall have the right, from time to time without prejudice to any other remedy Landlord may have on account thereof, to draw upon the Letter of Credit and apply such funds to Landlord's damages arising from any default on the part of Tenant, in which event Tenant shall immediately upon request by Landlord restore the balance of the Letter of Credit to the amount required hereunder. Tenant shall not have the right to call upon Landlord to apply all or any part of the Security Deposit to cure any default or fulfill an obligation of Tenant, but such use shall be solely in the discretion of Landlord. Tenant shall maintain the Letter of Credit, or a substitute Letter of credit from the Bank (or another bank approved by Landlord and conforming to the requirements of this Section 24.01), in accordance with the terms hereof, in full force and effect at all times through the Term and for thirty (30) days thereafter. If the Letter of Credit will expire, Tenant shall replace the Letter of Credit deposited with Landlord by providing Landlord with a substitute Letter of Credit at least thirty (30) days prior
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(each such 30th day prior being referred to herein as a "Change Date") to the expiration date of the then effective Letter of Credit in the amount required hereunder. Any failure by Tenant to provide such a substitute Letter of Credit shall be a Default of Tenant for which there shall be no grace period, and shall entitle Landlord to draw on all funds available under the Letter of Credit and hold the same as security for Tenant's performance of its obligations under this Lease. If Landlord in its reasonable judgment determines that the bank issuing the Letter of Credit currently held by Landlord no longer satisfies the requirements of this Lease or is no longer of sufficient net worth or creditworthiness, Landlord may require that Tenant, within thirty (30) days of receipt of notice thereof, obtain, at Tenant's sole cost and expense, a substitute Letter of Credit from another bank reasonably approved by Landlord and satisfying the requirements of this Lease. As soon as reasonably practicable following the expiration or earlier termination of the Term, Landlord shall return the Security Deposit or so much thereof as shall not have theretofore been applied in accordance with the terms of this section or drawn upon by Landlord and applied by Landlord to cure any Default of Tenant hereunder. Landlord shall have no obligation to pay interest on Letter of Credit or any proceeds therefrom. No party other than Landlord, its successors and assigns, and Tenant shall have any rights to such proceeds as a third-party beneficiary. If Landlord conveys Landlord's interest under this Lease, the Letter of Credit may be assigned or negotiated by Landlord to Landlord's grantee, and if so assigned or negotiated, provided Landlord gives Tenant notice of the name of such grantee, Tenant agrees to look solely to such grantee for proper application of the Letter of Credit in accordance with the terms of this Section and the return thereof in accordance herewith. Upon such delivery, Tenant hereby releases grantor Landlord of any and all liability with respect to the Letter of Credit, the application of any proceeds thereof and its return, and Tenant agrees to look solely to such grantee. This provision shall also apply to subsequent grantees. Neither the holder of a mortgage nor the lessor in a ground lease of property which includes the Premises shall ever be responsible to Tenant for the return or application of Security Deposit, whether or not it succeeds to the position of Landlord hereunder, unless the Security Deposit shall have been received in hand by such holder or ground lessor. If any portion of the Security Deposit shall be in the form of cash (the "Cash Security Deposit"), then the following provisions shall be applicable. At any time during the Term, Tenant shall have the right to substitute a Cash Security Deposit for the Letter of Credit. The Cash Security Deposit will be held by Landlord in the amount of the Security Deposit as security for the performance by Tenant of all obligations on the part of Tenant to be kept and performed under this Lease. The Cash Security Deposit may not be deemed by Tenant to constitute rent for any month. Landlord shall have no obligation to pay interest on the Cash Security Deposit. Landlord shall not be required to hold the Cash Security Deposit in a segregated account. No party other than Landlord, its successors and assigns and Tenant shall have any rights to the Cash Security Deposit as a third-party beneficiary. The then remaining portion of the Cash Security Deposit shall be returned to Tenant as soon as reasonably practicable after the expiration of the
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Term, provided there then exists no Default of Tenant. Tenant shall not have the right to call upon Landlord to apply all or any part of the Cash Security Deposit to cure any default or fulfill any obligation of Tenant, but such use shall be solely in the discretion of Landlord. In the event that Landlord applies any portion or all of the Cash Security Deposit to Landlord's damages arising from any default of Tenant, Tenant shall immediately upon request by Landlord restore the balance of the Cash Security Deposit to the amount required under this Lease. Upon any conveyance by Landlord of its interest under this Lease, the Cash Security Deposit shall be delivered by Landlord to Landlord's grantee. Upon any such delivery, Tenant hereby releases Landlord herein named of any and all liability with respect to the Cash Security Deposit, its application and return, and Tenant agrees to look solely to such grantee or transferee. This provision shall also apply to subsequent grantees and transferees. Neither the holder of a mortgage nor the lessor in a ground lease of property which includes the Premises shall ever be responsible to Tenant for the return or application of Security Deposit, whether or not it succeeds to the position of Landlord hereunder, unless the Security Deposit shall have been received in hand by such holder or ground lessor. In the event that on two (2) occasions during the Lease Term a Default shall occur for which Landlord shall give Tenant a notice of Default, whether or not such Default shall be timely cured, and without limiting Landlord's other rights and remedies under this Lease, Tenant shall, immediately upon notice from Landlord, increase the Security Deposit by paying to Landlord an additional amount equal to two hundred percent (200%) of the original Security Deposit, the original Security Deposit and such amount to be held thereafter by Landlord as the Security Deposit under the terms and provisions hereof. ARTICLE25 General Provisions 25.01 Force Majeure. In the event that Landlord or Tenant shall be delayed, hindered in or prevented from the performance of any act required hereunder by reason of Force Majeure, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. 25.02 Notices and Communications. All notices, demands, requests, consents, approvals and other communications provided for or permitted under this Lease shall be in writing, either delivered by hand or sent by registered or certified mail, postage prepaid or by a recognized overnight courier which maintains delivery records, to the following address: (a) if to Landlord at the address stated in Section 1.01 hereof, or at such other address as Landlord shall have designated in writing to the Tenant, with a copy to such Persons as Landlord shall have designated in writing to Tenant, or
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(b) if to Tenant at the address stated in Section 1.01 hereof, or at such other address as the Tenant shall have designated in writing to the Landlord, with a copy to such Persons as Tenant shall have designated in writing to Landlord. Any notice provided for herein shall become effective only upon and at the time of receipt by the Person to whom it is given, provided that (a) if such notice is mailed by registered or certified mail, it shall be deemed to be received on (i) the third Business Day following the mailing thereof or (ii) the day of its receipt, if a Business Day, or the next succeeding Business Day, whichever of (i) or (ii) shall be the earlier; or (b) if such notice is sent by a recognized overnight courier, it shall be deemed to be received on the first Business Day after receipt by such courier. 25.03 Tenant Estoppel Certificate. Tenant shall, without charge, at any time and from time to time hereafter, within ten (10) days after written request of Landlord, certify by written instrument duly executed and acknowledged to Landlord or any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any Person specified in such request; (a) as to whether this Lease has been supplemented or amended, and if so, the substance and manner of such supplement or amendment, (b) as to the existence of any offsets, counterclaims or defenses thereto on the part of Tenant, (c) as to the existence of any Default or Event of Default, (d) as to the Term Commencement Date and Stated Expiration Date, and (e) as to any other matters as may reasonably be so requested, in the form of Exhibit F. Any such certificate may be relied upon by Landlord and any other Person to whom the same may be exhibited or delivered, and the contents of such certificate shall be binding on the party executing same. Tenant shall in addition, within 5 Business Days of the Term Commencement Date, execute and deliver to Landlord a tenant estoppel certificate substantially in the form attached hereto as Exhibit F. 25.04 Renewal. If this Lease is renewed or extended the provisions of Section 7.01 shall not apply. 25.05 Governing Law. This Lease and the performance thereof shall be governed, interpreted, construed and regulated by the laws of The Commonwealth of Massachusetts. 25.06 Partial Invalidity. If any term, covenant, condition or provision of this Lease or the application thereof to any person or circumstance shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.
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25.07 Notice of Lease. The parties will at any time, at the request of either one, promptly execute duplicate originals of an instrument, in recordable form, which will constitute a Notice of Lease, setting forth a description of the Premises and the Lease Term. The cost of review and recording shall be borne by Tenant. 25.08 Interpretation. The Section headings used herein are for reference and convenience only and shall not enter into the interpretation hereof. This Lease may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 25.09 Bind and Inure; Limitation of Landlord's Liability. The obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No owner of the Land and Building shall be liable under this Lease except for breaches of Landlord's obligations occurring while owner of the Land and Building. The obligations of Landlord shall be binding upon the assets of Landlord which comprise the Land and Building but not upon other assets of Landlord. No individual partner, trustee, stockholder, officer, director, employee or beneficiary of Landlord shall be personally liable under this Lease and Tenant shall look solely to Landlord's interest in the Land and Building in pursuit of its remedies upon an event of default hereunder, and the general assets of Landlord and its partners, trustees, stockholders, officers, employees or beneficiaries of Landlord shall not be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Tenant. 25.10 Parties. Except as herein otherwise expressly provided, the covenants, conditions and agreements contained in this Lease shall be binding upon the heirs, successors and assigns of the parties hereto. ARTICLE26 Miscellaneous 26.01 Extended Hours HVAC. Tenant shall have extended hours available for HVAC. Extended hours shall be defined as from 6:30 PM to 8:00 AM Monday through Friday and any time on Saturday or Sunday or other non-Business Day. If Tenant shall require space heating or cooling during extended hours, Landlord shall furnish such service at Tenant's expense, including reasonable costs and management expense, provided that Tenant gives Landlord at least one (1) Business Day advance notice. In the event Tenant introduces onto the Premises equipment which overloads the systems, and/or in any other
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way causes the systems not adequately to perform their proper functions, supplementary systems may at Landlord's option be provided by Landlord at Tenant's expense. 26.02 Holdover Clause. Any holding over by Tenant after the expiration of the Term of this Lease shall be treated as a daily tenancy at sufferance at a rate equal to the greater of the then fair rent value of the Premises or two (2) times the sum of Rent in effect on the Stated Expiration Date. Tenant shall also pay to Landlord all damages, direct and/ or indirect (including any loss of a tenant or rental income), sustained by reason of any such holding over. 26.03 Relocation. Landlord reserves the right to relocate Tenant to a similar space within the Building or a comparable space in another building within the local area at Landlord's cost. 26.04 Brokerage. Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Lease other than Cassidy Turley FHO and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt other than Cassidy Turley FHO. 26.05 Landlord's Expenses Regarding Consents. Tenant shall reimburse Landlord promptly on demand for all reasonable legal and other expenses incurred by Landlord in connection with all requests by Tenant for consent or approval hereunder. 26.06 Signage. Landlord shall provide building standard Tenant signage on the Building's lobby directory and on Tenant's suite entrance. 26.07 Financial Statements. Within ten (10) days after request by Landlord from time to time, Tenant shall deliver to Landlord Tenant's audited financial statements (which shall be for the latest available year and in any event for a year ended not more than fifteen (15) months prior to Landlord's request), which, if Tenant is publicly held, may consist of Tenant's annual report to its shareholders. Such financial statements may be delivered to Landlord's mortgagees and lenders and prospective mortgagees, lenders, investors and purchasers. 26.08 Anti-Terrorism Representations. Tenant represents and warrants to Landlord that: (a) Tenant is not, and shall not during the Term of this Lease become, a person or entity with whom Landlord is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools required
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to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the "USA Patriot Act") and Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto, including, without limitation, persons and entities named on the Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List (collectively, "Prohibited Persons"); and (b) Tenant is not currently conducting any business or engaged in any transactions or dealings, or otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises; and (c) Tenant will not in the future during the Term of this Lease engage in any transactions or dealings, or be otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises; and (d) Tenant shall provide a written list of the names of the persons holding a direct ownership interest in the Tenant for purposes of compliance with Presidential Executive Order 13224 (issued September 24, 2001). 26.09 Furniture. Tenant shall be allowed to use the furniture that is currently in the space through the term of the Lease. Landlord shall retain ownership of the furniture.
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ARTICLE27 Entire Agreement 27.01 Entire Agreement. No oral statemen t or prior written matter shall have any force or effect. This Agreement shall not be modified or canceled except by writing subscribed to by all parties. No representations, inducement, promises or agreements , oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The sub mission of this Lease for examination, review , negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Lease shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. Executed as a sealed instrument as of the14th d a y of September, 2012. LANDLORD: BEDFORD STREET LLC By: Carruth Capita l, LLC Its Manager By:/:;,/ 7./ V: I ':::;;=--.. Christopher F. Egan, President and Managing Member of Carruth Capital, LLC , not individually and without personal liability TENANT: iSPECIMEN, INC. By: /s/ Christopher Ianelli Printed Name: Christopher Ianelli Title:President & CEO
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBIT A (LEGAL DESCRIPTION) That certain parcel of land, together with the buildings and improvements thereon, situated in Lexington, in the County of Middlesex and Commonwealth of Massachusetts, bounded and described as follows: NORTHEASTERLY: SOUTHEASTERLY: NORTHEASTERLY: SOUTHEASTERLY: SOUTHWESTERLY: NORTHWESTERLY: by the southwesterly line of Bedford Street, three hundred seventy-two and 58/100 feet; nine hundred twenty-nine and 19/100 feet, and; two hundred forty-six and 94/100 feet, by Lot 1 as shown on plan hereinafter mentioned; by land now or formerly of the Town of Lexington, five hundred thirty-nine and 49/100 feet; by the middle line of a ditch on land now or formerly of Russell N. Cox et al, Trs., three hundred twenty-four and 37/100 feet; and by land now or formerly of the Boston Edison Company, fourteen hundred seventy-nine and 41/100 feet. Said parcel is shown as Lot 2 on said plan, (Plan No. 31699B) All of said boundaries are determined by the Court to be located as shown on a subdivision plan, as approved by the Court, filed in the Land Registration Office, a copy of which is filed in Registry of Deeds for the South Registry District of Middlesex County in Registration Book 697, Page 180, with Certificate 113530. For Title, see Deed recorded with Middlesex County South District Registry of Deeds Certificate of Title# 206336, Book 1611, Page 186.
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITB (PLAN SHOWING TENANT'S SPACE) Any discrepancy between this Exhibit B and Exhibit C shall be resolved in favor of Exhibit B.
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EXHIBIT B 0 f /II ' - L I ' ::l±:-□,= o·5· 25· 1'1o· SECOND FLOOR PLAN SUITE 2050 450 BEDFORD STREET LEXINGTON, MASSACHUSETTS 2012_0393MPI08/23/2012 SECOND THIS SHEET FLOOR KEY PLAN
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITC MEMORANDUM OF WORK AND INSTALLATIONS TO BE INITIALLY PERFORMED AND FURNISHED IN THE PREMISES Tenant to accept Premises in "AS IS" condition, except Landlord, at Landlord's sole cost and expense shall infill one (1) doorway between the Premises and the adjacent space. Tenant shall have access to the Premises prior to the Term Commencement Date to install equipment and furnishings at no additional charge.
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITD SERVICES TO BE PROVIDED BY LANDLORD (AS OPERATING EXPENSES) A.Replacement of fluorescent tubes and starters in overhead parabolic light fixtures as needed. B.Hot and cold water for lavatory and drinking purposes. C.Toilet supplies including soap, paper or cloth towels, and toilet tissue for lavatories. D.Janitor services in accordance with the following schedule and to be accomplished unless otherwise indicated, five nights per week after Tenant's normal working hours: Entrance Doors: Entrance Floor: Broadloom: Wastepaper Containers: Entrance glass will be cleaned five times per week. Entrance floor will be polished five times per week. All carpeted areas will be vacuumed five times per week. Broadloom will be shampooed upon request, at an additional cost to Tenant. Wastepaper containers will be emptied five times per week; plastic liner bags will be provided for wastepaper containers; liners will be changed once per week. Water Fountains: All water fountains will be sanitized and polished five times per week. Washrooms: Scuff Marks: Tile Floors: Washrooms will be cleaned and serviced five times per week. This will include refilling all paper towel, toilet tissue, and soap dispensers, cleaning all towel and trash containers, cleaning and polishing all stainless steel fixtures, cleaning toilets, washing and sanitizing all wash basins and shelves, cleaning and polishing all mirrors, removing all disfigurations such as ink marks, drawings, etc. from all partitions and walls, damp mopping of floors. All scuff marks will be removed five times per week from all scuff plates on doors. All floors will be swept five times per week. All corridors and office floors will be polished five times per week. Floors will be stripped whenever necessary.
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E.Proper care of grounds surrounding the Building, including care of lawns and shrubs and including removal of litter. F.Maintaining and cleaning the sidewalks and parking areas in front of and around the Building including snow removal. G.Provision of adequate lighting for the parking areas servicing the Building. H.Exterior windows will be washed annually as a common area expense. I.HVAC (Heating, Ventilation, and Air-Conditioning) during normal business hours (i.e. non-extended hours).
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITE RULES AND REGULATIONS 1.Heating, lighting and plumbing: The Landlord should be notified at once of any trouble with heating, lighting or plumbing fixtures. Tenants must not leave the doors of the Premises unlocked at night. 2.The sidewalks, entrances, halls and stairways shall not be obstructed by any Tenant or used for any purposes other than ingress and egress to and from their respective Premises, and no articles or rubbish shall be left therein. 3.No toilet fixture shall be used for any purpose other than that for which it is intended, and no sweepings, rubbish, rags, ashes or other substances shall be thrown therein. 4.The weight and position of all safes and heavy equipment or machines shall be subject to the approval of the Landlord. 5.Lettering on doors, tablets and building directory shall be subject to the approval of the Landlord; no lettering shall be allowed on outside windows. 6.No wires for telephone service, electric lights, messenger service or for any other purpose shall be put in the Premises without the consent of the Landlord. 7.No glass in doors or elsewhere through which light is admitted into any part of the building shall be obstructed. 8.No animals or birds shall be kept in or about the Building. 9.All freight, furniture, etc. must be received and delivered through entrances to the Building designated for such purpose unless otherwise authorized by the Landlord. 10.Nothing shall be thrown from or taken in through the windows, nor shall anything be left outside the Building on the windowsills of the Premises. 11.No person shall loiter in the halls, corridors, or lavatories. 12.The Landlord, its agents and employees shall have access at reasonable times to perform their duties in the maintenance and operation of the Premises.
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13.No Tenant shall use any method of heating other than that provided for in the Tenant's Lease without the consent of the Landlord. 14.Any cost associated with damage caused to the Building or the Premises or to any person or property herein as a result of any breach of any of the rules and regulations by the Tenant shall be borne by the Tenant. 15.The Landlord reserves the right to make any such other and further rules and regulations as, in its judgment, may from time to time be necessary for maintaining the safety and cleanliness of the Premises and Building for the preservation of good order therein. 16.All office areas shall require floor mats under any chairs that have casters, so that the carpet shall remain in good order and repair.
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 To:<>("Lender") <> <> Attn: <> EXHIBITF TENANT ESTOPPEL CERTIFICATE Re:LeaseAgreementdated--------andamended ("Lease"), between BEDFORD STREET LLC, as "Landlord", and iSPECIMEN, INC., as "Tenant," guaranteed by NI A ("Guarantor") for leased premises known as '150 Bedford Street, Lexington, Massachusetts 02420 (the "Premises") of the property Suite 2050 (suite or separate Tenant address) commonly known as 450 Bedford Street, Lexington, Massachusetts 02420 (the Property"). 1.Tenant hereby certifies that the following representations with respect to the Lease are accurate and complete as of the date hereof: a. Dates of all amendments, letter agreements, modifications and waivers related to the Lease b.Commencement Date c.Expiration Date d. Current Annual Base Rent Adjustment DateRental Amount e.Fixed or CPI Rent Increases
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k.Termination OptionsTermination Date-------Fees Payable _ 2.Tenant further certifies to Lender that: a. the Lease is presently in full force and effect and represents the entire agreement between Tenant and Landlord with respect to the Premises; b. the Lease has not been assigned and the Premises have not been sublet by Tenant; c. Tenant has accepted and is occupying the Premises, all construction required by the Lease has been completed and any payment, credits or abatements required to be given by Landlord to Tenant have been given; d. Tenant is open for business or is operating its business at the Premises; e. no installment of rent or other charges under the Lease other than current monthly rent has been paid more than 30 days in advance and Tenant is not in arrears on any rental payment or other charges; f.Landlord has no obligation to segregate the security deposit or to pay interest thereon; g. Landlord is not in default under the Lease and no event has occurred which, with the giving of notice or passage of time, or both, could result in a default by Landlord; h. Tenant has no existing defenses, offsets, liens, claims or credits against the payment obligations under the Lease; 1.Tenant has not been granted any options or rights to terminate the Lease earlier than the Expiration Date [except as stated in paragraph 1 (k)]; j.Tenant has not been granted any options or rights of first refusal to purchase the Premises or the Property; k. Tenant has not received notice of violation of any federal, state, county or municipal laws, regulations, ordinances, orders or directives relating to the use or condition of the Premises or the Property; and l.no hazardous wastes or toxic substances, as defined by all applicable federal, state or local statutes, rules or regulations have been disposed, stored or treated on or about the Premises or the Property by Tenant. m. the Lease does not give the Tenant any operating exclusives for the Property. 3.This certification is made with the knowledge that Lender is about to provide Landlord with financing which shall be secured by a Deed of Trust (or Mortgage), Security Agreement and Assignment of Rents, Leases and Contracts ("Mortgage") upon the Property. Tenant acknowledges that Landlord's interest in the Lease is being duly assigned to Lender as security for Lender's loan to Landlord. All rent payments under the Lease shall continue to be paid to Landlord in accordance with the terms of the Lease until Tenant is notified otherwise in writing by Lender or its successors and assigns. Tenant further acknowledges and agrees that Lender and Lender's respective successors
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and assigns holding the Mortgage at any time after the date of this certificate shall have the right to rely on the information contained in this certificate. The undersigned is authorized to execute this Tenant Estoppel Certificate on behalf of Tenant. TENANT iSPECIMEN, INC. By: _ Printed Name: Title: Date:
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITG AGREEMENT OF SUBORDINATION !''ION-DISTURBANCE AND ATTORNMENT THIS AGREEMENT is dated the day of ------between <> ("Lender") and iSPECIMEN, INC., a Delaware C corporation ("Tenant"). RECITALS: A.Tenant has executed that certain lease dated (the "Lease") with BEDFORD STREET LLC, as Landlord ("Landlord") covering the premises described in the Lease ("Premises") in that certain building located at 450 Bedford Street, Lexington, Massachusetts (the "Property") and more particularly described in Exhibit A attached hereto and made a part hereof, by this reference; and B. Lender has made or has agreed to make a mortgage loan to Landlord secured by a mortgage or deed of trust encumbering the Property which includes an assignment of Landlord's interest in the Lease (the "Mortgage"); and C.Tenant and Lender desire to confirm their understanding with respect to the Lease and the Mortgage. NOW, THEREFORE, in consideration of the covenants, terms, conditions, agreements contained herein, the parties hereto agree as follows: 1.The Lease and any extensions, modifications or renewals thereof, including but not limited to any option to purchase or right of first refusal to purchase the Property or any portion thereof, if any, is and shall continue to be subject and subordinate in all respects to the Mortgage and the lien created thereby, and to any advancements made thereunder and to any consolidations, extensions, modifications or renewals thereof. 2.Tenant agrees to deliver to Lender, in the manner set forth in paragraph 7, a copy of any notice of default sent to Landlord by Tenant. If Landlord fails to cure such default within the time provided in the Lease, Lender shall have the right, but not the obligation to cure such default on behalf of Landlord within thirty (30) calendar days after the time provided for Landlord to cure such default in the Lease or within a reasonable period if such default cannot be cured within that time, provided Lender is proceeding with due diligence to cure such default. In such event Tenant shall not terminate the Lease while such remedies are being diligently pursued by Lender. Further, Tenant shall not terminate the Lease on the basis of any default by Landlord which is incurable by Lender (such as,
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for example, the bankruptcy of Landlord or breach of any representation by Landlord), provided Lender is proceeding with due diligence to commence an action to appoint a receiver or to obtain the right to possession of the Property by foreclosure, deed in lieu of foreclosure, or otherwise ("Foreclosure"). Tenant hereby agrees that no action taken by Lender to enforce any rights under the Mortgage or related security documents, by reason of any default thereunder (including, without limitation, the appointment of a receiver, any Foreclosure or any demand for rent under any assignment of rents or leases) shall give rise to any right of Tenant to terminate the Lease nor shall such action invalidate or constitute a breach of any of the terms of the Lease. 3.So long as Tenant is not in default under the Lease, Tenant's possession and occupancy of the Premises shall not be disturbed by Lender during the term of the Lease or any extension thereof. 4.If Lender succeeds to the interest of Landlord under the Lease, subject to Tenant's performance of its obligations under the Lease, the Lease will continue in full force and effect. Thereupon, Lender shall recognize the Lease and Tenant's rights thereunder and Tenant shall make full and complete attornment to Lender as substitute Landlord upon the same terms, covenants and conditions as provided in the Lease, except for any option to purchase or right of first refusal to purchase the Property as may be provided in the Lease. Further, Tenant agrees that any such option or right of first refusal to purchase the Property or any portion thereof, as may be provided in the Lease shall not apply to and shall not in any way impair or delay any Foreclosure, as defined herein. 5.Tenant agrees that, if Lender shall succeed to the interest of Landlord under the Lease, Lender, its successors and assigns, shall not be: (a) liable for any prior act or omission of Landlord or any prior Landlord or consequential damages arising therefrom; or (b)subject to any offsets or defenses which Tenant might have as to Landlord or any prior Landlord; or (c) required or obligated to credit Tenant with any rent or additional rent for any rental period beyond the then current month which Tenant might have paid Landlord; or (d)bound by any material amendments or modifications of the Lease such as those affecting rent, term or permitted use made without Lender's prior written consent; or (e) liable for refund of all or any part of any security deposit unless such security deposit shall have been actually received by Lender. 6.The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The words, "Lender," "Landlord" and "Tenant" shall include their respective heirs, legatees, executors, administrators, beneficiaries, successors and assigns.
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7.All notices, and all other communication with respect to this Agreement, shall be directed as follows:if to Lender, ("Lender's Address") or such other address as Lender may designate in writing to Tenant and, if to Tenant, at the address set forth in the Lease or at such other address as Tenant may designate in writing to Lender. All notices shall be in writing and shall be (a) hand-delivered, (b) sent by United States express mail or by private overnight courier, or (c) served by certified mail postage prepaid, return receipt requested, to the appropriate address set forth above. Notices served as provided in (a) and (b) shall be deemed to be effective upon delivery. Any notice served by certified mail shall be deposited in the United States mail with postage thereon fully prepaid and shall be deemed effective on the day of actual delivery as shown by the addressee's return receipt or the expiration of three business days after the date of mailing, whichever is earlier in time. 8.This Agreement contains the entire agreement between the parties and no modifications shall be binding upon any party hereto unless set forth in a document duly executed by or on behalf of such party. 9.This Agreement may be executed in multiple counterparts, all of which shall be deemed originals and with the same effect as if all parties had signed the same document. All of such counterparts shall be construed together and shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. LENDER: <> TENANT: iSPECIMEN, INC. By: _ By: _ Its Authorized Signatories By: _ Printed Name:. _ Title: _
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBIT I CERTIFICATE OF VOTE A meeting of The Board of Directors of iSPECIMEN, INC., was held on September 14, 2012 at the office located at 275 Grove Street, Suite 2-400, Newton, Massachusetts 02466. Christopher Ianelli, the President of the Corporation, presided at the meeting and declared that a quorum of the Board of Directors was present and in attendance. Upon motion duly made and seconded, the Board of Directors unanimously VOTED: That Christopher Ianelli, President of iSPECIMEN, INC., be and is hereby authorized, in name of, and on behalf of the said Corporation, with respect to all real estate of said Corporation now, or at any time hereafter, leased by said Corporation, to sign, seal, acknowledge, and bind said Corporation regarding any and all leases, releases, notes, assignments, agreements, notices, estoppels, affidavits specifically including property at 450 Bedford Street, Lexington, Massachusetts and all such instrument s as he may by his execution thereof approve, said authority to remain in full force and effect until notice of revocation thereof shall be recorded in each Registry of /'\ Deeds wherein this Vote shall be recorded. A TRUE COPY: ATTEST: 1 I, Joseph R. Ianelli, Secretary, hereby certify that I am the duly elected and qualified Secretary for the above named Corporation and that the above is a true copy of the Vote that was passed, and that Christopher Ianelli is the duly elected and qualified president of the Corporation. Attest: Secretary 51
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBIT J PARKING Tenant, upon the commencement of its occupancy of the Premises, shall have the right to use for its designated employees, as appurtenant to the Premises no more than six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot. Tenant shall use the parking areas solely for parking registered passenger vehicles. Storage trailers, storage containers, busses, motor homes, trucks and like vehicles are not permitted. Landlord shall in no event be required to enforce such rights on Tenant's behalf. Use of such spaces may not be sold, assigned, licensed or otherwise given to any person for any compensation or fee or otherwise. The use of such parking spaces by Tenant may be regulated by rules and regulations issued by the Landlord from time to time. Landlord reserves the right, after reasonable written notice to Tenant, at any time and from time to time to change the location of any parking space or spaces designated for Tenant's use pursuant to this Section.
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BEDFORD STREET LLC 450 Bedford Street Lexington, Massachusetts 02420 EXHIBITL/C FORM_OF LETTER OF CREDIT [NAME OF BANK] Irrevocable Standby Letter of Credit No. Beneficiary:Applicant: Expiration date/ Location: counter at the above address: /at our Ladies and Gentlemen: We hereby establish our Irrevocable Standby Letter of Credit No. in your favor in the amount of$. and for the account of applicant available by your drafts drawn on us at sigh and accompanied by the following required documents: 1.The original of this letter of credit and amendments if any (for our endorsement of drawing, which will be returned unless credit is fully utilized). 2.Beneficiary's statement on its letterhead signed and appropriately completed in the following form: "The undersigned Landlord hereby certifies that the amount drawn hereunder is due and owing to Landlord by ,the Tenant under that certain Lease executed by and between Landlord and Tenant further certifies", either that (a) "There exists a Default of Tenant as defined in the Lease, and further described as follows: [Describe the /default and state the amount due to Landlord on account thereof]; or (b) "We are in receipt of [name of bank's] notice of non-extension of letter of credit No. and the Tenant has failed to provide a replacement letter of credit as required under the Lease. We shall hold, apply and retain the amount drawn as a cash security deposit." Additional Conditions: 1. Partial drawings are allowed.
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2. This letter of credit may be amended to designate the successor in interest of the landlord in the leasehold premises identified hereunder as the beneficiary, only upon presentation of a notarized statement from the current beneficiary requesting us to amend the letter of credit to designate the landlord's successor in interest as the new beneficiary. Special Conditions: It is a condition of this letter of credit that it will be automatically renewed without any amendment for a period of one year from the present or each future successive expiration date, but not beyond -----unless at least thirty (30) days prior to such date we notify you and applicant by overnight mail / courier, proof of receipt required, or by certified mail, return receipt requested, that we elect not to renew this letter of credit for any additional period. In no event this letter of credit will be automatically renewed beyond its final expiry date of Draft(s) must indicate the number and date of this letter of credit. Each draft presented hereunder must be accompanied by this original Letter of Credit for our endorsement thereon of the amount of such draft. This letter of credit sets forth in full the terms of our obligations to you, and our undertaking shall not in any way be amended or amplified by reference to any documents, instruments or any agreement referred to herein or to which this letter of credit relates, and such reference, if any, shall not be deemed to incorporate herein by reference any document, instrument or agreement. We hereby agree with the drawers, endorsers and bonafide holders that the drafts drawn under and in accordance with the terms and conditions of this credit shall be duly honored upon presentation to the drawee, if negotiated on or before the expiration date of this credit as extended in accordance with the terms hereof. Except as otherwise set forth, this credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Publication No. 500.
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FIRST AMENDMENT TO LEASE AGREEMENT This First Amendment to Lease Agreement ("First Amendment") is made and shall be effective for all purposes as of the 9t h day of September, 2013 by and between BEDFORD STREET LLC ("Landlord"), a Massachusetts limited liability company, having a principal place of business at 116 Flanders Road, Suite 2000, Westborough, Massachusetts 01581 and !SPECIMEN INC. ("Tenant") a duly organized and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant and Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of2,142 square feet at 450 Bedford Street, Lexington , Massachusetts, and WHEREAS, Landlord and Tenant desire to extend the Lease Term for an additional l two (2) years and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows: 1. Landlord and Tenant hereby incorporate all terms and provisions of the Lease herein as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this amendment shall have the same meaning given to terms in the Lease. 2. LEASE, FIRST PARAGRAPH: Delete: "275 Grove Street, Suite 2-400, Newton, Massachusetts 02466." Insert: "450 Bedford Street, Suite 2050, Lexington, Massachusetts 02420." 3. LEASE, ARTICLE 1.01 REFERENCE DATA: A. Tenant's Address (for Notice): Delete: "Mr. Christopher Ianelli President iSpecimen Inc. 275 Grove Street, Suite 2-400 Newton, MA 02466 Telephone: 617-279-2488 x 701 Facsimile: 617-279-2488 Mobile: 617-438-0194 Email: cianelli@ispecimen.com With a copy to: None" J·IPUBLIC\Commc,rci 114soBEDFORD\TENANTS\CURRENDISPECJMEN\LEASEIAMEND-1 ORJGINA Ldoc
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Insert: "Mr. Christopher Ianelli President iSpecimen Inc. 450 Bedford Street, Suite 2050 Lexington, MA 02420 Telephone: 617-279-2488 Mobile: 617-438-0194 Email: cianelli@ispecimen.com With a copy to: Michael Kushnir, Esq. Hinckley, Allen & Snyder, LLP 28 State Street Boston, MA 02109 Telephone:617-345-9000 Email: mkushnir@hinckleyallen.com" B. Stated Expiration Date: Delete:"The Stated Expiration Date is December 31, 2013." Insert: "The Stated Expiration Date is December 31, 2015." C. Basic Rent (subject to Section 4.03): See Schedule Below: Insert: 4. LEASE, ARTICLE 26, MISCELLANEOUS: A. A1ticle 26.04, Brokerage: Insert: "Tenant warrants and represents to Landlord that it has had no
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under this Lease beyond applicable periods of notice and grace) on such terms as Landlord has determined to offer such space to third parties. Landlord's notice shall also set forth the proposed date of leasing to third parties (the "RFO Effective Date"). Within ten (I 0) Business Days of being notified of the terms of such proposed offering by Landlord, Tenant shall have the right to notify Landlord that Tenant elects to add such space to the Premises on all of the terms and conditions of this Lease except that the terms set forth in Landlord's notice which are inconsistent with the terms of this Lease shall apply to the additional space so added to the Premises. Such option space shall be added to the Premises on the RFO Effective date and shall remain part of the Premises for the lease term set forth in Landlord's notice. In the event written notice indicating its intent to exercise its option hereunder is not received by Landlord within this ten (I 0) Business Day period, this Right of First Offer shall expire and Landlord may proceed to lease the available space with no further obligation to Tenant. Any additional space shall be leased for a period of thirty-six (36) months or through the Stated Expiration Date whichever period is greater. This Right of First Offer is secondary and subordinate to existing tenant's rights, if any. If Tenant expands into the adjacent space (occupied by Accenture), Tenant shall be allowed to use the furniture that is currently in the space, should it be relinquished by the existing tenant through the term of the Lease, and any extensions or renewals thereof, in its AS IS condition, for no additional cost. Landlord shall retain ownership of the furniture." 5. Tenant Improvements: Tenant shall accept the Premises in AS IS condition except Landlord, at Landlord's expense, shall install a sink and vanity within Tenant's current supply closet and relocate an existing refrigerator located in another suite to Tenant's suite. Landlord shall provide Tenant a statement of work that details the plans, materials, timing and costs for the installation of sink and vanity (the "Work Statement"). Landlord shall review with Tenant, and if acceptable Tenant shall approve, the Work Statement prior to initiating the actual work. Landlord's cost for the installation of sink and vanity shall not exceed $6,500.00. Tenant shall reimburse Landlord for any costs in excess of $6,500.00 or such excess costs shall be amortized over the Lease Term at eight percent (8%) interest. Lai1dlord covenants to complete such improvements as soon as reasonably possible following the execution hereof. In all other respects, the Lease of September 14, 20I 2 is hereby ratified, confirmed, and approved.
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No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The submission of this First Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This First Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Lease Agreement as of the date set forth above. LANDLORD: ALFRED STREET LLC By: Carruth Capital, LLC Its Manager By:_ ------1: "--:_,;C----{;,--"------,-=: -------Christopher Egan, President and Managing Member Carruth Capital, LLC not individually and without personal liability. TENANT: !SPECIMEN INC. By: /s/ Christopher Ianelli Printed Name: Christopher Ianelli Title: President and CEO
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SECOND AMENDMENT TO LEASE AGREEMENT This Second Amendment to Lease Agreement ("Second Amendment") is made and shall be effective for all purposes as of the 1 8tt h day of August, 2014 by and between BEDFORD STREET LLC ("Landlord"), a Massachusetts limited liability company, having a principal place of business at 116 Flanders Road, Suite 2000, Westborough, Massachusetts 01581 and ISPECIMEN INC. ("Tenant") a duly organized and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant and Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of 2,142 square feet at 450 Bedford Street, Lexington, Massachusetts , and where Tenant and Landlord by approval of the First Amendment to Lease Agreement dated September 9, 2013 extending the Lease Term for an additional two (2) years, and WHEREAS, Landlord and Tenant desire to relocate Tenant from Suite 2050 consisting of 2,142 square feet ("Original Premises") to Suite 1010 consisting of 5,799 square feet ("Relocation Premises" ), extend the Lease Term and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises here in contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows: 1. Landlord and Tenant hereby incorporate all terms and provisions of the Lease herein as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this amendment shall have the same meaning given to terms in the Lease. 2. FIRST AMENDMENT TO LEASE AGREEMENT: A. Item 2, First Paragraph: Delete: "450 Bedford Street, Suite 2050, Lexington, Massachusetts 02420." Insert: "450 Bedford Street, Suite 10l 0, Lexington , Massachusetts 02420." B. Item 3A, Tenant' s Address (for Notice): Delete: " Mr. Christopher Ianelli President iSpecimen Inc. 450 Bedford Street, Suite 2050 Lexington, MA 02420
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Telephone: Mobile: Email: 617-279-2488 617-438-0194 cianelli@ispecimen.com With a copy to:Michael Kushnir, Esq. Hinckley, Allen & Snyder, LLP 28 State Street Boston, MA 02109 Telephone:617-345-9000 Email: mkushnir@hinckleyallen.com" Insert:"Mr. Christopher Ianelli President iSpecimen Inc. 450 Bedford Street, Suite 1010 Lexington, MA 02420 Telephone:781-301-6698 Mobile:617-438-0194 Email:cianelli@imecimen.com With a copy to:John Hession, Esq. Cooley, LLP 500 Boylston Street, 14th Floor Boston, MA 02I 16 Email: jhession@cooley.com" B.Item 2B. Stated Expiration Date: Delete:"The Stated Expiration Date is December 31, 2015." Insert:"TheStatedExpiration Datefor theOriginalPremisesis September 30, 2014. The Stated Expiration Date for the RelocationPremises 1s September 30, 2019." C. Item 2C. Basic Rent (subject to Section 4.03): See Schedule Below: Delete: Insert:
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D. Item 4A, Brokerage: Insert: "Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Second Amendment to Lease Agreement and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt with." 3. LEASE, ARTICLE 1.01, REFERENCE DATA: A. Premises: Delete:"The portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. Insert: "From October 1, 2012 to September 30, 2014, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. From October 1, 2014 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-1 attached hereto." B. Rentable Area of Premises: Delete:"Approximately 2,142 Square Feet." Insert: C.Insert: "Original Premises: approximately 2,142 Square Feet. Relocation Premises: approximately 5,799 Square Feet." "Relocation Premises Term Commencement Date: The Relocation Premises Term Commencement Date is October 1, 2014." D. Tenant's Share: Delete:"5.44%" Insert:"From 10/01/2012 to 09/30/2014: 5.44% From 10/01/2014 to the Stated Expiration Date: 14.74%"
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E. Security Deposit: Delete:"$7,086.46 (equal to two [2] months Basic Rent)." Insert: "From 10/01/2012 to 09/30/2014: $7,086.46 (equal to two [2] months Basic Rent) From 10/01/2014 to the Stated Expiration Date: $21,195.36 (equal to two [2] months Basic Rent)." 4. Exhibit J. Parking: Delete: "six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot" Insert: "from 10/01/2012 to 09/30/2014: six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space ;in the Building's covered parking lot from 10/01/2014 to the Stated Expiration Date: sixteen (16) unassigned parking spaces in the Building's common area parking lot and four (4) parking spaces in the Building's covered parking lot 5. Relocation Premises Tenant Improvements: Tenant shall accept the Premises in AS IS condition except Landlord, at Landlord's expense, shall provide a tenant improvement allowance to construct the Relocation Premises in accordance with the attached floor plan. Landlord's cost shall not exceed $164,711.30. Tenant shall reimburse Landlord in a lump sum for any costs in excess of $164,711.30 or such excess costs shall be amortized over the Lease Term at eight percent (8%) interest, at Landlord's election. Tenant requests improvements commence as soon as possible following the signing of the Second Amendment to Lease Agreement. In all other respects, the Lease of September 14, 2012 and the First Amendment to Lease Agreement dated September 9, 2013 are hereby ratified, confirmed, and approved. No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of m1y force or effect. The submission of this Second Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Second Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. Remainder of this page left intentionally blank.
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IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Lease Agreement as of the date set forth above. LANDLORD: BEDFORDSTREETLLC By: Carruth Capital, LLC Its Mana. By: --F---,,.,.,::::..._-= --------------------------------------- Christopher Egan , President and Managing Member of CarruthCapital, LLC not individually and without personal liability. TENANT: ! SPECIMEN INC. By: /s/ Christopher Ianelli Printed Name: Christo pher Ianelli Title: President and CEO
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r I I I I I I I I I I I ( I I I I '--I I ;;o n 00 .i.t.0 ro 3 ::, ro 5 r-ill Ci I £ :r a, :§a I I I I I JI
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THIRD AMENDMENT TO LEASE AGREEMENT This Third Amendment to Lea Agreement ("Third Amendment") is made and shall be effective for all purposes as of the 4th Day of December, 2014 by and between BEDFORD STREET LLC ("Landlord") , a Massachusetts limited liability company, having a principal place of business at 116 Flanders Road, Suite 2000, Westborough, Massachusetts 01581 and !SPECIMEN INC. ("Tenant") a duly organized and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant and Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of 2,142 square feet at 450 Bedford Street, Lexington, Massachusetts, and where Tenant and Landlord by approval of the First Amendment to Lease Agreement dated September 9, 2013 extending the Lease Term for an additional two (2) years, and where Tenant and Landlord by approval of the Second Amendment to Lease Agreement dated August 18, 2014 relocated Tenant from Suite 2050 consisting of 2,142 square feet (" Original Premises“) to Suite 1010 consisting of 5,799 square feet ("Relocation Premises") and extend the Lease Te1m, and WHEREAS, Landlord and Tenant desire to increase the Relocation Premises by 744 square feet, revise the Lease Term and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows: 1. Landlord and Tenant hereby incorporate all terms and provisions of the Lease herein as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this amendment shall have the same meaning given to terms in the Lease. 2. SECOND AMENDMENT TO LEASE AGREEMENT: A.Item 2B, Stated Expiration Date: Delete:"TheStatedExpiration Date forthe OriginalPremises is September 30, 2014. The Stated Expiration Date for the RelocationPremises 1s September 30, 2019." Insert:"The Stated Expiration Date for the Original Premises is January 14, 2015. The Stated Expiration Date for the Relocation Premises is January 31, 2020."
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B.Item 2C, Basic Rent (subject to Section 4.03): Schedule Below: Delete: Insert: Premises FromTo Original Monthly Annual Rent Rent Premises /2,142 sf\ 01/01/201401/14/2015$3,480.75$41,769.00 Monthly Annual Premises FromTo Relocation Rent Rent Premises (6,543 sf) 01/15/201501/31/2020$12,077.29$144,927.45" C.Item 2D, Brokerage: Insert: "Tenant wan-ants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Third Amendment to Lease Agreement and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt with." D.Item 3A, Premises: Delete: "From October 1, 2012 to September 30, 2014, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. From October 1, 2014 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-1 attached hereto." Insert: "From October 1, 2012 to January 14, 2015, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto.
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From January 15, 2015 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-1 attached hereto." E.Item 3B, Rentable Area of Premises: Delete: "Relocation Premises: approximately 5,799 Square Feet." Insert: "Relocation Premises: approximately 6,543 Square Feet." F.Item 3C. Relocation Premises Term Commencement Date: Delete:"Relocation Premises Term Commencement Date is October 1, 2014." Insert" "Relocation Premises Term Commencement Date is January 15, 2015." G.Item 3D. Tenant's Share: Delete: "From 10/01/2012 to 09/30/2014: 5.44% From 10/01/2014 to the Stated Expiration Date: 14.74%" Insert: "From 10/01/2012 to 01/14/2015: 5.44% From 01/15/2015 to the Stated Expiration Date: 16.63%" H.Item 3E, Security Deposit: Delete: "From 10/01/2012 to 09/30/2014: $7,086.46 (equal to two [2] months Basic Rent) From 10/01/2014 to the Stated Expiration Date: $21,195.36 (equal to two [2] months Basic Rent)." Insert: "From 10/01/2012 to 01/14/2015: $7,086.46 (equal to two [2] months Basic Rent) From 01/15/2015 to the Stated Expiration Date: $24,154.88 (equal to two [2] months Basic Rent)." I.Item 5, Relocation Premises Tenant Improvements: Delete: "Tenant shall accept the Premises in AS IS condition except Landlord, at Landlord's expense, shall provide a tenant improvement allowance to construct the Relocation Premises in accordance with the attached floor plan. Landlord's cost shall not exceed $164,711.30. Tenant shall reimburse Landlord in a lump sum for any costs in excess of $164,711.30 or such excess costs shall be amortized over the Lease Term at eight percent (8%) interest, at Landlord's election. Tenant requests improvements commence as soon as possible following the signing of the Second Amendment to Lease Agreement."
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Insert: "Tenant shall accept the Premises in AS IS condition except Landlord, at Landlord's expense, shall provide a tenant improvement allowance to construct the Relocation Premises in accordance with the attached floor plan. Landlord's cost shall not exceed $192,241.00. Tenant shall reimburse Landlord in a lump sum for any costs in excess of $192,241.00 or such excess costs shall be amortized over the Lease Term at eight percent (8%) interest, at Landlord's election. Tenant requests improvements commence as soon as possible following the signing of the Third Amendment to Lease Agreement." 3. Delete Exhibit B-1 Relocation Premises 4. Insert Exhibit B-2, Relocation Premises-revised. In all other respects, the Lease of September 14, 2012, the First Amendment to Lease Agreement dated September 9, 2013 and the Second Amendment to Lease Agreement dated August 18, 2014 are hereby ratified, confirmed, and approved. No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The submission of this Third Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Third Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. Remainder of this page left intentionally blank.
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IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Lease Agreement as of the date set forth above. LANDLORD: BEDFORD STREET LLC By: Carruth Capital, LLC Its Manager By:fu ,,, Chri015her ?:"lr7foan, President and Managing Member of Carruth Capital, LLC not individually and without personal liability. TENANT: !SPECIMEN INC. By: - Printed Name: Christopher Ianelli Title: President and CEO
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IT ' = N J""'3 co 6,543 RSF (INCLUDED EXPANSION AREA) LIMIT OF TENANTEXPANSION AREAI SPACE PROPOSED FIRST FLOOR PLAN INOICAT£S PROPOSED WALL CONSTl!UCTION NOTE: All ROOM Ollrr.lENStONS ARE APPROXIMATE PRELIMINARY LAYOUT FOR: iSPECIMEN 450 BEDFORD STREET LEXINGTON, MASSACHUSETTS 2014_0253SF1 10/28/2014 THIS SPACE FIRST FLOOR KEY PLAN
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FOURTH AMENDMENT TO LEASE AGREEMENT This Fourth Amendment to Lease Agreement ("Fourth Amendment") is made and shall be effective for all purposes as of the 20th - day of May,2015 by and between BEDFORD STREET LLC ("Landlord"), a Massachusetts limited liability company, having a principal place of business at 116 Flanders Road, Suite 2000, Westborough, Massachusetts 01581 and !SPECIMEN INC. ("Tenant") a duly organized and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant and Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of 2,142 square feet at 450 Bedford Street, Lexington, Massachusetts, and where Tenant and Landlord by approval of the First Amendment to Lease Agreement dated September 9, 2013 extending the Lease Term for an additional two (2) years, and where Tenant and Landlord by approval of the Second Amendment to Lease Agreement dated August 18, 2014 relocated Tenant from Suite 2050 consisting of 2,142 square feet (" Original Premises " ) to Suite 1010 consisting of 5,799 square feet ("Relocation Premises") and extend the Lease Term, and where Tenant and Landlord by approval of the Third Amendment to Lease Agreement dated December 4, 2014 increased the Relocation Premises by 744 square feet for a total of 6,543 square feet, and WHEREAS, Landlord and Tenant desire to confirm the Relocation Premises Term Commencement Date and extend the Lease Term for one (1) additional month and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows: 1.Landlord and Tenant hereby incorporate all terms and provisions of the Lease herein as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this an1endment shall have the same meaning given to terms in the Lease. 2. THIRD AMENDMENT TO LEASE AGREEMENT: A. Item 2A, Stated ExpirationDate: Delete:" The Stated Expiration Date for the Original Premises is January 14, 2015. The Stated Expiration Date for the Relocation Premises is January 31, 2020." Insert:"The Stated Expiration Date for the Original Premises is January 14, 2015. The Stated Expiration Date for the Relocation Premises is February 29, 2020."
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B. Item 2B, Basic Rent (subject to Section 4.03): Schedule Below: Delete: Insert: C. Item 2C, Brokerage: Insert: "Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Fourth Amendment to Lease Agreement and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt with." 3.Landlord and Tenant agree that the Term Commencement Date for the Relocation Premises is January 15, 2015. Landlord and Tenant also agree that the Rent due from Tenant for the period January 1, 2015 to January 31, 2015 is equal to Seven Thousand Four Hundred Dollars and Forty Four Cents ($7,400.44). 4.Tenant shall accept the Relocation Premises in AS IS condition. In all other respects, the Lease of September 14, 2012, the First Amendment to Lease Agreement dated September 9, 2013, the Second Amendment to Lease Agreement dated August 18, 2014 and the Third Amendment to Lease Agreement dated December 4, 2014 are hereby ratified, confirmed, and approved .
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In all other respects, the Lease of September 14, 2012, the First Amendment to Lease Agreement dated September 9, 2013, the Second Amendment to Lease Agreement dated August 18, 2014 and the Third Amendment to Lease Agreement dated December 4, 2014 are hereby ratified, confirmed, and approved. No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The submission of this Fourth Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Fourth Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment to Lease Agreement as of the date set forth above. LANDLORD: BEDFORDSTREETLLC By:Carruth Capital, LLC Its Man By Christopher F. Egan, President and Managing MemberofaCapital,LLCnot individually and without personal liability. TENANT: iSPECIMEN INC. By: /s/ Christopher Ianelli Printed Name:Christopher Ianelli Title:President and CEO J:\PUBL!C\Commercial\450 BEDFORD\TENANT_[\CURREN1\IS.f'_ECll'liEN\LEASE\AMEND-4 ORIGINAL docx 3
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FIFTH AMENDMENT TO LEASE AGREEMENT This Fifth Amendment to Lease Agreement (" Fifth Amendment" ) is made and shall be effective for all purposes as of the 5th day of October , 2016 by and between BEDFORD STREET LLC ("Landlord"), a Massachusetts limited liability company, having a principal place of business at I 16 Flanders Road, Suite 2000, Westborough, Massachusetts O1581 and !S PECIMEN INC. ("Tenant") a duly organize d and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant an d Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of 2,142 square feet at 450 Bedford Street, Lexington , Massachusetts, and where Tenant and Landlord by approval of the First Amendment to Lease Agreement dated September 9, 2013 extending the Lease Term for an additional t wo (2) years, and where Tenant and Landlord by approval of the Second Amendment to Lease Agreement dated August 18, 2014 relocate d Tenant from Suite 2050 consisting of 2,142 square feet (" Original Premises" ) to Suite IO I 0 consisting of 5,799 square feet ("Relocation Premises") and extend the Lease Term, and where Tenant and Landlord by approval of the Third Amendment to Lease Agreement dated December 4, 2014 increase d the Relocation Premises by 744 square feet for a total of 6,543 square feet, and where Tenant and Landlord by approval of the Fourth Amendment to Lease Agreement dated May 20, 201 5 confirmed the Relocation Premises Term Commencement Date and extended the Leas e Term for one (I) additional month, and WHEREAS, Landlord and Tenant desire to lease an additional 1,842 square feet ("Expansion Premises I") for a total of 8,385 square feet ("Total Premises") and extend the Lease Term for four (4) additional years and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows : I.Landlord and Tenant hereby incorporate all terms and provisions of the Lease here in as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this amendment shall have the same meaning given to terms in the Lease. 2. FOURTH AMEN DM ENT TO LEASE AGREEMENT: A. Item 2A, Stated Expiration Date: Delete :"The Stated Expiration Date for the Re location Premise s is February 29, 2020." Inset rt:" The Stat ed ExpirationDate for the Relocation Premises and Expansion Premises I is February 28, 2024." J:\PUllLIC\Co nuncr rinl\450 llEDFORD\TENANTS\CUR RENn lSPECIMEN\I EASE\A MEND-5 ORIGINAL.docx
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B. Item 2B, Basic Rent (subject to Section 4.03): See Schedule Below: Delete: Insert: "Premises From To Monthly Annual Rent Rent 01/15/201502/29/2020$12,077.29$144,927.45 Relocation 03/01/2020 02/28/2021 $10,359.75 $124,317.00 Premises 03/01/2021 02/28/2022 $10,496.06 $125,952.75 (6,543 sf) 03/01/2022 02/28/2023 $10,632.38 $127,588.50 03/01/2023 02/28/2024 $10,768.69 $129,224.25 Expansion Premises I (! ,842 sf) 11/01/201601/31/2017$0.00$0.00 02/01/201702/29/2020$2,839.75$34,077.00 03/01/202002/28/2021$2,916.50$34,998.00 03/01/202102/28/2022$2,954.88$35,458.50 03/01/202202/28/2023$2,993.25$35,919.00 03/01/20?302/28/2024$3,031.63$36,379.50" C. Item 2C, Brokerage: Insert: "Tenant warrants and represents to Landlord that. it has had no dealings with any broker or agent in connection with this Fifth Amendment to Lease Agreement and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt with." 3. THIRD AMENDMENT TO LEASE AGREEMENT: A. Item 2D, Premises: Delete: "From October 1, 2012 to January 14, 2015, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. From January 15, 2015 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-1 attached hereto."· Insert: "Original Premises: From October I, 2012 to January 14, 2015, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto.
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Relocation Premises: From January 15, 2015 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-2 attached hereto. Expansion Premises I: From November 1, 2016 to the Stated Expiration Date, the portion of the building known as Suite 1050 located on the First Floor as shown on Exhibit B-3 attached hereto." B. Item 2E, Rentable Area of Premises: Insert: C.Insert: "Expansion Premises I: approximately 1,842 Square Feet." "Expansion Premises I Term Commencement Date: The Expansion Premises I Term Commencement Date is November 1, 2016. E. Item 2G, Tenant's Share: Delete: "From 10/01/2012 to 01/14/2015: 5.44% From 01/15/2015 to the Stated Expiration Date: 16.63%" Insert: "From !0/01/2012 to 01/14/2015: 5.44% From 01/15/2015 to 09/30/2016: 16.63% From 11/01/2016 to the Stated Expiration Date: 21.31%" F. Item 3E, Security Deposit: Delete: "From 10/01/2012 to 01/14/2015: $7,086.46 (equal to two [2] months Basic Rent) From 01/15/2015 to the Stated Expiration Date: $24,154.88 (equal to two [2] months Basic Rent)." Insert: "From 10/01/2012 to 01/14/2015: $7,086.46 (equal to two [2] months Basic Rent) From 01/15/2015 to 10/31/2016: $24,154.88 (equal to two [2] months Basic Rent)." . From I 1/01/2016 to the Stated Expiration Date:· $27,600.64 (equal to two [2] months Basic Rent)." 3. FIRST AMENDMENT TO LEASE AGREEMENT A. Item 4, Exhibit J, Parking: Delete: "from 10/01/2012 to 09/30/2014: six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot from 10/01/2014 to the Stated Expiration Date: sixteen (16) unassigned parking spaces in the Building's common area parking lot and four (4) parking spaces in the Building's covered parking lot"
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Insert: "from 10/01/2012 to 09/30/2014: six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot from 10/01/2014 to 10/31/2016: sixteen (16) unassigned parking spaces in the Building's common area parking lot and four (4) parking spaces in the Building's covered parking lot from 11/01/2016 to the Stated Expiration Date: twenty-one (21) unassigned parking spaces in the Building's common area parking lot and six (6) parking spaces in the Building’s ‘covered parking lot" 4. Tenant Improvements: Tenant shall accept the Relocation Premises and Expansion Premise I in AS IS condition except Landlord shall remove the existing kitchenette in Expansion Premises I and patch the ceiling and carpet as necessary at Landlord's expense. 5. Additional Tenant Improvements: Tenant desires for Landlord to construct the improvements shown on the floor plan attached as Exhibit C-1 ("Additional Tenant Improvements"). Landlord shall construct the Additional Tenant Improvements and Tenant shall reimburse Landlord for such costs or at Tenant's election, such costs shall be amortized over the Lease Term at five percent (5%) interest. Landlord estimates the costs of the Additional Tenant Improvements to be $24, I 02.00. Amortizing such costs over the period 01/01/2017 to 02/28/2024 would add $0.48 psf / year to the Basic Rent, for both the Relocation Premises and Expansion Premises I. 6. Insert Exhibit B-3, Expansion Premises I Floor Plan 7. Insert Exhibit C-1, Additional Tenant Improvements In all other respects, the Lease of September 14, 2012, the First Amendment to Lease Agreement dated September 9, 2013, the Second Amendment to Lease Agreement dated August 18, 2014, the Third Amendment to Lease Agreement dated December 4, 2014 and the Fourth Amendment to Lease Agreement dated May 20, 2015 are hereby ratified, confirmed, and approved. No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The submission of this Fifth Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Fifth Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant.
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IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amendment to Lease Agreement as of the date set forth above. LANDLORD: BEDFORD STREET LLC By:Carruth Capital, LLC Its Mana14er By:-Christopher F.Egan, President and Managing Member of Carruth Capital, LLC not individually and without personal liability. TENANT: ISPECIMEN INC. By: /s/ Christopher Ianelli Printed Name:Christopher Ianelli Title:President and CEO
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[LOGO]
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§ "o; ·./('-.. -,.-,./'·,, :-1..-:.: i:·-::> sf"Si.' ACCESS ?AUEL L!"-1:;:Pf§2:&.E Sl<J.FG,V" I r---------------------------------------------------------------, I o=B -'=-"""1 F=:f: / I L;I1 Ii ----------<....../"/, .A --......_ - ,, f,-.. o' 'r,i@-',!!·--·. , ----@I t (i&o1 ,! I Hi) II WORK II /lQ2!\ Kl I .' --·-----'-------' SC --ci10,E' ._d.,.:,..,.. 'LI.-.:.-..-=_--=:_:ij[ , "-I.., ..-'--·• ./. \ 'VI r L7I I SCSC "-"-SC"I-.!£!J -q] ,,,.,,,.,.., =' ""' I "''iF-"===J F-t...-, u L/ I II '<!} 1 l[§] f-'RmN'AeT· <M EX CtlffV( L,"-1 PJl J ,oo ,:ooc-OQ ::::; '" I II I II I II II I I II £ £•··a·-·a--_ FIRST FLOOR DEMOLITIONPLAN L -----------------J ======:: INDICATES ITEMS TO BE REMOVEDTHIS SPACE 1I DEMOLITION PLAN FOR: iSPECIMEN 450 BEDFORD STREET LEXINGTON, MASSACHUSETTS 2016_0352DP108/31/2016EXHIBIT C-1 Page I ofS FIRST FLOOR KEY PLAN
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EXHIBIT C-1 Page 4 ofS PROPOSED TENANT IMPROVEMENTS FOR iSPECIMEN EXPANSION 450 Bedford Street, Lexington MA 8-31-2016 Referenced Floor Plans: SP! and DPI dated 8-31-2016 1. Demolition: Remove all walls and other items as indicated on demolition plan. 2016_0352TI.00I Removal of ceiling system is selective. Ceilings in individual rooms which are not demolished are to remain. Ceilings in large areas are to remain and be extended into areas where rooms have been demolished. 2. Interior Partitions: New interior walls shall be constructed of 3-5/8" x 25 Ga. metal studs at 16" O/C with 1/2" gypsum wallboard on both sides. Walls shall extend to 6" above the ceiling grid. 3. Doors, Frames and Hardware: Provide a new pair of double doors at new closet with 3' x 8' -4" leafs. Reuse existing door at server room. 4. Ceilings: Existing ceilings to remain and be repaired, with new (to match adjacent areas) only as required by new layout. Also refer to demolition notes above. 5. Floor Finishes: Extend existing vinyl tile into area indicated on floor plan. Provide new 4" vinyl base on all new walls. 6. Paint: New gypsum board walls shall receive one primer and two finish coats of latex eggshell finish paint. New and relocated door frames shall receive a primer and two finish coats of latex acrylic semigloss paint. 7. Lighting: Relocate existing light fixtures as required by new layout.
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EXHIBIT C-1 Page S of 5 450 Bedford Street 8-31-2016 Page 2 of2 8. Power: Provide 4-20A dedicated circuits above ceiling and connect to tenant furnished power poles at open office area. Provide power to wall mounted TV's. 9. HVAC: Existing system diffusers and ductwork will be relocated, with new ductwork, diffusers, controls & equipment as required by new layout. 10. Plumbing: Remove existing sink. 11. Fire Protection: Existing sprinkler system is to be modified as required by new layout. 12. Life Safety: Modify and add to existing emergency lighting, exit signs, fire extinguishers and fire alarm horn/strobe units as required by new layout. 13. Misc: Repair existing perimeter window blinds as required for proper operation and uniform appearance. Provide but glazed tempered glass sidelights where indicated on floor plan. 14. Work not included: Installation of telephone and computer wiring, outlets and equipment. Furnishings including, but not limited to, open office workstations and reception desk. Security system. END
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'61, SIXTH AMENDMENT TO LEASE AGREEMENT This Sixth Amendment to Lease Agreement ("Fifth Amendment") is made and shall be effective for all purposes as of the 10th day of April, 2017 by and between BEDFORD STREET LLC ("Landlord"), a Massachusetts limited liability company, having a principal place of business at 116 Flanders Road, Suite 2000,Westborough,Massachusetts 01581 and !SPECIMEN INC. ("Tenant") a duly organized and existing Delaware C corporation, having a principal place of business at 450 Bedford Street, Lexington, Massachusetts 02420. WITNESSETH WHEREAS, Tenant and Landlord entered into a Lease ("Lease") dated September 14, 2012 for a total of 2,142 square feet at 450 Bedford Street, Lexington, Massachusetts, and where Tenant and Landlord by approval of the First Amendment to Lease Agreement dated September 9, 2013 extending the Lease Term for an additional two (2) years, and where Tenant and Landlord by approval of the Second Amendment to Lease Agreement dated August 18, 2014 relocated Tenant from Suite 2050 consisting of 2,142 square feet ("Original Premises") to Suite 1010 consisting of 5,799 square feet ("Relocation Premises") and extend the Lease Term, and where Tenant and Landlord by approval of the Third Amendment to Lease Agreement dated December 4, 2014 increased the Relocation Premises by 744 square feet for a total of 6,543 square feet, and where Tenant and Landlord by approval of the Fourth Amendment to Lease Agreement dated May 20, 2015 confirmed the Relocation Premises Term Commencement Date and extended the Lease Term for one (1) additional month, and where Tenant and Landlord by approval of the Fifth Amendment to Lease Agreement dated October 5, 2016 Tenant leased an additional 1,842 square feet ("Expansion Premises I") for a total of 8,385 square feet ("Total Premises") and extended the Lease Term for four (4) additional years, and WHEREAS, Landlord and Tenant desire to confirm the Term Commencement Date and Rent Commencement Date on the Expansion Premises I and to amend the Lease as more fully described hereinafter. NOW THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Lease shall be amended as follows: 1. Landlord and Tenant hereby incorporate all terms and provisions of the Lease herein as is specifically set forth, except as said terms are modified herein. Capitalized terms not specifically defined in this amendment shall have the same meaning given to terms in the Lease.
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2. FIFTH AMENDMENT TO LEASE AGREEMENT: A. Item 2B, Basic Rent (subject to Section 4.03): See Sched11)e Below: Delete: Insert: B. Item 2C, Brokerage:
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Insert: "Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this Sixth Amendment to Lease Agreement and covenants to defend, with counsel approved by Landlord, hold harmless and indemnify Landlord from and against any and all cost, expense or liability for any compensation, commissions and charges claimed by any broker or agent with whom Tenant has dealt with."
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C. Item 3A, Premises: Delete: "Original Premises: From October 1, 2012 to January 14, 2015, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. Relocation Premises: From January 15, 2015 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-2 attached hereto. Expansion Premises I: From November 1, 2016 to the Stated Expiration Date, the portion of the building known as Suite 1050 located on the First Floor as shown on Exhibit B-3 attached hereto." Insert: "Original Premises: From October 1, 2012 to January 14, 2015, the portion of the Building known as Suite 2050 located on the Second Floor as shown on Exhibit B attached hereto. Relocation Premises: From January 15, 2015 to the Stated Expiration Date, the portion of the Building known as Suite 1010 located on the First Floor as shown on Exhibit B-2 attached hereto. Expansion Premises I: From December 1, 2016 to the Stated Expiration Date, the portion of the building known as Suite 1050 located on the First Floor as shown on Exhibit B-3 attached hereto." D. Item 3C, Expansion Premises I Term Commencement Date: E. Item 3E, Tenant's Share: Delete:"From 10/01/2012 to01/14/2015: 5.44% From 01/15/2015 to 09/30/2016: 16.63% From 11/01/2016 to the Stated Expiration Date: 21.31%" Insert:"From 10/01/2012 to 01/14/2015: 5.44% From 01/15/2015 to 11/30/2016: 16.63% From 12/01/2016 to the Stated Expiration Date: 21.31%" F. Item 3F, Security Deposit: Delete:"From 10/01/2012 to 01/14/2015:$7,086.46 (equal to two [2] months Basic Rent)
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From 01/15/2015 to 10/31/2016:$24,154.88 (equal to two [2] months Basic Rent)." From 11/01/2016 to the Stated Expiration Date: $27,600.64 (equal to two [2] months Basic Rent)." Insert: "From 10/01/2012 to 01/14/2015: $7,086.46 From 01/15/2015 to 11/30/2016: $24,154.88 From 12/01/2016 to the Stated Expiration Date: $27,600.64" G. Item 3A, Exhibit J, Parking: Delete: "from 10/01/2012 to 09/30/2014: six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot from 10/01/2014 to 10/31/2016: sixteen (16) unassigned parking spaces in the Building's common area parking lot and four (4) parking spaces in the Building's covered parking lot from 11/01/2016 to the Stated Expiration Date: twenty-one (21) unassigned parking spaces in the Building's common area parking lot and six (6) parking spaces in the Building's covered parking lot" Insert: "from 10/01/2012 to 09/30/2014: six (6) unassigned parking spaces in the Building's common area parking lot and one (1) parking space in the Building's covered parking lot from 10/01/2014 to 11/30/2016: sixteen (16) unassigned parking spaces in the Building's common area parking lot and four (4) parking spaces in the Building's covered parking lot from 12/01/2016 to the Stated Expiration Date: twenty-one (21) unassigned parking spaces in the Building's common area parking lot and six (6) parking spaces in the Building's covered parking lot" 4. Tenant Improvements: Tenant shall accept the Relocation Premises and Expansion Premise I in AS IS condition. In all other respects, the Lease of September 14, 2012, the First Amendment to Lease Agreement dated September 9, 2013, the Second Amendment to Lease Agreement dated August 18, 2014, the Third Amendment to Lease Agreement dated December 4, 2014, the Fourth Amendment to Lease Agreement dated May 20, 2015 and the Fifth Amendment to Lease Agreement dated October 5, 2016 are hereby ratified, confirmed, and approved.
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No representations, inducement, promises or agreements, oral or otherwise, between Landlord and Tenant or any of their respective brokers, employees or agents, not embodied herein, shall be of any force or effect. The submission of this Sixth Amendment to Lease Agreement for examination, review, negotiation and/or signature shall not constitute an offer or an option to lease or a reservation of the Premises and is subject to withdrawal or modification at any time by either party. This Sixth Amendment to Lease Agreement shall become effective and binding only if and when it shall be executed and delivered by both Landlord and Tenant. IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment to Lease Agreement as of the date set forth above. LANDLORD: BEDFORD STREET LLC By: Carruth Capital, LLC Its Mana.: By:_ .:::::...,_---=------::::o - - ----Christopher F. Egan, President and Managing Member Carruth Capital, LLC not individually and without personal liability. TENANT: iSPECIMEN INC. By: /s/ Christopher Ianelli Printed Name: Christopher Ianelli Title: President and CEO J:IPUBLIC\Commercial\450 BEDFORDITENANfSICURRENl\lSPECIMENILEASE\AMEND-6 WORKING FILE\AMEND-6 REDLINE-2.docx 6
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Exhibit 10.6
SERIES A PREFERRED STOCK SUBSCRIPTION
AGREEMENT
iSpecimen Inc.
275 Grove Street, Suite 2-400
Newton, Massachusetts 02466
Attention: Christopher Ianelli, MD,
PhD - Chief Executive Officer
The undersigned investor
(the “Investor”) acknowledges that it has received and reviewed certain information relating to an investment
in iSpecimen Inc. (the “Company” or the “Corporation”), including a
Business Plan, Executive Summary, the outline of the terms of the Series A Preferred Stock attached hereto as Exhibit A
(and including the actual terms of the Series A Preferred Stock attached as Exhibit A-1) for an issuance of up
to $2.0 million in value of Series A Preferred Stock (the “Offering Materials”).
1. Subscription
for Series A Preferred Stock; Closing(s). Subject to the terms and conditions hereof, the undersigned Investor hereby
irrevocably subscribes for and agrees to purchase __________ shares (the “Securities”) of Series A
Preferred Stock at a price of $0.762 per share, and at a pre-money valuation of $3.5 million, and tenders herewith good
funds in the amount of ____________ dollars ($_________), payable to the order of the Company. The undersigned Investor
is acquiring such Securities by the payment to the Company of new funds through a wire transfer, check or other consideration.
The investment in the Securities will be made once the Company has received stockholder approval for the authorization of the Series A
Preferred Stock and has received subscriptions for at least $500,000 in commitments. The Company may hold periodic closings until
it has received commitments and subscriptions for an aggregate of $1.5 million in additional commitments; provided, however,
the Board of Directors may accept Subscriptions for up to a maximum of $2.0 million in commitments if such investment is determined
to be in the best interests of the Company.
1.1 Conversion
of Debt for Investment in the Securities. If the Investor is a holder of the Company’s previously issued Convertible
Promissory Notes (the “Notes”), the Investor may acquire the Securities through the conversion, exchange
and cancellation of such indebtedness for money borrowed under the Notes. The Investor converting the Notes acknowledges and agrees
that upon conversion and cancellation of the Notes as provided herein, and by virtue of the Investor’s signature below, such
conversion and cancellation of the Notes in exchange for the Securities shall be in full satisfaction of any and all claims, obligations,
fees, expenses and other charges or liabilities owing by the Company in respect of the Notes as of the date of conversion. The
Notes may be converted at the Investor’s election by the issuance of one (1) share of Series A Preferred Stock
for each $0.762 of principal amount converted under the Notes. The principal amount on the Notes so converted shall be contributed
to the equity capital of the Company. At the Company’s election, accrued interest on the Notes may be paid in cash or
may be converted to Series A Preferred Stock, following the Closing. The Investor understands and acknowledges that any shares
of Series A Preferred Stock that may be issued upon conversion of the accrued interest on the Notes is a transaction subject
to taxation.
1.2. Use
of Proceeds. The proceeds from the sale of the Series A Preferred will be used for expansion of sales and marketing
effort (including marketing to academic medical centers and hospitals), implementation of the installation at UMass Medical Center,
and working capital and other general corporate purposes.
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
1.3 Tranched
Closings for Significant Investment. For any Investor subscribing for $1,500,000 or more of Securities (a “Major
Investor”), such investment may be divided into three (3) tranches, with funding of the total investment commitment
based on the achievement by the Company of the milestones set forth below. The tranches shall be made available to the Company
as follows: (1) 40% of the Major Investor’s total investment commitment shall be provided to the Company upon the execution
of this Agreement; (2) 30% of the Major Investor’s total investment commitment shall be provided to the Company upon
the successful implementation of the Company’s technology solution at an initial hospital site (“Milestone 2”);
and (3) 30% of the Major Investor’s total investment commitment shall be provided to the Company upon the execution
by the Company of definitive agreements with a second hospital or healthcare system that would permit specimen and data access
for the Company (“Milestone 3”). Funds shall be provided to the Company within five (5) business
days notice to the Major Investor, in which evidence and/or documentation of milestone achievement is provided.
2. Representations
and Warranties of the Investor. The undersigned Investor understands and acknowledges that the Securities are being offered
and sold under one or more of the exemptions from registration provided for in Section 4(2) of the Securities Act of
1933, as amended (the “Securities Act”), including Regulation D promulgated thereunder, and any applicable
state securities laws. The Investor is purchasing the Securities without being offered or furnished any formal offering literature
or prospectus other than the Offering Materials. The Investor understands that this transaction has not been reviewed and approved
by the Securities and Exchange Commission or by any state regulatory authority charged with the administration of the securities
laws of any state. All documents, records and books pertaining to this investment have been made available to the undersigned,
and that the books and records of the Company will be available upon reasonable notice for inspection by the Investor during reasonable
business hours.
2.1. Suitability:
The Investor confirms that it understands and has fully considered for purposes of this investment the risks of this investment
and understands that (i) this investment is suitable only for an investor who is able to bear the economic consequences of
losing its entire investment, (ii) the purchase of the Securities is a speculative investment which involves a high degree
of risk, and (iii) there are substantial restrictions on the transferability of, and there will be no immediate public market
for, the Securities, and accordingly, it may not be possible for the Investor to liquidate its investment in case of emergency.
The Investor recognizes that the Company is a development-stage enterprise with limited operating history and is currently developing,
extending and refining its business strategy and marketing plan.
2.2. Lack
of Liquidity: The Investor confirms that it is able to bear the economic risk of this investment, and to hold the Securities
for an indefinite period of time. The Investor has sufficient liquid assets so that the illiquidity associated with this investment
will not cause any undue financial difficulties or affect the undersigned Investor’s ability to provide for its current
needs and possible financial contingencies, and that its commitment to all speculative investments is reasonable in relation to
its net worth and annual income.
2.3. Knowledge
and Experience: The Investor has such knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of this speculative investment and of making an informed investment decision. The Investor is
an “accredited investor” as defined in Rule 501 of Regulation D of the Securities Act. As an “accredited
investor” as defined in Rule 501 of Regulation D of the Securities Act, if the Investor is an individual, the Investor
has (i) a net worth (exclusive of his or her primary residence and furnishings) of $1.0 million, or (ii) annual income
in each of the last two calendar years (and anticipated annual income for this calendar year) of at least $200,000 (or $300,000
jointly with the Investor’s spouse).
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
2.4. Access
to Management: The Investor confirms that, in making its decision to purchase the Securities, it has relied solely upon
independent investigations made by him or her. The Investor has been given the opportunity to ask questions of, and to receive
answers from, management and other persons acting on behalf of the Company concerning the Company and the terms and conditions
of this offering. The Investor confirms that he, she or has received the Offering Materials regarding the business of the Company.
2.5. Investment
Intent: The Securities are being acquired by the undersigned solely for the Investor’s own personal account, for
investment purposes only, and not with a view to, or in connection with, any resale or distribution thereof. The Investor has
no contract, undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge
to any person the Securities for which it hereby subscribes, or any part thereof, or any interest therein or any rights thereto.
The Investor has no present plans to enter into any such contract, undertaking, agreement or arrangement. The Investor must bear
the economic risk of the investment for an indefinite period of time because the Securities have not been registered under the
Securities Act and applicable state securities laws and, therefore, cannot be sold unless they are subsequently registered under
the Securities Act and applicable state securities laws or unless an exemption from such registration is available.
2.6. Investment
Commitment Not Disproportionate to Net Worth: The Investor’s overall commitment to investments which are not readily
marketable is not disproportionate to the undersigned’s net worth and the Investor’s investment in the Company will
not cause such overall commitment to become excessive.
2.7 No
Use of Brokers. The Investor is under no obligation to pay any broker’s fee or commission in connection with its
investment.
2.8 Adequacy
of Accredited Investor Representations. This offering of the Securities is being made solely to “accredited investors”
under Regulation D of the Securities Act. The Company is expressly relying on the representations of each Investor as to his,
her or its status as an “accredited investor” under federal and state securities laws. If the representations of the
Investor set forth above as an “accredited investor” are inaccurate, false or incorrect at the time of the investment
commitment so as to jeopardize the status of the offering of the Securities, the Company, in its sole discretion and election
(and without any liability or further obligation of the Company to the Investor), may refund to the Investor the purchase price
of the Securities.
3. Representations
and Warranties of the Company. The Company hereby represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule attached as Exhibit B to this Agreement, which exceptions shall be deemed to be part of the
representations and warranties made hereunder, the following representations are true and complete as of the date hereof. The Disclosure
Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section,
and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this
Section to the extent it is readily or reasonably apparent from a reading of the disclosure that such disclosure is applicable
to such other sections and subsections.
3.1. Organization,
Good Standing and Authority of the Company; No Subsidiaries. The Company is a corporation duly organized, validly existing
and in corporate good standing under the laws of the State of Delaware. The Company is qualified to conduct business as a foreign
corporation in the Commonwealth of Massachusetts.
Page 3
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
3.2. Authorization.
The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions
of this Agreement the valid and enforceable obligations they purport to be. The issuance and sale of the Series A Preferred
Stock does not require any further corporate action and will not be subject to preemptive rights of any present or future stockholders
of the Company. Upon its issuance and sale to the Investor, the Series A Preferred Stock will be duly authorized, validly
issued, fully paid and non-assessable. This Agreement constitutes the valid and binding obligation of the Company, enforceable
in accordance with its terms.
3.3. No
Default. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby do not and will not constitute a default under any of the terms, conditions or provisions
of the Certificate of Incorporation or Bylaws of the Company (as amended to date), or any material contract, agreement or arrangement
to which the Company is a party or by which it is bound.
3.4. Capital
Stock of Company. Following the initial Closing, the authorized capital stock of the Company shall consist of (A) 9,000,000
shares of Common Stock, of which (i) 3,000,000 shares are currently issued and outstanding, (ii) warrants to purchase
100,722 shares of Common Stock are outstanding, and (iii) 721,785 shares of Common Stock are reserved for issuance under
the Company’s 2012 Stock Option Plan, and (B) 5,000,000 shares of Preferred Stock, none of which are issued and outstanding,
but 3,445,874 shares of which are designated as Series A Preferred Stock having the terms set forth on Exhibit A-1.
3.5. Compliance
with Laws; Permits. The Company holds all material licenses, approvals, certificates, permits and authorizations necessary
for the lawful conduct of its business and is in material compliance with all applicable laws, rules, regulations and ordinances.
The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business, the lack
of which could materially and adversely affect the business, properties, prospects or financial condition of the Company. The
Company is not in default in any material respect under any such franchise, permit, license or other similar authority.
3.6. Litigation.
There is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or
to the best knowledge, information and belief of the Company any investigation by) any governmental or other instrumentality or
agency, pending, or, to the Company’s knowledge, information and belief, threatened against or affecting the Company, or
any of its properties, intellectual property and patents, or other rights, which could materially and adversely affect the right
or ability of the Company to carry on its business as now conducted.
3.7. Intellectual
Property; Proprietary Rights, Employee Restrictions. To the best of its knowledge, the Company has all patents, patent
licenses, copyrights, trademarks, service marks, trade names, trade secrets or other proprietary rights useful for its business
(collectively, “Intellectual Property Rights”) as presently conducted or contemplated. The Company’s
Intellectual Property Rights are sufficient to carry on the business of the Company as presently conducted or contemplated. To
the best of its knowledge, the Company has a license to use all of its Intellectual Property Rights and it has obtained any licenses,
releases or assignments necessary to use all third parties’ intellectual property rights in works embodied in its products
and material for the conduct of its business. The Company has not received any notice or other claim from any person asserting
that any of the Company’s present or contemplated activities infringe or may infringe any intellectual property rights of
such person. The Company has taken all reasonable measures to protect and preserve the security, confidentiality and value of
its Intellectual Property Rights, including its trade secrets and other confidential information. Each employee, consultant and
officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially
in the form or forms delivered to the counsel for the Purchasers. The Company is not aware that any of its employees or consultants
is in violation thereof.
Page 4
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
3.8. Compliance
with Other Instruments. The Company is not in violation or default of any provisions of its Restated Certificate of Incorporation
or Bylaws (each as amended to date), or of any instrument, judgment, order, writ, or decree, or under any note, indenture, mortgage,
lease, agreement, contract or purchase order to which it is a party or by which it is bound or, to its knowledge, of any provision
of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse
Effect.
3.9. Financial
Statements. The Company has made available to the Investor the Company’s unaudited financial statements, including
balance sheet and statements of profit and loss and cash flows as of and for the period ended December 31, 2011, and an unaudited
balance sheet (the “Balance Sheet”) and statement of profit and loss and cash flows of the Company for
the period ended March 31, 2012 (the “Balance Sheet Date,” and all the financial statements referred
above being collectively referred to herein as the “Financial Statements”). The Financial Statements
have been prepared in accordance with the books and records of the Company and in accordance with U.S. generally accepted accounting
principles (“GAAP”) applied on a consistent basis throughout the relevant period, except that the Financial
Statements do not contain the footnotes required by GAAP. The Financial Statements fairly present the financial condition and
operating results of the Company as of the dates, and for the periods, indicated therein.
3.10. Title
to Assets. The Company owns no, and has not in the past owned any, real property. The Company has good and marketable
title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no material encumbrance,
other than (i) liens or encumbrances for current taxes not yet due and payable; (ii) liens imposed by law and incurred
in the ordinary course of business for obligations not past due; (iii) liens in respect of pledges or deposits under workers’
compensation laws or similar legislation; and (iv) encumbrances and defects in title which do not in any case materially
detract from the value of the property subject thereto or as would individually or in the aggregate have a Material Adverse Effect.
3.11. No
Undisclosed Liabilities. Except as set forth in the Financial Statements, the Company has no material liabilities
(whether accrued, absolute, unliquidated, contingent or otherwise, whether or not known to the Company, whether due or to become
due and regardless of where asserted) (“Liabilities”), except for those Liabilities (i) disclosed
in the Balance Sheet, (ii) incurred in connection with the transactions contemplated hereby, or (iii) that were incurred
after the date of the Balance Sheet in the ordinary course of business (none of which is a Liability resulting from breach of
contract, breach of warranty, tort, infringement, claim or proceeding) and that individually and in the aggregate will not have
a Material Adverse Effect.
4. Registration
Rights. The Company hereby grants the following registration rights with respect to the shares of Common Stock issuable
upon the conversion of the Series A Preferred Stock issued to the Investor (the “Registrable Securities”):
4.1. “Piggy-Back”
Registrations: For a period of four (4) years from the closing of the Company’s first underwritten, registered
public offering of shares, if at any time the Company shall determine to register in a public offering for its own account (or
the account of selling stockholders) under the Securities Act of 1933 any of its Common Stock, it shall send to the Investor written
notice of such determination and, if within 15 days after receipt of such notice, the Investor shall so request in writing,
the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Securities
such holder requests to be registered. This right shall not apply to a registration of shares of Common Stock on Form S-4
or Form S-8 (or their then equivalents) relating to shares of Common Stock to be issued by the Company in connection with
any acquisition of any entity or other business combination involving the Company, or shares of Common Stock issuable in connection
with any stock option, stock compensation or other employee benefits plan of the Company for the benefit of directors, officers,
employees or consultants of the Company.
Page 5
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
If, in connection with
any offering involving an underwriting of Common Stock to be issued by the Company and/or selling stockholders, the managing underwriter
or the Company shall impose a limitation on the number of shares of such Common Stock which may be included in any such registration
statement because, in its judgment, such limitation is necessary to effect an orderly public distribution of the Common Stock and
to maintain a stable market for the securities of the Company, then the Company shall be obligated to include in such registration
statement only such limited portion (which may be none) of the Securities with respect to which the Investor has requested inclusion
hereunder, pro rata based upon the number of shares originally requested for inclusion in such registration statement by
all selling stockholders requesting inclusion thereunder.
4.2. Expenses.
In the case of a registration under Section 4.1, the Company shall bear the expenses of any filing of any registration,
including, but not limited to, printing, legal and accounting expenses, Securities and Exchange Commission and FINRA filing fees
and all related “Blue Sky” fees and expenses; provided, however, that the Company shall have no obligation
to pay or otherwise bear any portion of the underwriters’ commissions or discounts attributable to the Registrable Securities
being offered and sold by the Investor, or the fees and expenses of any counsel, tax advisor or accountant selected by the Investor
in connection with the registration of the Registrable Securities.
4.3. Lock-Up
Agreement for Public Offering. In connection with any public offering of equity securities of the Company, the Investor
agrees not to sell, pledge, transfer or otherwise dispose of, or grant any option or purchase right with respect to, any shares
of capital stock then owned by him and not otherwise offered in the public offering, or engage in any short sale, hedging transaction
or other derivative security transaction involving the Registrable Securities or other shares of Common Stock of the Company held
by it or him, for such period of time commencing thirty (30) days prior to the proposed effective date of such public offering
until 180 days following the effective date of such public offering. The Company shall use its best efforts to ensure that the
foregoing restrictions shall apply to any selling stockholder participating in the offering or to any officer, director or any
holder of at least 1% of the Company’s outstanding capital stock (the “Significant Lock-Up Participants”);
provided, however, that if the Company is unsuccessful in obtaining lock-up agreements from at least ninety percent
(90%) of the Significant Lock-Up Participants and lock-up agreements representing at least ninety percent (90%) of the shares
held by all Significant Lock-Up Participants, the undersigned Investor shall be released of the lock-up restrictions set forth
in this Section 5.3.
4.4. Expiration
of Registration Rights. The obligations of the Company under this Section 5 to register the Securities shall expire
and terminate at such time as the Investor shall not be deemed to be an “affiliate” of the Company and shall be otherwise
entitled or eligible to sell such securities without the need for the filing of a registration statement under the Securities Act,
including without limitation, for any resales of restricted securities made pursuant to Rule 144 as promulgated by the Securities
and Exchange Commission, or a sale made pursuant to section 4(1) and/or 4(2) under the Securities Act; provided,
however, that the Investor shall continue to possess its registration rights granted hereunder if the average daily trading
volume of the Company following the initial public offering of Common Stock does not permit the Investor to sell all of its holdings
to the public in one transaction under Rule 144, or the liquidity in the shares of Common Stock held by the Investor would
be adversely affected by the absence of the registration rights set forth herein, determined in the reasonable good faith judgment
of the Investor.
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
5. Transferability
of Stock. The undersigned Investor agrees not to transfer or assign this Agreement, or any of its interest herein, and
further agrees that the assignment and transfer of the Securities acquired pursuant hereto shall be made only in accordance with
all applicable laws.
6. Right
of First Offer on Future Issuances of Equity Securities. The Company shall, prior to any proposed issuance by the Company
of any of its equity securities, first offer to the Investor by written notice the right, for a period of ten (10) business
days, to purchase for cash at an amount equal to the price or other consideration for which such equity securities are proposed
to be issued, a number of such securities so that, after giving effect to such issuance (and the conversion, exercise and exchange
into or for shares of Common Stock of all such securities that are so convertible, exercisable or exchangeable for Common Stock),
the Investor will maintain its proportionate equity ownership (on a fully-diluted basis) in the offered financing as of the date
of such notice (treating the Investor, for the purpose of such computation, as the holder of the number of shares of Common Stock
which would be issuable to such party upon conversion, exercise and exchange of all securities held by the Investor (including
any preferred stock) that are convertible, exercisable or exchangeable into or for shares of Common Stock, and assuming the like
conversion, exercise and exchange of all such other securities held by other investors participating in the financing pursuant
to the foregoing Right of First Offer).
6.1. Mechanics
of Right of First Offer. The Company shall provide written notice to the Investor and shall describe the securities proposed
to be issued by the Company and specify the number, price and payment terms. The Investor may accept the Company's offer as to
the full number of securities offered to it or any lesser number, by written notice thereof given by it to the Company prior to
the expiration of the ten-day day period. The Company shall sell and the Investor shall buy, upon the terms specified, the number
of securities agreed to be purchased by the Investor at such time and commensurate with the sale by the Company of all of the
remainder of such securities and as hereinafter provided. The Investor shall have oversubscription rights with respect to any
securities not purchased by any other Investor, allocated on an equitable, pro rata basis as determined by the Board of Directors.
6.2. Exceptions
to Rights of First Offer. The participation rights of the Investor pursuant to this Section 6 shall not
apply to equity securities issued or issuable: (a) as a stock dividend or upon any subdivision of shares of capital stock;
(b) pursuant to subscriptions, warrants, options, convertible securities, or other rights which are outstanding or are hereafter
issued by the Board of Directors; (c) pursuant to the grant, exercise or issuance of options, warrants or other rights to
purchase capital stock granted or issued to directors, officers, employees or consultants of the Company and approved by the Company’s
Board of Directors or the issuance of shares to employees, officers, directors, advisors or consultants reserved pursuant to any
stock option plan, stock purchase plan or other employee plan of the Company approved by the Company’s Board of Directors,
or other shares issued to directors, advisors, vendors or consultants as approved by the Board of Directors; (d) in connection
with any strategic partner alliance or joint venture or other partnering arrangements approved by the Board of Directors; (e) in
connection with any bona fide loan or debt security issued pursuant to any lease of capital equipment, line of credit facility,
term loan, bridge financing, or other indebtedness for money borrowed and approved by the Board of Directors; (f) securities
issued to a third party in connection with any acquisition, merger or purchase of all or substantially all assets of another company;
and (g) securities issued pursuant to any outstanding convertible securities, options or other rights convertible into Common
Stock or for which rights of first offer have already been granted pursuant to this Section 6.
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
7. Financial
Information and Reports. The Company shall furnish the following to the Investor for so long as the Investor continues
to maintain ownership of at least $50,000 in value of Series A Preferred Stock held by such Investor:
(a) Quarterly
Reports: as soon as available and in any event within forty five (45) days after the end of each calendar quarter,
balance sheets, statements of income and retained earnings and a summary statement of quarterly cash flow of the Company for such
quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding
fiscal year; and
(b) Annual
Reports: as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of
the Company, a copy of the annual report (whether reviewed, compiled or audited) for such year, including balance sheets of the
Company as of the end of such fiscal year and statements of income and retained earnings and of changes in financial position of
the Company for such year.
8. Miscellaneous.
This Agreement and the documents referenced herein constitute the entire Agreement between the parties relative to the subject
matter of the sale of the Securities, and supersede all proposals or agreements, written or oral, and all other communications
between the parties relating to the subject matter of this Agreement. Any provision of this Agreement may be waived, amended,
modified, superseded, canceled, terminated, renewed or extended through a written instrument signed by the Company and the holders
of a majority of the then-outstanding shares of Series A Preferred Stock. Any waiver, modification, amendment, renewal
or other alteration shall be limited to the particular instance and for the particular purpose when and for which it is given.
The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way effect the validity, legality
or enforceability of any other provision of this Agreement and this Agreement shall be construed and reformed by any court of competent
jurisdiction to give full effect to the essential purposes of this Agreement. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the Delaware General Corporation Law (as to matters within
the scope thereof), the general laws of the Commonwealth of Massachusetts as to matters of contract law, and the federal securities
laws, where applicable. All notices provided for in this Agreement shall be given in writing and shall be effective when served
either by personal delivery, express overnight courier service, electronic facsimile transmission (including PDF), or by first
class mail, postage prepaid, addressed to the parties at their respective addresses herein set forth, or to such other address
or addresses as either party may later specify by written notice to the other. This Agreement may be executed in duplicate counterparts,
which, when taken together, shall constitute one instrument and each of which shall be deemed to be an original instrument.
* * * * * * * * * *
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
iSpecimen Inc.
Series A Preferred Stock Subscription
Agreement
Signature Page
IN WITNESS WHEREOF,
the undersigned has hereby executed this Series A Preferred Stock Subscription Agreement as of this ___ day of ______, 2012.
Name & Signature of Investor:
Investor Name:
Investor Address:
Amount Subscribed:
The Company hereby
accepts the foregoing Series A Preferred Stock Subscription Agreement, subject to the terms and conditions set forth herein,
as of this ____ day of ______, 2012.
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iSpecimen Inc.
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By:
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/s/ Christopher
J. Ianelli, MD, PhD
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Christopher J. Ianelli, MD, PhD
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Its: Chief
Executive Officer
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
Exhibit A
ISPECIMEN INC.
MEMORANDUM OF TERMS
SERIES A PREFERRED STOCK FINANCING
July 1, 2012
This memorandum summarizes the principal
terms proposed by iSpecimen Inc. to a limited number of individual, accredited investors and/or affiliated entities, with respect
to a private placement of its Series A Convertible Preferred Stock.
This memorandum is intended solely as a
basis for further discussion and does not constitute a legally binding obligation. No legally binding obligations will be created,
implied, or inferred until a document in final form entitled “Stock Purchase Agreement” is executed and delivered by
all parties. Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall
exist among them and there shall be no obligations whatsoever based on such things as parol evidence, extended negotiations, “handshakes,”
oral understandings, or courses of conduct (including reliance and changes of position).
The
Offering
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Issuer:
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iSpecimen Inc., a Delaware corporation (the “Company”)
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Securities:
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Series A Convertible Preferred Stock (the “Series A Preferred”), convertible into shares of the Company’s Common Stock (the “Common”)
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Consideration:
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Cash and cancellation of indebtedness
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Number
of Securities Offered:
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Up to 3,445,874 shares
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Amount of Offering:
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Up to $2,000,000, but not less than $500,000.
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Valuation:
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$3,500,000 pre-money; $5,500,000 post-money (assuming a maximum $2,000,000 financing)
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Price per Share:
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$0.762 (the “Original Purchase Price”). The Original Purchase Price represents a post-money valuation of $5,500,000 (assuming a maximum $2,000,000 financing).
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Tranched Closing
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for Significant Investment:
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For any Investor investing $1,500,000 or more, such investment may be divided into three (3) tranches, to be made available to the Company on the following basis:
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•
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Tranche 1 = 40% of the total investment commitment upon the execution of Series A Preferred Stock Subscription Agreement;
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iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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•
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Tranche 2 = 30% of the total investment commitment upon successful implementation of the Company’s technology solution at an initial hospital site;
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•
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Tranche 3 = 30% of the total investment commitment upon the execution of definitive agreements with a second hospital
or healthcare system that would permit specimen and data access to the Company.
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Investors:
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A limited number of accredited, individual investors and/or affiliated entities acceptable to the
Company (the “Investors”).
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Anticipated Closing Date:
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An
initial closing is expected to occur on or before July 23, 2012, with one or more
additional closings within 15 days thereafter to allow for proper conversion of any outstanding
convertible debt and issuance of stock.
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Use of Proceeds:
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The
proceeds from the sale of the Series A Preferred will be used for working capital.
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Terms of the Series A
Preferred
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Dividends:
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Starting on the date of investment, dividends shall accrue on each share of the Series A Preferred
on a cumulative, non-compounding basis at the rate of six percent (6%) per annum (“Accruing Dividends”).
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Accruing Dividends shall be payable only in the event of a liquidation,
dissolution, or winding-up of the Company. For any other dividends or distributions, the Series A Preferred will
participate with Common on an as-converted basis. No dividends shall be paid on any other equity securities at a rate greater
than the rate at which dividends are paid on Series A Preferred (based on the number of shares of Common into which
Series A Preferred and any other securities are convertible on the date the dividend is declared). Dividends on
Series A Preferred will be in preference to dividends paid on any other equity securities.
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Liquidation Preference:
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In
the event of any liquidation, dissolution, or winding-up of the Company or a Deemed Liquidation,
as defined below, the holders of Series A Preferred shall be entitled to receive,
prior to and in preference to the holders of all other holders of equity, an amount equal
to the greater of: (i) the Original Purchase Price, plus any unpaid Accruing Dividends,
plus any other dividends or distributions declared but not paid (the “Liquidation
Preference”) or (ii) the amount such holders would have received had the
shares of Series A Preferred been converted into Common immediately prior to the
liquidation, dissolution, or winding-up.
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Page 11
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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|
|
After the payment of the Liquidation Preference to the holders of the
Series A Preferred, the remaining assets of the Company shall be distributed solely to the holders of the Common on a
pro-rata basis. A consolidation, merger, acquisition, sale of voting control, or sale of all or substantially all of the
assets of the Company (in which the stockholders of the Company do not own a majority of the outstanding shares of the
surviving corporation) shall be deemed to be a liquidation or winding-up event (a “Deemed Liquidation”)
for purposes of the Liquidation Preference. A Deemed Liquidation, however, may be waived upon the election of the holders of
a majority of the then outstanding shares of the Series A Preferred.
|
|
|
Conversion:
|
The Series A Preferred may be converted at any time, at the option of the holder, into shares
of Common. The conversion rate shall initially be 1:1, subject to adjustments, as provided and described below.
|
|
|
Automatic Conversion:
|
Each share of Series A
Preferred shall automatically convert into Common, at the then applicable conversion rate, upon (i) the closing of a firmly
underwritten public offering of common stock with total gross proceeds to the Company of not less than twenty-five million dollars
($25,000,000), before deduction of underwriters’ commissions and expenses (a “Qualified Public Offering”),
or (ii) the consent of the holders of a majority of the then outstanding shares of the Series A Preferred.
|
|
|
Conversion Price Adjustments:
|
The conversion price
of the Series A Preferred shall be subject to adjustment, on a broad-based weighted-average basis, if the Company issues
additional securities at a price per share less than the then applicable conversion price; provided however, that there will be
no adjustment to the conversion price for: (i) shares issued upon conversion of the Series A Preferred; (ii) shares,
options, warrants, or other rights issued to employees, consultants or directors in accordance with plans, agreements, or similar
arrangements; (iii) shares issued upon exercise of options, warrants, or convertible securities; (iv) shares issued
as a dividend or distribution on the Series A Preferred or for which adjustment is otherwise made pursuant to the certificate
of incorporation (e.g., stock splits); (v) shares issued in connection with a Qualified Public Offering; (vi) shares
issued or issuable pursuant to an acquisition of another corporation or a joint venture agreement approved by the board; (vii) shares
issued or issuable to banks, equipment lessors or other financial institutions pursuant to debt financing or commercial transactions
approved by the board; (viii) shares issued or issuable in connection with any settlement approved by the board; (ix) shares
issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other
similar arrangements or strategic partnerships approved by the board; (x) shares issued to suppliers of goods or services
in connection with the provision of goods or services pursuant to transactions approved by the board; (xi) shares issued
pursuant to other transactions approved by the board; and (xii) shares that are otherwise excluded by consent of holders
of a majority of the Series A Preferred.
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Page 12
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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|
General Voting Rights:
|
The Series A Preferred
will vote together with the Common and not as a separate class except as specifically provided herein, in the certificate of incorporation,
or as otherwise required by law. Each share of Series A Preferred shall have a number of votes equal to the number of shares
of Common then issuable upon conversion of such share of Series A Preferred.
|
|
|
Board of Directors:
|
The
authorized size of the Company’s Board of Directors (the “Board”)
shall be set at minimum of three and a maximum of five individuals, to be fixed at five
at or immediately following the final closing. The Board shall be comprised of:
|
|
|
(i)
|
Christopher Ianelli, the Chief Executive Officer;
|
|
|
(ii)
|
_____________, designated by the Chief Executive Officer to represent the holders of the
Common;
|
|
|
(iii)
|
_____________, designated by the Chief Executive Officer as the lead investor (the “Lead
Investor”) to represent the holders of the Series A Preferred;
|
|
|
(iv)
|
One director that is either a) designated jointly by the Chief Executive Officer and the Lead Investor
in the event that the Series A Preferred represent a minimum of forty percent (40%) of the outstanding capital stock of the
Company upon final closing or b) designated solely by the Chief Executive Officer in the event that the Series A Preferred
represent a less than forty percent (40%) of the outstanding capital stock of the Company upon final closing; and
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Page 13
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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|
(v)
|
One independent director to be elected by the holders of Series A Preferred and Common, voting
together following the final closing.
|
|
|
|
The Board will meet at least once every quarter. Each Board committee shall
include at least one Series A Preferred director; provided however that the Series A Preferred represent a minimum
of twenty percent (20%) of the outstanding capital stock of the Company at the time of committee formation.
|
|
|
|
The Company will bind D&O insurance with a carrier and in an amount
satisfactory to the Board. In the event the Company merges with another entity and is not the surviving corporation, or
transfers all of its assets, proper provisions shall be made so that successors of the Company assume Company’s
obligations with respect to indemnification of members of the Board.
|
|
|
Protective Provisions:
|
So long as the Series A
Preferred represent a minimum of twenty percent (20%) of the outstanding capital stock of the Company, consent of the majority
of the holders of the Series A Preferred will be required to: (i) alter any provision of the certificate of incorporation
or the bylaws if it would adversely alter the rights, preferences, privileges or powers of or restrictions on any series of preferred
stock; (ii) increase or decrease the authorized number of shares of any series of preferred stock; (iii) approve any
transaction or series of transactions deemed to be a liquidation of the Company; (iv) approve any merger, sale of assets
or other corporate reorganization or acquisition; (v) approve the voluntary liquidation or dissolution of the Company; or
(vii) declare or pay any dividend or distribution or approve any repurchase with respect to the Series A Preferred (except
as otherwise provided in the certificate of incorporation) or the Common (subject to customary exceptions).
|
Investor
Rights
|
|
Information Rights:
|
The Company shall provide in
a reasonable timeframe to each Investor: (i) annual financial statements within 120 days following year-end and (ii) upon
request, quarterly financial statements within 45 days following quarter-end.
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Page 14
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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|
Right of First Refusal:
|
Each
holder of the Series A Preferred shall have a right in the event the Company proposes to offer equity securities to any person
(other than securities issued to employees, officers, and directors of the Company, securities issued pursuant to a merger or
acquisition, securities issued in connection with an equipment leasing or debt financing, securities issued pursuant to a registration
statement, or securities issued in connection with strategic transactions) to purchase its pro rata share of any offering of new
securities by the Company. The pro rata share shall be calculated by dividing the outstanding shares of Series A Preferred
held by such holder, on an as-converted basis, by the total number of shares outstanding, on a fully-diluted basis. Such right
of first refusal will terminate upon a Qualified Public Offering or upon an acquisition, merger, or consolidation of the Company
and may be waived, modified, or terminated by a majority vote of the Series A Preferred.
|
Other
matters
|
|
Vesting of Employee Shares:
|
Subject to the discretion
of the board, shares and options issued to employees, directors and consultants will be subject to four-year vesting, with 25%
vesting on the first anniversary of the commencement of services and the remainder vesting monthly thereafter. The Company will
have the right, upon termination of services, to repurchase any unvested shares.
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|
|
Proprietary Information:
|
The Company will have all
employees and consultants enter into non-disclosure and inventions agreements to protect its proprietary information.
|
|
|
Purchase Agreement:
|
The investment will be made
pursuant to a stock purchase agreement which will contain, among other things, appropriate representations and warranties of the
Company and the Investors and appropriate conditions of closing.
|
|
|
Finders:
|
The Company and the investors will each indemnify the other for any finder’s fees for which
they are respectively responsible.
|
|
|
Legal Fees and Expenses:
|
The Company will
pay the reasonable fees and expenses of a single counsel to the investors, up to a maximum of $10,000, following the closing.
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Page 15
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
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|
Conditions Precedent:
|
The investment will be subject
to customary conditions, including but not limited to: (i) completion of due diligence to the satisfaction of the Investors;
(ii) negotiation and execution of definitive agreements customary in transactions of this nature; (iii) receipt of all
required authorizations, approvals and consents; (iv) delivery of customary closing certificates; and (v) the absence
of material adverse changes with respect to the Company.
|
|
|
Confidentiality:
|
The terms of this memorandum are confidential, and neither the contents nor the details of it may be shown or disclosed by
the Investors, except to those individuals who have a need to know as a result of being involved in or asked to advise on the proposed
transaction or to other individuals or entities for purposes of making such individuals or entities like Investors in the Company's
Series A Preferred Stock.
|
|
|
Counsel to the Company:
|
John Hession
|
|
|
|
Cooley LLP
|
|
|
|
500 Boylston Street
|
|
|
|
Boston, MA 02116-3736
|
Capitalization
Set forth below is the Company’s projected, fully-diluted
capitalization, as adjusted to reflect the sale of all shares of the Series A preferred stock offered in this financing.
|
|
|
Shares
|
|
|
Ownership
|
|
|
Type
|
|
Common Shareholders
|
|
|
3,000,000
|
|
|
|
42
|
%
|
|
Common
|
|
Warrants
|
|
|
100,722
|
|
|
|
1
|
%
|
|
Common
|
|
Stock Option Plan
|
|
|
721,785
|
|
|
|
10
|
%
|
|
Common
|
|
Series A Preferred Shareholders
|
|
|
3,445,874
|
|
|
|
47
|
%
|
|
Series A Convertible Preferred
|
|
Total
|
|
|
7,268,381
|
|
|
|
100
|
%
|
|
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Page 16
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
EXHIBIT A-1
Designation of the Terms of Series A
Preferred Stock
1. Description
and Designation of the Series A Preferred Stock. A total of Three Million Four Hundred Forty Five Thousand Eight
Hundred Seventy Four (3,445,874) shares of the Corporation’s previously undesignated Preferred Stock, $.001 par value,
shall be designated as the “Series A Preferred Stock.” The original issue price per share of the
Series A Preferred Stock shall be $0.762 per share (the “Series A Original Issue Price”).
2. Dividends.
(a) 6%
Cumulative, Non-Compounding Dividend. The holders of Series A Preferred Stock, shall be entitled to receive, out of
any funds legally available therefor, cumulative dividends at the annual rate of six percent (6%) per share of the Series A
Original Issue Price from the date of original issuance of each share of each such series of Series A Preferred Stock by the
Corporation to each holder (the “Series A Cumulative Dividend”). Such Series A Cumulative Dividend
shall accumulate annually but not compound, whether or not declared by the Board of Directors, from the date of original issuance
by the Corporation of each share to any initial holder, and shall accrue until paid as set forth herein. The Series A Cumulative
Dividend shall be payable only upon a Liquidation Event as provided in Section 3 (including any election to treat a merger
or sale as such as a Deemed Liquidity Event, as defined below). Upon any voluntary conversion of the Series A Preferred Stock
or Qualified Public Offering (as defined herein), no accrued but unpaid Series A Cumulative Dividend on the shares of Series A
Preferred Stock so converted shall be due and payable. Dividends on the Series A Preferred will be in preference to dividends
paid on any other equity securities of the Corporation.
(b) Participating
Dividends. In the event that the Board of Directors shall declare a cash dividend payable upon the then outstanding shares
of Common Stock, the holders of the Series A Preferred Stock shall be entitled to the amount of dividends on the Series A
Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which the shares of Series A
Preferred Stock held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof, such number
determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend. Such determination
of “whole shares” shall be based upon the aggregate number of shares of Series A Preferred Stock held by each
holder, and not upon each share of Series A Preferred Stock so held by the holder.
3. Liquidation,
Dissolution or Winding Up.
(a) Treatment
at Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, or in the event of its insolvency (each, a “Liquidation Event”), before
any distribution or payment is made to any holders of Common Stock, and subject to the liquidation rights and preferences of any
class or series of Preferred Stock designated in the future to be senior to, or on a parity with, the Series A Preferred Stock
with respect to liquidation preferences, the holders of Series A Preferred Stock shall be entitled to be paid prior to the
Common Stock out of the assets of the Corporation available for distribution to holders of the Corporation’s capital stock
of all classes, whether such assets are capital, surplus or earnings, an amount equal to the Original Issue Price per share of
Series A Preferred Stock held by any holder plus any declared but unpaid Series A Cumulative Dividend (if
any) (the “Series A Liquidation Preference”). In lieu of receiving the Series A Liquidation
Preference amount, the holders of the Series A Preferred Stock may elect to convert to Common Stock pursuant to Section 5
hereof at any time prior to any liquidation, dissolution or winding up. The Series A Preferred Stock shall be subordinate
in right of payment to any series of Preferred Stock hereafter created or designated by the Board of Directors or stockholders
(the “Senior Preferred Stock”).
Page 17
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
If, upon liquidation,
dissolution or winding up of the Corporation, the assets available for distribution to its stockholders shall be insufficient to
pay the holders of the Series A Preferred Stock the Series A Liquidation Preference to which they otherwise would be
entitled, the holders of Series A Preferred Stock shall share ratably in any distribution of available assets pro rata in
proportion to the liquidation preference amounts which would otherwise be payable upon liquidation with respect to the outstanding
shares of the Series A Preferred Stock if all liquidation preference amounts with respect to such shares were paid in full,
subject in all cases to any senior liquidation preferences of any series of Senior Preferred Stock hereafter created.
(b) Distribution
of Residual Assets to Holders of Common Stock. After the Series A Liquidation Preference shall have been made in full
to the holders of the Series A Preferred Stock, or funds necessary for such payment shall have been set aside by the Corporation
in trust for the account of holders of the Series A Preferred Stock so as to be available for such payment, then the remaining
assets or consideration available for distribution to stockholders shall be distributed ratably among the holders of the Common
Stock, ratably in proportion to the number of shares of Common Stock held by each such holder. The amounts set forth above shall
be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital structure of the Common Stock or Series A Preferred
Stock.
(c) Distributions
Other than Cash. Whenever the distributions provided for in this Section 3 shall be payable in property other than
cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of
Directors. All distributions (including distributions other than cash) made hereunder shall be made pro rata to the holders
of Series A Preferred Stock. In the event of any business combination involving non-cash consideration, the acquisition consideration
(including any shares of capital stock or other securities to be delivered or exchanged by the acquiring corporation) shall be
reallocated among the holders of Series A Preferred Stock and Common Stock in an appropriate and equitable manner to give
economic effect to the intents and purposes of Sections 3(a), 3(b) and 3(c) hereof; provided, however,
that each holder of Series A Preferred Stock has the right to convert such holder’s shares of Series A Preferred
Stock at any time prior to any such merger, sales of assets or capital stock, business combination or other acquisition into shares
of Common Stock.
(d) Treatment
of Mergers, Sales of Assets or Business Combinations. The holders of not less than a majority of the outstanding shares
of Series A Preferred Stock (the “Majority Interest”), may elect to have treated as a Liquidation
Event: (i) any merger or consolidation of the Corporation into or with another corporation (except one in which the holders
of capital stock of the Corporation immediately prior to such merger or consolidation continue to hold at least a majority of the
voting power of the capital stock of the surviving corporation), (ii) any sale of all or substantially all of the assets,
outstanding capital stock or intellectual property of the Corporation, or (iii) any acquisition (other than through a direct
issuance of securities by the Corporation) by any person (or group of affiliated or associated persons) of beneficial ownership
of a majority of the equity securities of the Corporation or any material subsidiary (whether or not newly-issued shares) in a
single transaction or a series of related transactions in a transaction designed to be a business combination or acquisition of
the Corporation and not an equity financing for the purpose of securing working capital (each, a “Deemed Liquidity
Event”).
Page 18
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
If such election is
made, all consideration payable to the stockholders of the Corporation in connection with any such Deemed Liquidity Event, or all
consideration payable to the Corporation and distributable to its stockholders, together with all other available assets of the
Corporation (net of obligations owed by the Corporation that are senior to the Series A Preferred Stock), in connection with
any such asset sale, shall be, as applicable, paid by the purchaser to the holders of, or distributed by the Corporation in redemption
(out of funds legally available therefor) of, the Series A Preferred Stock and any junior stock in accordance with the preferences
and priorities set forth in Section 3(a). 3(b) and Section 3(b) above, with such preferences and priorities
specifically intended to be applicable in any such merger or consolidation, asset sale, as if such transaction were a Liquidation
Event. In furtherance of the foregoing, the Corporation shall take such actions as are necessary to give effect to the provisions
of this Section 3(d), including without limitation, (x) in the case of a merger or consolidation, causing the definitive
agreement relating to such merger or consolidation to provide for a rate at which the shares of each subseries of Series A
Preferred Stock are converted into or exchanged for cash, new securities or other property which gives effect to the preferences
and priorities set forth in Sections 3(a), 3(b) and 3(c) above, or (y) in the case of an asset sale, redeeming
the Series A Preferred Stock.
For purposes hereof,
the foregoing transactions for constituting a Deemed Liquidity Event shall not include any reorganization, merger or consolidation
involving (1) only a change in the state of incorporation of the Corporation, (2) a merger of the Corporation with or
into a wholly-owned subsidiary of the Corporation that is incorporated in the United States of America, or (3) an acquisition,
whether by merger, reorganization, consolidation or other form of business combination, of which the Corporation is substantively
the surviving corporation and operates as a going concern, of another corporation and which does not involve a recapitalization
or reorganization of the Series A Preferred Stock or Common Stock, and does not involve (in a single transaction or series
of interrelated transactions) a transfer of more than 51 % of the voting power of the Corporation in a business combination transaction.
(e) Allocation
of Liquidation Preference in a Merger or Sale. The Series A Liquidation Preference shall in all events be paid in
cash; provided, however, that if the Series A Liquidation Preference is payable in connection with a merger,
consolidation or sale of capital stock, then the consideration (including any shares of capital stock to be delivered by the acquiring
entity) payable to the holders of Common Stock and all classes or series of Preferred Stock in connection with such event shall
be allocated or reallocated, as applicable, among the holders of Common Stock and Series A Preferred Stock in an appropriate
and equitable manner to give economic effect to the priority of distributions among the holders of Common Stock and all classes
and series of Preferred Stock. The foregoing allocation to the holders of Series A Preferred Stock and Common Stock shall
apply notwithstanding that, pursuant to the terms of the merger, consolidation or sale of capital stock, consideration is only
allocated to the holders of Common Stock, it being the intention of this Section 3 that, if a business combination is to be
treated as a Deemed Liquidity Event or liquidation, holders of Common Stock shall not be entitled to any payment until the holders
of outstanding Series A Preferred Stock have received the Series A Liquidation Preference. If there is more than one
form of consideration payable in connection with the business combination, such consideration shall be allocated proportionately
to the holders of the Series A Preferred Stock and Common Stock based on the amount to which each such holder of each class
or series is entitled.
4. Voting
Power.
(a) General
Voting with Common Stock. Each holder of Series A Preferred Stock shall be entitled to vote on all matters submitted
to the general vote of all stockholders. Each holder of Series A Preferred Stock shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such holder’s shares of Series A Preferred Stock
could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of stockholders
entitled to vote on any matter or, if no such record date is established, at the date such vote is taken or any written consent
of stockholders is solicited. The number of shares of Common Stock to which a holder of each series of the Series A Preferred
Stock shall be entitled to receive upon conversion shall be the product obtained by multiplying the Series A Conversion Rate
by the number of shares of Series A Preferred Stock held by such holder. Except as otherwise provided in the Certificate of
Incorporation of the Corporation, as amended from time to time after the date of filing of this instrument, with respect to the
rights of the Senior Preferred Stock, the holders of shares of Series A Preferred Stock and Common Stock shall vote together
(or render written consents in lieu of a vote) as a single class on all matters submitted to the stockholders of the Corporation.
Such determination of “whole shares” shall be based upon the aggregate number of shares of Series A Preferred
Stock held by each holder. On the date of filing of this instrument, the holders of Series A Preferred Stock vote with the
holders of Common Stock on the basis of one (1) share of Common Stock for each one (1) share of Series A Preferred
Stock so held.
Page 19
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(b) General
Election of Directors. The holders of the Series A Preferred Stock shall be entitled to vote with the holders of the
Common Stock (in the manner set forth above based on voting value) for the election of the directors of the Corporation. The authorized
size of the Company’s Board of Directors (the “Board”) shall be set at either three (3) or five (5) members,
to be fixed at three (3) at or immediately following the final closing. In the case of a three member Board, the Board shall
be comprised of: (i) the Chief Executive Officer of the Company; (ii) one (1) individual elected by the holders
of a majority of the outstanding shares of Common Stock; and (iii) one (1) individual to be elected as an independent
director by the holders of the Series A Preferred Stock and Common Stock, voting together as a single class on an “as
converted” basis. In the case of a five member Board, the Board shall be comprised of: (i) the Chief Executive Officer
of the Company; (ii) one (1) individual elected by the holders of a majority of the outstanding shares of Common Stock;
(iii) two (2) individuals elected by the holders of a majority of the outstanding shares of Series A Preferred Stock;
and (iv) one (1) individual to be elected as an independent director by the holders of the Series A Preferred Stock
and Common Stock, voting together as a single class on an “as converted” basis.
(c) Right
of the Series A Preferred Stock to Designate and Elect Two (2) Directors. The holders of a majority of the outstanding
shares of the Series A Preferred Stock, voting as a single class, shall be entitled to elect up to two (2) directors
of the Corporation (the “Series A Preferred Director(s)”), depending on the size of the Board. At
any annual or special meeting of the Corporation (or in a written consent in lieu thereof) held for the purpose of electing directors,
the presence in person or by proxy (or by written consent) of the holders of a majority of the outstanding shares of Series A
Preferred Stock shall constitute a quorum for the election of the Series A Preferred Director(s). The holders of a majority
of the shares of Series A Preferred Stock present in person or by proxy at any meeting relating to the election of directors
(calculated after the determination of a quorum) shall then be entitled to elect the Series A Preferred Directors as set forth
above, and in the manner set forth above. Any Series A Preferred Director may be removed during his or her term of office,
with or without cause, by and only by the affirmative vote or written consent of holders of a majority of the outstanding shares
of Series A Preferred Stock entitled to so designate such Series A Preferred Director(s) as set forth above. Any
vacancy in the office of a Series A Preferred Director shall be filled by a person appropriately designated by the holders
of a majority of the outstanding shares of Series A Preferred Stock.
(d) Protective
Provisions. So long as the Series A Preferred Stock represents a minimum of twenty percent (20%) of the outstanding
capital stock of the Corporation, the Corporation shall not, (in any case, by merger, consolidation, operation of law or otherwise),
without first having provided written notice of such proposed action to each holder of outstanding shares of the Series A
Preferred Stock and having obtained the prior approval of the holders of a majority of the then outstanding shares of Series A
Preferred Stock, given in writing or by consent or vote at a meeting:
(1) altering, changing or
amending the preferences, privileges or rights of the Series A Preferred Stock or the Certificate of Incorporation or Bylaws
in a manner which is adverse to the holders of the Series A Preferred;
Page 20
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(2) increase or decrease
the authorized number of shares of any series of Preferred Stock;
(3) approve any transaction
or series of transactions deemed to be a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary;
(4) approve any Deemed Liquidity
Event or other corporate reorganization or acquisition; or
(5) declare or pay any dividend
or distribution or approve any repurchase with respect to the Series A Preferred (except as otherwise provided in Section 2
above) or the Common Stock (other than required redemptions and repurchases under restricted stock agreements or
stock option agreements with employees, advisors, consultants and others and other arrangements approved by the Board of Directors).
Further, the Corporation
shall not, by amendment, alteration or repeal of this Certificate of Incorporation (whether by merger, consolidation, operation
of law, or otherwise) or through any Deemed Liquidity Event, or any other reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, agreement or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed hereunder by the Corporation and shall at all times
in good faith assist in the carrying out of all the provisions of this Section 4(d) and in the taking of all such action
as may be necessary or appropriate in order to protect the rights of the holders of each series of the Series A Preferred
Stock against impairment.
5. Conversion
Rights. The holders of the Series A Preferred Stock shall have the following rights with respect to the conversion
of such shares into shares of Common Stock:
(a) General.
Subject to and in compliance with the provisions of this Section 5, any shares of the Series A Preferred Stock may, at
the option of any holder, be converted at any time into fully-paid and non-assessable shares of Common Stock. The number of shares
of Common Stock to which a holder of each series of the Series A Preferred Stock shall be entitled to receive upon conversion
shall be the product obtained by multiplying the Series A Conversion Rate by the number of shares of Series A Preferred
Stock held by such holder. The conversion rate in effect at any time for the Series A Preferred Stock shall be the quotient
obtained by dividing the Series A Original Issue Price by the Series A Conversion Value, calculated as provided below
(the “Series A Conversion Rate”). The Series A Conversion Value in effect from time to time,
except as adjusted in accordance with this Section 5, shall be $0.762 per share (the “Series A Conversion
Value”).
(b) Adjustments
to Series A Conversion Value Due to Dilutive Issuances.
Page 21
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(i) Dilutive
Issuances of Common Stock or Common Stock Equivalents. From and after the date of filing of this instrument, if the Corporation
shall, while there are any shares of any series of Series A Preferred Stock outstanding, issue or sell any shares of its Common
Stock or Common Stock Equivalents (as defined below) without consideration or at a price per share less than the Series A
Conversion Value in effect immediately prior to such issuance or sale, then in each such case such Series A Conversion Value
upon any such issuance or sale at less than the Series A Conversion Value, except as hereinafter provided in Section 5(b)(iv),
shall be lowered so as to be equal to an amount determined by multiplying the Series A Conversion Value by a fraction:
(1) the
numerator of which shall be (a) the number of shares of Common Stock and Common Stock Equivalents outstanding immediately
prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully diluted basis
assuming the exercise or conversion of all outstanding Common Stock Equivalents, but excluding any options or other Common Stock
Equivalents reserved but not yet granted), plus (b) the number of shares of Common Stock which the aggregate consideration,
if any, received by the Corporation in connection with the total number of such additional shares of Common Stock (or Common Stock
Equivalents) so issued would purchase at the Series A Conversion Value in effect immediately prior to such issuance, and
(2) the
denominator of which shall be (a) the number of shares of Common Stock and Common Stock Equivalents outstanding immediately
prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully diluted basis
assuming the exercise or conversion of all outstanding Common Stock Equivalents, but excluding any options or other Common Stock
Equivalents reserved but not yet granted), plus (b) the number of such additional shares of Common Stock or Common Stock Equivalents
so issued.
The anti-dilution adjustment
provisions of this Section 5(b)(i) may be waived in any instance (without the necessity of convening any separate meeting
of stockholders of other classes or series) upon the written approval of the holders of a majority of the outstanding shares of
Series A Preferred Stock.
(ii) Treatment
of Warrants, Options and Purchase Rights to Common Stock or Convertible Securities.
(1) Common
Stock Equivalents. For the purposes of determining the anti-dilution adjustments under this Section 5(d), the issuance
of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase
rights with respect to such convertible or exchangeable securities (collectively, “Common Stock Equivalents,”
and individually, a “Common Stock Equivalent”), shall be deemed an issuance of Common Stock with respect
to adjustments in the applicable Series A Conversion Value, if the “Net Consideration Per Share” which may be
received by the Corporation for such Common Stock or Common Stock Equivalents shall be less than the Series A Conversion
Value in effect at the time of such issuance. Any obligation, agreement or undertaking to issue Common Stock Equivalents at any
time in the future shall be deemed to be an issuance at the time such obligation, agreement or undertaking is made or arises. No
anti-dilution adjustment of the Series A Conversion Value shall be made under this Section 5(b) upon the issuance
of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents
if any adjustment shall previously have been made upon the original issuance of any such Common Stock Equivalents.
(2) Decreases
in Net Consideration Per Share and Retroactive Adjustment upon Expiration of Common Stock Equivalents. Should the Net Consideration
Per Share of any such Common Stock or Common Stock Equivalents be decreased at any time, then upon the effectiveness of each such
change, the Series A Conversion Value will be that which would have been obtained (1) had the adjustments made upon the
issuance of such Common Stock Equivalents been made upon the basis of the actual Net Consideration Per Share of such securities,
and (2) had the adjustments made to the Series A Conversion Value since the date of issuance of such Common Stock Equivalents
been made to such Series A Conversion Value, as adjusted pursuant to clause (1) above. Any adjustment of the Series A
Conversion Value with respect to this paragraph which relates to any Common Stock Equivalent shall be disregarded if, as, and when
such Common Stock Equivalent expires or is cancelled without being exercised, so that the Series A Conversion Value effective
immediately upon such cancellation or expiration shall be equal to the Series A Conversion Value that would have been in effect
had the expired or cancelled Common Stock Equivalent not been issued.
Page 22
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(3) Definition
of Net Consideration Per Share. For purposes of calculating the anti-dilution provisions of this Section 5(d), the
“Net Consideration Per Share” which may be received by the Corporation shall mean the amount equal to
the total amount of consideration, if any, received by the Corporation for the issuance of such Common Stock Equivalents (including
the gross proceeds received from any convertible debt financing, or the proceeds received in connection with the issuance of Common
Stock Equivalents in the event of any debt financing in which Common Stock or Common Stock Equivalents are issued), plus the minimum
amount of consideration, if any, payable to the Corporation upon exercise, or conversion or exchange thereof, divided by the aggregate
number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted.
The Net Consideration Per Share which may be received by the Corporation shall be determined in each instance as of the date of
issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate adjustments
which may be applicable with respect to such Common Stock Equivalents.
(iii) Consideration
Other than Cash. For purposes of this Section 5(b), if a part or all of the consideration received by the Corporation
in connection with the issuance of shares of the Common Stock or Common Stock Equivalents consists of property other than cash,
such consideration shall be deemed to have a fair market value as is reasonably determined in good faith by the Board of Directors,
including the vote of the Series A Director.
(iv) Exceptions
to Anti-dilution Adjustments. The anti-dilution adjustments provided for in this Section 5(b) shall not
apply under any of the circumstances with respect to the grant, issuance, transfer, disposition, offer or sale of: (i) shares
of Common Stock issued upon conversion of the Series A Preferred Stock (or any other series of Preferred Stock hereafter created);
(ii) shares, options, warrants, or other rights issued to employees, officers, advisors, consultants or directors in accordance
with plans, agreements, or similar arrangements approved by the Board of Directors; (iii) shares issued upon exercise of options,
warrants, or convertible securities; (iv) shares issued as a dividend or distribution on the Series A Preferred or for
which adjustment is otherwise made pursuant to the Second Amended & Restated Certificate of Incorporation (e.g.,
stock dividends and stock splits or combinations or subdivisions); (v) shares of Common Stock issued in connection with a
public offering on a registration statement filed under the Securities Act of 1933 and the rules and regulations issued thereunder;
(vi) shares issued or issuable pursuant to an acquisition of another corporation, a joint venture agreement or license or
collaboration agreement approved by the Board of Directors; (vii) shares of equity securities issued or issuable to banks,
commercial lendors, equipment lessors, venture debt organizations or other financial institutions pursuant to debt financing or
commercial transactions approved by the Board of Directors; (viii) shares issued or issuable in connection with any settlement
approved by the Board of Directors; (ix) shares issued or issuable in connection with sponsored research, collaboration, technology
license, development, OEM, collaboration, joint venture, marketing or other similar arrangements or strategic partnerships approved
by the Board of Directors; (x) shares issued to suppliers of goods or services in connection with the provision of goods or
services pursuant to transactions approved by the Board of Directors; (xi) shares issued pursuant to other transactions approved
by the Board of Directors; and (xii) shares that are otherwise excluded by consent of holders of a majority of the outstanding
Series A Preferred Stock.
(c) Adjustments
to Conversion Value Due to Subdivision or Combination of Common Stock. In case the Corporation shall at any time subdivide
(by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares of Common
Stock, the Series A Conversion Value in effect immediately prior to such subdivision shall be proportionately reduced. Conversely,
in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Series A
Conversion Value in effect immediately prior to such combination shall be proportionately increased.
Page 23
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(d) Dividends
Other Than Common Stock Dividends. In the event the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other distribution (other than a distribution in liquidation
or other distribution otherwise provided for herein) with respect to the Common Stock payable in (i) securities of the Corporation
other than shares of Common Stock, or (ii) other assets (excluding cash dividends or distributions), then and in each
such event provision shall be made so that the holders of the Series A Preferred Stock shall receive upon conversion thereof
in addition to the number of shares of Common Stock receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their shares of Series A Preferred Stock been converted into Common Stock on
the date of such event and had they thereafter, during the period from the date of such event to and including the Conversion Date
(as that term is hereafter defined), retained such securities or such other assets receivable by them during such period, giving
application to all other adjustments called for during such period under all provisions of this Section 5 with respect to
the rights of the holders of the Series A Preferred Stock.
(e) Capital
Reorganization or Reclassification. If the Common Stock issuable upon the conversion of the Series A Preferred Stock
shall be changed into the same or different number of shares of any class or classes of capital stock, whether by capital reorganization,
recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for
elsewhere in Section 5(c) and (d), or the sale of all or substantially all of the Corporation’s capital stock or
assets to any other person), then and in each such event the holders of Series A Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of capital stock and other securities and property receivable upon such
reorganization, recapitalization, reclassification or other change by the holders of the number of shares of Common Stock into
which such shares of Series A Preferred Stock might have been converted immediately prior to such reorganization, recapitalization,
reclassification or change, all subject to further adjustment as provided herein.
(f) Capital
Reorganization, Merger or Sale of Assets. Subject to the provisions of Section 3(d), if at any time or from time
to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, recapitalization, reclassification
or exchange of shares provided for elsewhere in Section 5(c), (d) and (e)) or a merger or consolidation of the Corporation
with or into another corporation, or the sale of all or substantially all of the Corporation’s capital stock or assets to
any other person (any of which events is herein referred to as a “Reorganization”), then, as a part of
such Reorganization, provision shall be made so that the holders of the Series A Preferred Stock shall thereafter be entitled
to receive upon conversion of the Series A Preferred Stock the number of shares of stock or other securities or property (including
cash) of the Corporation (or of the successor corporation resulting from such merger, consolidation or sale), to which such holder
would have been entitled if such holder had converted its shares of Series A Preferred Stock immediately prior to such Reorganization.
In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5(f) to the
end that the provisions of this Section 5(f) (including adjustment of the Series A Conversion Value then in effect)
shall be applicable after that event in as nearly equivalent a manner as may be practicable.
As provided in Section 3,
upon the occurrence of a Reorganization under circumstances which make the preceding paragraph applicable, the holders of at least
a majority of the outstanding shares of Series A Preferred Stock, shall have the option of electing treatment of the shares
of the Series A Preferred Stock under either this Section 5(f) or Section 3(d) hereof, notice of which
election shall be submitted in writing to the Corporation at its principal offices no later than five (5) business days before
the effective date of such event.
Page 24
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
For purposes hereof,
a Reorganization shall not include any reorganization, merger or consolidation involving (1) only a change in the state
of incorporation of the Corporation, (2) a merger of the Corporation with or into a wholly-owned subsidiary of the Corporation
that is incorporated in the United States of America, or (3) an acquisition, whether by merger, reorganization, consolidation
or other form of business combination, of which the Corporation is substantively the surviving corporation and operates as a going
concern, of another corporation and which does not involve a recapitalization or reorganization of the Preferred Stock or Common
Stock, and does not involve (in a single transaction or series of interrelated transactions) a transfer of more than 50% of the
voting power of the Corporation in a business combination.
(g) Automatic
Conversion Upon Public Offering, Equity Financing or Election of Preferred Stock.
(i) Mandatory
Conversion of Preferred Stock. Immediately (1) upon the effectiveness of an underwritten public offering on a firm
commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation and/or selling stockholders in which the Corporation and/or
selling stockholders receive gross proceeds equal to or greater than $25 million (a “Qualified Public Offering”),
or (2) upon the approval, set forth in a written notice to the Corporation, of the holders of a majority of the outstanding
shares of Series A Preferred Stock of an election to convert the Series A Preferred Stock into Common Stock, then all
outstanding shares of Series A Preferred Stock shall be converted automatically into the number of shares of Common Stock
into which such shares of Series A Preferred Stock are then convertible pursuant to this Section 5 hereof as of the closing
and consummation of such underwritten public offering, or the stated date of approval of such holders of Series A Preferred
Stock, without any further action by the holders of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
The automatic conversion
of the Series A Preferred Stock into shares of Common Stock as provided in clause (1) above shall be subject in all circumstances
to the closing and consummation of the offer and sale of shares of Common Stock pursuant to any Qualified Public Offering.
(ii) Surrender
of Certificates Upon Mandatory Conversion. Upon the occurrence of the conversion events specified in the preceding paragraph
(i), the holders of the Series A Preferred Stock shall, upon notice from the Corporation, surrender the certificates representing
such shares at the office of the Corporation or of its transfer agent for the Common Stock. Thereupon, there shall be issued and
delivered to such holder a certificate or certificates for the number of shares of Common Stock into which the shares of Series A
Preferred Stock so surrendered were convertible on the date on which such conversion occurred. The Corporation shall not be obligated
to issue such certificates unless certificates evidencing the shares of Series A Preferred Stock being converted are either
delivered to the Corporation or any such transfer agent, or the holder notifies the Corporation that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith.
(h) Certificate
as to Adjustments; Notice by Corporation. Upon any adjustment of the Series A Applicable Conversion Rate, then and
in each such case the Corporation shall give written notice thereof, by delivery in person, first class mail, postage prepaid,
electronic mail, overnight courier service, telecopy or telex, to the holders of the Series A Preferred Stock, which notice
shall state the Series A Conversion Rate resulting from such adjustment, setting forth in reasonable, itemized detail the
method upon which such calculation is based.
Page 25
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
(i) Exercise
of Conversion Privilege. To exercise its conversion privilege, a holder of Series A Preferred Stock shall surrender
the certificate(s) representing the shares being converted to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such shares. Such notice shall also state the name
or names (with address or addresses) in which the certificate(s) for shares of Common Stock issuable upon such conversion
shall be issued. The certificate(s) for shares of Series A Preferred Stock surrendered for conversion shall be accompanied
by proper assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation,
together with the certificate(s) representing the shares of Series A Preferred Stock being converted, shall be the “Conversion
Date”. As promptly as practicable after the Conversion Date, the Corporation shall issue and shall deliver to the
holder of the shares of Series A Preferred Stock being converted, or on its written order, such certificate(s) as it
may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series A Preferred
Stock in accordance with the provisions of this Section 5, and cash, as provided in Section 5(j), in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior
to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of
Series A Preferred Stock shall cease and the person(s) in whose name(s) any certificate(s) for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the holder(s) of record of the shares of Common
Stock represented thereby. In the event some but not all of the shares of Series A Preferred Stock represented by a certificate(s) surrendered
by a holder are converted, the Corporation shall execute and deliver to or on the order of the holder, at the expense of the Corporation,
a new certificate representing the number of shares of Series A Preferred Stock which were not converted.
(j) Cash
in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued
upon the conversion of shares of Series A Preferred Stock. Instead of any fractional shares of Common Stock which would otherwise
be issuable upon conversion of Series A Preferred Stock, the Corporation shall pay to the holder of the shares of Series A
Preferred Stock which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction
of the market price per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at
the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be
based upon the aggregate number of shares of Series A Preferred Stock being converted at any one time by any holder thereof,
not upon each share of Series A Preferred Stock being converted.
(k) Reservation
of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the
Series A Preferred Stock (including any shares of Series A Preferred Stock represented by any warrants, options, subscription
or purchase rights for the Series A Preferred Stock), and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock (including
any shares of Series A Preferred Stock represented by any warrants, options, subscriptions or purchase rights for the Series A
Preferred Stock), the Corporation shall use all reasonable efforts and take such action as may be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.
Page 26
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
6. Notices
of Record Date. In case at any time: (i) there shall be any capital reorganization or reclassification of the capital
stock of the Corporation, or a consolidation or merger of the Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all its assets; or (ii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, then, in any one or more of said cases, the Corporation shall give,
by delivery in person, first class mail, postage pre-paid, electronic mail, overnight courier service, telecopy or telex, addressed
to each holder of any shares of each series of the Series A Preferred Stock at the address of such holder as shown on the
books of the Corporation, in the case of any such event, at least ten (10) days’ prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing clause shall also specify, the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, as the case may be.
7. No
Impairment. The Corporation shall not, by amendment, alteration or repeal of this Second Amended & Restated Certificate
of Incorporation (whether by merger, consolidation, operation of law, or otherwise) or through any Deemed Liquidity Event, any
event described in Section 3 hereof, or any other reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, agreement or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation and shall at all times in good faith assist in the
carrying out of all the provisions of Section 3 and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the holders of the Series A Preferred Stock against impairment.
* * * * * * *
Page 27
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
EXHIBIT B: Disclosure Schedule
Capital Stock, Post-Financing:
Set forth below is the Company’s current fully-diluted
capitalization, as adjusted to reflect the sale of all shares of the Series A preferred stock offered in this financing.
|
|
|
Shares
|
|
|
Ownership
|
|
|
Type
|
|
Common Shareholders
|
|
|
3,000,000
|
|
|
|
42
|
%
|
|
Common
|
|
Warrants
|
|
|
100,722
|
|
|
|
1
|
%
|
|
Common
|
|
Stock Option Plan
|
|
|
721,785
|
|
|
|
10
|
%
|
|
Common
|
|
Series A Preferred Shareholders
|
|
|
3,445,874
|
|
|
|
47
|
%
|
|
Series A Convertible Preferred
|
|
Total
|
|
|
7,268,381
|
|
|
|
100
|
%
|
|
|
Material Contracts:
The Company is a party
to a certain Collaboration Agreement with UMass Medical Center. Under the terms of this Agreement, UMass would supply patient tissue,
blood, fluid samples, and related data and specimens to the Company for distribution to research laboratories and institutions,
and pharmaceutical and biotechnology companies that require such materials for research and development. UMass desires to implement
iSpecimen’s software technology and data processes for analyzing and extracting patient data from UMass’s laboratory
and clinical information systems and for retrieving clinical specimens from the UMass hospital and research systems from the laboratory
workflow, using a combination of proprietary and open systems provided by the Company and integrated with UMass’s clinical
information systems. UMass is providing clinicians and researchers associated with UMass access to patient specimens and data for
internal clinical and research operations. The Company provides UMass with advanced analytical tools and functionality that can
improve UMass’s hospital and/or laboratory operations and facilitate outcomes research.
The Company is responsible
for all direct costs related to the installation and implementation of the “Indigo Software” for use at UMass’s
facility, excluding costs related to the extraction of data from existing UMass information systems for use in and with the Indigo
Software. UMass is responsible for all costs related to the implementation of a data extraction method for transferring data from
existing UMass information systems and data stores into the Company’s Indigo Software. UMass may request and the Company
may elect to have the Company initially pay the entire capital amount of $10,000 and offset such capital expenditure against future
amounts owed by the Company to UMass). UMass is providing IT personnel at its cost, and the Company will not be reimbursing UMass
for these efforts. The Company issued 90,000 shares of its Common Stock to UMass Medical Center Inc. in connection with this Agreement.
Page 28
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
The Company is a party
to a certain Software Development Agreement with NHR, Inc. Under the terms of this Agreement, NHR developed, authored, implemented
and deployed the Indigo Software for the benefit of the Company. The Company owns all right, title and interest in the Indigo Software
developed by NHR, including all intellectual property rights. The Company and NHR agreed to a hybrid payment plan consisting of
cash and convertible debt including the issuance of a convertible promissory note to NHR by the Company. The total amount due NHR
under this Agreement for successful completion of the Development Plan and the successful achievement of the Acceptance Criteria
is $605,000 and will be divided and paid as follows: (1) a convertible promissory note in the principal amount of $150,000
(the “Developer’s Note”); and (2) a cash payment in the amount of $455,000, to be paid in installments
that are in accordance with the completion of the milestones specified under the mutually accepted Development Plan, and dependent
and conditioned on the satisfactory testing, acceptance, performance, and implementation of the Indigo Software according to the
Development Plan and milestones.
The Company is a party
to a certain Distribution and Lead Generation Agreement with Starlims Corporation. Under the terms of this Agreement, the Company
is licensing Starlims’s proprietary software under a worldwide, non-exclusive, non-transferable, fee-bearing license to use,
reproduce and distribute directly to end users, the object code copies of the Starlims Software solely as bundled with the Company’s
Indigo Software Product. During the term of this Agreement (a) the Company appointed Starlims, on a non-exclusive basis, to
generate sales leads for the Company’s Indigo Software Product; and (b) Starlims appointed the Company, on a non-exclusive
basis, to generate sales leads for the Starlims’s Software. Starlims also agreed that, during the term of this Agreement,
it would not enter into an agreement with any entity listed as a designated competitor of the Company to provide the Starlims’s
Software to such a Competitor so that the competitor can make available a product to its end users materially similar to the Company’s
Indigo Software Product. Payment terms include the following: 50% of the license costs for the Starlims Software is invoiced upon
delivery, and the other 50% is invoiced 60 days after delivery. Maintenance Service costs and related expenses invoiced monthly
for actual days provided or in accordance with predetermined milestones.
Page 29
iSpecimen Inc - Series A Preferred Stock Subscription Agreement
Exhibit 10.7
iSpecimen, Inc.
Capital Commitment Agreement
Capital
Commitment Agreement (the “Agreement”) made as of this September 1, 2012, by and between
iSpecimen Inc., a Delaware corporation located at 275 Grove Street, Suite 2-400,
Newton, Massachusetts 02466 (the “Company”), and Andrew L. Ross, an individual residing at 75
Myles Standish Road, Weston, MA 02493 and an investor in the Company (the “Investor”).
Recitals
|
|
A.
|
WHEREAS, Investor has previously has made a commitment to invest $1,500,000 (the “Series A
Commitment”) for 1,968,504 shares of the Company’s Series A Preferred Stock (the “Preferred
Shares”) at a price per share of $0.762, as evidenced by a certain Series A Preferred Stock Subscription Agreement
executed by the parties;
|
|
|
B.
|
WHEREAS, the initial $600,000 of the Series A Commitment has already been provided
to the Company by the Investor, in exchange for the initial 787,402 shares of the Preferred Shares, with the remaining $900,000
of the Series A Commitment to be provided to the Company in two subsequent; and
|
|
|
C.
|
WHEREAS, the Investor is hereby willing to commit additional equity capital to the Company,
above and beyond the Series A Commitment, upon the achievement of certain milestones and objectives.
|
Agreement
In consideration of
the facts set forth in the recitals hereto, which recitals are made a substantive part of this Agreement, and the mutual agreements
herein contained, the parties hereto agree as follows:
The parties acknowledge
that the Investor has previously made an investment commitment of $1,500,000 in the Company for the purchase of 1,968,504 shares
of the Company’s Series A Preferred Stock, at a price per share of $0.762. To date, $600,000 of the total $1,500,000
investment commitment has been funded by the Investor. The tranches for funding of such Investor’s total investment commitment
have been or shall be, as the case may be, made as follows: (1) 40% of the Investor’s total investment commitment (or
$600,000) has been made prior to the execution of this Agreement site (“Tranche 1”); (2) 30.0% of
the Investor’s total investment commitment (or $450,000) shall be made and shall be dependent upon the successful implementation
of the Company’s technology solution at an initial hospital site (“Tranche 2”); and (3) 30.0%
of the Investor’s total investment commitment (or $450,000) shall be made and shall be dependent upon the execution by the
Company of definitive agreements with a second hospital or healthcare system that would permit specimen and data access for the
Company (“Tranche 3”) (collectively, the “Existing Investment”, which shall
equal the Series A Commitment).
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1
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Page
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Capital Commitment Agreement
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|
|
2. Commitment
for Follow-On Investment.
2.1 Commitment
for Follow-On Investment. The Investor hereby undertakes and commits to provide to the Company an additional $500,000
of equity capital (the “Follow-On Equity Commitment”) in accordance with the terms below, to be accepted
at the election and sole discretion of the Company. The terms of the Follow-On Equity Commitment shall be as follows: (i) the
Follow-On Equity Commitment shall be available to the Company for a period of nineteen (19) months from the date of execution
of the Series A Preferred Stock Subscription Agreement between the Company and the Investor and only upon completion of the
Existing Investment; (ii) the Company shall provide a minimum notice to the Investor of thirty (30) days of its intention
to draw down on the Follow-On Equity Commitment; (iii) the Follow-On Equity Commitment shall be in exchange for the Company's
Common Stock issued and priced at the Board-approved value for options and other Common Stock transactions three months prior
to the notice date; and (iv) the Company must demonstrate satisfactory achievement of no less than ninety (90%) of projected
gross revenue objectives, as presented in the Company’s financial projections attached hereto as Exhibit A, calculated
on a trailing twelve month basis at the time of the call for the Follow-On Equity Commitment. The foregoing clause (iv) may
be waived by mutual consent of the parties if the Company is deemed viable by some other commercially reasonable standard.
2.2 Consideration
for Follow-On Equity Commitment. In consideration for making the Existing Investment and for offering the Follow-On Equity
Commitment, the Company shall grant to Investor a certain number of shares of the Company’s Common Stock (the “Common
Shares”), sequentially and in accordance with the terms outlined below, such that the Investor shall own a total
of one-third (1/3) of the capital stock of the Company issued and outstanding on the date of completion of the Existing Investment.
The Common Shares shall be issued as follows: (i) 440,000 Common Shares shall be issued upon the completion by the Investor
of the Tranche 2 investment; (ii) 190,000 Common Shares shall be issued upon the completion by the Investor of the Tranche
3 investment; and (iii) an additional number of Common Shares shall be issued, if necessary, upon the completion of the Existing
Investment such that the sum of the Preferred Shares and Common Shares owned by the Investor equals one-third (1/3) of the Company’s
issued and outstanding capital stock on the date of completion of the Existing Investment. For reference and clarification, example
capitalization projections are attached hereto as Exhibit B. The Common Shares, when so issued, shall be fully vested upon
issuance. As a prerequisite to the issuance of any Common Shares under this Agreement, the Company will promptly undertake to waive
any anti-dilution adjustment provision specified in the Series A Preferred Stock Subscription Agreement.
3. Representations
of Investor. To induce the Company to enter into this Agreement, Investor hereby represents and warrants to
the Company that the statements contained in this section are true and correct as of the date hereof:
3.1 Ownership.
Investor is receiving the Common Shares being issued to him hereunder for his own account and not as nominee or agent for any other
person and not with a view to, or for offer or sale in connection with, any distribution thereof within the meaning of the Securities
Act of 1933 or any state securities law, subject to Investor’s rights at all times to sell or otherwise dispose of all or
any part of such Common Shares.
3.2 Investor
Knowledge. Investor represents: (i) as an officer and director of the Company, and the sole manager and member of
the Company, he is knowledgeable, sophisticated and experienced in business and financial matters concerning the Company and the
Company; (ii) he has previously invested in securities similar to the Common Shares and fully understands the limitations
on transfer described in this Agreement; (iii) is able to bear the economic risks of obtaining and holding the Common Shares
and is presently able to afford the complete loss of his investment therein and in the Common Shares; and (iv) has been afforded
access to information about the Company and the Company, and the Company’s and Company’s financial condition, results
of operations, business, management and prospects, to the extent that the Company or the Company possesses such information or
can acquire it without unreasonable effort or expense, sufficient to enable Investor to evaluate his investments in the Common
Shares.
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3.3 Information;
Reliance on Representations. Investor acknowledges that he has been afforded the opportunity (i) to ask such questions
about the Company which he has deemed necessary and to receive answers concerning the terms and conditions of the conversion and
exchange of the Company membership interests for the Common Shares, and (ii) to obtain such additional information that the
Company or Company possesses or can acquire without unreasonable effort or expense and that is necessary to verify the accuracy
and completeness of the answers provided by the Company or the Company. Investor also acknowledges that he has been advised to
and afforded the opportunity to consult with his own attorney regarding legal matters concerning the transactions described herein
and to consult with an independent tax adviser regarding the tax consequences of the transactions described herein.
3.4 Suitability.
The Investor confirms that it understands and has fully considered for purposes of this investment the risks of this investment
and understands that (i) this investment is suitable only for an investor who is able to bear the economic consequences of
losing its entire investment, (ii) the purchase of the Common Shares is a speculative investment which involves a high degree
of risk, and (iii) there are substantial restrictions on the transferability of, and there will be no immediate public market
for, the Common Shares, and accordingly, it may not be possible for the Investor to liquidate its investment in case of emergency.
The Investor recognizes that the Company is a development-stage enterprise with limited operating history and is currently developing,
extending and refining its business strategy and marketing plan.
3.5 Lack
of Liquidity. The Investor confirms that it is able to bear the economic risk of this investment, and to hold the
Common Shares for an indefinite period of time. The Investor has sufficient liquid assets so that the illiquidity associated with
this investment will not cause any undue financial difficulties or affect the undersigned Investor’s ability to provide for
its current needs and possible financial contingencies, and that its commitment to all speculative investments is reasonable in
relation to its net worth and annual income.
3.6 Knowledge
and Experience. The Investor has such knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of this speculative investment and of making an informed investment decision. The Investor is an
“accredited investor” as defined in Rule 501 of Regulation D of the Securities Act of 1933, as amended
(the “Securities Act”). As an “accredited investor” as defined in Rule 501 of
Regulation D of the Securities Act, if the Investor is an individual, the Investor has (i) a net worth (exclusive of his primary
residence and furnishings) of $1.0 million, or (ii) annual income in each of the last two calendar years (and anticipated
annual income for this calendar year) of at least $200,000 (or $300,000 jointly with the Investor’s spouse).
3.7 Investment
Intent. The Common Shares are being acquired by the undersigned solely for the Investor’s own personal account, for
investment purposes only, and not with a view to, or in connection with, any resale or distribution thereof. The Investor has no
contract, undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge
to any person the Common Shares for which it hereby subscribes, or any part thereof, or any interest therein or any rights thereto.
The Investor has no present plans to enter into any such contract, undertaking, agreement or arrangement. The Investor must bear
the economic risk of the investment for an indefinite period of time because the Common Shares have not been registered under the
Securities Act and applicable state securities laws and, therefore, cannot be sold unless they are subsequently registered under
the Securities Act and applicable state securities laws or unless an exemption from such registration is available.
3.9 Investment
Commitment Not Disproportionate to Net Worth. The Investor’s overall commitment to investments which are not readily
marketable is not disproportionate to the undersigned’s net worth and the Investor’s investment in the Company will
not cause such overall commitment to become excessive.
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4. Confidentiality.
All non-public information disclosed by
a party to the other party the pursuant to this Agreement, as well as the discussions and negotiations between the parties regarding
the transaction, shall be subject to confidentiality obligations. The parties acknowledge that during the performance of this Agreement,
each party will have access to certain of the other party’s Confidential Information or Confidential Information of third
parties that the disclosing party is required to maintain as confidential. Both parties agree that all items of Confidential Information
are proprietary to the disclosing party or such third party, as applicable, and shall remain the sole property of the disclosing
party or such third party. “Confidential Information” shall mean all written or oral information not generally
available to the public, disclosed by either party to the other, related to the operations of the Company’s business or the
operations of either party or a third party that has been identified as confidential or that by the nature of the information or
the circumstances surrounding disclosure ought reasonably to be treated as confidential.
Each party agrees as
follows: (i) to use the Confidential Information only for the purposes described herein; (ii) that such party will not
reproduce the Confidential Information and will hold in confidence and protect the Confidential Information from dissemination
to, and use by, any third party; (iii) that neither party will create any derivative work from Confidential Information disclosed
to such party by the other party; (iv) to restrict access to the Confidential Information to such of its personnel, agents,
and/or consultants, if any, who have a need to know the information and have access and who have been advised of and have agreed
in writing to treat such information in accordance with the terms of this Agreement; and (v) to return or destroy all Confidential
Information of the other party in its possession upon termination or expiration of this Agreement.
Notwithstanding the
foregoing sentence, Confidential Information does not include (i) information which is or becomes publicly available
(except as may be disclosed in violation of this Agreement); or (ii) information acquired by the Investor from a source other
than the Company or any of its employees, which source acquired such information directly from the Company without a breach of
any confidentiality obligation between such source and the Company; (iii) information which is independently developed by
the Investor without access to or use of Confidential Information of the Company or any of its affiliates or customers; or (iv) information
received from a third party outside the Company that was disclosed without a breach of any confidentiality obligation.
5. Miscellaneous.
The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto. This Agreement and
any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the General
Corporation Law of the State of Delaware as to matters within the scope thereof. As to all other matters, including contract matters,
this Agreement shall be governed by and construed under the internal laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws or choice of laws that would result in the application of any law other than the laws of the
Commonwealth of Massachusetts. This Agreement may be executed in two or more counterparts, including facsimile counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any notice, request
or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if (a) personally
delivered to the party to be notified, (b) when sent by e-mail or facsimile transmission (including PDF or other electronic
means) if sent during normal business hours of the recipient, if not, then on the next business day, (c) four (4) days
after having been deposited in the U.S. mail, or (d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. This Agreement, together with all exhibits and schedules
hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes
any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect
to the subject matter hereof. From and after the date of this Agreement, upon the request of Investor or the Company, the Company,
the Company and Investor shall execute and deliver such instruments, documents or other writings as may be reasonably necessary
or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. Amendments, modifications
or additions to this Agreement may be made and compliance with any term, covenant, agreement, condition or provision set forth
herein may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively) upon the
written consent of the Company and Investor. No modification of this Agreement or waiver of the terms and conditions hereof shall
be binding upon the parties, unless approved in writing by each party. This Agreement constitutes the full and complete agreement
of the parties with respect to the subject matter hereof, and supersedes any prior communications, agreements in principle, understandings,
conversations, documentation, whether oral or in writing. It is understood and agreed however, that the parties shall correct any
discrepancies between this agreement and the parties’ understandings that are the result of a scrivener's error.
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Signing of this Agreement and transmission
by facsimile or electronic document transfer will be acceptable and binding upon the parties hereto. Each party agrees that no
failure or delay by another party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other further exercise or the exercise of any other right, power or privilege
hereunder.
6. Resolution
of Disputes.
6.1 Arbitration.
Except as provided in Section 6.2 below, any controversy or claim arising out of or relating to this Agreement
shall be submitted for settlement to an arbitrator. If the parties cannot agree upon an arbitrator, the controversy, claim or breach
shall be referred to JAMS/EndDispute. Such arbitration shall be held in Boston, Massachusetts, and the judgment upon the award
rendered shall be entered by consent in any court having jurisdiction. The prevailing party shall be entitled to recover all costs
and expenses associated with any arbitration (including attorneys’ fees); and if no party completely prevails, each party
shall be responsible for its own expenses. In the event of any conflict between the arbitration rules in effect from time
to time and the provisions of this Agreement, the provisions of this Agreement shall be controlling. The arbitrator shall be required
to (i) follow the substantive rules of applicable law, (ii) require all testimony to be transcribed, and (iii) accompany
the award with findings of fact and a statement of reasons for the decision. The arbitrator shall have the authority to permit
discovery for no more than thirty (30) days, to the extent deemed appropriate by the arbitrator, upon reasonable request of a party.
The arbitrator shall have no power or authority to (i) add to or detract from the written agreement of the parties set forth
herein, (ii) modify or disregard any provision of this Agreement or any of the other related documents, or (iii) address
or resolve any issue not submitted by the parties The arbitrator shall hold proceedings during a period of not longer than thirty
(30) days promptly following conclusion of discovery, and the arbitrator shall render a final decision within ten (10) days
following conclusion of the hearings. The arbitrator shall have the power to grant injunctive relief (without the necessity of
a party posting a bond) in the event a party has violated the terms of this Agreement.
6.2 Injunctive
Relief. Each party hereby acknowledges that breach of its obligations hereunder may result in irreparable harm to the other
party and monetary damages may be inadequate to compensate for such harm. Therefore, the party who has been harmed by a breach
of this Agreement may seek injunctive relief against such breach or threatened breach in addition to any other remedies that party
may have under applicable law, and without the necessity of posting a bond.
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iSpecimen, Inc.
Capital Commitment Agreement
Signature
Page
In
Witness Whereof, each of the parties hereto have caused this Capital Commitment Agreement to be duly executed as of
the day and year first written above.
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iSpecimen, Inc.
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By:
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/s/ Christopher Ianelli, MD, PhD
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Name:
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Christopher Ianelli, MD, PhD
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Title:
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President & Chief Executive Officer
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Investor
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/s/ Andrew L. Ross
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Andrew L. Ross
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Capital Commitment Agreement
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Exhibit A
Financial Projections
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Exhibit B
Example Capitalization Projection
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Capital Commitment Agreement
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Exhibit 10.8
Execution Version
iSpecimen Inc.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B
Preferred Stock Purchase Agreement (this “Agreement”) is made as of August 22, 2014,
by and among iSpecimen Inc., a Delaware corporation (the “Company”), and the investors listed
on Exhibit A attached to this Agreement, as such Exhibit A may be supplemented from time to time
to add New Investors (each an “Investor” and collectively, the “Investors”).
The parties hereby
agree as follows.
1. Purchase
and Sale of Series B Preferred Stock.
1.1 Sale
and Issuance of Series B Preferred Stock.
1.1.1 Filing
of Restated Certificate. The Company shall adopt and file with the Secretary of State of the State of Delaware on or before
the Initial Closing (as defined below) the Third Amended and Restated Certificate of Incorporation in substantially the form of
Exhibit B attached to this Agreement (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the “Restated Certificate”).
1.1.2 Sale
of Series B Preferred Stock. Subject to the terms and conditions of this Agreement, each Investor that is not a Note Investor
(as defined below) agrees to purchase at the Initial Closing (as defined below) and the Company agrees to sell and issue to each
such Investor at the Initial Closing that number of shares of Series B Preferred Stock, $0.0001 par value per share (the “Series B
Preferred Stock”), set forth opposite such Investor’s name on Exhibit A (the “Series B
Shares”), at a purchase price of $2.52019 per share (the “Series B Price”), subject to Section 1.3
of this Agreement. The aggregate amount of Series B Shares to be sold pursuant to this Agreement shall not exceed 3,174,365
shares.
1.2 Conversion
of Promissory Notes and Issuance of Series A-1 Preferred Stock.
1.2.1 Conversion
of Promissory Notes. By execution of this Agreement, certain Investors who are holders of Convertible Promissory Notes (each
a “Note Investor” and collectively, the “Note Investors”) in the aggregate
principal amount of $550,000.00 (the “Convertible Notes”), hereby agree that, subject to Section 1.3
of this Agreement, the principal amount of (and all accrued interest thereon) all such Convertible Notes previously issued by the
Company to the Note Investors are cancelled, extinguished, terminated, retired and contributed to the capital of the Company as
of the date of the Initial Closing through the acquisition by the Note Investors of that number of shares of Series A-1 Preferred
Stock, $0.0001 par value per share (the “Series A-1 Preferred Stock”), set forth opposite such Note
Investor’s name on Exhibit A (the “Series A-1 Shares”), which shall be
calculated at the conversion rate of one (1) share of Series A-1 Preferred Stock for each $1.00808 per share in principal
amount of (and all accrued interest thereon) all Convertible Notes so converted (at a $10.0 million capped pre-money valuation).
The aggregate amount of Series A-1 Shares to be sold pursuant to this Agreement by cancellation or conversion of indebtedness
owed to the Note Investors by the Company shall not exceed 556,550 shares.
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
1.3 Closing;
Delivery.
1.3.1 Initial
Closing. The initial closing of the purchase and sale of the Series B Shares and Series A-1 Shares (collectively,
the “Shares”) shall take place remotely via the exchange of documents and signatures on August 22,
2014 or at such other time and place as the Company and the Investors representing a majority of the Series B Shares to be
sold mutually agree upon, orally or in writing (which time and place are designated as the “Initial Closing”).
A minimum commitment of $3,000,000 of new proceeds shall be required for the Initial Closing (excluding any amounts related to
the conversion of the Convertible Notes described above). At the Initial Closing, each of the Investors shall deliver to the Company
the purchase price for the Shares by (i) check payable to the Company or by wire transfer to a bank account designated by
the Company, or (ii) cancellation of indebtedness owed by the Company to Note Investors holding Convertible Notes, as applicable.
In the event there is more than one closing, the term “Closing” shall apply to each such closing unless
otherwise specified herein.
1.3.2 Tranche
Closings. Subject to the terms of this Agreement and provided that an Investor commits at the Initial Closing to the purchase
and sale of that total number of Series B Shares as set forth opposite such Investor’s name on Exhibit A,
each such Investor shall have the option to make the balance of payments for such Investor’s Series B Shares at three
(3) successive closings following the Initial Closing (each such closing a “Tranche Closing” and
collectively, the “Tranche Closings”). Such Tranche Closings shall be triggered by and in accordance
with the Company’s achievement of certain milestones (as described below and on Schedule A). The Company shall
provide each Investor at least sixty (60) days’ prior written notice of each Tranche Closing. The Tranche Closings shall
take place not more than fifteen (15) days after satisfaction of the conditions to each Tranche Closing set forth below. Notwithstanding
the foregoing, each Investor may invest more than such Investor’s pro rata commitment in any Tranche Closing to satisfy
such Investor’s full commitment made at the Initial Closing.
1.3.3 Achievement
of Milestones. The obligations of the Investors to participate at the Tranche Closings are subject to the fulfillment by the
Company of the milestones and objectives set forth in Schedule A attached hereto. Any change to the milestones in
Schedule A must be approved by the Board of Directors of the Company (the “Board”), which
approval shall include the vote of OBF Investments, LLC and Andrew Ross (the “Series B Lead Investors”).
When the Board has determined that the objectives and milestones outlined in Schedule A have been achieved, the Company
may initiate the respective Tranche Closings by sending to the Investors sixty (60) days prior written notice. Following the end
of the sixty-day notice period, the Investors shall transfer funds to the Company within ten (10) business days. At each Tranche
Closing, each of the representations and warranties of the Company contained in Section 2 shall be true and correct as of
such Tranche Closing with the same effect as though such representations and warranties had been made on and as of the date of
the Initial Closing, except for changes to the extent required and immaterial matters arising in the ordinary course of business.
At each Tranche Closing, the Company shall have performed and complied with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or before such Tranche Closing and shall have obtained
all approvals, consents and qualifications necessary to complete the purchase and sale described herein. As promptly as practicable,
the Company shall notify the Investors of the anticipated attainment or default of any of the milestones set forth in Schedule
A. The Company shall have ninety (90) days to remedy any missed milestone (the “Cure Period”).
Following the Initial
Closing and the provision of the Tranche 1 investment, the Series B Lead Investors may introduce substitute investors reasonably
acceptable to the Board (a “Substitute Investor”) in order for such Substitute Investor to subscribe
for all or a portion of the original Series B Lead Investor’s commitment in subsequent tranches set forth on Schedule
A in “Milestone Based Investment Tranches.” Subject to the approval of the Board (which approval shall not
be unreasonably withheld, conditioned or delayed), the Series B Lead Investors may assign, transfer or bestow their right
to invest in Tranches 2-4 to Substitute Investors. At any Tranche Closing, all Investors (other than New Investors or Substitute
Investors) shall have a right of oversubscription on Series B Shares not subscribed for by the original Investor participating
at the Initial Closing or a Substitute Investor following the Initial Closing (a “Right of Oversubscription”);
provided, however, that the Series B Lead Investors shall have the obligation to purchase all Series B Shares
not subscribed for an any Tranche Closing following such initial exercise of the Right of Oversubscription by all Investors and
any Substitute Investor. The Right of Oversubscription shall be allocated pro rata among all Investors (including a Substitute
Investor) exercising the Right of Oversubscription, with the numerator being the shares of Preferred Stock held by each Investor
(including a Substitute Investor) exercising the Right of Oversubscription, and the denominator being all shares of Preferred Stock
held by all Investors (including all Substitute Investors) exercising the Right of Oversubscription. For the avoidance of doubt,
the Right of Oversubscription shall not apply to a transfer, sale, gift or other disposition to a Substitute Investor by a Series B
Lead Investor, or otherwise to a New Investor (as defined below) introduced to the Company by any Investor or any existing stockholder
of the Company and participating at a Tranche Closing. For the avoidance of doubt, New Investors and Substitute Investors shall
enjoy the same rights and privileges with respect to the purchase and ownership of Series B Shares, except as expressly set
forth herein.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
1.3.4 Failure
to Invest at Tranche Closing. If any Investor fails to participate fully for its complete pro rata commitment in any Tranche
Closing (a “Defaulting Investor”), the existing shares of Series B Shares then held by such Defaulting
Investor shall be automatically converted into Common Stock, and such Defaulting Investor shall forfeit all of its rights related
to the Series B Shares, other than registration rights and the right to obtain basic financial information afforded to all
other holders of Common Stock. Failure by any Series B Lead Investor to provide the committed capital upon satisfactory achievement
of a milestone (with exceptions, such as allowing approved affiliates or other investors approved by the Board to assume some of
the investment commitment for any milestone) shall result in automatic disqualification from participation in subsequent tranches
and/or rounds of investment and the conversion into Common Stock of any Series B Shares held by that Investor. All non-defaulting
Investors shall have the right to oversubscribe for the Defaulting Investor’s portion of the defaulted investment amount
(on a pro rata basis among the non-defaulting Investors). Notwithstanding the foregoing and for the avoidance of doubt, a holder
of Series B Shares may satisfy its obligation to make additional investments in the Company at a Tranche Closing pursuant
to this Agreement by assigning, transferring or otherwise substituting other investor(s) approved in advance by the Board
to satisfy such Investor’s commitment to make additional investments in the Company pursuant to this Agreement and to subscribe
for all or a portion of such Investor’s commitment in any Tranche Closing. Upon any such substitution for the full amount
of the Investor’s required subscription for that Tranche Closing, the Investor shall have satisfied the investment commitment
and shall not be deemed a Defaulting Investor. If less than all of the Investor’s commitment in any Tranche Closing is not
fully funded (whether by that Investor or its Substitute Investor(s), as defined below), a number of Series B Shares previously
or to be concurrently issued to such Investor equivalent in value to that portion of the amount which was not funded by that Investor
at any Tranche Closing shall be converted into Common Stock, and the Defaulting Investor shall forfeit all rights to participate
in any subsequent Tranche Closing. By way of illustration and example, if a holder of Series B Shares was required to purchase
300,000 shares of Series B Shares at a Tranche Closing, and such holder only purchases 200,000 shares (whether directly by
such holder or in conjunction with such holder’s substituted investor(s)), then 100,000 shares of Series B Shares previously
issued to any such holder shall be converted into Common Stock.
1.3.5 Failure
to Achieve Milestone. If the Company fails to achieve within the Cure Period a required milestone for a Tranche Closing set
forth on Schedule A, the Series B Lead Investors shall have the right: (i) to withhold funding for that
Tranche Closing; (ii) at their election fund the Tranche Closing and receive twenty percent (20%) warrant coverage for the
Tranche Closing connected to the missed milestone (calculated as twenty percent (20%) of those Series B Shares to be purchased
by each Investor at the Tranche Closing) for one cent ($0.01) per share (with an exercise period of five (5) years), or (iii) a
right of first refusal to fund on terms equal to those offered by any third party investor after the Cure Period. The Board and
the Series B Lead Investors shall discuss in good faith appropriate mechanisms for an adjustment of the valuation related
to the Series B Shares. The Board’s determination shall take in consideration how many milestones have been achieved
to date, the number of days or months by which the milestone was missed, the Company’s remediation efforts to correct the
missed milestone, the time required to obtain the milestone and the next milestone, the increase in valuation also achieved by
previously-obtained milestones, and other relevant factors. The Board, including the members of the Board designated by the Series B
Lead Investors, shall determine in good faith with the recommendations of management, significant stockholders, and external experts
an appropriate mechanism for addressing the change in valuation due to a missed milestone (including the issuance of the warrant
coverage).
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
1.3.6 Delivery
of Stock Certificates. As soon as practicable following the Initial Closing, the Company shall deliver to each Investor a certificate
representing the Shares being purchased by such Investor against payment of the purchase price or cancellation of indebtedness
therefor. The Note Investors shall tender to the Company at the Initial Closing the original of all outstanding Convertible Notes
and such Convertible Notes shall be marked “Cancelled.” By signing this Agreement, the Note Investors hereby further
agree that (i) regardless of the actual date of the Initial Closing, interest shall have stopped accruing under any Convertible
Note, as applicable, of the day immediately prior to such Initial Closing (the “Interest Accrual Date”),
and hereby waive any interest on such indebtedness after such Interest Accrual Date, (ii) the number of Series A-1 Shares
issued to the Note Investors pursuant hereto upon conversion of such Convertible Notes fully satisfies the Company’s obligation
to issue to the Note Investors shares of the Company’s capital stock under such Convertible Notes, and (iii) all outstanding
principal and interest which has accrued through the Interest Accrual Date under such Convertible Notes shall be automatically
converted into Series A-1 Shares without further action on the part of the Company or the holder, and such Convertible Notes
shall be automatically canceled in their entirety and thereafter represent only the right of the holder thereof to receive the
Series A-1 Shares issuable upon such conversion as set forth on Exhibit A.
1.3.7 New
Investors. The Company may, with the consent of the Series B Lead Investors (which consent shall not be unreasonably withheld,
conditioned or delayed), offer and sell to other accredited investors (as accredited under the federal securities laws, the “New
Investors”), at the Series B Price, up to that number of Series B Shares that is equal to the total number
of Series B Shares authorized by the Restated Certificate (that is, an aggregate of 3,174,362 Series B Shares are reserved
for aggregate financing gross proceeds of approximately $8,000,000) less the number of Series B Shares actually issued and
sold by the Company at the Initial Closing or any Tranche closing. New Investors may include persons or entities who are already
Investors under this Agreement. The Company and the New Investors purchasing Series B Shares at each Tranche Closing will
execute counterpart signature pages to this Agreement and that certain Investor Rights Agreement in the form of Exhibit D
attached hereto (the “Investors’ Rights Agreement,” and together with this Agreement, the “Transaction
Agreements”). Such New Investors will, upon delivery to the Company of such signature pages, become parties to, and
bound by, the Transaction Agreements, each to the same extent as if they had been Investors at the Initial Closing. Each Investor
hereby agrees to waive any rights of first refusal it may have in connection with the sale of any Series B Shares in such
Tranche Closing to New Investors. For the avoidance of doubt, the Right of Oversubscription set forth above in Section 1.3.3
shall not apply to the purchase of Series B Shares by a New Investor.
1.3.8 Use
of Proceeds. The proceeds from the issuance of the Series B Shares will be used for working capital, sales and marketing,
the achievement of the milestones set forth in Schedule A, and general corporate purposes.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2. Representations
and Warranties of the Company. The Company hereby represents and warrants to each Investor that, except as set forth on the
Disclosure Schedule attached as Exhibit C to this Agreement (the “Disclosure Schedule”),
if any, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations
are true and complete as of the date of the Closing, except as otherwise indicated.
2.1 Organization,
Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and corporate authority required (a) to carry
on its business as presently conducted and as presently proposed to be conducted and (b) to execute, deliver and perform its
obligations under the Transaction Agreements. The Company is duly qualified and has the power and authority to transact business
as a foreign corporation and is in good standing under the laws of each jurisdiction in which the failure to so qualify would have
a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, prospects, property,
or results of operations of the Company (a “Material Adverse Effect”).
2.2 Capitalization.
The authorized capital of the Company consists, immediately prior to the Closing (unless otherwise noted), of the following.
2.2.1 A
total of 16,000,000 shares of common stock of the Company, $0.0001 par value per share (the “Common Stock”),
5,402,783 shares of which are issued and outstanding immediately prior to the Closing, 97,440 shares of which are issuable on conversion
of those certain Warrants to Purchase Common Stock, 3,427,871 shares of which are issuable on conversion of the Company’s
Series A Preferred Stock (the “Series A Preferred Stock”), 556,550 shares of which are issuable
on conversion of the Series A-1 Shares, 3,200,000 shares of which are issuable on conversion of the Series B Shares,
and up to 991,785 additional shares of which are issuable pursuant to the Company’s 2013 Stock Incentive Plan (as described
in Section 2.2.3 of this Agreement). All of the outstanding shares of Common Stock and Series A Preferred Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued in material compliance with all applicable federal and
state securities laws.
2.2.2 A
total of 8,000,000 shares of preferred stock of the Company, $0.0001 par value per share (the “Preferred Stock”),
of which (i) 3,427,871 shares are designated as Series A Preferred Stock, all of which are issued and outstanding immediately
prior to the Closing, (ii) 556,550 shares are designated as Series A-1 Preferred Stock, none of which are issued and
outstanding immediately prior to the Closing, and (iii) 3,200,000 shares are designated as Series B Preferred Stock,
none of which are issued and outstanding immediately prior to the Closing.
2.2.3 A
total of up to 991,785 additional shares of Common Stock are subject to issuance to officers, directors, employees and consultants
of the Company pursuant to the Company’s 2013 Stock Incentive Plan (the “Stock Plan”). All such
shares of Common Stock reserved under the Stock Plan remain available for issuance to officers, directors, employees, advisors
and consultants pursuant to the Stock Plan.
2.2.4 There
are no outstanding preemptive rights, options, warrants, conversion privileges or rights (including but not limited to rights of
first refusal or similar rights), orally or in writing, to purchase or acquire any securities from the Company including, without
limitation, any shares of Common Stock, or Preferred Stock, or any securities convertible into or exchangeable or exercisable for
shares of Common Stock or Preferred Stock, except for (a) the conversion privileges of the Series B Shares and Series A-1
Shares to be issued under this Agreement pursuant to the terms of the Restated Certificate, (b) the conversion privileges
of the shares of Series A Preferred Stock pursuant to the terms of the Restated Certificate, (c) the Warrants described
in Section 2.2.2 of this Agreement, (d) the rights provided in the Investors’ Rights Agreement, and (e) the
securities and rights described in Section 2.2.3 of this Agreement.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.2.5 Except
at set forth on the Disclosure Schedule, none of the Company’s stock purchase agreements or stock option documents contains
provision(s) for acceleration of vesting (or lapse of a repurchase right) or other changes in the vesting provisions or other
terms of such agreement or understanding upon the occurrence of any event or combination of events, and no such acceleration or
changes in vesting provisions or terms would be triggered by the sale(s) contemplated hereunder and/or the Transaction Agreements.
The Company has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment,
cancellation, replacement grant, repricing, or any other means. Except as set forth in the Restated Certificate, the Company has
no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.
2.2.6 The
Company has not issued or sold any of its securities at less than fair market value to any employee, consultant or other provider
of services to the Company. The Company has not accelerated vesting of any of the Company’s securities in such a way as to
cause the holder of such security to recognize ordinary income subject to an excise tax pursuant to Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).
2.3 Subsidiaries.
The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust,
joint venture, limited liability company, association, or other business entity. The Company is not a participant in any joint
venture, partnership or similar arrangement.
2.4 Authorization.
All corporate action has been taken, or will be taken prior to the Closing, on the part of the Board and stockholders that is necessary
for the authorization, execution and delivery of the Transaction Agreements by the Company and the performance by the Company of
the obligations to be performed by the Company as of the date hereof under the Transaction Agreements. The Transaction Agreements,
when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement
of creditors’ rights generally, or (b) as limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
2.5 Valid
Issuance of Shares. The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set
forth in this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and free of restrictions on transfer
other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or
encumbrances created by or imposed by an Investor. Based in part on the accuracy of the representations of the Investors in Section 3
of this Agreement and subject to filings pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities
Act”), and applicable state securities laws, the offer, sale and issuance of the Shares to be issued pursuant to
and in conformity with the terms of this Agreement and the issuance of the Common Stock, if any, to be issued upon conversion thereof
for no additional consideration and pursuant to the Restated Certificate, will be issued in compliance with all applicable federal
and state securities laws. The Common Stock issuable upon conversion of the Shares has been duly reserved for issuance, and upon
issuance in accordance with the terms of the Restated Certificate, will be duly authorized, validly issued, fully paid and non-assessable
and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable federal and
state securities laws and liens or encumbrances created by or imposed by an Investor. Based in part upon the representations of
the Investors in Section 3 of this Agreement, and subject to filings pursuant to Regulation D of the Securities Act and applicable
state securities laws, the Common Stock issuable upon conversion of the Shares will be issued in compliance with all applicable
federal and state securities laws.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.6 Governmental
Consents and Filings. No consent, approval, order or authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the
consummation of the transactions contemplated by this Agreement, except for (a) the filing of the Restated Certificate, which
will have been filed as of the Closing, and (b) filings pursuant to Regulation D of the Securities Act, and applicable state
securities laws, which have been made or will be made in a timely manner.
2.7 Litigation.
There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court,
arbitrator, mediator or governmental body, or to the Company’s knowledge, currently threatened in writing (a) against
the Company or (b) against any consultant, officer, director or key employee of the Company arising out of his or her consulting,
employment or board relationship with the Company or that could otherwise materially and adversely impact the Company.
2.8 Intellectual
Property. The Company owns or possesses sufficient legal rights to all Intellectual Property (as defined below) that is necessary
to the conduct of the Company’s business as now conducted and as presently proposed to be conducted (the “Company
Intellectual Property”) without any violation or infringement (or in the case of third-party patents, patent applications,
trademarks, trademark applications, service marks, or service mark applications, without any violation or infringement known to
the Company) of the rights of others. No product or service marketed or sold (or proposed to be marketed or sold) by the Company
violates or will violate any license or infringes or will infringe any rights to any patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, trade secrets, licenses, domain names, mask works, information
and proprietary rights and processes (collectively, “Intellectual Property”) of any other party, except
that with respect to third-party patents, patent applications, trademarks, trademark applications, service marks, or service mark
applications the foregoing representation is made to the Company’s knowledge only. Other than with respect to commercially
available software products under standard end-user object code license agreements, there is no outstanding option, license, agreement,
claim, encumbrance or shared ownership interest of any kind relating to the Company Intellectual Property, nor is the Company bound
by or a party to any options, licenses or agreements of any kind with respect to the Intellectual Property of any other person.
The Company has not received any written communications alleging that the Company has violated or, by conducting its business,
would violate any of the Intellectual Property of any other person. The Company has obtained and possesses valid licenses to use
all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that
it has otherwise provided to its employees for their use in connection with the Company’s business. Section 2.8
of the Disclosure Schedule lists all Intellectual Property as are necessary to the conduct of its business as is now conducted.
None of the Company Intellectual Property includes or incorporates into its source code any open source software that is licensed
under the General Public License or another open source code license having a similar “contaminating” effect on the
Company Intellectual Property or that would otherwise require the Company or any of its subsidiaries to release any portion of
its source code, or to permit free redistribution, reverse engineering or modification of any of the Company Intellectual Property.
2.9 Employee
and Consultant Matters. Each current and former employee, consultant and officer of the Company has executed an agreement with
the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for
the Investors. No current or former employee or consultant has excluded works or inventions from his or her assignment of inventions
pursuant to such agreement. To the Company’s knowledge, no such employees or consultants is in violation thereof. To the
Company’s knowledge, none of its employees is obligated under any judgment, decree, contract, covenant or agreement that
would materially interfere with such employee’s ability to promote the interests of the Company or that would interfere with
such employee’s ability to promote the interests of the Company or that would conflict with the Company’s business.
To the best of the Company’s knowledge, all individuals who have purchased unvested shares of the Company’s Common
Stock have timely filed elections under Section 83(b) of the Internal Revenue Code. To the Company’s knowledge,
it will not be necessary to use any inventions of any of its employees or consultants (or persons it currently intends to hire)
made prior to their employment by the Company. Each employee and consultant has assigned to the Company all Intellectual Property
rights he or she owns that are related to the Company’s business as now conducted and as presently proposed to be conducted.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.10 Compliance
with Other Instruments. The Company is not in violation or default (a) of any provisions of the Restated Certificate or
Bylaws, (b) of any judgment, order, writ or decree of any court or governmental entity, (c) under any agreement, instrument,
contract, lease, note, indenture, mortgage or purchase order to which it is a party that is required to be listed on the Disclosure
Schedule, or, (d) to its knowledge, of any provision of federal or state statute, rule or regulation materially applicable
to the Company. The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions
contemplated by the Transaction Agreements will not result in any such violation or default, or constitute, with or without the
passage of time and giving of notice, either (i) a default under any such judgment, order, writ, decree, agreement, instrument,
contract, lease, note, indenture, mortgage or purchase order or (ii) an event which results in the creation of any lien, charge
or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or
license applicable to the Company.
2.11 Title
to Property and Assets. The Company owns its properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances and security interests except for statutory liens for the payment of current taxes that are not yet delinquent and
liens, encumbrances and security interests which arise in the ordinary course of business and which do not affect material properties
and assets of the Company. With respect to the property and assets it leases, the Company is in material compliance with each such
lease.
2.12 Agreements.
Except for the Transaction Agreements and as set forth on the Disclosure Schedule, there are no agreements, understandings, instruments,
contracts or proposed transactions to which the Company is a party that involve (a) obligations (contingent or otherwise)
of, or payments to, the Company in excess of $15,000, (b) the license of any Intellectual Property to or from the Company
other than licenses with respect to commercially available software products under standard end-user object code license agreements
or standard customer terms of service and privacy policies for Internet sites, (c) the grant of rights to manufacture, produce,
assemble, license, market, or sell its products to any other person, or that limit the Company’s exclusive right to develop,
manufacture, assemble, distribute, market or sell its products, or (d) indemnification by the Company with respect to infringements
of proprietary rights other than standard customer or channel agreements (each, a “Material Agreement”).
The Company is not in material breach of any Material Agreement. Each Material Agreement is in full force and effect and is enforceable
by the Company in accordance with its respective terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally,
or (ii) the effect of rules of law governing the availability of equitable remedies.
2.13 Liabilities.
Except as set forth in the Disclosure Schedule, the Company has no liabilities or obligations, contingent or otherwise, in excess
of $15,000 individually or $30,000 in the aggregate. The Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its capital stock, (ii) made any loans or advances
to any person, other than ordinary advances for travel expenses, or (iii) sold, exchanged or otherwise disposed of any of
its assets or rights, other than the sale of its inventory in the ordinary course of business.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.14 Certain
Transactions. Except as set forth on Section 2.14 of the Disclosure Schedule, other than (i) employment compensation,
including payment of salary, (ii) standard employee benefits generally made available to all employees, (iii) standard
director and officer indemnification agreements approved by the Board, and (iv) the purchase of shares of the Company’s
capital stock and the issuance of options to purchase shares of the Company’s Common Stock, in each instance, approved in
the written minutes of the Board, there are no agreements, understandings or proposed transactions between the Company and any
of its officers, directors, consultants or key employees, or any affiliate thereof.
2.15 Rights
of Registration and Voting Rights. The Company is not under any obligation to register under the Securities Act any of its
currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities,
except for the registration rights contained in the Investors’ Rights Agreement. To the Company’s knowledge, except
as contemplated in the Investors’ Rights Agreement, no stockholder of the Company has entered into any agreements with respect
to the voting of capital shares of the Company.
2.16 Absence
of Liens. The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and
encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens
that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property
or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or
assets.
2.17 Financial
Statements. The Company has delivered to each Investor (1) its unaudited financial statements as of December 31,
2013, and the related unaudited statement of income for the twelve (12) months then ended, and (2) its unaudited financial
statements as of June 30, 2014, and the related unaudited statement of income for the six (6) months then ended (collectively,
the “Financial Statements”). The Financial Statements have been prepared in accordance with generally
accepted accounting principles (“GAAP”) applied on a consistent basis through the relevant period, except
that the Financial Statements do not contain the footnotes required by GAAP. The Financial Statements fairly present in all material
respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities
or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent
to the date of the most recent balance sheet included in the Financial Statements, (ii) obligations under contracts and commitments
incurred in the ordinary course of business and (iii) liabilities and obligations of a type or nature not required under GAAP
to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material
Adverse Effect.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.18 Changes.
Since January 1, 2014, there has not been: (i) any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that
have not caused, in the aggregate, a Material Adverse Effect; (ii) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which
is not material to the Company; (iii) any change or amendment to a material contract or agreement by which the Company or
any of its assets is bound or subject; (iv) any change in any compensation arrangement or agreement with any employee, officer,
director or stockholder; (v) any resignation or termination of employment of any officer or founder of the Company; (vi) any
mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially
impair the Company’s ownership or use of such property or assets; (vii) any loans or guarantees made by the Company
to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances
and other advances made in the ordinary course of its business; (viii) any declaration, setting aside or payment or other
distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other
acquisition of any such stock by the Company; (ix) any sale, assignment or transfer of any Company Intellectual Property
that could reasonably be expected to result in a Material Adverse Effect; (x) receipt of notice that there has been a loss
of, or material order cancellation by, any major customer of the Company; (xi) to the Company’s knowledge, any other
event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could
reasonably be expected to result in a Material Adverse Effect; or (xii) any arrangement or commitment by the Company to do
any of the things described in this Section 2.18.
2.19 Employee
Matters.
2.19.1 As
of the date hereof, the Company employs nine (9) full-time employee, two (2) part-time employees, and six (6) consultants
or independent contractors. To the Company’s knowledge, none of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would materially interfere with such employee’s ability to promote the interest of the Company
or that would conflict with the Company’s business. Neither the execution or delivery of the Transaction Agreements, nor
the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business
as now conducted and as presently proposed to be conducted, will, to the Company’s knowledge, conflict with or result in
a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under
which any such employee is now obligated.
2.19.2 The
Company is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries,
commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be
reimbursed to such employees, consultants, or independent contractors. The Company has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related
to wages, hours, worker classification, and collective bargaining. The Company has withheld and paid to the appropriate governmental
entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of
the Company and is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing.
2.19.3 The
employment of each employee of the Company is terminable at the will of the Company. Except as set forth in Section 2.19 of
the Disclosure Schedule or as required by law, upon termination of the employment of any such employees, no severance or other
payments will become due. Except as set forth in Section 2.19 of the Disclosure Schedule, the Company has no policy, practice,
plan, or program of paying severance pay or any form of severance compensation in connection with the termination of employment
services.
2.19.4 The
Company has not made any representations regarding equity incentives to any officer, employees, director or consultant that are
inconsistent with the share amounts and terms set forth in the minutes of meetings of the Company’s Board.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
2.19.5 Section 2.19
of the Disclosure Schedule sets forth each employee benefit plan maintained, established or sponsored by the Company, or which
the Company participates in or contributes to, which is subject to the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”). The Company has made all required contributions and has no liability to any such employee
benefit plan, other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA,
and has complied in all material respects with all applicable laws for any such employee benefit plan.
2.19.6 Each
current and former employee, officer and consultant of the Company has executed and delivered a proprietary information and inventions
agreement or similar proprietary agreement pursuant to which such employee, officer and consultant has assigned all intellectual
property rights to the Company. Each such agreement remains in full force and effect and to the Company’s knowledge, no employee,
officer or consultant is in violation of such agreement.
2.20 Tax
Returns and Payments. There are no material federal, state, county, local or foreign taxes due and payable by the Company which
have not been timely paid. There are no material accrued and unpaid federal, state, country, local or foreign taxes of the Company
which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by
any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state,
county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes
of limitations with respect to taxes for any year.
2.21 Permits.
The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack
of which could reasonably be expected to have a Material Adverse Effect. The Company is not in default under any of such franchises,
permits, licenses or other similar authority, which default could reasonably be expected to have a Material Adverse Effect.
2.22 Corporate
Documents. The Restated Certificate and Bylaws of the Company are in the form made available to the Investors. The copy of
the minute books of the Company made available to the Investors contains minutes of all meetings of directors and stockholders
and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and accurately
reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to
all transactions referred to in such minutes.
2.23 Insurance.
The Company maintains insurance with respect to its properties and business of the kinds and in the amounts not less than are customarily
obtained by corporations of established reputation engaged in the same or similar business and similarly situated, including, without
limitation, insurance against loss, damage, fire, theft and public liability
2.24 Property
and Assets. The Company has good and marketable title to all of its material properties and assets, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, security interest, lease, charge or encumbrance, other than liens resulting
from taxes which have not yet become delinquent and liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business.
2.25 Broker
and Finders. The Company has not retained any investment banker, broker, or finder in connection with the transaction contemplated
by this Agreement.
2.26 Disclosure
of Material Information. Neither this Agreement, the Restated Certificate, the Investors’ Rights Agreement, nor any document
or certificate furnished to the Investors by or on behalf of the Company contains any untrue statement of a material fact, and
none of this Agreement or such other documents and certificates omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
3. Representations
and Warranties of the Investors. Each Investor hereby represents and warrants to the Company, severally and not jointly, as
follows in connection with the investment in the Shares.
3.1 Authorization.
The Investor has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which such Investor
is a party, when executed and delivered by the Investor, will constitute valid and legally binding obligations of the Investor,
enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and any other laws of general application relating to or affecting the enforcement of creditors’ rights
generally, or (b) the effect of rules of law governing the availability of equitable remedies.
3.2 Purchase
Entirely for Own Account. This Agreement is made with the Investor in reliance upon the Investor’s representation to
the Company, which by the Investor’s execution of this Agreement, the Investor hereby confirms, that the Shares to be acquired
by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor
does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations
to such person or to any third person, with respect to any of the Shares. The Investor has not been formed for the specific purpose
of acquiring the Shares.
3.3 Disclosure
of Information. The Investor has had an opportunity to discuss the Company’s business, management, financial affairs
and the terms and conditions of the offering of the Shares with the Company’s management. Nothing in this Section 3,
including the foregoing sentence, limits or modifies the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.
3.4 Restricted
Securities. The Investor understands that the Shares have not been, and will not be, registered under the Securities Act, by
reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Investor’s representations as expressed herein. The Investor
understands that the Shares are “restricted securities” under applicable United States federal and state securities
laws and that, pursuant to these laws, the Investor must hold the Shares indefinitely unless they are registered with the Securities
and Exchange Commission and qualified by state authorities or an exemption from such registration and qualification requirements
is available. The Investor acknowledges that the Company has no obligation to register or qualify the Shares, or the Common Stock
into which it may be converted, for resale except as set forth in the Investors’ Rights Agreement. The Investor further acknowledges
that if an exemption from registration or qualification is available, it may be conditioned on various requirements including,
but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Company
which are outside of the Investor’s control, and which the Company is under no obligation and may not be able to satisfy.
3.5 No
Public Market. The Investor understands that no public market now exists for the Shares, and that the Company has made no assurances
that a public market will ever exist for the Shares.
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iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
3.6 Legends.
The Investor understands that the Shares and any securities issued in respect of or exchange for the Shares, may bear any one or
more of the following legends: (a) any legend set forth in, or required by, the other Transaction Agreements; (b) any
legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate
so legended; and (c) the following legend:
“THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”
3.7 Accredited
and Sophisticated Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. The Investor is an investor in securities of companies in the development stage and acknowledges that
Investor is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. If other than an individual, Investor
also represents it has not been organized for the purpose of acquiring the Shares.
3.8 No
General Solicitation. Neither the Investor nor any of its officers, directors, employees, agents, stockholders or partners
has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation with respect
to the offer and sale of the Shares, or (b) published any advertisement in connection with the offer and sale of the Shares.
3.9 Exculpation
Among Investors. The Investor acknowledges that it is not relying upon any person, other than the Company and its officers
and directors, in making its investment or decision to invest in the Company. The Investor agrees that neither any Investor nor
the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any
other Investor for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Shares.
3.10 Residence.
If the Investor is an individual, then the Investor resides in the state identified in the address of the Investor set forth on
Exhibit A; if the Investor is a partnership, corporation, limited liability company or other entity, then the
office or offices of the Investor in which its principal place of business is identified in the address or addresses of the Investor
set forth on Exhibit A.
3.11 Broker
and Finders. The Investor has not retained any investment banker, broker, or finder in connection with the transaction contemplated
by this Agreement.
4. Conditions
to the Investors’ Obligations at Closing.
The obligations of
each Investor to acquire the Shares at the Initial Closing are subject to the fulfillment, on or before the Closing, of each of
the following conditions, unless otherwise waived:
4.1 Representations
and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in
all respects as of the Closing.
13
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
4.2 Performance.
The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by the Company on or before the Closing and shall have obtained all approvals,
consents and qualifications necessary to complete the purchase and sale described herein.
4.3 Compliance
Certificate. The President of the Company shall deliver to the Investors at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications.
All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the Series B Shares pursuant to this Agreement
shall be obtained and effective as of the Closing.
4.5 Board
of Directors. As of the Closing, the authorized size of the Board shall be set at five (5) members and the Board shall
be comprised of (i) Christopher J. Ianelli, the Chief Executive Officer, (ii) Andrew L. Ross, designated to represent
the holders of the Series A Preferred Stock, (iii) George Scholl, designated by OBF Investments, LLC to represent the
holders of the Series B Preferred Stock, (iv) a director to be designated by the Chief Executive Officer to represent
the holders of the Common Stock, initially Jill Mullan, and (v) one independent director to be agreed upon by the other directors.
4.6 Investors’
Rights Agreement. The Company, each Investor (other than the Investor relying upon this condition to excuse such Investor’s
performance hereunder) and the other stockholders of the Company named as parties thereto shall have executed and delivered the
Investors’ Rights Agreement.
4.7 Delaware
Filing. The Company shall have filed the Restated Certificate with the Secretary of State of Delaware on or prior to the Initial
Closing, which shall continue to be in full force and effect as of the Closing.
4.8 Secretary’s
Certificate. The Secretary of the Company shall have delivered to the Investors at the Closing a certificate certifying (i) the
Bylaws of the Company, (ii) resolutions of the Board approving the Transaction Agreements and the transactions contemplated
under the Transaction Agreements, (iii) resolutions of the stockholders of the Company approving the Restated Certificate;
and (iv) that the Company is in good standing in Delaware and each other jurisdiction in which the failure to so qualify would
have a Material Adverse Effect, and attach a copy of each such good standing certificate issued by the Delaware Secretary of State
and each other secretary of state, as applicable.
4.9 Indemnification
Agreement. The Company shall have executed and delivered an Indemnification Agreement with each member of the Board
as of the Closing in substantially the form attached hereto as Exhibit E.
4.10 Minimum
Investment. At the Initial Closing, the Investors shall invest a minimum of not less than $3,000,000 in new proceeds in the
aggregate (excluding the conversion of the Convertible Notes).
4.11 Proceedings
and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and substance to each Investor, and each Investor (or its counsel)
shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such
documents may include good standing certificates.
14
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
5. Conditions
of the Company’s Obligations at Closing.
The obligations of
the Company to sell Series B Shares to the Investors at the Closing are subject to the fulfillment, on or before the Closing,
of each of the following conditions, unless otherwise waived:
5.1 Representations
and Warranties. The representations and warranties of each Investor contained in Section 3 shall be true and correct in
all material respects as of the Closing.
5.2 Performance.
The Investors shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by them on or before the Closing.
5.3 Qualifications.
All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the Series B Shares pursuant to this Agreement
shall be obtained and effective as of the Closing.
5.4 Investors’
Rights Agreement. Each Investor shall have executed and delivered the Investors’ Rights Agreement.
6. General
Provisions.
6.1 Successors
and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
6.2 Governing
Law. This Agreement shall be governed by, and construed in accordance with, (i) the General Corporation Law of the State
of Delaware as to matters within the scope thereof, and (ii) as to matters of contract law, the law of the Commonwealth of
Massachusetts, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
6.3 Counterparts;
Facsimile. This Agreement may be executed and delivered by facsimile signature and in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument.
6.4 Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.5 Notices.
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent
by facsimile or electronic transmission (including PDF) during normal business hours of the recipient, and if not sent during normal
business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by first class
mail, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight
prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on the signature page or Exhibit A, or to such address or facsimile
number as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company,
it shall be sent to iSpecimen Inc., 450 Bedford Street, Lexington, MA 02420, Attention: Christopher Ianelli, MD, PhD, Chief Executive
Officer, with a copy (which shall not constitute notice) sent to Cooley LLP, 500 Boylston Street, Boston MA 02116-3736, Attention:
John Hession. If notice is given to the Investors, a copy (which shall not constitute notice) shall be sent to Foley &
Lardner LLP, 111 North Orange Avenue, Suite 1800, Orlando, FL 32801-2386, Attention: Michael A. Okaty.
15
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
6.6 No
Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s fee or commission
in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for
any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the
costs and expenses of defending against such liability or asserted liability) for which each Investor or any of its officers, employees,
or representatives is responsible. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission
or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and
expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.7 Attorneys’
Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the
Transaction Agreements, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements
in addition to any other relief to which such party may be entitled.
6.8 Fees
and Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery
and performance of the Agreement; provided, however, that the Company shall, at the Closing, reimburse the fees of and expenses
of Foley & Lardner LLP, as counsel for the Investors, for a fee estimate of $25,000 plus expenses.
6.9 Amendments
and Waivers. Except as specified in Section 1.2.1, any term of this Agreement may be amended, terminated or waived only
with the written consent of the Company and the holders of a majority of the then-outstanding Series B Shares (or Common Stock
issued on conversion thereof). Any amendment or waiver effected in accordance with this Section 6.9 shall be binding upon
the Investors and each transferee of the Series B Shares (or the Common Stock issuable upon conversion thereof), each future
holder of all such securities, and the Company.
6.10 Severability.
The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
6.11 Delays
or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon
any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching
or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character
on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions
or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.12 Entire
Agreement. This Agreement (including the Exhibits hereto), the Restated Certificate and the other Transaction Agreements constitute
the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written
or oral agreement relating to the subject matter hereof existing between the parties are expressly cancelled.
16
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
iSpecimen Inc.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
In
Witness Whereof, the parties have executed this Series B Preferred Stock
Purchase Agreement as of the date first written above.
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iSpecimen Inc.
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By:
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/s/ Christopher Ianelli, M.D., Ph.D.
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Name:
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Christopher Ianelli, M.D., Ph.D.
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Title:
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President, Chief Executive Officer
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INVESTORS:
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OBF Investments, LLC
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/s/
Andrew L. Ross
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Andrew L. Ross
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/s/ Jill
Preotle
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Jill Preotle
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/s/ Peter
Aldrich
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Peter Aldrich
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/s/ Brad
Callow
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Brad Callow
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/s/ David
Ianelli
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David Ianelli
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/s/ Jonathan
Ianelli
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Jonathan Ianelli
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iSpecimen Inc.
Signature Page to Series B Preferred Stock Purchase Agreement
EXHIBIT A
Schedule
of Investors
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Name and Address of Investor
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TOTAL
Cash Purchase Price
Committed
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TOTAL
Series B
Shares Purchased
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Cash
Purchase
Price at 1st
Closing
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Series B Shares
Purchased
at 1st
Closing
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Cancellation of
Indebtedness*
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Series A-1
Shares
Converted at
1st Closing
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OBF Investments, LLC
c/o John Murphy
8669 Commodity Circle
Orlando,
FL 32819
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$
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5,999,997.79
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2,380,772
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$
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2,250,000.44
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892,790
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N/A
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N/A
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Andrew Ross
75 Myles Standish Road
Weston,
MA 02493
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$
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1,817,838.25
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721,310
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$
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681,691.24
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270,492
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N/A
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N/A
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Jill Preotle
27 Commonwealth Avenue
Boston,
MA 02116
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N/A
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N/A
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N/A
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N/A
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$
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256,780.82
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254,722
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Peter C. Aldrich Revocable Trust
c/o Peter C. Aldrich
151 Coolidge Hill
Cambridge,
MA 02138
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N/A
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N/A
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N/A
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N/A
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$
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203,534.25
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201,901
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Brad Callow
179 Florence Road
Waltham,
MA 02453
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N/A
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N/A
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N/A
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N/A
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$
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50,363.01
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49,959
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David Ianelli
33 Glen Road
Hopkinton, MA 01748
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N/A
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N/A
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N/A
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N/A
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$
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25,181.51
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24,979
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Marisa Ianelli
104 Cross Street
Belmont, MA 02478
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N/A
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N/A
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N/A
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N/A
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$
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25,181.51
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24,979
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Kevin Richard
6 Holmes Road
Lexington,
MA 02420
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$
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75,605.70
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30,000
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$
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75,605.70
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30,000
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N/A
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N/A
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David Wages
31 Pinecone Lane
Southborough,
MA 01772
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$
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5,040.38
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2,000
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$
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5,040.38
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2,000
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N/A
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N/A
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Gregory Netland
8 Fieldstone Way
Boxford,
MA 01921
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$
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504.04
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200
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$
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504.04
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200
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N/A
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N/A
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J. Michael Grenon
12 Woodstone Road
Northborough,
MA 01532
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$
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50,000.57
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19,840
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$
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50,000.57
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19,840
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N/A
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N/A
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MRNGL Trust
c/o David Grenon
15 Tournament Way
Sutton,
MA 01590
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$
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50,000.57
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19,840
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$
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50,000.57
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19,840
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N/A
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N/A
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Seagull Investments, LLC
100 Grove Street, Suite 200
Wocester,
MA 01605
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$
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1,008.08
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400
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$
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1,008.08
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400
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N/A
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N/A
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|
|
|
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TOTALS:
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$
|
7,999,995.38
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3,174,362
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$
|
3,113,851.02
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1,235,562
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$
|
561,041.10
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556,540
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*Includes interest accrued as of and through August 22,
2014 of $11,041.10.
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
EXHIBIT B
Amended and Restated Certificate of Incorporation
(See tab 3)
EXHIBIT C
Disclosure Schedule
(See tab 2)
EXHIBIT D
Investors’ Rights Agreement
(See tab 4)
EXHIBIT E
Director Indemnification Agreements
(See tab 3)
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
Schedule
A
Tranche
Closings and Milestones
The Initial Closing:
|
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Milestone:
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Initial Series B Financing
|
|
|
Measurement:
|
Series B Financing Closing Date by August 10, 2014
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Investment Amount for Lead Investor
I: $2,250,000
Investment Amount for Lead Investor
II: $750,000
1st Tranche Closing:
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Milestone:
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Supply Network Development
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Measurement:
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Definitive agreements executed with healthcare facilities providing access to a total of 9M specimens, on an annualized
basis by April 30, 2015.
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Investment Amount for Lead Investor
I: $1,250,000
Investment Amount for Lead Investor
II: $425,000
2nd Tranche Closing:
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Milestone:
|
Supply Network Implementations
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|
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Measurement:
|
iSpecimen software implemented at signed supply sites providing access to 9M specimens on an annualized basis by November 30,
2015.
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Investment Amount for Lead Investor
I: $1,250,000
Investment Amount for Lead Investor
II: $425,000
3rd Tranche Closing:
|
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Milestone:
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Revenue Achievement
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Measurement:
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Revenue achievement of ≥ $1.5M from any preceding 180 day time period by June 30, 2016.
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Investment Amount for Lead Investor
I: $1,250,000
Investment Amount for Lead Investor
II: $400,000
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
Addendum
This addendum to the “Series B Preferred Stock Purchase
Agreement” provides the details of all corrections and revisions made to the original document, all of which have been made
and inserted above, as follows:
Page 5 – Section 2.2.1
|
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Original:
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A total of 16,000,000 shares of common stock of the Company, $0.0001 par value per share (the “Common Stock”),
5,402,783 shares of which are issued and outstanding immediately prior to the Closing, 97,440 shares of which are issuable on conversion
of those certain Warrants to Purchase Common Stock, 3,427,871 shares of which are issuable on conversion of the Company’s
Series A Preferred Stock (the “Series A Preferred Stock”), 556,550 shares of which are issuable
on conversion of the Series A-1 Shares, 3,200,000 shares of which are issuable on conversion of the Series B Shares,
and up to 991,785 additional shares of which are issuable pursuant to the Company’s 2013 Stock Incentive Plan (as described
in Section 2.2.3 of this Agreement). All of the outstanding shares of Common Stock and Series A Preferred Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued in material compliance with all applicable federal and
state securities laws.
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Revised:
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A total of 16,000,000 shares of common stock of the Company, $0.0001 par value per share (the “Common Stock”),
5,402,783 shares of which are issued and outstanding immediately prior to the Closing, 97,440 shares of which are issuable on conversion
of those certain Warrants to Purchase Common Stock, 3,427,871 shares of which are issuable on conversion of the Company’s
Series A Preferred Stock (the “Series A Preferred Stock”), 556,550 shares of which are issuable
on conversion of the Series A-1 Shares, 3,200,000 shares of which are issuable on conversion of the Series B Shares,
and up to 1,257,945 shares of which are issuable pursuant to the Company’s 2013 Stock Incentive Plan (as further described
in Section 2.2.3 of this Agreement). All of the outstanding shares of Common Stock and Series A Preferred Stock are duly
authorized, validly issued, fully paid and non-assessable and were issued in material compliance with all applicable federal and
state securities laws.
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Page 5 – Section 2.2.3
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Original:
|
A total of up to 991,785 additional shares of Common Stock are subject to issuance to officers, directors, employees and consultants
of the Company pursuant to the Company’s 2013 Stock Incentive Plan (the “Stock Plan”). All such
shares of Common Stock reserved under the Stock Plan remain available for issuance to officers, directors, employees, advisors
and consultants pursuant to the Stock Plan.
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Revised:
|
A total of up to 1,257,945 additional shares of Common Stock are subject to issuance to officers, directors, employees and
consultants of the Company pursuant to the Company’s 2013 Stock Incentive Plan (the “Stock Plan”).
All such shares of Common Stock reserved under the Stock Plan remain available for issuance to officers, directors, employees,
advisors and consultants pursuant to the Stock Plan.
|
iSpecimen Inc.
Series B Preferred Stock Purchase Agreement
Exhibit 10.9
Execution Version
iSpecimen Inc.
INVESTORS’ RIGHTS AGREEMENT
This Investors’
Rights Agreement (this “Agreement”) is made and entered into and effective as of August 22,
2014, by and among iSpecimen Inc., a Delaware corporation (the “Company”), the parties listed
on Exhibit A attached hereto (the “Investors”) and the parties listed on Exhibit B
attached hereto (the “Key Holders”). The Investors and the Key Holders are referred to collectively
as the “Stockholders.”
RECITALS
A. Certain
of the Investors have agreed to purchase from the Company, and the Company has agreed to sell to the Investors, up to 3,174,365
shares of the Company’s Series B Preferred Stock (the “Series B Preferred Stock”) and
certain of the Investors have agreed to cancel indebtedness owed to them by the Company for up to 556,540 shares of the Company’s
Series A-1 Preferred Stock (the “Series A-1 Preferred Stock”) on the terms and conditions
set forth in that certain Series B Preferred Stock Purchase Agreement dated of even date herewith by and among the Company
and the Investors, as amended from time to time (the “Series B Agreement”).
B. It
is a condition to the closing of the sale of the Shares (as defined below) that the parties hereto execute and deliver this Agreement.
NOW, THEREFORE, in consideration
of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows:
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1.
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COVENANTS OF THE COMPANY.
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(a) Basic
Financial Information. The Company will furnish to each Investor: (1) within 120 days of the close of the applicable
fiscal year, annual unaudited financial statements for the fiscal year ending 2013 and audited financial statements starting with
the fiscal year ending December 31, 2014 of the Company, including an unaudited balance sheet as of the end of such fiscal
year, an unaudited statement of operations and an unaudited statement of cash flows of the Company for such year, all prepared
in accordance with generally accepted accounting principles and practices; and (2) within 45 days of the close of each quarter
and if requested by an Investor, quarterly unaudited financial statements for each fiscal quarter of the Company (except the last
quarter of the Company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal year, an unaudited
statement of operations and an unaudited statement of cash flows of the Company for such quarter, all prepared in accordance with
generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments.
(b) Confidentiality.
Anything in this Agreement to the contrary notwithstanding, no Investor by reason of this Agreement shall have access to any
trade secrets or confidential information of the Company. The Company shall not be required to comply with any information rights
in respect of any Investor whom the Board of Directors of the Company (the “Board of Directors”) reasonably
determines to be a competitor or an officer, employee, or holder of ten percent (10%) or more of a competitor. Each Investor agrees
that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment
in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement other than to any
of the Investor’s attorneys, accountants, consultants, and other professionals, to the extent necessary to obtain their
services in connection with monitoring the Investor’s investment in the Company.
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Investors’ Rights Agreement
Execution Version
(c) Inspection
Rights. The Company shall permit each Investor to visit and inspect the Company’s properties, to examine its books of
account and records and to discuss the Company’s affairs, finances and accounts with its officers, all at such reasonable
times as may be requested by such Investor.
1.2 Key
Man Life Insurance. The Company shall use its commercially reasonable efforts to obtain, within ninety (90) days of the date
hereof, from financially sound and reputable insurers term “key-person” insurance for Christopher Ianelli, MD, PhD
in an amount satisfactory to the Board of Directors and will use commercially reasonable efforts to cause such insurance policies
to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. The key-person
policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval of the
Board of Directors.
1.3 Additional
Rights. In the event that the Company issues securities in its next equity financing after the date hereof (the “Next
Financing”) which have (a) rights, preferences or privileges that are more favorable than the terms of the
Shares, such as price based anti-dilution protection or (b) provides all such future investors other contractual terms such
as preemptive rights or improved registration rights, the Company shall provide substantially equivalent rights to the Investors
with respect to the Shares (with appropriate adjustment for economic terms or other contractual rights), subject to such Investor’s
execution of any documents, including, if applicable, investors’ rights, co-sale, voting and other agreements, executed
by the investors purchasing securities in the Next Financing (such documents referred to herein as the “Next Financing
Documents”). Any Investor will qualify as a “Major Investor” for all purposes in the Next Financing
Documents to the extent such concept exists in any Next Financing. Notwithstanding anything herein to the contrary, upon the execution
and delivery of the Next Financing Documents by Investors holding a majority of the then outstanding Shares held by all Investors,
this Agreement (excluding any then-existing obligations) shall be amended and restated by and into such Next Financing Documents.
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2.
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RESTRICTIONS ON TRANSFER.
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2.1 Limitations
on Disposition. Each person owning of record shares of Common Stock of the Company issued or issuable pursuant to the conversion
of the Shares and any shares of Common Stock of the Company issued as a dividend or other distribution with respect thereto or
in exchange therefor or in replacement thereof (collectively, the “Securities”) or any assignee of record
of Securities (each such person, a “Holder”) hereby agrees not to make any disposition of all or any
portion of any Securities unless and until:
(a) there
is then in effect a registration statement under the Securities Act of 1933, as amended (the “Securities Act”),
covering such proposed disposition and such disposition is made in accordance with such registration statement; or
(b) such
Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and, at the expense of such Holder or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require registration of such securities under the Securities
Act.
(c) Notwithstanding
the provisions of Sections 2.1(a) and (b) above, no such registration statement or opinion of counsel shall be required:
(i) for any transfer of any Securities in compliance with SEC Rule 144 or Rule 144A, or (ii) for any Permitted
Transfers (as defined in Section 6.3(c) below);
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Execution Version
provided that in the case
of clause (ii) the transferee agrees in writing to be subject to the terms of this Agreement to the same extent as if the
transferee were an original Investor or Key Holder hereunder and in the case of Permitted Transfers by individuals for estate
planning purposes, the transfer was without additional consideration or at no greater than cost.
2.2 “Market
Stand-Off” Agreement. Each Holder hereby agrees that it shall not, to the extent requested by the Company or an underwriter
of securities of the Company, sell or otherwise transfer or dispose of any Securities or other shares of stock of the Company
then owned by such Holder (other than to donees or partners of the Holder who agree to be similarly bound) for up to one hundred
eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act; provided,
however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or
material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company
announces that it will release earnings results during the 16-day period beginning on the last day of the restricted period, and
if the Company’s securities are listed on the Nasdaq Stock Market and Rule 2711 thereof applies, then the restrictions
imposed by this Section 2.2 shall continue to apply until the expiration of the 18-day period beginning on the issuance of
the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond
two hundred fifteen (215) days after the effective date of the registration statement.
For purposes of this
Section 2.2, the term “Company” shall include any wholly-owned subsidiary of the Company into which the Company
merges or consolidates. To enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the
certificates representing the shares subject to this Section 2.2 and to impose stop transfer instructions with respect to
the Securities and such other shares of stock of each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Each Holder further agrees to enter into any agreement reasonably required
by the underwriters to implement the foregoing within any reasonable timeframe so requested.
2.3 Drag
Along Right. In the event that each of (i) the holders of a majority of the shares of Common Stock and Preferred Stock,
voting together as a single class on an “as-converted” basis, and (ii) a majority of the Board of Directors approve
a Liquidation Event or Deemed Liquidity Event (as such terms are defined in the Company’s Third Amended & Restated
Certificate of Incorporation, such Liquidation Event, a “Drag Along Sale”), then each Stockholder hereby
agrees to vote (in person, by proxy or by action by written consent, as applicable) all shares of capital stock of the Company
now or hereafter directly or indirectly owned of record or beneficially by such Stockholder in favor of, and adopt, such Drag
Along Sale and to execute and deliver all related documentation and take such other action in support of the Drag Along Sale as
shall reasonably be requested by the Company in order to carry out the terms and provision of this Section 2.3, including
without limitation executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement,
indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free
and clear of impermissible liens, claims and encumbrances) and any similar or related documents. The obligation of any party to
participate in a Drag Along Sale pursuant to this Section shall not apply to a Liquidation Event, where the other party involved
in such transaction is an affiliate or stockholder holding more than ten percent (10%) of the voting power of the Company. Notwithstanding
the foregoing, to the extent the Investors would receive less than two times (2x) the Original Issue Price (as defined in the
Restated Certificate of Incorporation) for each share of Series B Preferred Stock held by each Investor in connection with
such Liquidation Event, then the approval of the Stockholders required above shall also require the approval of Investors holding
at least sixty percent (60%) of the outstanding shares of Series B Preferred Stock, voting as a separate class.
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3.1 General.
Each holder of Series A Preferred Stock, Series A-1 Preferred Stock or Series B Preferred Stock (collectively,
the “Preferred Stock”) has the right of first refusal to purchase such holder’s Pro Rata Share
(as defined below) of all (or any part) of any New Securities (as defined in Section 3.2 below) that the Company may from
time to time issue after the date of this Agreement, provided, however, such holder of Preferred Stock shall have
no right to purchase any such New Securities if such holder cannot demonstrate to the Company’s reasonable satisfaction
that such holder is at the time of the proposed issuance of such New Securities an “accredited investor” as such term
is defined in Regulation D under the Securities Act. A holder of Preferred Stock’s “Pro Rata Share”
for purposes of this right of first refusal is the ratio of (a) the number of shares of the Company’s Common Stock
issued or issuable upon conversion of the shares of Preferred Stock owned by such holder, to (b) a number of shares of Common
Stock of the Company equal to the sum of (1) the total number of shares of Common Stock of the Company then outstanding plus
(2) the total number of shares of Common Stock of the Company into which all then outstanding shares of Preferred Stock are
then convertible plus (3) the number of shares of Common Stock of the Company reserved for issuance under any stock purchase
and stock option plans of the Company and outstanding warrants or other rights to acquire capital stock.
3.2 New
Securities. “New Securities” shall mean any Common Stock or Preferred Stock of the Company, whether
now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of any
type whatsoever that are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock; provided,
however, that the term “New Securities” does not include: (a) shares of Common Stock issued
or issuable upon conversion of the outstanding shares of all the series of the Preferred Stock; (b) shares of Common Stock
or Preferred Stock issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding
as of the date of this Agreement and any securities issuable upon the conversion thereof; (c) shares of Common Stock or Preferred
Stock issued in connection with any stock split or stock dividend or recapitalization; (d) shares of Common Stock (or options,
warrants or rights therefor) granted or issued hereafter to employees, officers, directors, contractors, consultants or advisers
to, the Company or any subsidiary of the Company pursuant to incentive agreements, stock purchase or stock option plans, stock
bonuses or awards, warrants, contracts or other arrangements that are approved by the Company’s Board of Directors; (e) shares
of the Company’s Series A-1 Preferred Stock and Series B Preferred Stock issued pursuant to the Series B
Agreement; and (f) shares of Common Stock issued or issuable by the Company to the public pursuant to a registration statement
filed under the Securities Act.
3.3 Procedures.
In the event that the Company proposes to undertake an issuance of New Securities, it shall give to each Investor a written
notice of its intention to issue New Securities (the “Notice”), describing the type of New Securities
and the price and the general terms upon which the Company proposes to issue such New Securities given in accordance with Section 3.1.
Each Investor shall have twenty (20) days from the date such Notice is effective, as determined pursuant to Section 7.2,
based upon the manner or method of notice, to agree in writing to purchase such Investor’s Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased (not to exceed such Investor’s Pro Rata Share).
3.4 Failure
to Exercise. In the event that the Investors fail to exercise in full the right of first refusal within such twenty (20) day
period, then the Company shall have ninety (90) days thereafter to sell the New Securities with respect to which the Investors’
rights of first refusal hereunder were not exercised, at a price and upon general terms not materially more favorable to the purchasers
thereof than specified in the Company’s Notice to the Investors. In the event that the Company has not issued and sold the
New Securities within such ninety (90) day period, then the Company shall not thereafter issue or sell any New Securities without
again first offering such New Securities to the Investors pursuant to this Section 3.
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4.
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ELECTION OF BOARD OF DIRECTORS.
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4.1 Size
of the Board. Each Investor and Key Holder (collectively, each a “Stockholder”) agrees to vote,
or cause to be voted, all Shares (as defined below) owned by such Stockholder, or over which such Stockholder has voting control,
from time to time and at all times, in whatever manner as shall be necessary, to ensure that the size of the Board of Directors
shall be set and remain at five (5) directors. For purposes of this Agreement, the term “Shares”
shall mean and include any securities of the Company the holders of which are entitled to vote for members of the Board of Directors,
including without limitation, all shares of Common Stock and Preferred Stock, by whatever name called, now owned or subsequently
acquired by a Stockholder, however and whenever acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations,
similar events or otherwise.
4.2 Voting;
Board Composition. Subject to the rights of the stockholders of the Company to remove a director for cause in accordance with
the applicable provisions of the Delaware General Corporation Law, during the term of this Agreement, each Stockholder agrees
to vote (or consent pursuant to an action by written consent of the stockholders of the Company) all Shares, or to cause such
shares of shares of capital stock of the Company to be voted, in such manner as may be necessary to elect (and maintain in office)
as members of the Board of Directors the following designees or nominees:
(a) The
Company’s Chief Executive Officer, who shall initially by Christopher J. Ianelli (the “CEO Director”),
provided that if for any reason the CEO Director shall cease to serve as the Chief Executive Officer of the Company,
the holders of record of the shares of Common Stock, exclusively and as a separate class, shall promptly vote their respective
Shares (i) to remove the former Chief Executive Officer from the Board of Directors if such person has not resigned as a
member of the Board of Directors; and (ii) to elect such person’s replacement as Chief Executive Officer of the Company
as the new CEO Director.
(b) The
CEO Director shall be entitled to designate one (1) director of the Company to represent the holders of Common Stock (the
“Common Director” and collectively with the CEO Director, the “Common Directors”).
(c) For
so long as at least twenty five percent (25%) of the initially issued shares of Series A Preferred Stock and Series A-1
Preferred Stock, as adjusted for stock splits, stock dividends, combinations, recapitalizations or the like (together, the “Series A/A-1
Preferred Stock”), remain outstanding, the holders of record of the shares of Series A/A-1 Preferred Stock,
exclusively and voting together as a single class, shall be entitled to elect one (1) director of the Company (the “Series A/A-1
Director”), who shall initially be Andrew L. Ross.
(d) For
so long as OneBlood, Inc. or its affiliates (“OneBlood”) hold at least fifty percent (50%) of the
shares of Series B Preferred Stock originally issued to OneBlood, as adjusted for stock splits, stock dividends, combinations,
recapitalizations or the like, the “Series B Director” shall be nominated unilaterally by OneBlood.
George “Bud” Scholl shall initially be deemed to be the Series B Director. Notwithstanding the foregoing, if
OneBlood fails to participate fully for its complete pro rata commitment in any Tranche Closing (as defined in and required by
the Series B Agreement), then OneBlood shall forfeit its right to designate the Series B Director. Notwithstanding the
foregoing and for the avoidance of doubt, OneBlood shall not forfeit its right to designate the Series B Director if it satisfies
its obligation to make additional investments in the Company at any Tranche Closing by assigning, transferring or otherwise substituting
other investor(s) to satisfy OneBlood’s commitment to make additional investments as permitted by the Series B
Agreement. At any time when OneBlood does not hold at least fifty percent (50%) of the shares of Series B Preferred Stock
originally issued to it or its affiliates (as adjusted for stock splits, stock dividends, combinations, recapitalizations or the
like) or in the event that OneBlood forfeits its right to designate the Series B Director (as described above), then the
Series B Director shall be nominated by the holders of a majority of the outstanding Series B Shares whereby such nomination
shall take the form of a notice sent to each holder of Series B Shares soliciting nominations for the Series B Director
and shall contain instructions that each holder of Series B Shares is to return such notice, indicating his, her or its nominations
for the Series B Director, to the Secretary of the Company within ten (10) days of the effective date of such notice.
After all notices have been received by the Secretary of the Company, the Stockholders shall elect the person nominated by holders
of a majority of the outstanding Series B Shares. The Stockholders shall elect the Series B Director as a director elected
by the holders of the outstanding Series B Shares, voting separately as a class.
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(e) One
(1) independent, outside person with relevant industry, scientific or academic experience (the “Independent Director”)
to be agreed upon by the Common Directors, Series A/A-1 Director and Series B Director.
Each of the Series A/A-1
Director, Series B Director, the Common Directors, and the Independent Director is referred to as a “Board Designee.”
Any director elected as provided in the preceding sentences may be removed with or without cause by, and only by, the affirmative
vote of the holders of the shares of the class, classes, or series of capital stock entitled to elect such director or directors,
given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.
At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of
the outstanding shares of the class, classes, or series entitled to elect such director shall constitute a quorum for the purpose
of electing such director. Subject to the rights of the stockholders of the Company to remove a director for cause in accordance
with provisions of the Delaware General Corporation Law, during the term of this Agreement, no Stockholder shall take any action
to remove an incumbent Board Designee or to designate a new Board Designee unless such removal and/or designation of a Board Designee
is approved in a writing signed by that class of Stockholders entitled to nominate and elect a Board Designee as set forth above
in the preceding paragraph.
4.3 Proxy
to Elect Board Designees. Each Stockholder hereby appoints the then current Chief Executive Officer of the Company, as such
Stockholder’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote
all of such Stockholder’s Shares as set forth in this Agreement and to execute all appropriate instruments consistent with
this Agreement on behalf of such Stockholder if, and only if, such Stockholder (a) fails to vote or (b) attempts to
vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement,
all of such Stockholder’s Shares or execute such other instruments in accordance with the provisions of Section 4.1
of this Agreement within five (5) days of the Company’s or any other party’s written request for such Stockholder’s
written consent or signature. The proxy and power granted by each Stockholder pursuant to this Section are coupled with an
interest and are given to secure the performance of such party’s duties under this Agreement. Each such proxy and power
will be irrevocable for the term hereof. The proxy and power, so long as any party hereto is an individual, will survive the death,
incompetency and disability of such party or any other individual Stockholder of Shares and, so long as any party hereto is an
entity, will survive the merger or reorganization of such party or any other entity holding Shares.
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5.1 Registration
Rights. The Company hereby grants the following registration rights with respect to the shares of Common Stock issuable upon
the conversion of the Preferred Stock issued to the Investors (the “Registrable Securities”).
5.2. “Piggy-Back”
Registrations. For a period of five (5) years from the closing of the Company’s first underwritten, registered
public offering of shares, if at any time the Company shall determine to register in a public offering for its own account (or
the account of selling stockholders) under the Securities Act any of its Common Stock, it shall send to the Investor written notice
of such determination and, if within fifteen (15) days after receipt of such notice, the Investor shall so request in writing,
the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Securities
such holder requests to be registered. This right shall not apply to a registration of shares of Common Stock on Form S-4
or Form S-8 (or their then equivalents) relating to shares of Common Stock to be issued by the Company in connection with
any acquisition of any entity or other business combination involving the Company, or shares of Common Stock issuable in connection
with any stock option, stock compensation or other employee benefits plan of the Company for the benefit of directors, officers,
employees or consultants of the Company.
If, in connection with
any offering involving an underwriting of Common Stock to be issued by the Company and/or selling stockholders, the managing underwriter
or the Company shall impose a limitation on the number of shares of such Common Stock which may be included in any such registration
statement because, in its good faith judgment, such limitation is necessary to effect an orderly public distribution of the Common
Stock and to maintain a stable market for the securities of the Company, then the Company shall be obligated to include in such
registration statement only such limited portion (which may be none) of the Registrable Securities with respect to which the Investor
has requested inclusion hereunder, pro rata based upon the number of shares originally requested for inclusion in such
registration statement by all selling stockholders requesting inclusion thereunder.
5.3. Expenses.
In the case of a registration under Section 5.2, the Company shall bear the expenses of any filing of any registration,
including, but not limited to, printing, legal and accounting expenses, Securities and Exchange Commission and NASD filing fees
and all related “Blue Sky” fees and expenses; provided, however, that the Company shall have no obligation
to pay or otherwise bear any portion of the underwriters’ commissions or discounts attributable to the Registrable Securities
being offered and sold by the Investor, or the fees and expenses of any counsel, tax advisor or accountant selected by the Investor
in connection with the registration of the Registrable Securities.
5.4. Expiration
of Registration Rights. The obligations of the Company under this Section 5 to register the Registrable Securities shall
expire and terminate at such time as the Investor shall not be deemed to be an “affiliate” of the Company and shall
be otherwise entitled or eligible to sell such securities without the need for the filing of a registration statement under the
Securities Act, including without limitation, for any resales of restricted securities made pursuant to Rule 144 as promulgated
by the Securities and Exchange Commission, or a sale made pursuant to Section 4(1) and/or 4(2) under the Securities
Act; provided, however, that the Investor shall continue to possess its registration rights granted hereunder if
the average daily trading volume of the Company following the initial public offering of Common Stock does not permit the Investor
to sell all of its holdings to the public in one transaction under Rule 144, or the liquidity in the shares of Common Stock
held by the Investor would be adversely affected by the absence of the registration rights set forth herein, determined in the
reasonable good faith judgment of the Investor.
5.5 No
Registration Rights to Third Parties. The Company shall not grant registration rights to any new investor or other third party
which exceeds or is more beneficial to such investor or third party unless the Company first amends this Agreement to afford the
Investors hereunder the benefits of such new registration rights.
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6.
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RIGHTS OF FIRST REFUSAL AND CO-SALE RIGHTS.
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6.1 Right
of First Refusal. In the event that any Stockholder (for purposes of this Section 6.1, a “Transferring Stockholder”)
proposes to Transfer (as defined below) all or any portion of the Securities (the “Transfer Shares”)
held by such Person (a “Proposed Transaction”) to a Person (a “Proposed Transferee”)
other than a Permitted Transferee (as defined below), such Transferring Stockholder shall, subject to the “Co Sale”
provisions of Section 6.2 hereof, Transfer such Transfer Shares pursuant to and in accordance with the following provisions
of this Section 6.1. For purposes of Sections 6.1 and 6.2, “Transfer” shall mean any assignment,
sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of or any other like transfer or encumbering of
any Transfer Shares (or any interest therein) proposed by any Transferring Stockholder.
(a) Offer
Notice and Company’s Right of First Refusal. Such Transferring Stockholder shall deliver written notice (the “Offer
Notice”) of its desire to consummate the Proposed Transaction to the Company and to the other Stockholders (a “Non-Selling
Holder”) and shall otherwise comply with the provisions of this Section 6.1 and, if applicable, Section 6.2.
The Offer Notice shall specify (i) the number of Transfer Shares and type of securities of the Transferring Stockholder proposed
to be Transferred in the Proposed Transaction (the “Offered Shares”), (ii) the consideration per
Share to be paid for the Offered Shares (the “Offer Price”), (iii) the identities of the Proposed
Transferees, and (iii) all other material terms and conditions of the Proposed Transaction. In the event that the price
set forth in the Offer Notice is stated in consideration other than cash or cash equivalents, a majority of the Board of Directors
may determine the fair market value of such consideration, reasonably and in good faith, and the Company may exercise its right
to accept the offer to purchase the Offered Shares for the consideration per share and on the terms and conditions specified in
the Offer Notice (the “Right of First Refusal”) by payment of such fair market value in cash. If the
Transferring Stockholder has not previously sought a Determination (as defined below) and wishes to do so, the Offer Notice shall
also include the information required by Section 6.5, at which point, the Determination shall be made during the Right of
First Refusal period. The Offer Notice shall constitute an irrevocable offer to sell all of the Offered Shares to the Company
on the basis described below at a purchase price per share equal to the Offer Price, and on the same terms as set forth in the
Offer Notice. To exercise its Right of First Refusal under this Section 6.1, the Company must deliver a notice to the Transferring
Stockholder within fifteen (15) days after delivery of the Offer Notice.
(b) Grant
of Secondary Refusal Right to Stockholders. Each Stockholder hereby grants to the Non-Selling Holders the right to purchase
up to that number of Offered Shares as shall be equal to the product obtained by multiplying (X) the total number of Offered
Shares by (Y) a fraction, the numerator of which is the total number of shares of Common Stock (determined
on an “as converted to Common Stock” basis) owned by such Non-Selling Holder on the date of the Offer Notice and the
denominator of which is the total number of shares of Common Stock (determined on an “as converted to Common
Stock” basis) then held by all of the Non-Selling Holders on the date of the Offer Notice, subject to increase as hereinafter
provided (such number of Offered Shares shall be referred to herein as a “ROFR Fraction”) of any Offered
Shares not purchased by the Company pursuant to its Right of First Refusal, on the terms and conditions specified in the Offer
Notice (the “Secondary Refusal Right”). If the Company does not intend to exercise its Right of First
Refusal with respect to any or all of such Offered Shares, the Company shall deliver a written notice to the Transferring Stockholder
and to each Non-Selling Holder to that effect no later than fifteen (15) days after the Transferring Stockholder delivers the
Offer Notice to the Company (the “Secondary Notice”). To exercise its Secondary Refusal Right, a Non-Selling
Holder must deliver a notice to the Transferring Stockholder and the Company within ten (10) days after the Company’s
deadline for its delivery of the Secondary Notice as provided in the preceding sentence.
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(c) Undersubscription
of Transfer Shares. In the event that (a) the Company fails to elect to purchase any of the Offered Shares pursuant to
its Right of First Refusal and (b) any Non-Selling Holder fails to elect to purchase its ROFR Fraction, then all the other
Non-Selling Holders who so elect shall have the right to accept the offer to purchase, on a pro rata basis (based on their respective
holdings of shares of Common Stock and determined on an “as converted to Common Stock” basis) with all other Non-Selling
Holders who so elect (as hereinafter provided), any ROFR Fraction not purchased by such Non-Selling Holder. Each Non-Selling Holder
shall have the right to accept the Proposed Transaction by giving notice of such acceptance to the Transferring Stockholder within
thirty (30) days (the “Subsequent Option Period”), which notice shall indicate the maximum number of
Offered Shares subject thereto which such Non-Selling Holder is willing to purchase in the event fewer than all of the Non-Selling
Holders elect to purchase their ROFR Fraction. The Transferring Stockholder shall notify the Company and the Non-Selling Holders
promptly following any lapse of the Right of First Refusal and Secondary Refusal Rights without acceptance thereof or any rejection
of the Secondary Refusal Rights. The closing for the purchase of the Offered Shares by the Non-Selling Holders hereunder shall
take place within fifteen (15) business days after the expiration of the Subsequent Option Period.
(d) Sale
to Proposed Transferee. In the event that the Company does not elect to exercise its Right of First Refusal and the Non-Selling
Holders do not elect to exercise their respective Secondary Refusal Rights with respect to all of the Offered Shares, the Transferring
Stockholder may consummate the sale of the remaining non-purchased Offered Shares to the Proposed Transferee on the terms and
conditions set forth in the Offer Notice, subject to the provisions of Section 6.2. If the Transferring Stockholder’s
Transfer to the Proposed Transferee is not consummated in accordance with the terms of the Proposed Transaction within the later
of (i) thirty (30) days after the expiration of the later of the Secondary Refusal Rights or the Co-Sale Option set forth
in Section 6.2 (if applicable), and (ii) the satisfaction of all applicable governmental approval or filing requirements,
the Proposed Transaction shall be deemed to lapse, and any Transfers of Transfer Shares pursuant to such Proposed Transaction
shall be deemed to be in violation of the provisions of this Agreement unless the Company and the Non-Selling Holders are once
again afforded the Right of First Refusal and Secondary Refusal Rights provided for herein with respect to such Proposed Transaction.
(e) Exempt
Transfers. Notwithstanding the foregoing or anything to the contrary contained herein, the restrictions on transfers contained
herein shall not apply to the assignment or transfer to any substitute investor(s) made by the Investors pursuant to the
Series B Agreement.
6.2. Co-Sale
Option. In the event that a Stockholder or any of his Permitted Transferees (a “Co-Sale Transferor”)
proposes to Transfer all or any portion of the shares of Common Stock held by such Person to a Person other than a Permitted Transferee
(a “Co-Sale Transferee”), and the Right of First Refusal and Secondary Refusal Rights under Section 6.1
above (to the extent applicable) are not exercised with respect to any of the Offered Shares proposed to be Transferred (a “Co-Sale
Transaction”), such Co-Sale Transferor may Transfer such shares of Common Stock (the “Co-Sale Shares”)
only pursuant to and in accordance with the following provisions of this Section 6.2.
(a) Co-Sale
Offer Notice. Any Co-Sale Transferor proposing to effect a Co-Sale Transaction shall first provide written notice to the Company
and the Stockholders specifying (i) the number of Co-Sale Shares and type of securities of the Co-Sale Transferor subject
to the Co-Sale Transaction and, a statement that the Company and the Stockholders have not elected to exercise their Rights of
First Refusal with respect to all of the Co-Sale Shares, (ii) the Offer Price to be paid for such Co-Sale Shares, (iii) the
identities of the Co-Sale Transferees and (iv) all other material terms and conditions of the Co-Sale Transaction (the “Co-Sale
Offer Notice”).
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iSpecimen Inc.
Investors’ Rights Agreement
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Page 9
|
Execution Version
(b) Acceptance
Notice. Each Stockholder shall have the right to participate in the Co-Sale Transaction on the terms and conditions herein
stated (the “Co-Sale Option”), which right shall be exercisable within fifteen (15) business days after
receipt of the Co-Sale Offer Notice upon written notice (the “Acceptance Notice”) to the Co-Sale Transferor.
The Acceptance Notice shall indicate the maximum number of Co-Sale Shares such Stockholder wishes to Transfer (including the number
of Co- Sale Shares it would Transfer if one or more Stockholders do not elect to participate in the sale) on the terms and conditions
stated in the Co-Sale Offer Notice.
(c) Participation
in Co-Sale. Each such Stockholder shall have the right to exercise its Co- Sale Option and sell a portion of its Securities
pursuant to the Co-Sale Transaction which is equal to or less than the product obtained by multiplying (i) the total number
of Co-Sale Shares to be sold to a Co- Sale Transferee pursuant to the Co-Sale Transaction by (ii) a fraction, the numerator
of which is the total number of shares of Common Stock (determined on an “as converted to Common Stock” basis) deemed
to be held by such Stockholder on the date of the Co-Sale Offer Notice, and the denominator of which is the total number of shares
of Common Stock (determined on an “as converted to Common Stock” basis) held by the Co-Sale Transferor and deemed
to be held by all of the Investors and the Co-Sale Transferor. To the extent one or more Investors elect not to exercise their
Co-Sale Option, then the rights of the other Investors (who exercise their Co-Sale Option) to sell Co-Sale Shares shall be increased
proportionately based on their relative holdings by the full amount of Co-Sale Shares which the non-electing Investors were entitled
to sell pursuant to this Section 6.2. Within fifteen (15) business days after the date by which the Investors were required
to deliver the Acceptance Notice to the Co-Sale Transferor, the Co-Sale Transferor shall notify each participating Stockholder
of the number of Co-Sale Shares elected to be sold by such Stockholder that will be included in the sale and the date on which
the Co-Sale Transaction will be consummated, which shall be no later than the later of (i) thirty (30) days after the date
by which the Investors were required to notify the Co-Sale Transferor of their intent to exercise the Co-Sale Option and (ii) the
satisfaction of governmental approval or filing requirements, if any.
(d) Tender
of Transfer Shares. Any Stockholder may effect its participation in any Co- Sale Transaction hereunder by delivery to the
Co-Sale Transferee, or to the Co-Sale Transferor for delivery to the Co-Sale Transferee, of one or more instruments or certificates,
properly endorsed for Transfer, representing the Co-Sale Shares it elects to sell therein, provided that no such
Stockholder shall be required to make any representations or warranties or provide any indemnities in connection therewith other
than with respect to its ownership of the Co-Sale Shares being conveyed and only to the extent of the consideration received by
such Stockholder in such Co-Sale Transaction. At the time of consummation of the Co-Sale Transaction, the Co-Sale Transferee shall
remit directly to each such Stockholder that portion of the sale proceeds to which such Stockholder is entitled by reason of its
participation therein (less any adjustments due to the conversion of any convertible securities or the exercise of any exercisable
securities). For the avoidance of doubt, each Co-Sale Transferee shall be entitled to the same amount and form of consideration
in such Co-Sale Transaction as the Co-Sale Transferor and each other Co-Sale Transferee in such Co-Sale Transaction.
(e) Time
of Sale; Failure to Comply. Promptly after such sale, the Co-Sale Transferor shall notify each participating Stockholder of
the consummation thereof and shall furnish such evidence of the completion and time of completion of such sale and of the terms
thereof as may reasonably be requested by any such Stockholder. So long as the Co-Sale Transferee is neither a party, nor an Affiliate
of a party, to this Agreement, such Co-Sale Transferee shall take the Co-Sale Shares so Transferred free and clear of any further
restrictions of this Section 6. In the event that the Co-Sale Transaction is not consummated within the period required by
subparagraph (c) hereof or the Co-Sale Transferee fails timely to remit to each participating Stockholder its portion of
the sale proceeds, the Co-Sale Transaction shall be deemed to lapse, and any Transfers of Offered Shares or Co-Sale Shares pursuant
to a Proposed Transaction, to the extent applicable, or Co-Sale Transaction shall be deemed to be in violation of the provisions
of this Agreement unless the Transferring Stockholder or Co-Sale Transferor once again complies with the provisions of Sections
6.1 and 6.2 hereof, to the extent applicable, with respect to such Proposed Transaction or Co-Sale Transaction.
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iSpecimen Inc.
Investors’ Rights Agreement
|
Page 10
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Execution Version
(f) Continuity
of Restrictions. Any shares sold by the Transferring Stockholder and/or any participating Investors to any third party pursuant
to Sections 6.1 and 6.2 shall nevertheless be subject to the restrictions imposed or entitled to any of the benefits conferred
by this Agreement, including Section 6 hereof.
|
|
6.3.
|
Restrictions on Transfer.
|
(a) General
Prohibition on Transfers by Stockholders. No Stockholder shall sell, assign, transfer, grant an option to or for, pledge,
hypothecate, mortgage, encumber or dispose of all or any of his shares of capital stock of the Company except as expressly provided
in Sections 6.1, 6.2 and 6.3(b) of this Agreement.
(b) Permitted
Transfers by Stockholders. Notwithstanding the foregoing, a Stockholder may be able to transfer any of the Securities without
the restrictions set forth in Sections 6.1 and 6.2 in any Permitted Transfer.
(c) Definitions.
“Affiliate” means, with respect to any Stockholder, any other person who directly or indirectly, controls,
is controlled by or is under common control with such Stockholder, including without limitation any general partner, managing
member, manager, officer or director and other affiliated persons or equity holders of such Stockholder, or any venture capital
fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same
management company with, such Stockholder. As used herein, the word “family” shall include any spouse,
lineal ancestor or descendant, brother, sister, niece or nephew. As used in this Section 6.1, 6.2 and 6.3, the
term Stockholder is deemed to include any (i) Permitted Transferees of the Stockholder, except as expressly provided otherwise,
and (ii) any other person who has acquired securities prior to the date of this Agreement. As used, herein, “Permitted
Transfers” shall mean any of the following permitted transfers: (i) a Stockholder that is a partnership, limited
liability company, a corporation or a venture capital fund may transfer any securities held by such Stockholder (A) to a
partner of such partnership, a member of such limited liability company or stockholder of such corporation, (B) to an Affiliate
of such partnership, limited liability company or corporation, (C) to a retired partner of such partnership or a retired
member of such limited liability company, (D) to the estate of any such partner, member or stockholder, (E) to another
Stockholder or such other Stockholder’s Affiliate(s) and (F) pursuant to a sale, disposition, transfer or other
hypothecation by that Stockholder of its portfolio securities to a third party where the primary purpose of such disposition is
to effect or achieve liquidity by the Stockholder through the sale of substantially all of the portfolio securities held by that
Stockholder entity, and such sale involves the sale, disposition, transfer or other hypothecation by that Stockholder of more
than two (2) securities of portfolio companies (including the Company); and (ii) a Stockholder who is an individual
may (A) transfer up to 25% of his securities by way of gift for estate planning purposes to any member of his immediate family
or to any trust for the benefit of any such family member, provided that any transferee shall agree in writing with the Company
and the Investors, as a condition precedent to such transfer, to be bound by all of the provisions of this Agreement to the same
extent as if such transferee were the original stockholder hereunder, (B) transfer any of his shares of capital stock to
another Stockholder or such other Stockholder’s Affiliate(s), and (C) transfer any of his shares of capital stock by
will or the laws of descent and distribution to the heirs of the Stockholder, or in the event of the disability of the Stockholder,
to the legal representatives of the Stockholder; provided, in each case, such transferee shall be bound (and shall
agree to be bound) by all of the provisions of this Agreement to the same extent as if such transferee were the Stockholder. The
foregoing permitted transferees shall be referred to herein as the “Permitted Transferees.”
|
iSpecimen Inc.
Investors’ Rights Agreement
|
Page 11
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Execution Version
6.4. Duration
of Restrictions. The rights and obligations of the Company and each Stockholder under Section 6 of this Agreement shall
terminate and be of no further force or effect (a) immediately before the consummation of the Company’s first underwritten
public offering of Common Stock under the Securities Act (an “IPO”) or (b) immediately prior to
and expressly conditioned upon the consummation of the sale of all of the Company’s assets or capital stock either through
a direct sale, merger, reorganization, consolidation or other form of business combination or acquisition (and not an equity financing),
and a transaction in which the Investors receive cash or freely-tradable or registered securities in exchange for the shares of
Preferred Stock owned by them.
6.5. Sales
to Competitors Prohibited. Any other provision of this Agreement to the contrary notwithstanding, prior to an IPO, no Transfer
of securities, unless in connection with a Drag Along Sale, may be made by a Stockholder to a competitor of the Company, as determined
in good faith by the Board of Directors; provided that an entity the primary purpose of which is to make investments
in companies shall not be deemed to be a competitor solely on the basis of such entity holding a non-controlling interest in a
company that engages in a business that is competitive with the business of the Company. A Stockholder proposing to Transfer securities
shall request that the Board of Directors make a determination of whether the proposed transferee is a competitor of the Company.
Such Stockholder shall make such request in writing to the Board of Directors, which request may be incorporated in, or accompanied
by, an Offer Notice as provided in this Section 6, and may provide such other relevant information about such transferee
as may be appropriate. The Board of Directors shall consider such request and make a good faith determination (the “Determination”)
within ten (10) days of receipt of such Stockholder request and shall notify the requesting Stockholder of the Determination
within five (5) business days of the date of such Determination.
7.1 Amendment
and Waiver of Rights. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally
or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investors
(and/or any of their permitted successors or assigns) holding Transfer Shares representing and/or convertible into at least a
majority of all the Investors’ Shares (as defined below); provided, however, that any amendment to this Agreement
that adversely effects the Key Holders shall require the additional written consent of the holders of a majority of the outstanding
shares of the Company’s Common Stock then held by the Key Holders. Notwithstanding anything contained herein to the contrary,
and for the avoidance of doubt, nothing in this Section shall prevent, impair or prohibit the Investors from exercising any
rights provided to such Investors under this Agreement. As used herein, the term “Investors’ Shares”
shall mean the shares of Common Stock then issuable upon conversion of all then outstanding shares of Preferred Stock of all series
outstanding. Any amendment or waiver effected in accordance with this Section 7.1 shall be binding upon each Stockholder,
each permitted successor or assignee of such Stockholder and the Company.
7.2 Notices.
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent
by facsimile or electronic transmission (including PDF) during normal business hours of the recipient, and if not sent during
normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by
first class mail, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight
courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall
be sent to the respective parties at their address as set forth on the signature page or Exhibit A or Exhibit B
hereto, or to such address or facsimile number as subsequently modified by written notice given in accordance with this Section 7.2.
If notice is given to the Company, it shall be sent to iSpecimen Inc., 450 Bedford Street, Lexington, MA 02420, Attention: Christopher
Ianelli, M.D., Ph.D., Chief Executive Officer. If notice is given to the Investors, a copy (which shall not constitute notice)
shall be sent to Foley & Lardner LLP, 111 North Orange Avenue, Suite 1800, Orlando, FL 32801-2386, Attention: Michael
A. Okaty.
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iSpecimen Inc.
Investors’ Rights Agreement
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Page 12
|
Execution Version
7.3 Entire
Agreement. This Agreement and the documents referred to herein, together with all the Exhibits hereto, constitute the entire
agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede any and all prior
understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject
matter hereof.
7.4 Governing
Law. This Agreement shall be governed by, and construed in accordance with, (i) the General Corporation Law of the State
of Delaware as to matters within the scope thereof, and (ii) as to matters of contract law, the law of the Commonwealth of
Massachusetts, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
7.5 Severability.
The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other
provision.
7.6 Third
Parties. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of this Agreement.
7.7 Successors
and Assigns. This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred,
delegated or sublicensed by an Investors without the prior written consent of the Company. Any attempt by an Investor without
such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement
shall be void. Subject to the foregoing, and except as otherwise provided herein, this Agreement, and the rights and obligations
of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors,
administrators and legal representatives.
7.8 Titles
and Headings. The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded
in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections”
and “exhibits” will mean “sections” and “exhibits” to this Agreement.
7.9 Counterparts.
This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed
an original, and all of which together shall constitute one and the same agreement.
7.10 Costs
and Attorneys’ Fees. In the event that any action, suit or other proceeding is instituted concerning or arising out
of this Agreement or any transaction contemplated hereunder, the prevailing party shall recover all of such party’s costs
and attorneys’ fees incurred in each such action, suit or other proceeding, including any and all appeals or petitions therefrom.
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iSpecimen Inc.
Investors’ Rights Agreement
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Page 13
|
Execution Version
7.11 Adjustments
for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend of such
class or series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally
adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination or
stock dividend.
7.12 Further
Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be
reasonably necessary to carry out the purposes and intent of this Agreement.
7.13 Facsimile
Signatures. This Agreement may be executed and delivered by facsimile and upon such delivery the facsimile signature will
be deemed to have the same effect as if the original signature had been delivered to the other party.
7.14 Termination.
The rights, duties and obligations under Sections 1, 2.3, 3, 4 and 6 of this Agreement shall terminate immediately prior to
the closing of the Company’s IPO. Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing
obligations) shall terminate upon the closing of a Deemed Liquidation Event as defined in the Restated Certificate of Incorporation,
as amended from time to time. Section 1.1(b) shall survive any such termination of the Agreement.
7.15 Dispute
Resolution. Each party (a) hereby irrevocably and unconditionally submits to the jurisdiction of the federal or state
courts located in the Commonwealth of Massachusetts for the purpose of any suit, action or other proceeding arising out of or
based upon this Agreement or the Transaction Documents (as defined in the Series B Agreement dated of even date herewith),
(b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement or the Transaction
Documents except in the federal or state courts located in the Commonwealth of Massachusetts, and (c) hereby waive, and agree
not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution,
that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement, the Transaction Documents or the subject matter hereof and thereof may not be enforced in or by such court.
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iSpecimen Inc.
Investors’ Rights Agreement
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Page 14
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iSpecimen Inc.
Series A-1 and
Series B Preferred Stock Financing
Master Signature Page
IN
WITNESS WHEREOF, iSpecimen Inc., a Delaware corporation (the “Company”), and each of the
undersigned Investors, severally and not jointly, by his, her or its signature below, are executing the Series B Preferred
Stock Purchase Agreement relating to an investment of approximately $8 million in the Company at a price of $2.52019 per share
(the “Purchase Agreement”), and the Investors’ Rights Agreement (the “Investors’ Rights
Agreement”), each dated as of August 22, 2014, among the Company and the undersigned investor and the other investors
participating in this financing (as an “Investor” under the Purchase Agreement and the Investors’ Rights
Agreement).
iSpecimen Inc.
|
By:
|
/s/ Christopher Ianelli, M.D., Ph.D.
|
|
|
Name:
|
Christopher Ianelli, M.D., Ph.D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
SIGNATURE OF INVESTOR:
The undersigned Investor, as a condition precedent to becoming a holder of shares of Series A-1 Preferred Stock or Series B
Preferred Stock, hereby agrees to become a party to the Purchase Agreement and the Investors’ Rights Agreement. The undersigned
Investor shall become a party to and become bound by the Purchase Agreement and the Investors’ Rights Agreement upon (i) execution
and delivery to the Company of this Master Signature Page, and (ii) receipt by the Company of the investment consideration
required under the Purchase Agreement. Upon execution of this Master Signature Page and the delivery by the Investor of the
investment proceeds (whether through the cancellation of indebtedness for money borrowed, cash or otherwise), the undersigned
Investor shall therefore be entitled to all of the rights, and be bound by all of the obligations, set forth in each of the Purchase
Agreement and the Investors’ Rights Agreement, as the interests of the undersigned shall appear as an Investor thereunder.
By execution of this Master Signature Page, the undersigned Investor, if a holder of Convertible Promissory Notes of the Company,
also agrees that such Notes are hereby cancelled, extinguished and retired, and the obligations represented thereby contributed
to the capital of the Company.
IN
WITNESS WHEREOF, this Master Signature Page has been duly executed by or on behalf of the undersigned Investor, as of
the date below written. When so executed and delivered by the Company and each of the Investors named in the Purchase Agreement,
the Purchase Agreement and the Investors’ Rights Agreement shall become binding obligations of the parties thereto.
|
Please
Date: August 22, 2014
|
|
Brad
Callow
|
Digitally
signed by Brad Callow
DN: cn=Brad Callow, o, ou,
email=bcallow@ispecimen.com,
c=US
Date:
2014.08.22 12:22:22 -04'00'
|
|
|
|
Signature
of Investor
|
|
Cash Investment
Amount:
|
$
|
N/A
|
|
|
Bradford Callow
|
|
|
|
|
|
(Print Name of Investor)
|
|
|
|
|
|
|
|
Amount of Notes Converted:
|
$
|
50,363.01
|
*
|
|
179 Florence Road
|
|
*
|
This amount includes $50,000 in outstanding principal
plus $363.01 in accrued interest, assuming a note conversion date of August 22, 2014.
|
|
|
Street
Address
Waltham
|
MA
|
02453
|
|
|
|
|
|
City
|
State
|
Zip
|
iSpecimen
Inc., Series A-1 Preferred Stock and Series B Preferred Stock
Master Signature Page
iSpecimen
Inc.
Series A-1
and Series B Preferred Stock Financing
Master Signature Page
IN
WITNESS WHEREOF, iSpecimen Inc., a Delaware corporation (the “Company”), and each of the
undersigned Investors, severally and not jointly, by his, her or its signature below, are executing the Series B Preferred
Stock Purchase Agreement relating to an investment of approximately $8 million in the Company at a price of $2.52019 per share
(the “Purchase Agreement”), and the Investors’ Rights Agreement (the “Investors’ Rights
Agreement”), each dated as of August 22 , 2014, among the Company and the undersigned investor and the other
investors participating in this financing (as an “Investor” under the Purchase Agreement and the Investors’
Rights Agreement).
|
By:
|
/s/ Christopher Ianelli, M.D., Ph.D.
|
|
|
Name:
|
Christopher Ianelli, M.D., Ph.D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
SIGNATURE OF INVESTOR:
The undersigned Investor, as a condition precedent to becoming a holder of shares of Series A-1 Preferred Stock or Series B
Preferred Stock, hereby agrees to become a party to the Purchase Agreement and the Investors’ Rights Agreement. The undersigned
Investor shall become a party to and become bound by the Purchase Agreement and the Investors’ Rights Agreement upon (i) execution
and delivery to the Company of this Master Signature Page, and (ii) receipt by the Company of the investment consideration
required under the Purchase Agreement. Upon execution of this Master Signature Page and the delivery by the Investor of the
investment proceeds (whether through the cancellation of indebtedness for money borrowed, cash or otherwise), the undersigned
Investor shall therefore be entitled to all of the rights, and be bound by all of the obligations, set forth in each of the Purchase
Agreement and the Investors’ Rights Agreement, as the interests of the undersigned shall appear as an Investor thereunder.
By execution of this Master Signature Page, the undersigned Investor, if a holder of Convertible Promissory Notes of the Company,
also agrees that such Notes are hereby cancelled, extinguished and retired, and the obligations represented thereby contributed
to the capital of the Company.
IN
WITNESS WHEREOF, this Master Signature Page has been duly executed by or on behalf of the undersigned Investor, as of
the date below written. When so executed and delivered by the Company and each of the Investors named in the Purchase Agreement,
the Purchase Agreement and the Investors’ Rights Agreement shall become binding obligations of the parties thereto.
|
Please
Date: August __22_, 2014
|
|
Michael
Grenon
|
Digitally
signed by Michael Grenon
DN:
cn=Michael Grenon, o=Grimes and Company,
ou, email=mgrenon@grimesco.com, c=US
Date:
2014.08.20 10:55:17 -04'00'
|
|
|
|
Signature
of Investor
|
|
Cash Investment
Amount:
|
$
|
50,000
|
|
|
J. Michael
Grenon
|
|
|
|
|
|
(Print Name of Investor)
|
|
|
|
|
|
|
|
Amount of Notes Converted:
|
$
|
N/A
|
*
|
|
12 Woodstone Road
|
|
|
|
|
|
Street
Address
Northborough
|
MA
|
01532
|
|
|
|
|
|
City
|
State
|
Zip
|
iSpecimen
Inc., Series A-1 Preferred Stock and Series B Preferred Stock
Master Signature Page
iSpecimen
Inc.
Series A-1
and Series B Preferred Stock Financing
Master Signature Page
IN
WITNESS WHEREOF, iSpecimen Inc., a Delaware corporation (the “Company”), and each of the
undersigned Investors, severally and not jointly, by his, her or its signature below, are executing the Series B Preferred
Stock Purchase Agreement relating to an investment of approximately $8 million in the Company at a price of $2.52019 per share
(the “Purchase Agreement”), and the Investors’ Rights Agreement (the “Investors’ Rights
Agreement”), each dated as of August 22 , 2014, among the Company and the undersigned investor and the other
investors participating in this financing (as an “Investor” under the Purchase Agreement and the Investors’
Rights Agreement).
|
By:
|
/s/ Christopher
Ianelli, M.D., Ph.D.
|
|
|
Name:
|
Christopher Ianelli, M.D., Ph.D.
|
|
|
Title:
|
President
and Chief Executive Officer
|
|
SIGNATURE OF INVESTOR:
The undersigned Investor, as a condition precedent to becoming a holder of shares of Series A-1 Preferred Stock or Series B
Preferred Stock, hereby agrees to become a party to the Purchase Agreement and the Investors’ Rights Agreement. The undersigned
Investor shall become a party to and become bound by the Purchase Agreement and the Investors’ Rights Agreement upon (i) execution
and delivery to the Company of this Master Signature Page, and (ii) receipt by the Company of the investment consideration
required under the Purchase Agreement. Upon execution of this Master Signature Page and the delivery by the Investor of the
investment proceeds (whether through the cancellation of indebtedness for money borrowed, cash or otherwise), the undersigned
Investor shall therefore be entitled to all of the rights, and be bound by all of the obligations, set forth in each of the Purchase
Agreement and the Investors’ Rights Agreement, as the interests of the undersigned shall appear as an Investor thereunder.
By execution of this Master Signature Page, the undersigned Investor, if a holder of Convertible Promissory Notes of the Company,
also agrees that such Notes are hereby cancelled, extinguished and retired, and the obligations represented thereby contributed
to the capital of the Company.
IN
WITNESS WHEREOF, this Master Signature Page has been duly executed by or on behalf of the undersigned Investor, as of
the date below written. When so executed and delivered by the Company and each of the Investors named in the Purchase Agreement,
the Purchase Agreement and the Investors’ Rights Agreement shall become binding obligations of the parties thereto.
|
Please Date: August __22_,
2014
|
|
Michael
Grenon
|
Digitally
signed by Michael Grenon
DN: cn=Michael Grenon, o=Grimes
and Company,
ou, email=mgrenon@grimesco.com, c=US
Date: 2014.08.20 10:55:17 -04'00'
|
|
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Signature
of Investor
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Cash Investment
Amount:
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$
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50,000
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MRNGL Trust
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(Print Name of Investor)
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Amount of Notes Converted:
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$
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N/A
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*
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15 Tournament Way
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Street
Address
Sutton
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MA
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01590
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City
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State
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Zip
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iSpecimen Inc., Series A-1 Preferred Stock
and Series B Preferred Stock
Master Signature Page
Exhibit A
LIST OF INVESTORS
Name and Address of Investors
OBF Investments, LLC
c/o John Murphy
8669 Commodity Circle
Orlando, FL 32819
Andrew Ross
75 Myles Standish Road Weston, MA 02493
Jill Preotle
27 Commonwealth Avenue
Boston, MA 02116
Peter C. Aldrich Revocable Trust
c/o Peter C. Aldrich 151 Coolidge Hill
Cambridge, MA 02138
Brad Callow
179 Florence Road
Waltham, MA 02453
David Ianelli
33 Glen Road
Hopkinton, MA 01748
Marisa Ianelli
104 Cross Street
Belmont, MA 02478
Kevin Richard
6 Holmes Road
Lexington, MA 02420
iSpecimen Inc.
Investors’ Rights Agreement
Exhibit B
LIST OF KEY HOLDERS
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Name, Address and E-Mail
|
|
Number
of Shares
of Common Stock Held
|
|
Christopher Ianelli, MD PhD
c/o iSpecimen Inc.
450 Bedford Street, Suite 2050
Lexington, MA 02420
cianelli@ispecimen.com
|
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1,886,540
|
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Andrew Ross
75 Myles Standish Road
Weston, MA 02493
alr0624@msn.com
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2,020,283
|
iSpecimen Inc.
Investors’ Rights Agreement
Exhibit
10.10
XXXXXXXXX
Name of Investor
iSpecimen
Inc.
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
iSpecimen Inc.
450 Bedford Street
Lexington, MA 02420
Attention: Christopher Ianelli,
Chief Executive Officer
The undersigned investor
(the “Investor”) acknowledges that it has received and reviewed certain information relating to an investment
in iSpecimen Inc. (the “Company”), including the term sheet, investor presentation materials,
and other information provided in writing to the undersigned Investor (the “Offering Materials”).
1. Subscription
for Convertible Note. Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Unsecured Convertible Promissory Notes, in the form attached hereto as Exhibit A
(the “Convertible Notes”), in the amount set forth on the signature page of this Agreement. The
Convertible Notes shall bear interest at a rate of six percent (6%) per annum, on a non-compounding basis, and due on maturity
on the earlier of (i) the closing of a Qualified Equity Financing (as defined below), (ii) the date upon which prepayment
by the Company occurs with the consent of the Majority Lenders (as defined below), (iii) the date upon which the Convertible
Notes are otherwise converted into equity securities as set forth herein, or (iv) June 30, 2019 (the “Maturity
Date”). The Convertible Notes will be repayable upon demand of the Majority Lenders at any time on or after the Maturity
Date, provided that the Convertible Notes have not been converted or repaid in accordance with their terms. The Convertible Notes
will be subordinated, unsecured obligations of the Company. The Majority Lenders may, with the approval of the Company, elect to
extend the Maturity Date one or more times, at their discretion. The Convertible Notes will be issued by the Company solely to
“accredited investors” (as defined under Rule 501 of Regulation D of the Securities Act of 1933, as amended, the
“Securities Act”).
1.1 Note
Financing; Investor Participation. The Convertible Notes issued to the undersigned Investor and the Convertible Notes issued
to other investors (collectively, the “Investors”) are being issued in connection with an interim convertible
debt financing of the Company, yielding up to an aggregate of $5,500,000 in gross proceeds (the “Note Financing”).
The Note Financing is being consummated in order to facilitate either (i) a new permanent equity financing yielding gross
proceeds in excess of $10,000,000 million (including conversion of the outstanding principal of the Convertible Notes, a
“Qualified Equity Financing”) or (ii) the Company’s achievement of positive free cash flow
from operations on a quarterly basis (“Positive FCFO”). The term “positive free cash flow from
operations” means a positive value obtained by calculating the difference of the Company’s operating cash flow minus
capital expenditures, each as determined in accordance with generally accepted accounting principles, consistently applied in the
preparation of the Company’s historical financial statements. The determination of “Positive FCFO” for the purposes
of Section 1.6 hereof shall include (a) the achievement by the Company of Positive FCFO for the two consecutive calendar
quarters ending ninety (90) days prior to the Maturity Date (or Extended Maturity Date, as applicable) determined and measured
at the end of each quarter, and (b) the determination in good faith by the Board of Directors at the time of such calculation
that the Company is able to sustain two additional consecutive quarters of Positive FCFO.
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iSpecimen Inc.
Convertible Note Subscription Agreement
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The Convertible Notes
issued in this Bridge Financing are being offered only to existing stockholders of the Company as further set forth in the Offering
Materials presented to the undersigned Investor. The Investor understands and acknowledges that notwithstanding anything contained
herein to the Contrary, the rights, powers and privileges of the undersigned to covert the outstanding principal and interest on
the Convertible Notes into shares of 2X Participating Preferred Stock (as defined below) under Sections 1.6, 1.8 and 1.9 hereof
is conditioned upon the firm commitment and investment of the undersigned Investor to purchase at least $500,000 in principal amount
of Convertible Notes (each such Investor, a “Major Investor”). All other Investors who are not
Major Investors shall not be entitled to convert the Convertible Notes into shares of 2X Participating Preferred Stock and shall
not be afforded the discounts set forth in Sections 1.5 and 1.7 hereof applicable to Major Investors but shall otherwise have the
rights, powers and privileges set forth herein which are not specifically reserved for the Major Investors.
1.2 Initial
Closing Date and Serial Closings. A minimum capital requirement for the initial closing shall be $500,000 (the “Initial
Closing”). The Initial Closing shall take place as soon as practicable but no later than March 31, 2017 (the
“Closing Date”) following satisfaction of the conditions set forth in Section 8 below. At any time,
and from time to time, during the one-year period immediately following the Initial Closing, the Company may, at one or more additional
closings (each a “Closing”), offer, sell and issue additional Convertible Notes to Investors upon the
same terms and conditions hereof, provided that in no event shall the Company issue more than $5,500,000 in aggregate principal
amount of Convertible Notes across all Closings, including at the Initial Closing. Additional Closings may be held at the discretion
of the Board of Directors, and at each such Closing, any Investor shall execute an agreement in form and substance similar to this
Agreement, and the Company shall issue to such Investor a Convertible Note in the amount of such investment at such additional
Closing. Notwithstanding the foregoing, the Board of Directors may extend the period for additional Closings beyond one year in
its sole discretion.
1.3 Use
of Proceeds. The proceeds of the Convertible Notes shall be used to support research, product development, expansion of
sales and marketing efforts, working capital and general corporate purposes.
1.4 Amendments
of the Convertible Notes. This Agreement and the Convertible Notes may be amended, extended, converted, substituted, or
otherwise modified on behalf of all holders of Convertible Notes issued in connection with this Note Financing with the written
consent or approval of the Company and the holders of at least a majority in aggregate principal amount of all Convertible Notes
issued in this Note Financing, provided that such consent has been obtained from each Major Investor (all such Major
Investors acting by unanimous consent, the “Majority Lenders”). No individual Convertible Note holder
shall have the right to block any corporate action unless acted upon by the Majority Lenders and the Company, as set forth above.
Prior to the Maturity Date, the Company may not prepay the Convertible Notes without the approval of the Majority Lenders. The
Convertible Notes issued to the undersigned Investor and all other Convertible Notes issued by the Company in the Note Financing
shall rank pari passu in all respects (including repayment).
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Convertible Note Subscription Agreement
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1.5 Conversion
of Convertible Notes upon a Qualified Equity Financing. If a Qualified Equity Financing is consummated, either as a single
transaction or a series of related transactions prior to the Maturity Date or the Extended Maturity Date, as applicable, the Convertible
Notes shall automatically convert into substantially the same class or series of securities of the Company issued in such Qualified
Equity Financing (the “Qualified Preferred Stock”). In connection with the consummation of such Qualified
Equity Financing, the Convertible Notes shall be treated by the Company as surrendered for cancellation and exchanged into Qualified
Preferred Stock, and at the price per share set forth in the paragraph below. In connection with the consummation of such Qualified
Equity Financing, the Convertible Notes will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations
represented by all Convertible Notes so terminated and contributed to the capital of the Company.
In connection with
the consummation of a Qualified Equity Financing, the outstanding principal on the Convertible Notes (including all accrued interest
thereon) shall convert into Qualified Preferred Stock under one of the two scenarios described below:
(1) Scenario
1: if a Qualified Equity Financing occurs on a date which is within twelve (12) months from the issuance
date noted on the face of each such Convertible Note, then the outstanding principal on the Convertible Note held by that Investor,
including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor
is a Major Investor, the issue price of the Qualified Preferred Stock less a twenty percent (20%) discount to the issue price of
such Qualified Preferred Stock (that is, at a rate of eighty percent (80%) of the issue price of the Qualified Preferred Stock),
or (ii) the Investor is not a Major Investor, the issue price of the Qualified Preferred Stock less a ten percent (10%)
discount to the issue price of such Qualified Preferred Stock (that is, at a rate of ninety percent (90%) of the issue price of
the Qualified Preferred Stock), or (B) such price per share commensurate with a pre-money valuation of the Company of $34,500,000,
calculated on a Fully-Diluted Basis, and determined prior to the conversion of the Convertible Notes into the shares of Qualified
Preferred Stock; or
(2) Scenario
2: if a Qualified Equity Financing occurs on a date which is later than twelve (12) months from the issuance
date noted on the face of each such Convertible Note, then the outstanding principal on the Convertible Note held by that Investor,
including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor
is a Major Investor, the issue price of the Qualified Preferred Stock less a thirty percent (30%) discount to the issue price of
such Qualified Preferred Stock (that is, at a rate of seventy percent (70%) of the issue price of the Qualified Preferred Stock),
or (ii) the Investor is not a Major Investor, the issue price of the Qualified Preferred Stock less a twenty percent
(20%) discount to the issue price of such Qualified Preferred Stock (that is, at a rate of eighty percent (80%) of the issue price
of the Qualified Preferred Stock),or (B) such price per share commensurate with a pre-money valuation of the Company of $34,500,000,
calculated on a Fully-Diluted Basis, and determined prior to the conversion of the Convertible Notes.
For the avoidance of
doubt, the outstanding principal on each Convertible Note held by an Investor (including all accrued interest thereon) shall convert
at a rate in accordance with either Scenario 1 or Scenario 2 above, but not both. For purposes of this Agreement, “Fully-Diluted
Basis” shall mean the conversion of all equity securities of the Company convertible into Common Stock, including
outstanding shares of Preferred Stock and other convertible securities, the exercise of all outstanding options, warrants and other
rights to purchase Common Stock, and the reserves of shares of Common Stock available under any active stock plan, stock option
plan or other equity compensation plan of the Company, but excluding the Convertible Notes.
1.6 Conversion
of Convertible Notes upon Positive FCFO. If the Company achieves Positive FCFO prior to the consummation of a Qualified
Equity Financing and for the two consecutive quarters ending ninety (90) days prior to the Maturity Date (or the Extended Maturity
Date, as applicable), then the Convertible Notes shall automatically convert into a series of preferred stock of the Company (the
“FCFO Preferred Stock”) having rights and preferences substantially similar to the rights and privileges
of the Series B Preferred Stock of the Company (as existing on the date hereof), except as to the elements of pre-money
valuation, price per share, dividends, and liquidation preference (which elements are further set out below). The Company shall
provide the Investors written notice of the achievement of Positive FCFO within sixty (60) days of the achievement of the Positive
FCFO and at least thirty (30) days prior to the conversion of the Convertible Notes and provide the Investors access to all supporting
financial statements and accounting records required for verification of Positive FCFO. In connection with the Company’s
achievement of Positive FCFO, the Convertible Notes shall be treated by the Company as surrendered for cancellation and exchanged
into FCFO Preferred Stock, and at the price per share and upon the terms set forth in the paragraph below. In connection with the
Company’s achievement of Positive FCFO and subject to the terms below, the Convertible Notes will be deemed, for all purposes,
to be cancelled on the books of the Company and the obligations represented by all Convertible Notes so terminated and contributed
to the capital of the Company.
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Convertible Note Subscription Agreement
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In connection with
the Company’s achievement of Positive FCFO, the outstanding principal on the Convertible Notes, including all accrued interest
thereon (the “Accrued Amount”) shall convert into FCFO Preferred Stock at a price per share commensurate
with a $34,500,000 pre-money valuation of the Company, calculated on a Fully-Diluted Basis. If and as applicable, the FCFO Preferred
Stock shall be designated and authorized as two distinct classes as provided below and shall:
(1) as to Major
Investors, (a) rank senior to and be payable in preference of the then most senior series or class of Company capital stock
upon the liquidation, dissolution, merger, acquisition, business combination, sale of all or substantially all of the assets of
the Company (a “Deemed Liquidation Event”), (b) provide for a liquidation preference payable upon
a Deemed Liquidation Event equal to two-times (2X) the principal amount on the Convertible Notes so converted, (c) in addition
to the liquidation preference described in clause (a) above, participate in residual proceeds available for distribution to
holders of Common Stock upon a Deemed Liquidation Event, and (d) contain other rights, powers, preferences and privileges
no less than those of the Series B Preferred Stock (as existing on the date hereof) (the “2X Participating Preferred
Stock”); and
(2) as to any
Investor not a Major Investor, (a) rank pari passu to the Series B Preferred Stock (as existing on the
date hereof) in payment preference upon a Deemed Liquidation Event, (b) contain a one-times (1X) the principal amount on the
Convertible Notes so converted as the liquidation preference payable upon a Deemed Liquidation Event, (c) be non-participating
preferred stock, and (d) contain other rights, powers, preferences and privileges no less than those of the Series B
Preferred Stock (as existing on the date hereof) (the “Conversion Preferred Stock”).
The Company shall use
reasonable efforts to cause the authorization and designation of the classes FCFO Preferred Stock, as applicable, including obtaining
all necessary stockholder approvals, consents and waivers to so designate the respective classes FCFO Preferred Stock, upon the
achievement of Positive FCFO. The Company shall provide each Investor with evidence of the authorization and designation of the
respective classes of FCFO Preferred Stock. Notwithstanding anything contained herein to the contrary and for the avoidance of
doubt, the Convertible Notes shall not be deemed cancelled until the FCFO Preferred Stock has been duly authorized and designated
in accordance with applicable law.
1.7 Conversion
of Convertible Notes upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of the
Convertible Notes in full or prior to a Qualified Equity Financing, then upon the consummation of any such Acquisition, at the
option of the Majority Lenders, the Convertible Notes shall (a) be repaid in full in an amount equal to the outstanding principal
amount of the Convertible Notes plus all accrued interest thereon, or (b) shall convert into shares of Common
Stock of the Company (the “Conversion Shares”) at the Acquisition Conversion Price (as defined below).
The Company shall provide the Investors written notice of an Acquisition at least thirty (30) days prior to the closing of such
Acquisition. If the Majority Lenders elect to be repaid in accordance with option (a) in the preceding sentence, such amount
shall be paid upon consummation of the Acquisition (or as promptly as practicable thereafter) and shall remain a continuing obligation
of the Company (or any successor entity) until such amount is paid in full. An “Acquisition” shall mean
the sale of all or substantially all of the capital stock or assets of the Company in a business combination or other acquisition;
a merger, consolidation or reorganization of the Company in connection with a business combination (but not in connection with
an equity financing); or the sale or transfer of control by the stockholders of the Company to a third party (in a single transaction
or series of related transactions) representing a majority of the voting power of the Company (other than in connection with an
issuance of equity securities designed to raise working capital, including a Qualified Equity Financing).
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Convertible Note Subscription Agreement
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In the event that the
Majority Lenders elect to convert the Convertible Notes into Conversion Shares upon an Acquisition, the outstanding principal on
the Convertible Notes, including all accrued interest thereon, shall convert into such number of Conversion Shares equal to the
quotient of the aggregate principal and accrued interest outstanding on the Convertible Notes divided by a price
per share of Conversion Shares determined in accordance with one of the two scenarios set out below (the “Acquisition
Conversion Price”):
(1) Scenario
1: if an Acquisition occurs on a date which is within twelve (12) months from the issuance date noted on
the face of each such Convertible Note held by that Investor, then the outstanding principal on the Convertible Note, including
all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor is
a Major Investor, the estimated price per share of the Common Stock upon the closing of such Acquisition less a twenty percent
(20%) discount (that is, at a rate of eighty percent (80%) of the per share value of the Common Stock), or (ii) if the Investor
is not a Major Investor, the estimated price per share of the Common Stock upon the closing of such Acquisition less a ten
percent (10%) discount (that is, at a rate of ninety percent (90%) of the per share value of the Common Stock), or (B) such
price per share commensurate with a valuation of the Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined
immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents); or
(2) Scenario
2: if an Acquisition occurs on a date which is later than twelve (12) months
from the issuance date noted on the face of each such Convertible Note held by that Investor, then the outstanding principal on
the Convertible Note, including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if
(i) the Investor is a Major Investor, the estimated closing price per share of the Common Stock upon the closing of such Acquisition
less a thirty percent (30%) discount (that is, at a rate of seventy percent (70%) of the per share value of the Common Stock),
or (ii) if the Investor is not a Major Investor, the estimated price per share of the Common Stock upon the closing
of such Acquisition less a twenty percent (20%) discount (that is, at a rate of eighty percent (80%) of the per share value of
the Common Stock), or (B) such price per share commensurate with a valuation of the Company of $34,500,000, calculated on
a Fully-Diluted Basis, and determined immediately prior to the Acquisition (as further set forth in any of the initial definitive
Acquisition documents).
For the avoidance of
doubt, the outstanding principal on any Convertible Note held by an Investor (including all accrued interest thereon) shall convert
at an Acquisition Conversion Price determined in accordance with either Scenario 1 or Scenario 2 above, but not both.
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Convertible Note Subscription Agreement
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1.8 Optional
Conversion upon Maturity. If upon the Maturity Date the Company has not consummated a Qualified Equity Financing or achieved
Positive FCFO (and the Convertible Notes have not otherwise been repaid or converted), the Majority Lenders may elect, on behalf
of all Investors, to (i) demand payment for the full amount of the outstanding principal and accrued interest on the Convertible
Notes in cash upon the Maturity Date, (ii) elect to extend the Maturity Date by up to an additional eighteen (18) months (the
“Extended Maturity Date”), or (iii) convert the Accrued Amount on behalf of all Investors into shares
2X Participating Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors) at a rate equal
to a per share price of such preferred stock commensurate with a $27,000,000 pre-money valuation of the Company calculated on a
Fully-Diluted Basis, and determined immediately prior to the conversion of such Convertible Notes. The Majority Lenders shall submit
written notice to the Company of their election under this Section 1.8 no more than ten (10) days before the Maturity
Date or Extended Maturity Date, as applicable. If the Majority Lenders elect to extend the Maturity Date in accordance with clause
(ii) of this Section 1.8, then the rights provided herein shall again be applicable upon the Extended Maturity Date.
Notwithstanding the foregoing, if the Majority Lenders do not deliver a written election within such ten-day period, then the principal
and interest accrued on the Convertible Notes shall be immediately due and payable.
1.9 Elective
Conversion into Preferred Stock. Notwithstanding anything contained herein to the contrary, the Majority Lenders may elect
at any time prior to the Maturity Date and upon forty five (45) days’ prior written notice to the Company (an “Elective
Notice”) to convert the outstanding Accrued Amount on all Convertible Notes issued hereunder into shares of 2X Participating
Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors) (the “Elective Conversion”),
provided, that such Elective Notice is provided to the Company no fewer than ninety (90) days prior to the closing date
of a Qualified Equity Financing or the closing of an Acquisition. Upon such Elective Conversion, the Accrued Amount outstanding
on all of the Convertible Notes shall convert into shares of 2X Participating Preferred Stock (as to Major Investors) and Conversion
Preferred Stock (as to non-Major Investors), respectively, at a rate equal to a price per share commensurate with a pre-money valuation
of the Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined prior to the conversion of the Convertible Notes.
Upon the timely delivery and receipt by the Company of such Elective Notice, the Company shall take reasonable efforts to obtain
all approvals, consents, waivers and make all filings necessary or appropriate to designate and authorize the 2X Participating
Preferred Stock and Conversion Preferred Stock, if and as applicable. Upon an Elective Conversion, the Convertible Notes shall
be treated by the Company as surrendered for cancellation and exchanged into shares of 2X Participating Preferred Stock (as to
Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, and will be deemed, for all purposes,
to be cancelled on the books of the Company and the obligations represented by all Convertible Notes so terminated and contributed
to the capital of the Company.
1.10 Subordination.
The obligations represented by the Convertible Notes shall be subordinated in right of payment and priority and subject, in the
manner and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as defined
herein), so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed or otherwise
obligated to extend credit to the Company under any loan agreement. The term “Senior Debt” shall mean
all present and future indebtedness for money borrowed (whether term loan or working capital facility or other form of credit)
of the Company from institutional lenders, commercial credit companies, commercial banks, credit unions, government agencies, and
other commercial lenders which may be, from time to time, incurred by the Company, including, but not limited to, any negotiable
instruments evidencing the same, all guaranties, debts, demands, monies, indebtedness, liabilities and obligations owed or to become
owing, including interest, principal, costs, and other charges, and all claims, rights, causes of action, judgments, decrees, remedies,
or other obligations of any kind whatsoever and howsoever arising, whether voluntary, involuntary, absolute, contingent, direct,
indirect, or by operation of law.
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Convertible Note Subscription Agreement
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So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Convertible Notes agrees that each such holder shall
not: (i) collect, or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or
hereafter existing under the Convertible Notes (provided that this provision shall not be interpreted to prevent a conversion of
the Convertible Notes in accordance with their terms and the terms hereof); (ii) sell, assign, transfer, pledge, or give a
security interest in the Convertible Notes; (iii) enforce or apply any security, now or hereafter existing for the Convertible
Notes; (iv) commence, prosecute or participate in any administrative, legal, or equitable action against the Company concerning
the obligations under the Convertible Notes; (v) join in any petition for bankruptcy, assignment for the benefit of creditors,
or creditors’ agreement; (vi) take, maintain or enforce any lien or security, which is senior to the Senior Debt lender’s
interest, in any property, real or personal, to secure the obligations under the Convertible Notes; or (vii) incur any obligation
to, or receive any loans, advances, dividends, payments of any kind or gifts from, the Company with respect to the obligations
under the Convertible Notes; provided, however, that this paragraph shall not apply to (a) any filing by the
holder of the Convertible Notes of any proof of claim or any other similar filing or action to protect such lender’s rights
in bankruptcy, or (b) any action by the Company or the holders of the Convertible Notes that results solely in the issuance
and/or receipt of capital stock or other equity security of the Company.
2. Representations
and Warranties of the Company. The Company hereby makes the following representations in connection with the issuance of
the Convertible Notes.
2.1. Organization,
Good Standing and Authority of the Company; No Subsidiaries. The Company is a corporation duly organized, validly existing
and in corporate good standing under the laws of the State of Delaware, and has the requisite power and authority to own all of
its properties and assets and to carry on its business as it is now being conducted. The Company does not hold or own, directly
or indirectly, any capital stock or other equity securities of any other corporation, and is not a participant in any joint venture,
partnership or similar arrangement.
2.2. Authorization.
The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions of this
Agreement and the Convertible Note the valid and enforceable obligations they purport to be. The issuance and sale of the Convertible
Note do not require any further corporate action and will not be subject to preemptive rights of any present stockholders of the
Company, and the Convertible Note will, upon its issuance and sale to the Investor, be duly authorized, validly issued and enforceable
in accordance with its terms. This Agreement constitutes the valid and binding obligations of the Company, enforceable in accordance
with its terms. Notwithstanding anything in this Section to the contrary, enforcement of this Agreement and the Convertible
Note may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to or affecting the rights of creditors
generally and subject to the fact that equitable remedies are discretionary and may not be granted by a court of competent jurisdiction.
2.3. No
Default. The execution, delivery and performance of this Agreement and the Convertible Note by the Company and the consummation
by the Company of the transactions contemplated hereby do not and will not constitute a default under any of the terms, conditions
or provisions of the Certificate of Incorporation or Bylaws of the Company, or any material contract, agreement or arrangement
to which the Company is a party or by which it is bound.
2.4. Capital
Stock of Company. As of January 31, 2017, the authorized capital stock of the Company currently consists of (A) authorized
16,000,000 shares of Common Stock, of which 5,402,783 shares of Common Stock are issued and outstanding, and (B) authorized
8,000,000 shares of Preferred Stock, of which (i) 3,427,871 shares of Preferred Stock are designated as Series A Preferred
Stock and 3,427,871 shares of Series A Preferred Stock are issued and outstanding; (ii) 556,550 shares of Preferred Stock
are designated as Series A-1 Preferred Stock and 556,540 shares of Series A-1 Preferred Stock are issued and outstanding;
(iii) 3,200,000 shares of Preferred Stock are designated as Series B Preferred Stock and 3,174,364 shares of Series B
Preferred Stock are issued and outstanding. Warrants for a total of 187,979 shares of Common Stock are outstanding. A total of
1,713,570 shares of Common Stock are reserved for the issuance of equity incentive awards to employees, directors, advisors and
consultants of the Company pursuant to the Company’s 2013 Equity Incentive Plan. In accordance with the Company’s 2013
Equity Incentive Plan, options for a total of 752,422 shares of Common Stock have been granted to date. Except as stated above,
there are no outstanding options, convertible securities, warrants, agreements, restrictions, preemptive rights or rights of first
refusal, contracts, or commitments of any character which entitle any person to acquire or otherwise relate to the issuance of
any shares of capital stock of the Company or which restrict or otherwise relate to or provide for the transfer of any outstanding
shares of capital stock of the Company.
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Convertible Note Subscription Agreement
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2.5. Compliance
with Laws; Permits. The Company holds all material licenses, approvals, certificates, permits and authorizations necessary
for the lawful conduct of its business and is in material compliance with all applicable laws, rules, regulations and ordinances.
The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business, the absence
of which could materially and adversely affect the business, properties, prospects or financial condition of the Company (a “Material
Adverse Effect”). The Company is not in default in any material respect under any such franchise, permit, license
or other similar authority which could have a Material Adverse Effect.
2.6. Litigation.
There is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or to
the knowledge, information and belief of the Company) any investigation by any governmental or other instrumentality or agency,
pending, or, to the Company’s knowledge, information and belief, threatened against or affecting the Company, or any of its
properties, intellectual property or other rights which could materially and adversely affect the right or ability of the Company
to carry on its business as now conducted, or which could have a Material Adverse Effect. The Company does not know of any valid
basis for any such action, proceeding or investigation.
2.7. Intellectual
Property; Proprietary Rights, Employee Restrictions. To the best of its knowledge, the Company has all patents, patent
licenses, copyrights, trademarks, service marks, trade names, trade secrets or other proprietary rights useful for its business
(collectively, “Intellectual Property Rights”) as presently conducted or contemplated. The Company’s
Intellectual Property Rights are sufficient to carry on the business of the Company as presently conducted or contemplated. To
the best of its knowledge, the Company has a license to use all of its Intellectual Property Rights and it has obtained any licenses,
releases or assignments necessary to use all third parties’ intellectual property rights in works embodied in its products
and material for the conduct of its business. The Company has not received any notice or other claim from any person asserting
that any of the Company’s present or contemplated activities infringe or may infringe any intellectual property rights of
such person or any third party. The Company has taken all reasonable measures to protect and preserve the security, confidentiality
and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All Intellectual
Property Rights necessary for the conduct of the Company’s business have been developed by employees, consultants or third
parties and have been properly assigned to the Company as the sole property of the Company. There are no outstanding options, licenses,
agreements, claims, encumbrances or shared ownership interests of any kind relating to the Intellectual Property Rights of the
Company used in the conduct of its businesses, nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the Intellectual Property Rights of any other person, other than those licenses and agreements set forth
on Exhibit B.
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2.8. Absence
of Certain Developments. Since December 31, 2016, there has been (i) no material adverse change in the condition
(financial or otherwise) of the Company or in the business, operations, financial condition, assets, liabilities, prospects or
contractual rights of the Company, except that the Company has continued to incur operating losses on approximately the same basis
as during prior months since such date, (ii) no declaration, setting aside or payment of any dividend or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any of the capital stock of the Company, (iii) no
waiver of any valuable right of the Company or cancellation of any debt or claim held by the Company, (iv) no loan by the
Company to any officer, director, employee or shareholder of the Company, or any agreement or commitment therefor (other than any
such loan or other indebtedness described in this Agreement), (v) no increase, direct or indirect, in the compensation paid
or payable to any officer or employee of the Company, other than as authorized by a majority of the disinterested members of the
Board of Directors, (vi) no material loss, destruction or damage to any property of the Company whether or not insured, (vii) no
material change in the personnel of the Company or the terms and conditions of their employment, (viii) no acquisition or
disposition of any assets greater than $20,000 in the aggregate, nor any other transaction by the Company otherwise than for fair
value in the ordinary course of business, and (ix) no contract, agreement, commitment, expenditure or hiring of new employees
or consultants involving a potential commitment in excess of $20,000 in the aggregate or which is otherwise material and not entered
into in the ordinary course of business.
2.9. Information
Supplied to Investor. Neither this Agreement, the Convertible Note, nor any document or certificate furnished to the Investor
by or on behalf of the Company contains any untrue statement of a material fact, and none of this Agreement, the Convertible Note,
or such other documents and certificates omits to state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3. Representations
and Warranties of the Undersigned. The undersigned understands and acknowledges that the Convertible Notes, together with
any securities which such Convertible Notes are so convertible (the “Securities”), are being offered
and sold under one or more of the exemptions from registration provided for in Section 4(2) of the Securities Act, including
Regulation D promulgated thereunder, and any applicable state securities laws. The Investor is purchasing the Securities without
being offered or furnished any formal offering literature or prospectus other than the Offering Materials. The Investor understands
that this transaction has not been reviewed and approved by the Securities and Exchange Commission or by any state regulatory authority.
3.1. Suitability.
The Investor confirms that it understands and has fully considered for purposes of this investment the risks of this investment
and understands that (i) this investment is suitable only for an investor who is able to bear the economic consequences of
losing its entire investment, (ii) the purchase of the Securities is a speculative investment which involves a high degree
of risk, and (iii) there are substantial restrictions on the transferability of, and there will be no immediate public market
for, the Securities, and accordingly, it may not be possible for the Investor to liquidate its investment. The Investor recognizes
that the Company is a development-stage enterprise with limited operating history and is currently developing and revising its
business strategy and marketing plan.
3.2. Lack
of Liquidity. The Investor confirms that it is able to bear the economic risk of this investment, and to hold the Securities
for an indefinite period of time. The Investor has sufficient liquid assets so that the illiquidity associated with this investment
will not cause any undue financial difficulties or affect the undersigned’s ability to provide for its current needs and
possible financial contingencies, and that its commitment to all speculative investments is reasonable in relation to its net worth
and annual income.
3.3. Knowledge
and Experience. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. The Investor is an investor in securities of companies in the development stage and acknowledges that
Investor is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of the investment in the Convertible Notes. If other
than an individual, Investor also represents it has not been organized for the purpose of acquiring the Convertible Notes.
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3.4. Access
to Management. The Investor confirms that, in making its decision to purchase the Securities, it has relied solely upon
independent investigations made by him, and that it has been given the opportunity to ask questions of, and to receive answers
from, management of the Company concerning the Company and the terms and conditions of this offering. The Investor acknowledges
that it is not relying upon any person, other than the Company and its officers and directors, in making its investment or decision
to invest in the Company.
3.5. Investment
Intent. The Convertible Notes are being acquired by the undersigned solely for its own personal account, for investment
purposes only, and not with a view to, or in connection with, any resale or distribution thereof. The Investor has no contract,
undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge to any person
the Securities for which it hereby subscribes, or any part thereof, or any interest therein or any rights thereto. The Investor
has no present plans to enter into any such contract, undertaking, agreement or arrangement. The Investor must bear the economic
risk of the investment for an indefinite period of time because the Securities have not been registered under the Securities Act
and applicable state securities laws and, therefore, cannot be sold unless they are subsequently registered under the Securities
Act and applicable state securities laws or unless an exemption from such registration is available.
3.6. Brokers.
The Investor is under no obligation to pay any broker’s fee or commission in connection with its investment.
3.7. Investment
Commitment Not Disproportionate to Net Worth. The Investor’s overall commitment to investments that are not readily
marketable is not disproportionate to the undersigned’s net worth and the Investor’s investment in the Company will
not cause such overall commitment to become excessive.
3.8. Liquid
Asset Value. The current value of the Investor’s liquid assets, including cash, freely marketable securities and
cash surrender value of life insurance, is sufficient to provide for such Investor’s current and anticipated needs and possible
contingencies, so that such Investor is capable of bearing the economic risk of this investment in the Company.
3.9. Purchase
Entirely for Own Account. This Agreement is made with the Investor in reliance upon the Investor’s representation
to the Company, by the Investor’s execution of this Agreement, that the Investor hereby confirms, that the Convertible Notes
to be acquired by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents
that the Investor does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer
or grant participations to such person or to any third person, with respect to any of the Convertible Notes. The Investor has not
been formed for the specific purpose of acquiring the Convertible Notes.
3.10. No
General Solicitation. Neither the Investor nor any of its officers, directors, employees, agents, stockholders or partners
has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation with respect
to the offer and sale of the Convertible Notes, or (b) published any advertisement in connection with the offer and sale of
the Convertible Notes.
4. Transferability.
The undersigned agrees not to transfer or assign this Agreement, or any of its interest herein, and further agrees that the assignment
and transfer of the Convertible Notes acquired pursuant hereto shall be made only in accordance with all applicable laws and the
prior written consent of the Company (which may not be unreasonably withheld).
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5. Protective
Covenants. Until the earlier of the consummation of a Qualified Equity Financing or any other equity financing, the Company
covenants and agrees that it shall not, without the agreement of the Majority Lenders, either directly or by amendment of the Certificate
of Incorporation, Acquisition, or otherwise: (i) liquidate, dissolve or wind up the affairs of the Company; (ii) amend,
modify alter, or repeal any provision of the Certificate of Incorporation or Bylaws which would adversely affect the rights, privileges,
powers or preferences of the holders of the Convertible Notes; (iii) create, or authorize the creation of, or issue any other
convertible debt security having rights, preferences or privileges pari passu or senior to the Convertible Notes offered in this
Note Financing, except for any commercial credit, bank lines of credit, capital equipment loans or other commercial financing loans
entered into in the ordinary course of business and with the approval of the Board of Directors; (iv) guarantee any indebtedness
for money borrowed except for guarantees arising in the ordinary course of business of the Company and pursuant to market-based
terms with trade creditors, licensors of intellectual property, vendors and suppliers; (v) change the principal business of
the Company, enter new lines of business, or exit the current line of business; (vi) create, incur, assume or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest or other encumbrance of any nature, upon or with respect to any of
the assets of the Company, or pledge, mortgage, encumber on, create a security interest in the Intellectual Property Rights of
the Company, except for licenses granted or contracts entered into the ordinary course of business; or (vii) reclassify any
existing debt or equity of the Company.
6. Affirmative
Covenants of Investors. Upon the conversion of the Convertible Notes into any shares of capital stock of the Company in
accordance with the terms hereof and to the extent that the undersigned Investor is a holder of shares of capital stock of the
Company, the undersigned Investor agrees to (i) execute a written waiver of any anti-dilution adjustments that may now or
hereafter exist with respect to such shares of capital stock now or hereafter owned by the Investor in connection with any such
conversion, and (ii) consent in writing to the adoption, authorization and approval of the designation and authorization of
such class or series and such number of shares of capital stock of the Company into which the Convertible Notes are so convertible,
including the adoption of any document, filing or agreement necessary to effectuate the foregoing. In no event shall the Company
be deemed in breach or in default under this Agreement or the Convertible Notes for any failure related to the designation or authorization
of shares of capital stock in accordance with the terms hereof or any anti-dilution adjustments to shares of Company capital stock
if such failure in any way results from or relates to the failure of the Investor (or any investor) to comply with the covenants
set forth in this Section 6.
7. Right
of First Offer on Company Issuances of Equity Securities. Until the earlier consummation of a Qualified Equity Financing
(or any other form of convertible debt or equity financing), each Investor shall have the right, but not the obligation, to purchase
shares of the Company’s preferred stock (or indebtedness convertible into preferred stock or other equity securities) issued
and sold pursuant to a Qualified Equity Financing or other equity financing, at the terms of the preferred stock offered to the
investors in the Qualified Equity Financing or other equity financing. The foregoing rights to participate in a Qualified Equity
Financing or other equity financing shall terminate upon the consummation of any such financing. The Board of Directors may
in its sole discretion set aside a portion of any offering under this Section for the purposes of allocating investment proceeds
to new investors in the Company.
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If the Company proposes
to issue or sell any new equity securities for working capital purposes, until the earlier consummation of a Qualified Equity Financing
(or any other form of convertible debt or equity financing), the Company shall deliver a written notice to the Investors stating
(a) the Company’s bona fide intention to issue and sell such equity securities and the identity of the proposed offeree,
(b) the number or dollar value of the equity securities to be offered to the Investors, (c) a description of the equity
securities, and (d) the price and terms upon which the Company proposes to offer the equity securities. An Investor may exercise
its first offer rights by giving written notice thereof to the Company during the 15-day period after such Investor’s receipt
of the Company’s notice. In the event that any Investor exercises its first offer rights, in whole or in part, the Investor
shall purchase the equity securities on the same terms and conditions as the other purchasers and shall be entitled to all registrations,
preferences, information, preemptive and other rights as the other purchasers.
This right of first
offer shall not apply to (i) any shares of Common Stock or Common Stock equivalents, or the grant of options, warrants or
other rights exercisable therefor, issued or issuable, to directors, officers, employees, advisors or consultants pursuant to any
stock incentive plan, incentive or non-qualified stock option plan or agreement, restricted stock purchase plan or agreement, stock
issuance or restriction agreement, stock ownership plan, consulting agreement, or such other agreement or plan approved by a majority
of the Board of Directors; or (ii) any securities issued pursuant to a strategic alliance, licensing agreement, joint venture,
corporate partnership, collaboration agreement, technology licensing, or a business combination transaction or acquisition of complementary
business or a license of complementary or necessary technology (in which the Company is the acquiring party in a combination, or
licensor or licensee in a technology license) and which is approved by the Board of Directors; or (iii) any shares of Common
Stock issued or issuable upon conversion of shares of any series of preferred stock (whether now existing or hereafter issued)
or upon conversion, exercise or exchange of warrants or options to purchase Common Stock or Common Stock equivalents; or (iv) warrants
or other Common Stock equivalents that are issued in a bank line of credit, term loan, credit facility, government grant, equipment
financing or leasing, finance or other commercial debt transaction with any financial or institutional lender of indebtedness for
money borrowed and approved by the Board of Directors.
8. Financial
Information. The Company shall furnish the following to the Investor, for so long as the undersigned Investor holds any
of its Convertible Notes:
(i) Quarterly
Reports: as soon as available and in any event within 45 days after the end of each calendar quarter, balance sheets, statements
of income and retained earnings and a summary statement of quarterly cash flow of the Company for such quarter;
(ii) Annual
Reports: as soon as available and in any event within 180 days after the end of each fiscal year of the Company, a copy
of the annual report (whether reviewed, compiled, unaudited or audited) for such year, including balance sheets of the Company
as of the end of such fiscal year and statements of income and retained earnings and of changes in financial position of the Company
for such year; or
(iii) Other
Reports: such other reports, information, white papers, industry reports and a “state of the business” report
on operations, customer pipeline, new business proposals, potential joint ventures and strategic partnerships and other information
relevant to the prospects of the Company’s business, which the Company shall from time to time prepare and deliver to the
Major Investor;
(iv) Updates:
Via periodic email or telephone conference calls, an update of the progress of the Company with respect to financing, development
of product, testing and trials of the product, operations, and strategic partnerships or investments.
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The Investor agrees
to hold in strict confidence and trust and not to use or disclose (other than to the Investor’s advisors, and only those
who have a need to know and who shall be subject to similar confidentiality obligations) any confidential information provided
to or learned by the Investor in connection with the receipt of the above information. Notwithstanding anything contained in this
Section to the contrary, the Company shall not be obligated to provide confidential information to any person or entity (i) which
the Company reasonably deems in good faith to be a trade secret or similar confidential information (unless covered by an enforceable
confidentiality agreement, in a form reasonably acceptable to the Company), (ii) in order to preserve the Company's attorney-client
privilege or which would adversely affect the attorney-client privilege between the Company and its counsel, (iii) if the
person or entity is a competitor of the Company (whether direct or indirect); (iv) in order to fulfill the Company's obligations
with respect to confidential or proprietary information of third parties, including its manufacturing partners, strategic partners,
clinical trial sponsors or customers, or to protect the confidentiality of unpatentable information or competitive business information
of the Company (or its customers, strategic partners, vendors and suppliers); or (v) because such information would include
information, analyses or discussions which could pose a potential conflict of interest for the Investor and the Company.
9. Conditions
to Closing. The obligations of the Investor to fund the amounts set forth on the signature page hereof and the obligations
of the Company set forth herein at the Initial Closing shall be subject to the satisfaction of each of the following conditions:
(i) to the extent necessary, the requisite stockholders of the Company shall have provided any waivers, consents or approvals
necessary for the consummation of this Note Financing and issuance of the Convertible Notes, (ii) the parties shall have executed
and delivered this Agreement to one another, and (iii) the Company shall have raised commitments for at least $500,000 from
Investors.
10. Miscellaneous.
This Agreement and the Offering Materials and the documents referenced therein constitute the entire agreement between the parties
relative to the subject matter of the sale of the Convertible Notes, and supersede all proposals or agreements, written or oral,
and all other communications between the parties relating to the subject matter of this Agreement. For the avoidance of doubt,
this Agreement and the terms and conditions of the Convertible Notes may be amended, waived, modified or extended, and the Convertible
Notes may be substituted, extended, renewed, increased, converted or exchanged, by the written consent of the Company and the Majority
Lenders. Any waiver shall be limited to the particular instance and for the particular purpose when and for which it is given.
The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way effect the validity, legality
or enforceability of any other provision of this Agreement and this Agreement shall be construed and reformed by any court of competent
jurisdiction to give full effect to the essential purposes of this Agreement. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the general laws of the Commonwealth of Massachusetts and
the federal securities laws. All notices provided for in this Agreement shall be given in writing and shall be effective when served
either by personal delivery, express overnight courier service, electronic facsimile transmission, email transmission (with confirmation
of receipt), or by first class mail, postage prepaid, addressed to the parties at their respective addresses. This Agreement may
be executed in duplicate counterparts, which, when taken together, shall constitute one instrument and each of which shall be deemed
to be an original instrument. Any dispute, controversy or claim arising out of, in connection with, or in relation to this Agreement
or the Convertible Notes or the breach of any of the provisions, hereof or the Convertible Notes shall be settled by arbitration
in Boston, Massachusetts, pursuant to the rules then obtaining of JAMS/Endispute. Any award shall be final, binding and conclusive
upon the parties and a judgment rendered thereon may be entered in any court having competent jurisdiction thereof. The Company
is expressly relying on the representations of each Investor as to his, her or its status as an “accredited investor”
under federal and state securities laws. If the representations of the Investor set forth above as an “accredited investor”
are inaccurate on the date that such representations were made, the Company, in its sole discretion and election, and without any
liability or further obligation of the Company to the Investor, may refund to the Investor the purchase price of the Convertible
Notes.
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11. Written
Consent of Preferred Stock Holders. To the extent that the undersigned Investor is a holder of the Company’s Series B
Preferred Stock entitled to vote hereon (each, a “Stockholder”), in accordance with Section 228
of the Delaware General Corporation Law (the “DGCL”), each undersigned Stockholder does hereby, pursuant
to this Agreement, vote, and provides his, her or its consent in respect of, all shares of the Company’s outstanding Series B
Preferred Stock held of record by such Stockholder (whether now owned or hereafter acquired) for the adoption and approval of the
following consent contained in this Section 11, without a formal meeting and without prior notice. The undersigned Stockholder
hereby consents to, adopts, approves and waives the Note Financing in accordance with the terms of this Agreement and the applicable
provisions of the Company’s Third Amended & Restated Certificate of Incorporation, and hereby adopts and approves
each of this Agreement, the Convertible Notes and each of the transactions contemplated hereby. The undersigned Stockholder agrees
and acknowledges that the foregoing consent shall take immediate effect once adopted, approved and consented to by the Stockholders
holding at least a majority of the issued and outstanding Series B Preferred Stock of the Company.
[Signature Page Follows]
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iSpecimen, Inc.
CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT
Signature Page
IN WITNESS WHEREOF,
the undersigned has hereby executed this Convertible Note Subscription Agreement as of this 17th day of March 2017.
Name & Signature of Investor:
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Signature
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Name:
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Address:
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Email:
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Telephone:
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Investment Amount:
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Social Security #:
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If the Investor is a Stockholder,
and to the fullest extent permitted by law, this Agreement has been duly executed as of the date first set forth above. The consent
contained in Section 11 hereof shall be irrevocable and shall be effective immediately, provided that such consent shall be
deemed revoked if it has not become effective within 60 days of the actual date of the signature below, which actual date of signature
is the date on which provision for the effectiveness of the consent has been made.
* * *
The Company hereby
accepts the subscription of the Investor pursuant to this Convertible Note Subscription Agreement, subject to the terms and conditions
set forth herein, as of this 17th day of March 2017.
iSpecimen Inc.
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By:
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/s/ Christopher Ianelli
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Name: Christopher Ianelli
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Title: Chief Executive Officer
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Convertible Note Subscription Agreement
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EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
iSpecimen Inc.
UNSECURED CONVERTIBLE PROMISSORY NOTE
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$_________________
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____________________, 2017
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FOR VALUE RECEIVED,
iSpecimen, Inc., a Delaware corporation (the “Company”), hereby promises to pay, on the written
demand of the combined Majority Lenders at any time on or after the Maturity Date (as defined in the Note Subscription Agreement
referenced below between the Company and the Lender referenced herein)to _________________________ (the “Lender”)
the principal sum ___________________________________Dollars ($_____________) or such lesser principal amount then outstanding,
together with all accrued and unpaid interest thereon as set forth below. This Convertible Note is being issued in connection with
an interim debt financing of the Company by Lender and other lenders in an amount of up to $5,500,000 in order to facilitate a
Qualified Equity Financing or the achievement of Positive FCFO, pursuant to the terms of certain Convertible Note Subscription
Agreements (each a “Note Subscription Agreement” and collectively the “Note Subscription Agreements”).
Terms not defined herein shall have the meanings set forth in the Note Subscription Agreements between the Company and the Lender,
and other lenders who have executed similar Note Subscription Agreements.
Section 1. Interest.
Interest on the principal amount of this Convertible Note will accrue from and including the date hereof until and including
the date such principal amount is paid, at a rate equal to six percent (6.0%) per annum, without compounding. Principal and interest
shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office
of the Lender or at such other place as the legal holder may designate from time to time in writing to the Company. Interest shall
be computed on the basis of a 365-day year, for the actual days elapsed. Notwithstanding any other provision of this Convertible
Note, the Lender hereof does not intend to charge, and the Company shall not be required to pay, any interest or other fees or
charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the Company
or credited to reduce principal hereunder.
Section 2. No
Prepayment. Prior to the consummation of a Qualified Equity Financing or achievement of Positive FCFO (or any other form
of convertible debt or equity financing), the Company may not pay this Convertible Note in whole or in part at any
time prior to the Maturity Date without the prior approval or consent of the Company and the Majority Lenders. If permitted by
the Majority Lenders, any payment of principal by the Company will be accompanied by payment of all accrued and unpaid interest
on the principal sum being repaid. The Lender will note all partial payments of principal and accompanying payments of interest
on the face or reverse side of this Convertible Note.
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Section 3. Conversion
of Convertible Note upon a Qualified Equity Financing. If a Qualified Equity Financing is consummated, the Convertible
Notes shall automatically convert into shares of Qualified Preferred Stock at the rate and upon the terms contained in Section 1.5
of the Note Subscription Agreement. Upon a Qualified Equity Financing, this Convertible Note shall be treated by the Company as
surrendered for cancellation and exchanged into Qualified Preferred Stock, and will be deemed, for all purposes, to be cancelled
on the books of the Company and the obligations represented by all Convertible Notes so terminated and contributed to the capital
of the Company. For the avoidance of doubt, the outstanding principal on this Convertible Note (including all accrued interest
hereon) shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth in Section 1.5 of the Note Subscription
Agreement, but not both.
Section 4. Conversion
of Convertible Note upon Achievement of Positive FCFO. If the Company achieves Positive FCFO prior to the consummation
of a Qualified Equity Financing and for any two consecutive calendar quarters quarter prior to the Maturity Date (as may be extended),
then this Convertible Note shall automatically convert into shares of FCFO Preferred Stock at the rate and upon the terms contained
in Section 1.6 of the Note Subscription Agreement. The rights, preferences, powers and privileges of the respective classes
of FCFO Preferred Stock to be issued (i.e., whether 2X Participating Preferred Stock or Conversion Preferred Stock) shall be in
accordance with the terms set forth in Section 1.6 of the Note Subscription Agreement. For the avoidance of doubt, (a) if
the Lender is a Major Investor, this Convertible Note shall convert into shares of 2X Participating Preferred Stock upon the terms
set forth in Section 1.6 of the Subscription Agreement, and (b) if the Lender is not a Major Investor, this Convertible
Note shall convert into shares of Conversion Preferred Stock upon the terms set forth in Section 1.6 of the Subscription Agreement.
Upon the achievement of Positive FCFO, this Convertible Note shall be treated by the Company as surrendered for cancellation and
exchanged into FCFO Preferred Stock, and will be deemed, for all purposes, to be cancelled on the books of the Company and the
obligations represented by all Convertible Notes so terminated and contributed to the capital of the Company.
Section 5. Conversion
of Convertible Note upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of the
Convertible Notes in full, then upon the consummation of any such Acquisition, at the option of the Majority Lenders, the Convertible
Note shall (a) be repaid in full in an amount equal to the outstanding principal amount of the Convertible Notes plus
all accrued interest thereon, or (b) shall convert into Conversion Shares at the rate and upon the terms contained in Section 1.7
of the Note Subscription Agreement. In connection with the conversion of the Convertible Notes in connection with an Acquisition,
this Convertible Note will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company. For the avoidance of doubt, if this Convertible
Note shall convert into Conversion Shares, the outstanding principal on this Convertible Note (including all accrued interest hereon)
shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth in Section 1.7 of the Note Subscription
Agreement, but not both.
Section 6. Optional
Conversion at Maturity. In accordance with and subject to the terms of Section 1.8 of the Subscription Agreement,
if upon the Maturity Date the Company has not consummated a Qualified Equity Financing or achieved Positive FCFO (and the Convertible
Notes have not otherwise been repaid or converted), the Majority Lenders may elect, on behalf of all Lenders, to (i) demand
payment for the full amount of the outstanding principal and accrued interest on the Convertible Notes in cash upon the Maturity
Date, (ii) convert all Convertible Notes into shares of 2X Participating Preferred Stock (as to Major Investors) and Conversion
Preferred Stock (as to non-Major Investors), respectively, and each at a rate equal to a per share price commensurate with a $27,000,000
pre-money valuation of the Company calculated on a Fully-Diluted Basis, and determined immediately prior to the conversion of such
Convertible Notes, or (iii) elect to extend the Maturity Date by up to an additional eighteen (18) months (the “Extended
Maturity Date”).
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Convertible Note Subscription Agreement
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Section 7. Elective
Conversion. At any time prior to the Maturity Date and at the election of the Majority Lenders on behalf of all Investors
in the Bridge Financing, all Convertible Notes shall be converted into shares of 2X Participating Preferred Stock (as to Major
Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, and each upon the terms and on the conditions
set forth in Section 1.9 of the Subscription Agreement (an “Elective Conversion”). Upon an Elective
Conversion, this Convertible Note shall be treated by the Company as surrendered for cancellation and exchanged into shares of
2X Participating Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively
and as applicable, and will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company
Section 8. Subordination.
The obligations represented by this Convertible Note shall be subordinated in right of payment and priority and subject, in
the manner and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as
defined herein), so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed
or otherwise obligated to extend credit to the Company under any loan agreement. The term “Senior Debt”
shall mean all present and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit
companies, commercial banks, credit unions, government agencies, and other commercial lenders which may be, from time to time,
incurred by the Company, including, but not limited to, any negotiable instruments evidencing the same, all guaranties, debts,
demands, monies, indebtedness, liabilities and obligations owed or to become owing, including interest, principal, costs, and other
charges, and all claims, rights, causes of action, judgments, decrees, remedies, or other obligations of any kind whatsoever and
howsoever arising, whether voluntary, involuntary, absolute, contingent, direct, indirect, or by operation of law.
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Convertible Notes agrees that each such holder shall
not: (i) collect, or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or
hereafter existing under the Convertible Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Convertible
Notes; (iii) enforce or apply any security, now or hereafter existing for the Convertible Notes; (iv) commence, prosecute
or participate in any administrative, legal, or equitable action against the Company concerning the obligations under the Convertible
Notes; (v) join in any petition for bankruptcy, assignment for the benefit of creditors, or creditors’ agreement; (vi) take,
maintain or enforce any lien or security, which is senior to the Senior Debt lender’s interest, in any property, real or
personal, to secure the obligations under the Convertible Notes; or (vii) incur any obligation to, or receive any loans, advances,
dividends, payments of any kind or gifts from, the Company with respect to the obligations under the Convertible Notes; provided,
however, that this paragraph shall not apply to (a) any filing by the holder of the Convertible Notes of any proof
of claim or any other similar filing or action to protect such lender’s rights in bankruptcy, or (b) any action by the
Company or the holders of the Convertible Notes that results solely in the issuance and/or receipt of capital stock or other equity
security of the Company.
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Convertible Note Subscription Agreement
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Section 9. Events
of Default. The outstanding balance of this Convertible Note shall be immediately due and payable prior to maturity in
case of any of the following events, each of which shall be an “Event of Default”: (a) any Event
of Bankruptcy; (b) a dissolution, termination of existence, suspension or discontinuance of business, or ceasing to operate
as a going concern; (c) the issuance of any injunction or restraining order which results in a Material Adverse Effect on
any aspect of the business or assets of the Company, or levy on or attachment of any funds or other property, real or personal,
of the Company, in an amount in excess of $100,000, if, in each case, the same is not dismissed, discharged, released, satisfied
or vacated within a period of sixty (60) days; (d) the failure to perform any material covenant by the Company under the Note
Subscription Agreement for a period of 45 days; or (e) a material default (following expiration of any applicable notice and
cure periods) under any other material agreement of the Company, and in which the default results in a liability or obligation
against the Company greater than $100,000. As used herein, an “Event of Bankruptcy” means any of the
following events impacting the Company or its operating subsidiaries: (i) any assignment by the Company for the benefit of
its creditors; (ii) an admission in writing by the Company of its inability to pay its debts as they become due; (iii) filing
by the Company of a voluntary petition in bankruptcy; (iv) seeking or consenting to, or acquiescing in, the appointment of
any trustee, receiver, custodian, liquidator or similar official for the Company or a substantial part of its property; (v) the
elapse of 90 days after the commencement of an action against the Company seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief without such action being dismissed; (vi) the insolvency or other cessation of
existence of the Company and its operating subsidiaries; or (vii) any corporate action by the Company to authorize or effect
any of the foregoing actions. Upon any Event of Default, the interest rate on the Convertible Notes shall be computed at an annual
rate of eight percent (8%) from and after the Event of Default. Upon the occurrence of an Event of Default, the Lender’s
remedies shall include the rights to declare the entire principal balance of this Convertible Note and any accrued and unpaid interest
immediately due and payable, without notice or presentment, or exercise any other remedies available to a lender under the Uniform
Commercial Code and the Note Subscription Agreement.
Section 10. Payment
of Costs of Enforcement. The Company agrees to pay all costs, charges and expenses incurred by the Lender (including, without
limitation, costs of collection, court costs, and reasonable attorneys’ fees and disbursements) in connection with the successful
enforcement of the Lender’s rights under this Convertible Note (all such costs, charges and expenses being herein referred
to as “Costs”). The Company agrees that any delay on the part of the Lender in exercising any rights
hereunder will not operate as a waiver of such rights, and further agrees that any payments received hereunder will be applied
first to Costs, then to interest, and the balance to principal. The Lender shall not by any act, delay, omission, or otherwise
be deemed to waive any of its rights or remedies, and no waiver of any kind shall be valid unless in writing and signed by the
Lender. Presentment for payment, demand, protest, notice of protest and notice of nonpayment are hereby waived.
Section 11. Miscellaneous.
This Convertible Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto. This Convertible
Note is made under and shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts.
This Convertible Note may be amended, substituted, altered, waived, modified or extended, and the Convertible Note may be substituted,
extended, converted or exchanged, by the written consent of the Company and the Majority Lenders.
{Signature Page Follows}
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iSpecimen Inc.
Convertible Note Subscription Agreement
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IN WITNESS WHEREOF,
the Company has executed this Convertible Promissory Note as an instrument under seal as of the date first written above.
ATTEST:
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iSpecimen, Inc.
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_XXXXXXXXXXXXXXXXXXXX_
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By:
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/s/
Christopher Ianelli
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Title:
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Christopher Ianelli, Chief Executive Officer
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iSpecimen Inc.
Convertible Note Subscription Agreement
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Exhibit
10.11
XXXXXXXXX
Name
of Investor
iSpecimen
Inc.
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
iSpecimen
Inc.
450
Bedford Street
Lexington, MA 02420
Attention:
Christopher Ianelli, Chief Executive Officer
The
undersigned investor (the “Investor”) acknowledges that it has received and reviewed certain information
relating to an investment in iSpecimen Inc. (the “Company”), including the term sheet, investor
presentation materials, and other information provided in writing to the undersigned Investor (the “Offering Materials”).
1. Subscription
for Convertible Note. Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Unsecured Convertible Promissory Notes,
in the form attached hereto as Exhibit A (the “Convertible Notes”), in the amount set forth on
the signature page of this Agreement. The Convertible Notes shall bear interest at a rate of six percent (6%) per annum, on a
non-compounding basis, and due on maturity on the earlier of (i) the closing of a Qualified Equity Financing (as defined below),
(ii) the date upon which prepayment by the Company occurs with the consent of the Majority Lenders (as defined below), (iii) the
date upon which the Convertible Notes are otherwise converted into equity securities as set forth herein, or (iv) June 30, 2019
(the “Maturity Date”). The Convertible Notes will be repayable upon demand of the Majority Lenders at
any time on or after the Maturity Date, provided that the Convertible Notes have not been converted or repaid in accordance with
their terms. The Convertible Notes will be subordinated, unsecured obligations of the Company. The Majority Lenders may, with
the approval of the Company, elect to extend the Maturity Date one or more times, at their discretion. The Convertible Notes will
be issued by the Company solely to “accredited investors” (as defined under Rule 501 of Regulation D of the Securities
Act of 1933, as amended, the “Securities Act”).
1.1 Note
Financing; Investor Participation. The Convertible Notes issued to the undersigned Investor and the Convertible Notes
issued to other investors (collectively, the “Investors”) are being issued in connection with an
interim convertible debt financing of the Company, yielding up to an aggregate of $5,500,000 in gross proceeds (the
“Note Financing”). The Note Financing is being consummated in order to facilitate either (i) a new
permanent equity financing yielding gross proceeds in excess of $10,000,000 million (including conversion of the
outstanding principal of the Convertible Notes, a “Qualified Equity Financing”) or (ii) the
Company’s achievement of positive free cash flow from operations on a quarterly basis (“Positive
FCFO”). The term “positive free cash flow from operations” means a positive value obtained by
calculating the difference of the Company’s operating cash flow minus capital expenditures, each as
determined in accordance with generally accepted accounting principles, consistently applied in the preparation of the
Company’s historical financial statements. The determination of “Positive FCFO” for the purposes of Section
1.6 hereof shall include (a) the achievement by the Company of Positive FCFO for the two consecutive calendar quarters ending
ninety (90) days prior to the Maturity Date (or Extended Maturity Date, as applicable) determined and measured at the end of
each quarter, and (b) the determination in good faith by the Board of Directors at the time of such calculation that the
Company is able to sustain two additional consecutive quarters of Positive FCFO.
iSpecimen Inc.
Convertible Note Subscription Agreement
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The
Convertible Notes issued in this Bridge Financing are being offered only to existing stockholders of the Company as further set
forth in the Offering Materials presented to the undersigned Investor. The Investor understands and acknowledges that notwithstanding
anything contained herein to the Contrary, the rights, powers and privileges of the undersigned to covert the outstanding principal
and interest on the Convertible Notes into shares of 2X Participating Preferred Stock (as defined below) under Sections 1.6, 1.8
and 1.9 hereof is conditioned upon the firm commitment and investment of the undersigned Investor to purchase at least $500,000
in principal amount of Convertible Notes (each such Investor, a “Major Investor”). All other Investors
who are not Major Investors shall not be entitled to convert the Convertible Notes into shares of 2X Participating Preferred
Stock and shall not be afforded the discounts set forth in Sections 1.5 and 1.7 hereof applicable to Major Investors but shall
otherwise have the rights, powers and privileges set forth herein which are not specifically reserved for the Major Investors.
1.2 Initial
Closing Date and Serial Closings. A minimum capital requirement for the initial closing shall be $500,000 (the “Initial
Closing”). The Initial Closing shall take place as soon as practicable but no later than March 31, 2017 (the “Closing
Date”) following satisfaction of the conditions set forth in Section 8 below. At any time, and from time to time,
during the one-year period immediately following the Initial Closing, the Company may, at one or more additional closings (each
a “Closing”), offer, sell and issue additional Convertible Notes to Investors upon the same terms and
conditions hereof, provided that in no event shall the Company issue more than $5,500,000 in aggregate principal amount of Convertible
Notes across all Closings, including at the Initial Closing. Additional Closings may be held at the discretion of the Board of
Directors, and at each such Closing, any Investor shall execute an agreement in form and substance similar to this Agreement,
and the Company shall issue to such Investor a Convertible Note in the amount of such investment at such additional Closing. Notwithstanding
the foregoing, the Board of Directors may extend the period for additional Closings beyond one year in its sole discretion.
1.3 Use
of Proceeds. The proceeds of the Convertible Notes shall be used to support research, product development, expansion of
sales and marketing efforts, working capital and general corporate purposes.
1.4 Amendments
of the Convertible Notes. This Agreement and the Convertible Notes may be amended, extended, converted, substituted, or
otherwise modified on behalf of all holders of Convertible Notes issued in connection with this Note Financing with the written
consent or approval of the Company and the holders of at least a majority in aggregate principal amount of all Convertible Notes
issued in this Note Financing, provided that such consent has been obtained from each Major Investor (all such Major
Investors acting by unanimous consent, the “Majority Lenders”). No individual Convertible Note holder
shall have the right to block any corporate action unless acted upon by the Majority Lenders and the Company, as set forth above.
Prior to the Maturity Date, the Company may not prepay the Convertible Notes without the approval of the Majority Lenders. The
Convertible Notes issued to the undersigned Investor and all other Convertible Notes issued by the Company in the Note Financing
shall rank pari passu in all respects (including repayment).
iSpecimen Inc.
Convertible Note Subscription Agreement
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1.5 Conversion
of Convertible Notes upon a Qualified Equity Financing. If a Qualified Equity Financing is consummated, either as a
single transaction or a series of related transactions prior to the Maturity Date or the Extended Maturity Date, as
applicable, the Convertible Notes shall automatically convert into substantially the same class or series of securities of
the Company issued in such Qualified Equity Financing (the “Qualified Preferred Stock”). In
connection with the consummation of such Qualified Equity Financing, the Convertible Notes shall be treated by the Company as
surrendered for cancellation and exchanged into Qualified Preferred Stock, and at the price per share set forth in the
paragraph below. In connection with the consummation of such Qualified Equity Financing, the Convertible Notes will be
deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented by all Convertible
Notes so terminated and contributed to the capital of the Company.
In
connection with the consummation of a Qualified Equity Financing, the outstanding principal on the Convertible Notes (including
all accrued interest thereon) shall convert into Qualified Preferred Stock under one of the two scenarios described below:
(1)
Scenario 1: if a Qualified Equity Financing occurs on a date which is within twelve (12) months from
the issuance date noted on the face of each such Convertible Note, then the outstanding principal on the Convertible Note held
by that Investor, including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if
(i) the Investor is a Major Investor, the issue price of the Qualified Preferred Stock less a twenty percent (20%) discount to
the issue price of such Qualified Preferred Stock (that is, at a rate of eighty percent (80%) of the issue price of the Qualified
Preferred Stock), or (ii) the Investor is not a Major Investor, the issue price of the Qualified Preferred Stock less a
ten percent (10%) discount to the issue price of such Qualified Preferred Stock (that is, at a rate of ninety percent (90%) of
the issue price of the Qualified Preferred Stock), or (B) such price per share commensurate with a pre-money valuation of the
Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined prior to the conversion of the Convertible Notes into
the shares of Qualified Preferred Stock; or
(2)
Scenario 2: if a Qualified Equity Financing occurs on a date which is later than twelve (12) months
from the issuance date noted on the face of each such Convertible Note, then the outstanding principal on the Convertible Note
held by that Investor, including all accrued interest thereon, shall convert at a rate equal to the lesser of (A)
if (i) the Investor is a Major Investor, the issue price of the Qualified Preferred Stock less a thirty percent (30%) discount
to the issue price of such Qualified Preferred Stock (that is, at a rate of seventy percent (70%) of the issue price of the Qualified
Preferred Stock), or (ii) the Investor is not a Major Investor, the issue price of the Qualified Preferred Stock less a
twenty percent (20%) discount to the issue price of such Qualified Preferred Stock (that is, at a rate of eighty percent (80%)
of the issue price of the Qualified Preferred Stock),or (B) such price per share commensurate with a pre-money valuation of the
Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined prior to the conversion of the Convertible Notes.
For
the avoidance of doubt, the outstanding principal on each Convertible Note held by an Investor (including all accrued interest
thereon) shall convert at a rate in accordance with either Scenario 1 or Scenario 2 above, but not both. For purposes of this
Agreement, “Fully-Diluted Basis” shall mean the conversion of all equity securities of the Company convertible
into Common Stock, including outstanding shares of Preferred Stock and other convertible securities, the exercise of all outstanding
options, warrants and other rights to purchase Common Stock, and the reserves of shares of Common Stock available under any active
stock plan, stock option plan or other equity compensation plan of the Company, but excluding the Convertible Notes.
iSpecimen Inc.
Convertible Note Subscription Agreement
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1.6 Conversion
of Convertible Notes upon Positive FCFO. If the Company achieves Positive FCFO prior to the consummation of a
Qualified Equity Financing and for the two consecutive quarters ending ninety (90) days prior to the Maturity Date (or the
Extended Maturity Date, as applicable), then the Convertible Notes shall automatically convert into a series of preferred
stock of the Company (the “FCFO Preferred Stock”) having rights and preferences substantially
similar to the rights and privileges of the Series B Preferred Stock of the Company (as existing on the date hereof), except
as to the elements of pre-money valuation, price per share, dividends, and liquidation preference (which elements are further
set out below). The Company shall provide the Investors written notice of the achievement of Positive FCFO within sixty (60)
days of the achievement of the Positive FCFO and at least thirty (30) days prior to the conversion of the Convertible Notes
and provide the Investors access to all supporting financial statements and accounting records required for verification of
Positive FCFO. In connection with the Company’s achievement of Positive FCFO, the Convertible Notes shall be treated by
the Company as surrendered for cancellation and exchanged into FCFO Preferred Stock, and at the price per share and upon the
terms set forth in the paragraph below. In connection with the Company’s achievement of Positive FCFO and subject to
the terms below, the Convertible Notes will be deemed, for all purposes, to be cancelled on the books of the Company and the
obligations represented by all Convertible Notes so terminated and contributed to the capital of the Company.
In
connection with the Company’s achievement of Positive FCFO, the outstanding principal on the Convertible Notes, including
all accrued interest thereon (the “Accrued Amount”) shall convert into FCFO Preferred Stock at a price
per share commensurate with a $34,500,000 pre-money valuation of the Company, calculated on a Fully-Diluted Basis. If and as applicable,
the FCFO Preferred Stock shall be designated and authorized as two distinct classes as provided below and shall:
(1)
as to Major Investors, (a) rank senior to and be payable in preference of the then most senior series or class of Company capital
stock upon the liquidation, dissolution, merger, acquisition, business combination, sale of all or substantially all of the assets
of the Company (a “Deemed Liquidation Event”), (b) provide for a liquidation preference payable upon
a Deemed Liquidation Event equal to two-times (2X) the principal amount on the Convertible Notes so converted, (c) in addition
to the liquidation preference described in clause (a) above, participate in residual proceeds available for distribution to holders
of Common Stock upon a Deemed Liquidation Event, and (d) contain other rights, powers, preferences and privileges no less than
those of the Series B Preferred Stock (as existing on the date hereof) (the “2X Participating Preferred Stock”);
and
(2)
as to any Investor not a Major Investor, (a) rank pari passu to the Series B Preferred Stock (as existing on the
date hereof) in payment preference upon a Deemed Liquidation Event, (b) contain a one-times (1X) the principal amount on the Convertible
Notes so converted as the liquidation preference payable upon a Deemed Liquidation Event, (c) be non-participating preferred stock,
and (d) contain other rights, powers, preferences and privileges no less than those of the Series B Preferred Stock (as existing
on the date hereof) (the “Conversion Preferred Stock”).
The
Company shall use reasonable efforts to cause the authorization and designation of the classes FCFO Preferred Stock, as applicable,
including obtaining all necessary stockholder approvals, consents and waivers to so designate the respective classes FCFO Preferred
Stock, upon the achievement of Positive FCFO. The Company shall provide each Investor with evidence of the authorization and designation
of the respective classes of FCFO Preferred Stock. Notwithstanding anything contained herein to the contrary and for the avoidance
of doubt, the Convertible Notes shall not be deemed cancelled until the FCFO Preferred Stock has been duly authorized and designated
in accordance with applicable law.
iSpecimen Inc.
Convertible Note Subscription Agreement
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1.7 Conversion
of Convertible Notes upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of
the Convertible Notes in full or prior to a Qualified Equity Financing, then upon the consummation of any such Acquisition,
at the option of the Majority Lenders, the Convertible Notes shall (a) be repaid in full in an amount equal to the
outstanding principal amount of the Convertible Notes plus all accrued interest thereon, or (b) shall convert
into shares of Common Stock of the Company (the “Conversion Shares”) at the Acquisition Conversion
Price (as defined below). The Company shall provide the Investors written notice of an Acquisition at least thirty (30) days
prior to the closing of such Acquisition. If the Majority Lenders elect to be repaid in accordance with option (a) in the
preceding sentence, such amount shall be paid upon consummation of the Acquisition (or as promptly as practicable thereafter)
and shall remain a continuing obligation of the Company (or any successor entity) until such amount is paid in full. An
“Acquisition” shall mean the sale of all or substantially all of the capital stock or assets of the
Company in a business combination or other acquisition; a merger, consolidation or reorganization of the Company in
connection with a business combination (but not in connection with an equity financing); or the sale or transfer of control
by the stockholders of the Company to a third party (in a single transaction or series of related transactions) representing
a majority of the voting power of the Company (other than in connection with an issuance of equity securities designed to
raise working capital, including a Qualified Equity Financing).
In
the event that the Majority Lenders elect to convert the Convertible Notes into Conversion Shares upon an Acquisition, the outstanding
principal on the Convertible Notes, including all accrued interest thereon, shall convert into such number of Conversion Shares
equal to the quotient of the aggregate principal and accrued interest outstanding on the Convertible Notes divided by
a price per share of Conversion Shares determined in accordance with one of the two scenarios set out below (the “Acquisition
Conversion Price”):
(1)
Scenario 1: if an Acquisition occurs on a date which is within twelve (12) months from the issuance
date noted on the face of each such Convertible Note held by that Investor, then the outstanding principal on the Convertible
Note, including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor
is a Major Investor, the estimated price per share of the Common Stock upon the closing of such Acquisition less a twenty percent
(20%) discount (that is, at a rate of eighty percent (80%) of the per share value of the Common Stock), or (ii) if the Investor
is not a Major Investor, the estimated price per share of the Common Stock upon the closing of such Acquisition less a
ten percent (10%) discount (that is, at a rate of ninety percent (90%) of the per share value of the Common Stock), or (B) such
price per share commensurate with a valuation of the Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined
immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents); or
(2)
Scenario 2: if an Acquisition occurs on a date which is later than twelve (12) months from the
issuance date noted on the face of each such Convertible Note held by that Investor, then the outstanding principal on the Convertible
Note, including all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor
is a Major Investor, the estimated closing price per share of the Common Stock upon the closing of such Acquisition less a thirty
percent (30%) discount (that is, at a rate of seventy percent (70%) of the per share value of the Common Stock), or (ii) if the
Investor is not a Major Investor, the estimated price per share of the Common Stock upon the closing of such Acquisition
less a twenty percent (20%) discount (that is, at a rate of eighty percent (80%) of the per share value of the Common Stock),
or (B) such price per share commensurate with a valuation of the Company of $34,500,000, calculated on a Fully-Diluted Basis,
and determined immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents).
For
the avoidance of doubt, the outstanding principal on any Convertible Note held by an Investor (including all accrued interest
thereon) shall convert at an Acquisition Conversion Price determined in accordance with either Scenario 1 or Scenario 2 above,
but not both.
iSpecimen Inc.
Convertible Note Subscription Agreement
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1.8 Optional
Conversion upon Maturity. If upon the Maturity Date the Company has not consummated a Qualified Equity Financing or
achieved Positive FCFO (and the Convertible Notes have not otherwise been repaid or converted), the Majority Lenders may
elect, on behalf of all Investors, to (i) demand payment for the full amount of the outstanding principal and accrued
interest on the Convertible Notes in cash upon the Maturity Date, (ii) elect to extend the Maturity Date by up to an
additional eighteen (18) months (the “Extended Maturity Date”), or (iii) convert the Accrued Amount
on behalf of all Investors into shares 2X Participating Preferred Stock (as to Major Investors) and Conversion Preferred Stock
(as to non-Major Investors) at a rate equal to a per share price of such preferred stock commensurate with a $27,000,000
pre-money valuation of the Company calculated on a Fully-Diluted Basis, and determined immediately prior to the conversion of
such Convertible Notes. The Majority Lenders shall submit written notice to the Company of their election under this Section
1.8 no more than ten (10) days before the Maturity Date or Extended Maturity Date, as applicable. If the Majority Lenders
elect to extend the Maturity Date in accordance with clause (ii) of this Section 1.8, then the rights provided herein shall
again be applicable upon the Extended Maturity Date. Notwithstanding the foregoing, if the Majority Lenders do not deliver a
written election within such ten-day period, then the principal and interest accrued on the Convertible Notes shall be
immediately due and payable.
1.9 Elective
Conversion into Preferred Stock. Notwithstanding anything contained herein to the contrary, the Majority Lenders may elect
at any time prior to the Maturity Date and upon forty five (45) days’ prior written notice to the Company (an “Elective
Notice”) to convert the outstanding Accrued Amount on all Convertible Notes issued hereunder into shares of 2X Participating
Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors) (the “Elective
Conversion”), provided, that such Elective Notice is provided to the Company no fewer than ninety (90) days
prior to the closing date of a Qualified Equity Financing or the closing of an Acquisition. Upon such Elective Conversion, the
Accrued Amount outstanding on all of the Convertible Notes shall convert into shares of 2X Participating Preferred Stock (as to
Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, at a rate equal to a price per share
commensurate with a pre-money valuation of the Company of $34,500,000, calculated on a Fully-Diluted Basis, and determined prior
to the conversion of the Convertible Notes. Upon the timely delivery and receipt by the Company of such Elective Notice, the Company
shall take reasonable efforts to obtain all approvals, consents, waivers and make all filings necessary or appropriate to designate
and authorize the 2X Participating Preferred Stock and Conversion Preferred Stock, if and as applicable. Upon an Elective Conversion,
the Convertible Notes shall be treated by the Company as surrendered for cancellation and exchanged into shares of 2X Participating
Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, and will be
deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented by all Convertible Notes
so terminated and contributed to the capital of the Company.
1.10 Subordination.
The obligations represented by the Convertible Notes shall be subordinated in right of payment and priority and subject, in the
manner and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as defined
herein), so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed or otherwise
obligated to extend credit to the Company under any loan agreement. The term “Senior Debt” shall mean
all present and future indebtedness for money borrowed (whether term loan or working capital facility or other form of credit)
of the Company from institutional lenders, commercial credit companies, commercial banks, credit unions, government agencies,
and other commercial lenders which may be, from time to time, incurred by the Company, including, but not limited to, any negotiable
instruments evidencing the same, all guaranties, debts, demands, monies, indebtedness, liabilities and obligations owed or to
become owing, including interest, principal, costs, and other charges, and all claims, rights, causes of action, judgments, decrees,
remedies, or other obligations of any kind whatsoever and howsoever arising, whether voluntary, involuntary, absolute, contingent,
direct, indirect, or by operation of law.
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So
long as any of the Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is
committed or otherwise obligated to extend credit to the Company under any loan agreement, the holders of the Convertible
Notes agrees that each such holder shall not: (i) collect, or receive payment upon, by setoff or in any other manner, all or
any portion of the obligations now or hereafter existing under the Convertible Notes (provided that this provision shall not
be interpreted to prevent a conversion of the Convertible Notes in accordance with their terms and the terms hereof); (ii)
sell, assign, transfer, pledge, or give a security interest in the Convertible Notes; (iii) enforce or apply any security,
now or hereafter existing for the Convertible Notes; (iv) commence, prosecute or participate in any administrative, legal, or
equitable action against the Company concerning the obligations under the Convertible Notes; (v) join in any petition for
bankruptcy, assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain or enforce any lien
or security, which is senior to the Senior Debt lender’s interest, in any property, real or personal, to secure the
obligations under the Convertible Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends,
payments of any kind or gifts from, the Company with respect to the obligations under the Convertible Notes; provided, however,
that this paragraph shall not apply to (a) any filing by the holder of the Convertible Notes of any proof of claim or any
other similar filing or action to protect such lender’s rights in bankruptcy, or (b) any action by the Company or the
holders of the Convertible Notes that results solely in the issuance and/or receipt of capital stock or other equity security
of the Company.
2. Representations
and Warranties of the Company. The Company hereby makes the following representations in connection with the issuance
of the Convertible Notes.
2.1. Organization,
Good Standing and Authority of the Company; No Subsidiaries. The Company is a corporation duly organized, validly existing
and in corporate good standing under the laws of the State of Delaware, and has the requisite power and authority to own all of
its properties and assets and to carry on its business as it is now being conducted. The Company does not hold or own, directly
or indirectly, any capital stock or other equity securities of any other corporation, and is not a participant in any joint venture,
partnership or similar arrangement.
2.2. Authorization.
The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions
of this Agreement and the Convertible Note the valid and enforceable obligations they purport to be. The issuance and sale of
the Convertible Note do not require any further corporate action and will not be subject to preemptive rights of any present stockholders
of the Company, and the Convertible Note will, upon its issuance and sale to the Investor, be duly authorized, validly issued
and enforceable in accordance with its terms. This Agreement constitutes the valid and binding obligations of the Company, enforceable
in accordance with its terms. Notwithstanding anything in this Section to the contrary, enforcement of this Agreement and the
Convertible Note may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to or affecting the rights
of creditors generally and subject to the fact that equitable remedies are discretionary and may not be granted by a court of
competent jurisdiction.
2.3. No
Default. The execution, delivery and performance of this Agreement and the Convertible Note by the Company and the consummation
by the Company of the transactions contemplated hereby do not and will not constitute a default under any of the terms, conditions
or provisions of the Certificate of Incorporation or Bylaws of the Company, or any material contract, agreement or arrangement
to which the Company is a party or by which it is bound.
2.4. Capital
Stock of Company. As of January 31, 2017, the authorized capital stock of the Company currently consists of (A)
authorized 16,000,000 shares of Common Stock, of which 5,402,783 shares of Common Stock are issued and outstanding, and (B)
authorized 8,000,000 shares of Preferred Stock, of which (i) 3,427,871 shares of Preferred Stock are designated as Series A
Preferred Stock and 3,427,871 shares of Series A Preferred Stock are issued and outstanding; (ii) 556,550 shares of Preferred
Stock are designated as Series A-1 Preferred Stock and 556,540 shares of Series A-1 Preferred Stock are issued and
outstanding; (iii) 3,200,000 shares of Preferred Stock are designated as Series B Preferred Stock and 3,174,364 shares of
Series B Preferred Stock are issued and outstanding. Warrants for a total of 187,979 shares of Common Stock are outstanding.
A total of 1,713,570 shares of Common Stock are reserved for the issuance of equity incentive awards to employees, directors,
advisors and consultants of the Company pursuant to the Company’s 2013 Equity Incentive Plan. In accordance with the
Company’s 2013 Equity Incentive Plan, options for a total of 752,422 shares of Common Stock have been granted to
date. Except as stated above, there are no outstanding options, convertible securities, warrants, agreements, restrictions,
preemptive rights or rights of first refusal, contracts, or commitments of any character which entitle any person to acquire
or otherwise relate to the issuance of any shares of capital stock of the Company or which restrict or otherwise relate to or
provide for the transfer of any outstanding shares of capital stock of the Company.
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2.5. Compliance
with Laws; Permits. The Company holds all material licenses, approvals, certificates, permits and authorizations necessary
for the lawful conduct of its business and is in material compliance with all applicable laws, rules, regulations and ordinances.
The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business, the absence
of which could materially and adversely affect the business, properties, prospects or financial condition of the Company (a “Material
Adverse Effect”). The Company is not in default in any material respect under any such franchise, permit, license
or other similar authority which could have a Material Adverse Effect.
2.6. Litigation.
There is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or
to the knowledge, information and belief of the Company) any investigation by any governmental or other instrumentality or agency,
pending, or, to the Company’s knowledge, information and belief, threatened against or affecting the Company, or any of
its properties, intellectual property or other rights which could materially and adversely affect the right or ability of the
Company to carry on its business as now conducted, or which could have a Material Adverse Effect. The Company does not know of
any valid basis for any such action, proceeding or investigation.
2.7. Intellectual
Property; Proprietary Rights, Employee Restrictions. To the best of its knowledge, the Company has all patents, patent
licenses, copyrights, trademarks, service marks, trade names, trade secrets or other proprietary rights useful for its business
(collectively, “Intellectual Property Rights”) as presently conducted or contemplated. The Company’s
Intellectual Property Rights are sufficient to carry on the business of the Company as presently conducted or contemplated. To
the best of its knowledge, the Company has a license to use all of its Intellectual Property Rights and it has obtained any licenses,
releases or assignments necessary to use all third parties’ intellectual property rights in works embodied in its products
and material for the conduct of its business. The Company has not received any notice or other claim from any person asserting
that any of the Company’s present or contemplated activities infringe or may infringe any intellectual property rights of
such person or any third party. The Company has taken all reasonable measures to protect and preserve the security, confidentiality
and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All Intellectual
Property Rights necessary for the conduct of the Company’s business have been developed by employees, consultants or third
parties and have been properly assigned to the Company as the sole property of the Company. There are no outstanding options,
licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the Intellectual Property Rights
of the Company used in the conduct of its businesses, nor is the Company bound by or a party to any options, licenses or agreements
of any kind with respect to the Intellectual Property Rights of any other person, other than those licenses and agreements set
forth on Exhibit B.
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2.8. Absence
of Certain Developments. Since December 31, 2016, there has been (i) no material adverse change in the condition
(financial or otherwise) of the Company or in the business, operations, financial condition, assets, liabilities, prospects
or contractual rights of the Company, except that the Company has continued to incur operating losses on approximately the
same basis as during prior months since such date, (ii) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or acquisition of, any of the capital stock of the
Company, (iii) no waiver of any valuable right of the Company or cancellation of any debt or claim held by the Company, (iv)
no loan by the Company to any officer, director, employee or shareholder of the Company, or any agreement or
commitment therefor (other than any such loan or other indebtedness described in this Agreement), (v) no increase, direct or
indirect, in the compensation paid or payable to any officer or employee of the Company, other than as authorized by a
majority of the disinterested members of the Board of Directors, (vi) no material loss, destruction or damage to any property
of the Company whether or not insured, (vii) no material change in the personnel of the Company or the terms and conditions
of their employment, (viii) no acquisition or disposition of any assets greater than $20,000 in the aggregate, nor any other
transaction by the Company otherwise than for fair value in the ordinary course of business, and (ix) no contract, agreement,
commitment, expenditure or hiring of new employees or consultants involving a potential commitment in excess of $20,000 in
the aggregate or which is otherwise material and not entered into in the ordinary course of business.
2.9. Information
Supplied to Investor. Neither this Agreement, the Convertible Note, nor any document or certificate furnished to the Investor
by or on behalf of the Company contains any untrue statement of a material fact, and none of this Agreement, the Convertible Note,
or such other documents and certificates omits to state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3. Representations
and Warranties of the Undersigned. The undersigned understands and acknowledges that the Convertible Notes, together with
any securities which such Convertible Notes are so convertible (the “Securities”), are being offered
and sold under one or more of the exemptions from registration provided for in Section 4(2) of the Securities Act, including
Regulation D promulgated thereunder, and any applicable state securities laws. The Investor is purchasing the Securities without
being offered or furnished any formal offering literature or prospectus other than the Offering Materials. The Investor understands
that this transaction has not been reviewed and approved by the Securities and Exchange Commission or by any state regulatory
authority.
3.1. Suitability.
The Investor confirms that it understands and has fully considered for purposes of this investment the risks of this investment
and understands that (i) this investment is suitable only for an investor who is able to bear the economic consequences of
losing its entire investment, (ii) the purchase of the Securities is a speculative investment which involves a high degree
of risk, and (iii) there are substantial restrictions on the transferability of, and there will be no immediate public market
for, the Securities, and accordingly, it may not be possible for the Investor to liquidate its investment. The Investor recognizes
that the Company is a development-stage enterprise with limited operating history and is currently developing and revising its
business strategy and marketing plan.
3.2. Lack
of Liquidity. The Investor confirms that it is able to bear the economic risk of this investment, and to hold the Securities
for an indefinite period of time. The Investor has sufficient liquid assets so that the illiquidity associated with this investment
will not cause any undue financial difficulties or affect the undersigned’s ability to provide for its current needs and
possible financial contingencies, and that its commitment to all speculative investments is reasonable in relation to its net
worth and annual income.
3.3. Knowledge
and Experience. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. The Investor is an investor in securities of companies in the development stage and acknowledges that Investor
is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the investment in the Convertible Notes. If other than
an individual, Investor also represents it has not been organized for the purpose of acquiring the Convertible Notes.
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3.4. Access
to Management. The Investor confirms that, in making its decision to purchase the Securities, it has relied solely upon
independent investigations made by him, and that it has been given the opportunity to ask questions of, and to receive answers
from, management of the Company concerning the Company and the terms and conditions of this offering. The Investor acknowledges
that it is not relying upon any person, other than the Company and its officers and directors, in making its investment or decision
to invest in the Company.
3.5. Investment
Intent. The Convertible Notes are being acquired by the undersigned solely for its own personal account, for investment
purposes only, and not with a view to, or in connection with, any resale or distribution thereof. The Investor has no contract,
undertaking, understanding, agreement or arrangement, formal or informal, with any person to sell, transfer or pledge to any person
the Securities for which it hereby subscribes, or any part thereof, or any interest therein or any rights thereto. The Investor
has no present plans to enter into any such contract, undertaking, agreement or arrangement. The Investor must bear the economic
risk of the investment for an indefinite period of time because the Securities have not been registered under the Securities Act
and applicable state securities laws and, therefore, cannot be sold unless they are subsequently registered under the Securities
Act and applicable state securities laws or unless an exemption from such registration is available.
3.6. Brokers.
The Investor is under no obligation to pay any broker’s fee or commission in connection with its investment.
3.7. Investment
Commitment Not Disproportionate to Net Worth. The Investor’s overall commitment to investments that are not readily
marketable is not disproportionate to the undersigned’s net worth and the Investor’s investment in the Company will
not cause such overall commitment to become excessive.
3.8. Liquid
Asset Value. The current value of the Investor’s liquid assets, including cash, freely marketable securities and
cash surrender value of life insurance, is sufficient to provide for such Investor’s current and anticipated needs and possible
contingencies, so that such Investor is capable of bearing the economic risk of this investment in the Company.
3.9. Purchase
Entirely for Own Account. This Agreement is made with the Investor in reliance upon the Investor’s representation
to the Company, by the Investor’s execution of this Agreement, that the Investor hereby confirms, that the Convertible Notes
to be acquired by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents
that the Investor does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer
or grant participations to such person or to any third person, with respect to any of the Convertible Notes. The Investor has
not been formed for the specific purpose of acquiring the Convertible Notes.
3.10. No
General Solicitation. Neither the Investor nor any of its officers, directors, employees, agents, stockholders or partners
has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation with respect to
the offer and sale of the Convertible Notes, or (b) published any advertisement in connection with the offer and sale of the Convertible
Notes.
4. Transferability.
The undersigned agrees not to transfer or assign this Agreement, or any of its interest herein, and further agrees that the
assignment and transfer of the Convertible Notes acquired pursuant hereto shall be made only in accordance with all applicable
laws and the prior written consent of the Company (which may not be unreasonably withheld).
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5. Protective
Covenants. Until the earlier of the consummation of a Qualified Equity Financing or any other equity financing, the Company
covenants and agrees that it shall not, without the agreement of the Majority Lenders, either directly or by amendment of the
Certificate of Incorporation, Acquisition, or otherwise: (i) liquidate, dissolve or wind up the affairs of the Company; (ii) amend,
modify alter, or repeal any provision of the Certificate of Incorporation or Bylaws which would adversely affect the rights, privileges,
powers or preferences of the holders of the Convertible Notes; (iii) create, or authorize the creation of, or issue any other
convertible debt security having rights, preferences or privileges pari passu or senior to the Convertible Notes offered in this
Note Financing, except for any commercial credit, bank lines of credit, capital equipment loans or other commercial financing
loans entered into in the ordinary course of business and with the approval of the Board of Directors; (iv) guarantee any indebtedness
for money borrowed except for guarantees arising in the ordinary course of business of the Company and pursuant to market-based
terms with trade creditors, licensors of intellectual property, vendors and suppliers; (v) change the principal business of the
Company, enter new lines of business, or exit the current line of business; (vi) create, incur, assume or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest or other encumbrance of any nature, upon or with respect to any of the
assets of the Company, or pledge, mortgage, encumber on, create a security interest in the Intellectual Property Rights of the
Company, except for licenses granted or contracts entered into the ordinary course of business; or (vii) reclassify any existing
debt or equity of the Company.
6. Affirmative
Covenants of Investors. Upon the conversion of the Convertible Notes into any shares of capital stock of the Company in
accordance with the terms hereof and to the extent that the undersigned Investor is a holder of shares of capital stock of the
Company, the undersigned Investor agrees to (i) execute a written waiver of any anti-dilution adjustments that may now or hereafter
exist with respect to such shares of capital stock now or hereafter owned by the Investor in connection with any such conversion,
and (ii) consent in writing to the adoption, authorization and approval of the designation and authorization of such class or
series and such number of shares of capital stock of the Company into which the Convertible Notes are so convertible, including
the adoption of any document, filing or agreement necessary to effectuate the foregoing. In no event shall the Company be deemed
in breach or in default under this Agreement or the Convertible Notes for any failure related to the designation or authorization
of shares of capital stock in accordance with the terms hereof or any anti-dilution adjustments to shares of Company capital stock
if such failure in any way results from or relates to the failure of the Investor (or any investor) to comply with the covenants
set forth in this Section 6.
7. Right
of First Offer on Company Issuances of Equity Securities. Until the earlier consummation of a Qualified Equity Financing
(or any other form of convertible debt or equity financing), each Investor shall have the right, but not the obligation, to purchase
shares of the Company’s preferred stock (or indebtedness convertible into preferred stock or other equity securities) issued
and sold pursuant to a Qualified Equity Financing or other equity financing, at the terms of the preferred stock offered to the
investors in the Qualified Equity Financing or other equity financing. The foregoing rights to participate in a Qualified Equity
Financing or other equity financing shall terminate upon the consummation of any such financing. The Board of Directors may
in its sole discretion set aside a portion of any offering under this Section for the purposes of allocating investment proceeds
to new investors in the Company.
If
the Company proposes to issue or sell any new equity securities for working capital purposes, until the earlier consummation of
a Qualified Equity Financing (or any other form of convertible debt or equity financing), the Company shall deliver a written
notice to the Investors stating (a) the Company’s bona fide intention to issue and sell such equity securities and the identity
of the proposed offeree, (b) the number or dollar value of the equity securities to be offered to the Investors, (c) a description
of the equity securities, and (d) the price and terms upon which the Company proposes to offer the equity securities. An Investor
may exercise its first offer rights by giving written notice thereof to the Company during the 15-day period after such
Investor’s receipt of the Company’s notice. In the event that any Investor exercises its first offer rights, in whole
or in part, the Investor shall purchase the equity securities on the same terms and conditions as the other purchasers and shall
be entitled to all registrations, preferences, information, preemptive and other rights as the other purchasers.
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This
right of first offer shall not apply to (i) any shares of Common Stock or Common Stock equivalents, or the grant of options, warrants
or other rights exercisable therefor, issued or issuable, to directors, officers, employees, advisors or consultants pursuant
to any stock incentive plan, incentive or non-qualified stock option plan or agreement, restricted stock purchase plan or agreement,
stock issuance or restriction agreement, stock ownership plan, consulting agreement, or such other agreement or plan approved
by a majority of the Board of Directors; or (ii) any securities issued pursuant to a strategic alliance, licensing agreement,
joint venture, corporate partnership, collaboration agreement, technology licensing, or a business combination transaction or
acquisition of complementary business or a license of complementary or necessary technology (in which the Company is the acquiring
party in a combination, or licensor or licensee in a technology license) and which is approved by the Board of Directors; or (iii)
any shares of Common Stock issued or issuable upon conversion of shares of any series of preferred stock (whether now existing
or hereafter issued) or upon conversion, exercise or exchange of warrants or options to purchase Common Stock or Common Stock
equivalents; or (iv) warrants or other Common Stock equivalents that are issued in a bank line of credit, term loan, credit facility,
government grant, equipment financing or leasing, finance or other commercial debt transaction with any financial or institutional
lender of indebtedness for money borrowed and approved by the Board of Directors.
8. Financial
Information. The Company shall furnish the following to the Investor, for so long as the undersigned Investor holds any
of its Convertible Notes:
(i) Quarterly
Reports: as soon as available and in any event within 45 days after the end of each calendar quarter, balance sheets,
statements of income and retained earnings and a summary statement of quarterly cash flow of the Company for such quarter;
(ii) Annual
Reports: as soon as available and in any event within 180 days after the end of each fiscal year of the Company, a copy
of the annual report (whether reviewed, compiled, unaudited or audited) for such year, including balance sheets of the Company
as of the end of such fiscal year and statements of income and retained earnings and of changes in financial position of the Company
for such year; or
(iii) Other
Reports: such other reports, information, white papers, industry reports and a “state of the business” report
on operations, customer pipeline, new business proposals, potential joint ventures and strategic partnerships and other information
relevant to the prospects of the Company’s business, which the Company shall from time to time prepare and deliver to the
Major Investor;
(iv) Updates:
Via periodic email or telephone conference calls, an update of the progress of the Company with respect to financing, development
of product, testing and trials of the product, operations, and strategic partnerships or investments.
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The
Investor agrees to hold in strict confidence and trust and not to use or disclose (other than to the Investor’s
advisors, and only those who have a need to know and who shall be subject to similar confidentiality obligations) any
confidential information provided to or learned by the Investor in connection with the receipt of the above information.
Notwithstanding anything contained in this Section to the contrary, the Company shall not be obligated to provide
confidential information to any person or entity (i) which the Company reasonably deems in good faith to be a trade secret or
similar confidential information (unless covered by an enforceable confidentiality agreement, in a form reasonably acceptable
to the Company), (ii) in order to preserve the Company's attorney-client privilege or which would adversely affect the
attorney-client privilege between the Company and its counsel, (iii) if the person or entity is a competitor of the Company
(whether direct or indirect); (iv) in order to fulfill the Company's obligations with respect to confidential or proprietary
information of third parties, including its manufacturing partners, strategic partners, clinical trial sponsors or customers,
or to protect the confidentiality of unpatentable information or competitive business information of the Company (or its
customers, strategic partners, vendors and suppliers); or (v) because such information would include information, analyses or
discussions which could pose a potential conflict of interest for the Investor and the Company.
9. Conditions
to Closing. The obligations of the Investor to fund the amounts set forth on the signature page hereof and the obligations
of the Company set forth herein at the Initial Closing shall be subject to the satisfaction of each of the following conditions:
(i) to the extent necessary, the requisite stockholders of the Company shall have provided any waivers, consents or approvals
necessary for the consummation of this Note Financing and issuance of the Convertible Notes, (ii) the parties shall have executed
and delivered this Agreement to one another, and (iii) the Company shall have raised commitments for at least $500,000 from Investors.
10. Miscellaneous.
This Agreement and the Offering Materials and the documents referenced therein constitute the entire agreement between the parties
relative to the subject matter of the sale of the Convertible Notes, and supersede all proposals or agreements, written or oral,
and all other communications between the parties relating to the subject matter of this Agreement. For the avoidance of doubt,
this Agreement and the terms and conditions of the Convertible Notes may be amended, waived, modified or extended, and the Convertible
Notes may be substituted, extended, renewed, increased, converted or exchanged, by the written consent of the Company and the
Majority Lenders. Any waiver shall be limited to the particular instance and for the particular purpose when and for which it
is given. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way effect the validity,
legality or enforceability of any other provision of this Agreement and this Agreement shall be construed and reformed by any
court of competent jurisdiction to give full effect to the essential purposes of this Agreement. This Agreement shall be construed
and enforced in accordance with, and the rights of the parties shall be governed by, the general laws of the Commonwealth of Massachusetts
and the federal securities laws. All notices provided for in this Agreement shall be given in writing and shall be effective when
served either by personal delivery, express overnight courier service, electronic facsimile transmission, email transmission (with
confirmation of receipt), or by first class mail, postage prepaid, addressed to the parties at their respective addresses. This
Agreement may be executed in duplicate counterparts, which, when taken together, shall constitute one instrument and each of which
shall be deemed to be an original instrument. Any dispute, controversy or claim arising out of, in connection with, or in relation
to this Agreement or the Convertible Notes or the breach of any of the provisions, hereof or the Convertible Notes shall be settled
by arbitration in Boston, Massachusetts, pursuant to the rules then obtaining of JAMS/Endispute. Any award shall be final, binding
and conclusive upon the parties and a judgment rendered thereon may be entered in any court having competent jurisdiction thereof.
The Company is expressly relying on the representations of each Investor as to his, her or its status as an “accredited
investor” under federal and state securities laws. If the representations of the Investor set forth above as an “accredited
investor” are inaccurate on the date that such representations were made, the Company, in its sole discretion and election,
and without any liability or further obligation of the Company to the Investor, may refund to the Investor the purchase price
of the Convertible Notes.
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11. Written
Consent of Preferred Stock Holders. To the extent that the undersigned Investor is a holder of the Company’s
Series B Preferred Stock entitled to vote hereon (each, a “Stockholder”), in accordance with
Section 228 of the Delaware General Corporation Law (the “DGCL”), each undersigned Stockholder does
hereby, pursuant to this Agreement, vote, and provides his, her or its consent in respect of, all shares of the
Company’s outstanding Series B Preferred Stock held of record by such Stockholder (whether now owned or
hereafter acquired) for the adoption and approval of the following consent contained in this Section 11, without a formal
meeting and without prior notice. The undersigned Stockholder hereby consents to, adopts, approves and waives the Note
Financing in accordance with the terms of this Agreement and the applicable provisions of the Company’s Third Amended
& Restated Certificate of Incorporation, and hereby adopts and approves each of this Agreement, the Convertible Notes and
each of the transactions contemplated hereby. The undersigned Stockholder agrees and acknowledges that the foregoing consent
shall take immediate effect once adopted, approved and consented to by the Stockholders holding at least a majority of the
issued and outstanding Series B Preferred Stock of the Company.
[Signature
Page Follows]
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iSpecimen,
Inc.
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
Signature
Page
IN
WITNESS WHEREOF, the undersigned has hereby executed this Convertible Note Subscription Agreement as of this 17th day
of March 2017.
Name
& Signature of Investor:
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Name:
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Address:
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Email:
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Telephone:
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Investment Amount:
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Social Security #:
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If
the Investor is a Stockholder, and to the fullest extent permitted by law, this Agreement has been duly executed as of the date
first set forth above. The consent contained in Section 11 hereof shall be irrevocable and shall be effective immediately, provided
that such consent shall be deemed revoked if it has not become effective within 60 days of the actual date of the signature below,
which actual date of signature is the date on which provision for the effectiveness of the consent has been made.
* * *
The
Company hereby accepts the subscription of the Investor pursuant to this Convertible Note Subscription Agreement, subject to the
terms and conditions set forth herein, as of this 17th day of March 2017.
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iSpecimen Inc.
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By:
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Christopher Ianelli
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Title:
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Chief Executive Officer
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iSpecimen Inc.
Convertible Note Subscription Agreement
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EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
iSpecimen Inc.
UNSECURED CONVERTIBLE PROMISSORY NOTE
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$________________
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____________________, 2017
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FOR VALUE RECEIVED,
iSpecimen, Inc., a Delaware corporation (the “Company”), hereby promises to pay, on the written demand
of the combined Majority Lenders at any time on or after the Maturity Date (as defined in the Note Subscription Agreement referenced
below between the Company and the Lender referenced herein)to _________________________ (the “Lender”)
the principal sum ___________________________________Dollars ($_____________) or such lesser principal amount then outstanding,
together with all accrued and unpaid interest thereon as set forth below. This Convertible Note is being issued in connection with
an interim debt financing of the Company by Lender and other lenders in an amount of up to $5,500,000 in order to facilitate a
Qualified Equity Financing or the achievement of Positive FCFO, pursuant to the terms of certain Convertible Note Subscription
Agreements (each a “Note Subscription Agreement” and collectively the “Note Subscription Agreements”).
Terms not defined herein shall have the meanings set forth in the Note Subscription Agreements between the Company and the Lender,
and other lenders who have executed similar Note Subscription Agreements.
Section 1. Interest. Interest
on the principal amount of this Convertible Note will accrue from and including the date hereof until and including the date
such principal amount is paid, at a rate equal to six percent (6.0%) per annum, without compounding. Principal and interest
shall be payable in lawful money of the United States of America, in immediately available funds, at the principal
office of the Lender or at such other place as the legal holder may designate from time to time in writing to the Company.
Interest shall be computed on the basis of a 365-day year, for the actual days elapsed. Notwithstanding any other provision
of this Convertible Note, the Lender hereof does not intend to charge, and the Company shall not be required to pay, any
interest or other fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such
maximum shall be refunded to the Company or credited to reduce principal hereunder.
Section 2. No
Prepayment. Prior to the consummation of a Qualified Equity Financing or achievement of Positive FCFO (or any other form
of convertible debt or equity financing), the Company may not pay this Convertible Note in whole or in part at any
time prior to the Maturity Date without the prior approval or consent of the Company and the Majority Lenders. If permitted by
the Majority Lenders, any payment of principal by the Company will be accompanied by payment of all accrued and unpaid interest
on the principal sum being repaid. The Lender will note all partial payments of principal and accompanying payments of interest
on the face or reverse side of this Convertible Note.
iSpecimen Inc.
Convertible Note Subscription Agreement
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Section 3. Conversion of
Convertible Note upon a Qualified Equity Financing. If a Qualified Equity Financing is consummated, the Convertible
Notes shall automatically convert into shares of Qualified Preferred Stock at the rate and upon the terms contained in
Section 1.5 of the Note Subscription Agreement. Upon a Qualified Equity Financing, this Convertible Note shall be treated by
the Company as surrendered for cancellation and exchanged into Qualified Preferred Stock, and will be deemed, for all
purposes, to be cancelled on the books of the Company and the obligations represented by all Convertible Notes so terminated
and contributed to the capital of the Company. For the avoidance of doubt, the outstanding principal on this Convertible Note
(including all accrued interest hereon) shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth
in Section 1.5 of the Note Subscription Agreement, but not both.
Section 4. Conversion of
Convertible Note upon Achievement of Positive FCFO. If the Company achieves Positive FCFO prior to the consummation of
a Qualified Equity Financing and for any two consecutive calendar quarters quarter prior to the Maturity Date (as may be extended),
then this Convertible Note shall automatically convert into shares of FCFO Preferred Stock at the rate and upon the terms contained
in Section 1.6 of the Note Subscription Agreement. The rights, preferences, powers and privileges of the respective classes of
FCFO Preferred Stock to be issued (i.e., whether 2X Participating Preferred Stock or Conversion Preferred Stock) shall be in accordance
with the terms set forth in Section 1.6 of the Note Subscription Agreement. For the avoidance of doubt, (a) if the Lender is a
Major Investor, this Convertible Note shall convert into shares of 2X Participating Preferred Stock upon the terms set forth in
Section 1.6 of the Subscription Agreement, and (b) if the Lender is not a Major Investor, this Convertible Note shall convert
into shares of Conversion Preferred Stock upon the terms set forth in Section 1.6 of the Subscription Agreement. Upon the achievement
of Positive FCFO, this Convertible Note shall be treated by the Company as surrendered for cancellation and exchanged into FCFO
Preferred Stock, and will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company.
Section 5. Conversion
of Convertible Note upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of the
Convertible Notes in full, then upon the consummation of any such Acquisition, at the option of the Majority Lenders, the Convertible
Note shall (a) be repaid in full in an amount equal to the outstanding principal amount of the Convertible Notes plus
all accrued interest thereon, or (b) shall convert into Conversion Shares at the rate and upon the terms contained in Section 1.7
of the Note Subscription Agreement. In connection with the conversion of the Convertible Notes in connection with an Acquisition,
this Convertible Note will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company. For the avoidance of doubt, if this Convertible
Note shall convert into Conversion Shares, the outstanding principal on this Convertible Note (including all accrued interest hereon)
shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth in Section 1.7 of the Note Subscription Agreement,
but not both.
Section 6. Optional
Conversion at Maturity. In accordance with and subject to the terms of Section 1.8 of the Subscription Agreement, if
upon the Maturity Date the Company has not consummated a Qualified Equity Financing or achieved Positive FCFO (and the
Convertible Notes have not otherwise been repaid or converted), the Majority Lenders may elect, on behalf of all Lenders, to
(i) demand payment for the full amount of the outstanding principal and accrued interest on the Convertible Notes in cash
upon the Maturity Date, (ii) convert all Convertible Notes into shares of 2X Participating Preferred Stock (as to Major
Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, and each at a rate equal to a per share
price commensurate with a $27,000,000 pre-money valuation of the Company calculated on a Fully-Diluted Basis, and determined
immediately prior to the conversion of such Convertible Notes, or (iii) elect to extend the Maturity Date by up to an
additional eighteen (18) months (the “Extended Maturity Date”).
iSpecimen Inc.
Convertible Note Subscription Agreement
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Section 7. Elective
Conversion. At any time prior to the Maturity Date and at the election of the Majority Lenders on behalf of all Investors
in the Bridge Financing, all Convertible Notes shall be converted into shares of 2X Participating Preferred Stock (as to Major
Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively, and each upon the terms and on the conditions
set forth in Section 1.9 of the Subscription Agreement (an “Elective Conversion”). Upon an Elective
Conversion, this Convertible Note shall be treated by the Company as surrendered for cancellation and exchanged into shares of
2X Participating Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively
and as applicable, and will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company
Section 8. Subordination.
The obligations represented by this Convertible Note shall be subordinated in right of payment and priority and subject, in
the manner and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as
defined herein), so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed
or otherwise obligated to extend credit to the Company under any loan agreement. The term “Senior Debt”
shall mean all present and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit
companies, commercial banks, credit unions, government agencies, and other commercial lenders which may be, from time to time,
incurred by the Company, including, but not limited to, any negotiable instruments evidencing the same, all guaranties, debts,
demands, monies, indebtedness, liabilities and obligations owed or to become owing, including interest, principal, costs, and other
charges, and all claims, rights, causes of action, judgments, decrees, remedies, or other obligations of any kind whatsoever and
howsoever arising, whether voluntary, involuntary, absolute, contingent, direct, indirect, or by operation of law.
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Convertible Notes agrees that each such holder shall
not: (i) collect, or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or hereafter
existing under the Convertible Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Convertible Notes;
(iii) enforce or apply any security, now or hereafter existing for the Convertible Notes; (iv) commence, prosecute or participate
in any administrative, legal, or equitable action against the Company concerning the obligations under the Convertible Notes; (v)
join in any petition for bankruptcy, assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain
or enforce any lien or security, which is senior to the Senior Debt lender’s interest, in any property, real or personal,
to secure the obligations under the Convertible Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends,
payments of any kind or gifts from, the Company with respect to the obligations under the Convertible Notes; provided, however,
that this paragraph shall not apply to (a) any filing by the holder of the Convertible Notes of any proof of claim or any other
similar filing or action to protect such lender’s rights in bankruptcy, or (b) any action by the Company or the holders of
the Convertible Notes that results solely in the issuance and/or receipt of capital stock or other equity security of the Company.
iSpecimen Inc.
Convertible Note Subscription Agreement
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Section 9.
Events of Default. The outstanding balance of this Convertible Note shall be immediately due and payable
prior to maturity in case of any of the following events, each of which shall be an “Event of
Default”: (a) any Event of Bankruptcy; (b) a dissolution, termination of existence, suspension or
discontinuance of business, or ceasing to operate as a going concern; (c) the issuance of any injunction or restraining
order which results in a Material Adverse Effect on any aspect of the business or assets of the Company, or levy on or
attachment of any funds or other property, real or personal, of the Company, in an amount in excess of $100,000, if, in each
case, the same is not dismissed, discharged, released, satisfied or vacated within a period of sixty (60) days; (d) the
failure to perform any material covenant by the Company under the Note Subscription Agreement for a period of 45 days; or (e)
a material default (following expiration of any applicable notice and cure periods) under any other material agreement of the
Company, and in which the default results in a liability or obligation against the Company greater than $100,000. As used
herein, an “Event of Bankruptcy” means any of the following events impacting the Company or its
operating subsidiaries: (i) any assignment by the Company for the benefit of its creditors; (ii) an admission in writing by
the Company of its inability to pay its debts as they become due; (iii) filing by the Company of a voluntary petition in
bankruptcy; (iv) seeking or consenting to, or acquiescing in, the appointment of any trustee, receiver, custodian, liquidator
or similar official for the Company or a substantial part of its property; (v) the elapse of 90 days after the commencement
of an action against the Company seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or
similar relief without such action being dismissed; (vi) the insolvency or other cessation of existence of the Company and
its operating subsidiaries; or (vii) any corporate action by the Company to authorize or effect any of the foregoing actions.
Upon any Event of Default, the interest rate on the Convertible Notes shall be computed at an annual rate of eight percent
(8%) from and after the Event of Default. Upon the occurrence of an Event of Default, the Lender’s remedies shall
include the rights to declare the entire principal balance of this Convertible Note and any accrued and unpaid interest
immediately due and payable, without notice or presentment, or exercise any other remedies available to a lender under the
Uniform Commercial Code and the Note Subscription Agreement.
Section 10. Payment
of Costs of Enforcement. The Company agrees to pay all costs, charges and expenses incurred by the Lender (including,
without limitation, costs of collection, court costs, and reasonable attorneys’ fees and disbursements) in connection
with the successful enforcement of the Lender’s rights under this Convertible Note (all such costs, charges and
expenses being herein referred to as “Costs”). The Company agrees that any delay on the part of the
Lender in exercising any rights hereunder will not operate as a waiver of such rights, and further agrees that any payments
received hereunder will be applied first to Costs, then to interest, and the balance to principal. The Lender shall not by
any act, delay, omission, or otherwise be deemed to waive any of its rights or remedies, and no waiver of any kind shall be
valid unless in writing and signed by the Lender. Presentment for payment, demand, protest, notice of protest and notice of
nonpayment are hereby waived.
Section 11. Miscellaneous.
This Convertible Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto. This Convertible
Note is made under and shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts.
This Convertible Note may be amended, substituted, altered, waived, modified or extended, and the Convertible Note may be substituted,
extended, converted or exchanged, by the written consent of the Company and the Majority Lenders.
{Signature Page Follows}
iSpecimen Inc.
Convertible Note Subscription Agreement
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IN
WITNESS WHEREOF, the Company has executed this Convertible Promissory Note as an instrument under seal as of the date first
written above.
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ATTEST:
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iSpecimen, Inc.
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_XXXXXXXXXXXXXXXXXXXX_
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By:
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XXXXXXXXXXXXXXXXXX
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Title: Christopher Ianelli, Chief Executive Officer
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iSpecimen Inc.
Convertible Note Subscription Agreement
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Exhibit 10.12
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
iSpecimen Inc.
UNSECURED CONVERTIBLE PROMISSORY NOTE
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$ 650,000.00
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December 29, 2017
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FOR VALUE RECEIVED,
iSpecimen Inc., a Delaware corporation (the “Company”), hereby promises to pay, on the written demand
of the combined Majority Lenders at any time on or after the Maturity Date (as defined in the Note Subscription Agreement referenced
below between the Company and the Lender referenced herein), to Anna-Maria and Stephen Kellen Foundation, Inc. (the “Lender”)
the principal sum of six hundred fifty thousand dollars ($650,000.00) or such lesser principal amount then outstanding,
together with all accrued and unpaid interest thereon as set forth below. This Convertible Note is being issued in connection with
an interim debt financing of the Company by Lender and other lenders in an amount of up to $5,500,000 in order to facilitate a
Qualified Equity Financing or the achievement of Positive FCFO, pursuant to the terms of certain Convertible Note Subscription
Agreements (each a “Note Subscription Agreement” and collectively the “Note Subscription Agreements”).
Terms not defined herein shall have the meanings set forth in the Note Subscription Agreements between the Company and the Lender,
and other lenders who have executed similar Note Subscription Agreements.
Section 1. Interest.
Interest on the principal amount of this Convertible Note will accrue from and including the date hereof until and including
the date such principal amount is paid, at a rate equal to six percent (6.0%) per annum, without compounding. Principal and interest
shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office
of the Lender or at such other place as the legal holder may designate from time to time in writing to the Company. Interest shall
be computed on the basis of a 365-day year, for the actual days elapsed. Notwithstanding any other provision of this Convertible
Note, the Lender hereof does not intend to charge, and the Company shall not be required to pay, any interest or other fees or
charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the Company
or credited to reduce principal hereunder.
Section 2. No
Prepayment. Prior to the consummation of a Qualified Equity Financing or achievement of Positive FCFO (or any other form
of convertible debt or equity financing), the Company may not pay this Convertible Note in whole or in part at any
time prior to the Maturity Date without the prior approval or consent of the Company and the Majority Lenders. If permitted by
the Majority Lenders, any payment of principal by the Company will be accompanied by payment of all accrued and unpaid interest
on the principal sum being repaid. The Lender will note all partial payments of principal and accompanying payments of interest
on the face or reverse side of this Convertible Note.
Section 3. Conversion of Convertible Note upon a Qualified Equity Financing. If a Qualified Equity Financing is consummated, the
Convertible Notes shall automatically convert into shares of Qualified Preferred Stock at the rate and upon the terms contained
in Section 1.5 of the Note Subscription Agreement. Upon a Qualified Equity Financing, this Convertible Note shall be treated by
the Company as surrendered for cancellation and exchanged into Qualified Preferred Stock, and will be deemed, for all purposes,
to be cancelled on the books of the Company and the obligations represented by all Convertible Notes so terminated and contributed
to the capital of the Company. For the avoidance of doubt, the outstanding principal on this Convertible Note (including all accrued
interest hereon) shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth in Section 1.5 of the Note
Subscription Agreement, but not both.
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iSpecimen Inc.
Unsecured Convertible Promissory Note
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Section 4. Conversion
of Convertible Note upon Achievement of Positive FCFO. If the Company achieves Positive FCFO prior to the consummation
of a Qualified Equity Financing and for the two consecutive calendar quarters prior to the Maturity Date (as may be extended),
then this Convertible Note shall automatically convert into shares of FCFO Preferred Stock at the rate and upon the terms contained
in Section 1.6 of the Note Subscription Agreement. The rights, preferences, powers and privileges of the respective classes of
FCFO Preferred Stock to be issued (i.e., whether 2X Participating Preferred Stock or Conversion Preferred Stock) shall be in accordance
with the terms set forth in Section 1.6 of the Note Subscription Agreement. For the avoidance of doubt, (a) if the Lender is a
Major Investor, this Convertible Note shall convert into shares of 2X Participating Preferred Stock upon the terms set forth in
Section 1.6 of the Subscription Agreement, and (b) if the Lender is not a Major Investor, this Convertible Note shall convert
into shares of Conversion Preferred Stock upon the terms set forth in Section 1.6 of the Subscription Agreement. Upon the achievement
of Positive FCFO, this Convertible Note shall be treated by the Company as surrendered for cancellation and exchanged into FCFO
Preferred Stock, and will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company.
Section 5. Conversion
of Convertible Note upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of the
Convertible Notes in full, then upon the consummation of any such Acquisition, at the option of the Majority Lenders, the Convertible
Note shall (a) be repaid in full in an amount equal to the outstanding principal amount of the Convertible Notes plus
all accrued interest thereon, or (b) shall convert into Conversion Shares at the rate and upon the terms contained in Section
1.7 of the Note Subscription Agreement. In connection with the conversion of the Convertible Notes in connection with an Acquisition,
this Convertible Note will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented
by all Convertible Notes so terminated and contributed to the capital of the Company. For the avoidance of doubt, if this Convertible
Note shall convert into Conversion Shares, the outstanding principal on this Convertible Note (including all accrued interest
hereon) shall convert at a rate in accordance with either Scenario 1 or Scenario 2 set forth in Section 1.7 of the Note Subscription
Agreement, but not both.
Section 6. Optional
Conversion at Maturity. In accordance with and subject to the terms of Section 1.8 of the Subscription Agreement, if upon
the Maturity Date the Company has not consummated a Qualified Equity Financing or achieved Positive FCFO (and the Convertible
Notes have not otherwise been repaid or converted), the Majority Lenders may elect, on behalf of all Lenders, to (i) demand payment
for the full amount of the outstanding principal and accrued interest on the Convertible Notes in cash upon the Maturity Date,
(ii) convert all Convertible Notes into shares of 2X Participating Preferred Stock (as to Major Investors) and Conversion Preferred
Stock (as to non-Major Investors), respectively, and each at a rate equal to a per share price commensurate with a $27,000,000
pre-money valuation of the Company calculated on a Fully-Diluted Basis, and determined immediately prior to the conversion of
such Convertible Notes, or (iii) elect to extend the Maturity Date by up to an additional eighteen (18) months (the “Extended
Maturity Date”).
Section 7. Elective Conversion.
At any time prior to the Maturity Date and at the election of the Majority Lenders on behalf of all Investors in the Bridge
Financing, all Convertible Notes shall be converted into shares of 2X Participating Preferred Stock (as to Major Investors) and
Conversion Preferred Stock (as to non-Major Investors), respectively, and each upon the terms and on the conditions set forth
in Section 1.9 of the Subscription Agreement (an “Elective Conversion”). Upon an Elective Conversion,
this Convertible Note shall be treated by the Company as surrendered for cancellation and exchanged into shares of 2X Participating
Preferred Stock (as to Major Investors) and Conversion Preferred Stock (as to non-Major Investors), respectively and as applicable,
and will be deemed, for all purposes, to be cancelled on the books of the Company and the obligations represented by all Convertible
Notes so terminated and contributed to the capital of the Company
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iSpecimen Inc.
Unsecured Convertible Promissory Note
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Section 8. Subordination.
The obligations represented by this Convertible Note shall be subordinated in right of payment and priority and subject, in
the manner and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as
defined herein), so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed
or otherwise obligated to extend credit to the Company under any loan agreement. The term “Senior Debt”
shall mean all present and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit
companies, commercial banks, credit unions, government agencies and other commercial lenders, which may be, from time to time,
incurred by the Company, including, but not limited to, any negotiable instruments evidencing the same, all guaranties, debts,
demands, monies, indebtedness, liabilities and obligations owed or to become owing, including interest, principal, costs, and other
charges, and all claims, rights, causes of action, judgments, decrees, remedies, or other obligations of any kind whatsoever and
howsoever arising, whether voluntary, involuntary, absolute, contingent, direct, indirect, or by operation of law.
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Convertible Notes agrees that each such holder shall
not: (i) collect, or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or hereafter
existing under the Convertible Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Convertible Notes;
(iii) enforce or apply any security, now or hereafter existing for the Convertible Notes; (iv) commence, prosecute or participate
in any administrative, legal, or equitable action against the Company concerning the obligations under the Convertible Notes; (v)
join in any petition for bankruptcy, assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain
or enforce any lien or security, which is senior to the Senior Debt lender’s interest, in any property, real or personal,
to secure the obligations under the Convertible Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends,
payments of any kind or gifts from, the Company with respect to the obligations under the Convertible Notes; provided, however,
that this paragraph shall not apply to (a) any filing by the holder of the Convertible Notes of any proof of claim or any other
similar filing or action to protect such lender’s rights in bankruptcy, or (b) any action by the Company or the holders of
the Convertible Notes that results solely in the issuance and/or receipt of capital stock or other equity security of the Company.
Section 9. Events
of Default. The outstanding balance of this Convertible Note shall be immediately due and payable prior to maturity in
case of any of the following events, each of which shall be an “Event of Default”: (a) any Event of
Bankruptcy; (b) a dissolution, termination of existence, suspension or discontinuance of business, or ceasing to operate
as a going concern; (c) the issuance of any injunction or restraining order which results in a Material Adverse Effect on
any aspect of the business or assets of the Company, or levy on or attachment of any funds or other property, real or personal,
of the Company, in an amount in excess of $100,000, if, in each case, the same is not dismissed, discharged, released, satisfied
or vacated within a period of sixty (60) days; (d) the failure to perform any material covenant by the Company under the
Note Subscription Agreement for a period of 45 days; or (e) a material default (following expiration of any applicable notice
and cure periods) under any other material agreement of the Company, and in which the default results in a liability or obligation
against the Company greater than $100,000. As used herein, an “Event of Bankruptcy” means any of the
following events impacting the Company or its operating subsidiaries: (i) any assignment by the Company for the benefit of its
creditors; (ii) an admission in writing by the Company of its inability to pay its debts as they become due; (iii) filing by the
Company of a voluntary petition in bankruptcy; (iv) seeking or consenting to, or acquiescing in, the appointment of any trustee,
receiver, custodian, liquidator or similar official for the Company or a substantial part of its property; (v) the elapse of 90
days after the commencement of an action against the Company seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief without such action being dismissed; (vi) the insolvency or other cessation of existence of the
Company and its operating subsidiaries; or (vii) any corporate action by the Company to authorize or effect any of the foregoing
actions. Upon any Event of Default, the interest rate on the Convertible Notes shall be computed at an annual rate of eight percent
(8%) from and after the Event of Default. Upon the occurrence of an Event of Default, the Lender’s remedies shall include
the rights to declare the entire principal balance of this Convertible Note and any accrued and unpaid interest immediately due
and payable, without notice or presentment, or exercise any other remedies available to a lender under the Uniform Commercial
Code and the Note Subscription Agreement.
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iSpecimen Inc.
Unsecured Convertible Promissory Note
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Section 10. Payment of Costs
of Enforcement. The Company agrees to pay all costs, charges and expenses incurred by the Lender (including, without limitation,
costs of collection, court costs, and reasonable attorneys’ fees and disbursements) in connection with the successful enforcement
of the Lender’s rights under this Convertible Note (all such costs, charges and expenses being herein referred to as “Costs”).
The Company agrees that any delay on the part of the Lender in exercising any rights hereunder will not operate as a waiver of
such rights, and further agrees that any payments received hereunder will be applied first to Costs, then to interest, and the
balance to principal. The Lender shall not by any act, delay, omission, or otherwise be deemed to waive any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the Lender. Presentment for payment, demand, protest,
notice of protest and notice of nonpayment are hereby waived.
Section 11. Miscellaneous.
This Convertible Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto. This Convertible
Note is made under and shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts.
This Convertible Note may be amended, substituted, altered, waived, modified or extended, and the Convertible Note may be substituted,
extended, converted or exchanged, by the written consent of the Company and the Majority Lenders.
{Signature Page Follows}
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iSpecimen Inc.
Unsecured Convertible Promissory Note
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IN WITNESS WHEREOF,
the Company has executed this Convertible Promissory Note as an instrument under seal as of the date first written above.
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ATTEST:
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iSpecimen, Inc.
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By:
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/s/ Christopher Ianelli
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Title:
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Christopher Ianelli, Chief Executive Officer
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iSpecimen Inc.
Unsecured Convertible Promissory Note
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Exhibit 10.13
OMNIBUS Amendment
to
UNSECURED
CONVERTIBLE PROMISSORY NOTES
and
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
This Omnibus Amendment
to Unsecured Convertible Promissory Notes and Convertible Note Subscription Agreement (this “Amendment”) is
entered into this 3rd day of August, 2018, between iSpecimen Inc., a Delaware corporation (the “Company”), and
Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC (collectively, the “Lenders”).
Recitals
A. Pursuant
to the terms of that certain Convertible Note Subscription Agreement, (the “Convertible Note Subscription Agreement”),
the Company issued ten (10) promissory notes in the aggregate original principal amount of $5,500,000 to the Lenders between March
17, 2017 and June 30, 2018 as follows: (i) that certain Unsecured Convertible Promissory Note, dated as of March 17, 2017 in the
aggregate principal amount of $500,000 to Andrew L. Ross, (ii) that certain Unsecured Convertible Promissory Note, dated as of
May 15, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (iii) that certain Unsecured Convertible Promissory
Note, dated as of June 1, 2017 in the aggregate principal amount of $1,050,000 to Anna-Maria and Stephen Kellen Foundation, Inc.,
(iv) that certain Unsecured Convertible Promissory Note, dated as of June 12, 2017 in the aggregate principal amount of $1,450,000
to OBF Investments, LLC, (v) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2017 in the aggregate principal
amount of $250,000 to Andrew L. Ross, (vi) that certain Unsecured Convertible Promissory Note, dated as of December 29, 2017 in
the aggregate principal amount of $650,000 to Anna-Maria and Stephen Kellen Foundation, Inc., (vii) that certain Unsecured Convertible
Promissory Note, dated as of January 3, 2018 in the aggregate principal amount of $700,000 to OBF Investments, LLC, (viii) that
certain Unsecured Convertible Promissory Note, dated as of April 2, 2018 in the aggregate principal amount of $250,000 to Andrew
L. Ross, (ix) that certain Unsecured Convertible Promissory Note, dated as of June 6, 2018 in the aggregate principal amount of
$200,000 to Andrew L. Ross, and (x) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2018 in the aggregate
principal amount of $200,000 to Andrew L. Ross (collectively, the “Notes”).
B. The
Company and the Lenders desire to extend the Maturity Date of the Notes as set forth herein.
C. The
Company has requested and the Lenders have agreed to amend certain provisions of the Convertible Note Subscription Agreement as
set forth herein.
D. The
Company has requested that the Lenders consent to the incurrence of indebtedness by the Company that is otherwise not permitted
by the terms of Section 5 of the Convertible Note Subscription Agreement, and the Lenders agree to consent to the incurrence of
such indebtedness as set forth herein.
Agreement
Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to
them in the Notes or Convertible Note Subscription Agreement, as applicable.
2. Amendments to Convertible Note Subscription Agreement.
2.1 Section 1. Clause (iv) of the definition of “Maturity Date” is amended from June 30, 2019 to March 31 2020
(i.e. the date that is three (3) months following the maturity date of the Bridge Notes (as defined below), which date may, in
the sole discretion of the Board of Directors of the Company, be extended for two successive three (3) month periods to June 30,
2020 and September 30, 2020, as applicable; provided, however, that if the Bridge Notes are paid in full prior to their then stated
maturity date, the Maturity Date shall revert to June 30, 2019.
2.2 Section 1.7. Section 1.7 is hereby deleted in its entirety and replaced with the following:
“1.7 Conversion of Convertible
Notes upon Acquisition. If the Company is sold in an Acquisition prior to conversion or repayment of the Convertible Notes
in full or prior to a Qualified Equity Financing, then upon the consummation of any such Acquisition, at the option of the Majority
Lenders, the Convertible Notes shall (a) be repaid in full in an amount equal to the outstanding principal amount of the Convertible
Notes plus all accrued interest thereon, or (b) shall convert into shares of a newly created Series B1 Preferred
Stock of the Company with the same terms as the existing Series B Preferred Stock, except that the aggregate liquidation preference
of such Series B1 Preferred Stock shall equal the principal amount of the Convertible Notes plus accrued interest being converted
at such time (the “Conversion Shares”) at the Acquisition Conversion Price (as defined below). The Company
shall provide the Investors written notice of an Acquisition at least thirty (30) days prior to the closing of such Acquisition.
If the Majority Lenders elect to be repaid in accordance with option (a) in the preceding sentence, such amount shall be paid
upon consummation of the Acquisition (or as promptly as practicable thereafter) and shall remain a continuing obligation of the
Company (or any successor entity) until such amount is paid in full. An “Acquisition” shall mean the
sale of all or substantially all of the capital stock or assets of the Company in a business combination or other acquisition;
a merger, consolidation or reorganization of the Company in connection with a business combination (but not in connection with
an equity financing); or the sale or transfer of control by the stockholders of the Company to a third party (in a single transaction
or series of related transactions) representing a majority of the voting power of the Company (other than in connection with an
issuance of equity securities designed to raise working capital, including a Qualified Equity Financing).
In the event that the
Majority Lenders elect to convert the Convertible Notes into Conversion Shares upon an Acquisition, the outstanding principal on
the Convertible Notes, including all accrued interest thereon, shall convert into such number of Conversion Shares equal to the
quotient of the aggregate principal and accrued interest outstanding on the Convertible Notes divided by a price
per share of Conversion Shares determined in accordance with one of the two scenarios set out below (the “Acquisition
Conversion Price”):
(1) Scenario
1: if an Acquisition occurs on a date which is within twelve (12) months from the issuance date noted on
the face of each such Convertible Note held by that Investor, then the outstanding principal on the Convertible Note, including
all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor is a Major Investor,
such price per share commensurate with a valuation equal to the total consideration for the Acquisition (net of any Contingent
Consideration or Acquisition Transaction Fees), calculated based upon the Liquidity Capitalization, and determined immediately
prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents, less a twenty percent (20%)
discount (that is, at a rate of eighty percent (80%) of the calculated per share value), or (ii) if the Investor is not
a Major Investor, such price per share commensurate with a valuation equal to the total consideration for the Acquisition (net
of any Contingent Consideration or Acquisition Transaction Fees), calculated based upon the Liquidity Capitalization, and determined
immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents, less a ten percent
(10%) discount (that is, at a rate of ninety percent (90%) of the calculated per share value), or (B) such price per share commensurate
with a valuation of the Company of $34,500,000, calculated based upon the Liquidity Capitalization, and determined immediately
prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents); or
(2) Scenario
2: if an Acquisition occurs on a date which is later than twelve (12) months from the issuance date noted
on the face of each such Convertible Note held by that Investor, then the outstanding principal on the Convertible Note, including
all accrued interest thereon, shall convert at a rate equal to the lesser of (A) if (i) the Investor is a Major Investor,
such price per share commensurate with a valuation equal to the total consideration for the Acquisition (net of any Contingent
Consideration or Acquisition Transaction Fees), calculated based upon the Liquidity Capitalization, and determined immediately
prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents, less a thirty percent (30%)
discount (that is, at a rate of eighty percent (70%) of the calculated per share value), or (ii) if the Investor is not
a Major Investor, such price per share commensurate with a valuation equal to the total consideration for the Acquisition (net
of any Contingent Consideration or Acquisition Transaction Fees), calculated based upon the Liquidity Capitalization, and determined
immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents, less a twenty
percent (20%) discount (that is, at a rate of eighty percent (80%) of the calculated per share value), or (B) such price per share
commensurate with a valuation of the Company of $34,500,000, calculated based upon the Liquidity Capitalization, and determined
immediately prior to the Acquisition (as further set forth in any of the initial definitive Acquisition documents).
For the avoidance of
doubt, the outstanding principal on any Convertible Note held by an Investor (including all accrued interest thereon) shall convert
at an Acquisition Conversion Price determined in accordance with either Scenario 1 or Scenario 2 above, but not both. Notwithstanding
anything contained herein, the Majority Lenders hereby agree if the total consideration for the Acquisition is less than $25,000,000,
the parties will negotiate in good faith to determine the Acquisition Conversion Price.
For purposes herein,
“Contingent Consideration” shall mean any portion of consideration payable to the stockholders of the
Company that is payable only upon satisfaction of contingencies including any amounts placed in escrow or retained as a holdback
to satisfy any indemnification or similar obligations. For purposes herein, “Liquidity Capitalization”
shall mean the number, as of immediately prior to the Acquisition, of shares of capital stock (on an as-converted basis) outstanding,
assuming exercise or conversion of all outstanding vested and unvested options, warrants and other convertible securities, but
excluding: (i) shares of capital stock reserved and available for future grant under any equity incentive or similar plan; (ii)
all outstanding vested and unvested options, warrants and other convertible securities that are “out of the money”,
(iii) shares of capital stock issuable under this instrument; and (iv) shares of capital stock issuable under convertible promissory
notes. For purposes herein, “Acquisition Transaction Fees” shall mean any fees incurred solely in
connection with the Acquisition, including but not limited to banker’s fees, lawyer’s fees, accountant’s fees
and any payments required to be made under any management carve-out plan.
3. Consent to Incurrence of Secured Indebtedness. The Lender hereby consents to the incurrence of indebtedness
(the “Bridge Notes”) by the Company in the original principal amount of up to $4,000,000, which indebtedness
shall be secured by all assets of the Company, pursuant to the terms of that certain Note Subscription Agreement, dated of the
date hereof, between the Company and the investors party thereto.
4. No Other Amendments. No other amendments are made to the Notes or the Convertible Subscription Agreement.
5. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.
6. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State
of Delaware.
[Signature page follows.]
In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.
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Company:
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iSpecimen Inc.
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By:
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/s/ Christopher J. Ianelli
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Christopher J. Ianelli
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President & CEO
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Lenders:
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/s/ Andrew L. Ross
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Andrew L. Ross, individually
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Anna-Maria and Stephen Kellen Foundation, Inc.
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By:
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Name:
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Title:
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OBF Investments, LLC
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By:
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Name:
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Title:
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Exhibit 10.14
SECOND OMNIBUS Amendment
to
UNSECURED
CONVERTIBLE PROMISSORY NOTES
and
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
This Second Omnibus
Amendment to Unsecured Convertible Promissory Notes and Convertible Note Subscription Agreement (this “Amendment”)
is entered into this 1st day of May 2019, between iSpecimen Inc., a Delaware corporation (the “Company”),
and Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC (collectively, the “Lenders”).
Recitals
A. Pursuant
to the terms of that certain Convertible Note Subscription Agreement, (the “Convertible Note Subscription Agreement”),
the Company issued ten (10) promissory notes in the aggregate original principal amount of $5,500,000 to the Lenders between March
17, 2017 and June 30, 2018 as follows: (i) that certain Unsecured Convertible Promissory Note, dated as of March 17, 2017 in the
aggregate principal amount of $500,000 to Andrew L. Ross, (ii) that certain Unsecured Convertible Promissory Note, dated as of
May 15, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (iii) that certain Unsecured Convertible Promissory
Note, dated as of June 1, 2017 in the aggregate principal amount of $1,050,000 to Anna-Maria and Stephen Kellen Foundation, Inc.,
(iv) that certain Unsecured Convertible Promissory Note, dated as of June 12, 2017 in the aggregate principal amount of $1,450,000
to OBF Investments, LLC, (v) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2017 in the aggregate principal
amount of $250,000 to Andrew L. Ross, (vi) that certain Unsecured Convertible Promissory Note, dated as of December 29, 2017 in
the aggregate principal amount of $650,000 to Anna-Maria and Stephen Kellen Foundation, Inc., (vii) that certain Unsecured Convertible
Promissory Note, dated as of January 3, 2018 in the aggregate principal amount of $700,000 to OBF Investments, LLC, (viii) that
certain Unsecured Convertible Promissory Note, dated as of April 2, 2018 in the aggregate principal amount of $250,000 to Andrew
L. Ross, (ix) that certain Unsecured Convertible Promissory Note, dated as of June 6, 2018 in the aggregate principal amount of
$200,000 to Andrew L. Ross, and (x) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2018 in the aggregate
principal amount of $200,000 to Andrew L. Ross (collectively, the “Notes”).
B. The
Company and the Lenders desire to increase the amount of indebtedness that may be incurred by the Company that is otherwise
not permitted by the terms of Section 5 of the Convertible Note Subscription Agreement, and the Lenders agree to consent to the
incurrence of such indebtedness as set forth herein.
Agreement
Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Notes or Convertible
Note Subscription Agreement, as applicable.
2. Consent
to Incurrence of Secured Indebtedness. The Lenders hereby consent to the incurrence of indebtedness (the “Bridge
Notes”) by the Company up to an amount as approved in the sole discretion of the Board of Directors of the Company (which,
as of the date hereof, is an incremental increase of $1,000,000 to an aggregate amount of $5,000,000 from the originally consented
to amount of $4,000,000), which indebtedness shall be secured by all assets of the Company, pursuant to the terms of that certain
Note Subscription Agreement, dated of the date hereof, between the Company and the investors party thereto.
3. No
Other Amendments. No other amendments are made to the Notes or the Convertible Subscription Agreement.
4. Counterparts.
This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
5. Governing
Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware.
[Signature page follows.]
In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.
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Company:
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iSpecimen Inc.
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By:
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/s/ Christopher J. Ianelli
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Christopher J. Ianelli
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President & CEO
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Lenders:
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/s/ Andrew L. Ross
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Andrew L. Ross, individually
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Anna-Maria and Stephen Kellen Foundation, Inc.
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By:
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Name:
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Title:
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OBF Investments, LLC
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By:
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Name:
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Title:
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Exhibit 10.15
THIRD OMNIBUS Amendment
to
UNSECURED
CONVERTIBLE PROMISSORY NOTES
and
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
This Third Omnibus
Amendment to Unsecured Convertible Promissory Notes and Convertible Note Subscription Agreement (this “Amendment”)
is entered into this 15th day of November 2019, between iSpecimen Inc., a Delaware corporation (the “Company”),
and Andrew L. Ross, Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC (collectively, the “Lenders”).
Recitals
A. Pursuant
to the terms of that certain Convertible Note Subscription Agreement, (the “Convertible Note Subscription Agreement”),
the Company issued ten (10) promissory notes in the aggregate original principal amount of $5,500,000 to the Lenders between
March 17, 2017 and June 30, 2018 as follows: (i) that certain Unsecured Convertible Promissory Note, dated as of
March 17, 2017 in the aggregate principal amount of $500,000 to Andrew L. Ross, (ii) that certain Unsecured Convertible
Promissory Note, dated as of May 15, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (iii) that
certain Unsecured Convertible Promissory Note, dated as of June 1, 2017 in the aggregate principal amount of $1,050,000 to
Anna-Maria and Stephen Kellen Foundation, Inc., (iv) that certain Unsecured Convertible Promissory Note, dated as of
June 12, 2017 in the aggregate principal amount of $1,450,000 to OBF Investments, LLC, (v) that certain Unsecured Convertible
Promissory Note, dated as of June 30, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (vi) that
certain Unsecured Convertible Promissory Note, dated as of December 29, 2017 in the aggregate principal amount of $650,000
to Anna-Maria and Stephen Kellen Foundation, Inc., (vii) that certain Unsecured Convertible Promissory Note, dated as
of January 3, 2018 in the aggregate principal amount of $700,000 to OBF Investments, LLC, (viii) that certain Unsecured
Convertible Promissory Note, dated as of April 2, 2018 in the aggregate principal amount of $250,000 to Andrew L. Ross, (ix) that
certain Unsecured Convertible Promissory Note, dated as of June 6, 2018 in the aggregate principal amount of $200,000 to Andrew
L. Ross, and (x) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2018 in the aggregate principal
amount of $200,000 to Andrew L. Ross (collectively, the “Notes”).
B. The
Company and the Lenders desire to increase the amount of indebtedness that may be incurred by the Company that is otherwise
not permitted by the terms of Section 5 of the Convertible Note Subscription Agreement, and the Lenders agree to consent to
the incurrence of such indebtedness as set forth herein.
Agreement
Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Notes or Convertible Note
Subscription Agreement, as applicable.
2. Consent
to Incurrence of Secured Indebtedness. The Lenders hereby consent to the incurrence of
indebtedness (the “Bridge Notes”) by the Company up to an amount as approved in the sole discretion of the Board
of Directors of the Company (which, as of the date hereof, is an incremental increase of $2,000,000 to an aggregate amount of $7,000,000
from the previously amended and consented amount of $5,000,000), which indebtedness shall be secured by all assets of the Company,
pursuant to the terms of that certain Note Subscription Agreement, dated of the date hereof, between the Company and the investors
party thereto.
3. No
Other Amendments. No other amendments are made to the Notes or the Convertible Subscription
Agreement.
4. Counterparts.
This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
5. Governing
Law. This Amendment shall be governed by and construed in accordance with the laws of
the State of Delaware.
[Signature page follows.]
In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.
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Company:
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iSpecimen Inc.
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By:
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/s/ Christopher J. Ianelli
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Christopher J. Ianelli
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President & CEO
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Lenders:
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/s/ Andrew L. Ross
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Andrew L. Ross, individually
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Anna-Maria and Stephen Kellen Foundation, Inc.
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By:
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Name:
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Title:
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OBF Investments, LLC
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By:
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Name:
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Title:
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Exhibit 10.16
FOURTH OMNIBUS Amendment
to
UNSECURED
CONVERTIBLE PROMISSORY NOTES
and
CONVERTIBLE
NOTE SUBSCRIPTION AGREEMENT
This Fourth Omnibus Amendment to Unsecured Convertible Promissory
Notes and Convertible Note Subscription Agreement (this “Amendment”) is entered into this 29th day
of September 2020, between iSpecimen Inc., a Delaware corporation (the “Company”), and Andrew L. Ross,
Anna-Maria and Stephen Kellen Foundation, Inc., and OBF Investments, LLC (collectively, the “Lenders”).
Recitals
A. Pursuant
to the terms of that certain Convertible Note Subscription Agreement, (the “Convertible Note Subscription Agreement”),
the Company issued ten (10) promissory notes in the aggregate original principal amount of $5,500,000 to the Lenders between
March 17, 2017 and June 30, 2018 as follows: (i) that certain Unsecured Convertible Promissory Note, dated as of
March 17, 2017 in the aggregate principal amount of $500,000 to Andrew L. Ross, (ii) that certain Unsecured Convertible
Promissory Note, dated as of May 15, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (iii) that
certain Unsecured Convertible Promissory Note, dated as of June 1, 2017 in the aggregate principal amount of $1,050,000 to
Anna-Maria and Stephen Kellen Foundation, Inc., (iv) that certain Unsecured Convertible Promissory Note, dated as of
June 12, 2017 in the aggregate principal amount of $1,450,000 to OBF Investments, LLC, (v) that certain Unsecured Convertible
Promissory Note, dated as of June 30, 2017 in the aggregate principal amount of $250,000 to Andrew L. Ross, (vi) that
certain Unsecured Convertible Promissory Note, dated as of December 29, 2017 in the aggregate principal amount of $650,000
to Anna-Maria and Stephen Kellen Foundation, Inc., (vii) that certain Unsecured Convertible Promissory Note, dated as
of January 3, 2018 in the aggregate principal amount of $700,000 to OBF Investments, LLC, (viii) that certain Unsecured
Convertible Promissory Note, dated as of April 2, 2018 in the aggregate principal amount of $250,000 to Andrew L. Ross, (ix) that
certain Unsecured Convertible Promissory Note, dated as of June 6, 2018 in the aggregate principal amount of $200,000 to Andrew
L. Ross, and (x) that certain Unsecured Convertible Promissory Note, dated as of June 30, 2018 in the aggregate principal
amount of $200,000 to Andrew L. Ross (collectively, the “Notes”).
B. The
Company and the Lenders desire to amend the definition of Maturity Date of the Notes as set forth herein.
C. The
Company has requested and the Lenders have agreed to amend certain provisions of the Convertible Note Subscription Agreement as
set forth herein.
Agreement
Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Notes or Convertible Note
Subscription Agreement, as applicable.
2. Amendments
to Convertible Note Subscription Agreement.
2.1 Section 1.
Clause (iv) of the definition of “Maturity Date”, as previously amended,
shall be further amended as follows:
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Delete:
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“March 31 2020 (i.e. the date that is three (3) months following the maturity date of the Bridge Notes (as
defined below), which date may, in the sole discretion of the Board of Directors of the Company, be extended for two successive
three (3) month periods to June 30, 2020 and September 30, 2020, as applicable; provided, however, that if the Bridge
Notes are paid in full prior to their then stated maturity date, the Maturity Date shall revert to June 30, 2019.”
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Insert:
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“March 31 2021, which date may, in the sole discretion of the Board of Directors of the Company, be extended for
two (2) successive three (3) month periods to June 30, 2021 and September 30, 2021, as applicable; provided,
however, that if the Bridge Notes are paid in full prior to their then stated maturity date, the Maturity Date shall revert to
that date which is ninety days following the date of full repayment of the Bridge Notes.”
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3. No
Other Amendments. No other amendments are made to the Notes or the Convertible Note Subscription
Agreement.
4. Counterparts;
Facsimile and Electronic Signatures. This Amendment may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute
a single integrated agreement. For purposes of this Amendment, a document (or signature page thereto) signed and transmitted
by facsimile machine, portable document format, or other electronic means is to be treated as an original document. The signature
of any party on any such document, for purposes hereof, is to be considered as an original signature, and the document transmitted
is to be considered to have the same binding effect as an original signature on an original document. No party may raise the use
of a facsimile machine or other electronic means, or the fact that any signature was transmitted through the use of a facsimile
machine or other electronic means, as a defense to the enforcement of this Amendment.
5. Governing
Law. This Amendment shall be governed by and construed in accordance with the laws of
the State of Delaware.
In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.
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Company:
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iSpecimen Inc.
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By:
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/s/ Christopher J. Ianelli
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Christopher J. Ianelli
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President & CEO
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Lenders:
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/s/ Andrew L.
Ross
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Andrew L. Ross, individually
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Anna-Maria and Stephen Kellen Foundation, Inc.
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By:
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/s/ Michael M. Kellen
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Name: Michael M. Kellen
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Title: President
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OBF Investments, LLC
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Exhibit 10.17
iSpecimen
Inc.
NOTE SUBSCRIPTION AGREEMENT
iSpecimen Inc.
450 Bedford Street
Lexington, MA 02420
Attention: Christopher Ianelli,
Chief Executive Officer
The undersigned investor
(the “Investor”) acknowledges that it has received and reviewed certain information relating to a loan
to iSpecimen Inc. (the “Company”), including the term sheet, investor presentation materials,
and other information provided in writing to the undersigned Investor (the “Offering Materials”).
1. Subscription
for Note. Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes for and agrees
to purchase the principal amount of Secured Promissory Notes, in the form attached hereto as Exhibit A (the “Notes”),
in the amount set forth on the signature page of this Agreement. The Notes shall bear interest at a rate of twenty four percent
(24%) per annum, on a non-compounding basis, and due on maturity on the earlier of (i) the closing of a new permanent equity
financing yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes), (ii) the sale of the
Company, (iii) prepayment by the Company, or (iv) December 31, 2019 (which date may be extended for two successive
three month periods with the approval of the Board of Directors of the Company) (the “Maturity Date”).
The Notes will be repayable upon demand of the Majority Lenders at any time on or after the Maturity Date, provided that the Notes
have not been otherwise repaid in accordance with their terms. The Notes will be secured obligations of the Company. The Majority
Lenders may, with the approval of the Company, elect to extend the Maturity Date one or more times, at their discretion. The Notes
will be issued by the Company solely to “accredited investors” (as defined under Rule 501 of Regulation D of the
Securities Act of 1933, as amended, the “Securities Act”).
1.1 Note
Financing; Investor Participation; Minimum Investment. The Notes issued to the undersigned Investor and the Notes issued
to other investors (collectively, the “Investors”) are being issued in connection with an interim debt
financing of the Company, yielding up to an aggregate of $4,000,000 in gross proceeds (the “Note Financing”).
Each Note issued shall be for a principal amount of no less than $50,000.
1.2 Initial
Closing Date and Serial Closings. A minimum capital requirement for the initial closing shall be $500,000.00 (the “Initial
Closing”). The Initial Closing shall take place as soon as practicable but no later than September 30, 2018
(the “Closing Date”) following satisfaction of the conditions set forth in Section 6 below. At any
time, and from time to time, during the one-year period immediately following the Initial Closing, the Company may, at one or more
additional closings (each a “Closing”), offer, sell and issue additional Notes to Investors upon the
same terms and conditions hereof, provided that in no event shall the Company issue more than $4,000,000 in aggregate principal
amount of Notes across all Closings, including at the Initial Closing. Additional Closings may be held at the discretion of the
Board of Directors, and at each such Closing, any Investor shall execute an agreement in form and substance similar to this Agreement,
and the Company shall issue to such Investor a Note in the amount of such investment at such additional Closing. Notwithstanding
the foregoing, the Board of Directors may extend the period for additional Closings beyond one-year in its sole discretion.
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1.3 Use
of Proceeds. The proceeds of the Notes shall be used to support research, product development, expansion of sales and marketing
efforts, working capital and general corporate purposes.
1.4 Amendments
of the Notes. This Agreement and the Notes may be amended, extended, converted, substituted, or otherwise modified on behalf
of all holders of Notes issued in connection with this Note Financing with the written consent or approval of the Company and the
holders of at least a majority in aggregate principal amount of all Notes issued in this Note Financing (the “Majority
Lenders”). No individual Note holder shall have the right to block any corporate action unless acted upon by the
Majority Lenders and the Company, as set forth above. The Notes issued to the undersigned Investor and all other Notes issued by
the Company in this Note Financing shall rank pari passu in all respects (including repayment).
1.5 Subordination.
The obligations represented by the Notes shall be subordinated in right of payment and priority and subject, in the manner and
to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as defined herein),
so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed or otherwise obligated
to extend credit to the Company under any loan agreement. The term “Senior Debt” shall mean all present
and future indebtedness for money borrowed (whether term loan or working capital facility or other form of credit) of the Company
from institutional lenders, commercial credit companies, commercial banks, credit unions, government agencies, venture debt firms,
and other commercial lenders which may be, from time to time, incurred by the Company, including, but not limited to, any negotiable
instruments evidencing the same, all guaranties, debts, demands, monies, indebtedness, liabilities and obligations owed or to become
owing, including interest, principal, costs, and other charges, and all claims, rights, causes of action, judgments, decrees, remedies,
or other obligations of any kind whatsoever and howsoever arising, whether voluntary, involuntary, absolute, contingent, direct,
indirect, or by operation of law.
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Notes agrees that each such holder shall not: (i) collect,
or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or hereafter existing under
the Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Notes; (iii) enforce or apply any
security, now or hereafter existing for the Notes; (iv) commence, prosecute or participate in any administrative, legal, or
equitable action against the Company concerning the obligations under the Notes; (v) join in any petition for bankruptcy,
assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain or enforce any lien or security,
which is senior to the Senior Debt lender’s interest, in any property, real or personal, to secure the obligations under
the Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends, payments of any kind or gifts from,
the Company with respect to the obligations under the Notes; provided, however, that this paragraph shall not apply
to (a) any filing by the holder of the Notes of any proof of claim or any other similar filing or action to protect such lender’s
rights in bankruptcy, or (b) any action by the Company or the holders of the Notes that results solely in the issuance and/or
receipt of capital stock or other equity security of the Company.
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2.1 Grant
of Security Interest. The Company hereby grants, pledges, assigns, transfers and delivers to the Investors purchasing Notes
hereunder as “Secured Parties” a first-lien security interest in any and all of the following property
of the Company, whether now or hereafter existing or acquired (the “Collateral”): all Accounts and accounts
receivable, all Inventory (including raw materials, work-in-process, finished goods and supplies); all Contract Rights, all General
Intangibles (including, without limitation, payment intangibles, software, trademarks, patents, copyrights or other intellectual
property), all Equipment (including all machinery, furniture, and fixtures), all Goods, all Chattel Paper (whether tangible or
electronic), all fixtures, all Investment Property (including, without limitation, all financial assets, certificated and uncertificated
securities, securities accounts and security entitlements); all Letter-of-Credit Rights, all rights under judgments, all commercial
tort claims, and choses in action, all books, records and information relating to the Collateral and/or to the operation of the
Company’s business, all Instruments, promissory notes, documents of title, documents, policies and certificates of insurance,
securities, deposits, deposit accounts, money, cash or other property, all insurance proceeds, and all guaranties, rights, remedies
and privileges pertaining to any of the foregoing.
The Collateral shall
secure payment and performance of the Company’s obligations to pay principal and interest under the Notes. All references
to the “Code” shall refer to the Uniform Commercial Code of the State of Delaware, as amended from time
to time. Capitalized terms used but undefined in this section shall have the meanings ascribed to them in Article 9 of the
Code.
The Company hereby
irrevocably authorizes the Secured Parties at any time and from time to time to file in any Uniform Commercial Code jurisdiction
any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of the Company
or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9
of the Code, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information
required by Article 9 of the Code for the sufficiency or filing office acceptance of any financing statement or amendment,
including (i) the organization identification number issued to the Company and, (ii) in the case of a financing statement
filed as a fixture filing a sufficient description of real property to which the Collateral relates. The Company agrees to furnish
any such information to the Secured Parties promptly upon request. The Company also ratifies its authorization for the Secured
Parties to have filed in any jurisdiction any like financing statements if filed prior to the date hereof.
2.2 Appointment
of Collateral Agent. Each of the Secured Parties hereby agrees that one designated member of the Secured Parties shall
act as the initial collateral agent (the “Collateral Agent”), which individual shall initially be David
Ianelli, for the benefit of the Secured Parties in connection with the protection of the Collateral and all matters relating to
any security interest, from time to time, securing the Obligations, and no Secured Party shall have any right individually to exercise
any rights or remedies with respect to the Collateral. The Collateral Agent shall be fully indemnified by each of the Secured Parties,
on a pro rata basis, for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, tax liabilities,
broker’s or finder’s fees, out-of-pocket costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel for the Collateral Agent in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not the Collateral Agent shall be designated a party thereto) that may
be imposed on, incurred by, or asserted against the Collateral Agent, in any manner relating to or arising out of or incurred by
the Collateral Agent in connection with the Collateral Agent’s actions as the Secured Parties’ collateral agent; provided,
however, that the Secured Parties shall have no obligation to the Collateral Agent under this Section with respect
to liabilities arising from the gross negligence or willful misconduct of the Collateral Agent while acting as the collateral agent
for the Secured Parties, as determined by a court of competent jurisdiction. Notwithstanding the foregoing, in no event shall the
indemnification obligation of any Secured Party under the preceding sentence exceed the original principal amount of such Secured
Party’s Notes. The relationship between the Collateral Agent and the Secured Parties is that of agent and principal only,
and nothing contained in this Agreement or otherwise shall be construed to constitute the Collateral Agent as a trustee or fiduciary
for any Secured Party. The Collateral Agent may resign at any time upon notice to the Secured Parties and the Company (in which
case a majority in interest of the Secured Parties shall promptly appoint a replacement), and a majority in interest of the Secured
Parties may replace the Collateral Agent at any time upon written notice to the Collateral Agent and the Secured Parties.
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2.3 Events
of Default. Any one or more of the following shall constitute an event of default (an “Event of Default”
or “Default”) under this Agreement and under the Notes: (a) any failure of the Company to pay all
outstanding principal and accrued interest on the Notes, together with any other amounts otherwise due and owing (collectively,
“Obligations”), on demand of the Major Holders at any time on or after the Maturity Date; (b) any
Event of Bankruptcy; (c) a dissolution, termination of existence, suspension or discontinuance of business, or ceasing
to operate as a going concern; (d) the issuance of any injunction or restraining order which results in a Material Adverse
Effect on any aspect of the business or assets of the Company, or levy on or attachment of any funds or other property, real or
personal, of the Company, in an amount in excess of $100,000, if, in each case, the same is not dismissed, discharged, released,
satisfied or vacated within a period of sixty (60) days; (e) the failure to perform any material covenant by the Company under
the Note Subscription Agreement for a period of 45 days; or (f) a material default (following expiration of any applicable
notice and cure periods) under any other material agreement of the Company, and in which the default results in a liability or
obligation against the Company greater than $100,000. As used herein, an “Event of Bankruptcy” means
any of the following events impacting the Company or its operating subsidiaries: (i) any assignment by the Company for the
benefit of its creditors; (ii) an admission in writing by the Company of its inability to pay its debts as they become due;
(iii) filing by the Company of a voluntary petition in bankruptcy; (iv) seeking or consenting to, or acquiescing in,
the appointment of any trustee, receiver, custodian, liquidator or similar official for the Company or a substantial part of its
property; (v) the elapse of 90 days after the commencement of an action against the Company seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief without such action being dismissed; (vi) the insolvency
or other cessation of existence of the Company and its operating subsidiaries; or (vii) any corporate action by the Company
to authorize or effect any of the foregoing actions. Upon any Event of Default, the interest rate on the Notes shall be computed
at an annual rate of thirty percent (30%) from and after the Event of Default. Upon the occurrence of an Event of Default, the
Lender’s remedies shall include the rights to declare the entire principal balance of this Note and any accrued and unpaid
interest immediately due and payable, without notice or presentment, or exercise any other remedies available to a lender under
the Uniform Commercial Code and the Note Subscription Agreement.
2.4 Remedies
upon Default. Upon the occurrence of an Event of Default which is not cured by the Company within the applicable notice
and cure period or otherwise waived by the Major Holders, all Obligations of the Company shall be immediately due and payable in
full and the Secured Parties shall have the rights and remedies of a secured party under the Code. The waiver of the Major Holders
of an Event of Default shall not constitute a waiver of any other occurrence that constitutes an Event of Default. Any actions
taken by the Secured Parties or the Collateral Agent pursuant to this Agreement shall require the consent of the Major Holders,
and the Collateral Agent shall deliver to the Secured Parties a good faith estimate of the expenses it expects to incur in connection
with such actions prior to or contemporaneous with receiving the consent of the Major Holders. Upon a Default, the Secured Parties
may but are not required to do any one or more of the following: (i) without notice or demand to the Company declare the Obligations
to be immediately due and payable; (ii) exercise the rights and remedies accorded a secured party by the Code or by any instrument
securing the Obligations (including but not limited to, taking immediate possession of the Collateral); or (iii) perform any
warranty, covenant or agreement which the Company has failed to perform under this Agreement. The proceeds received from the disposition
of the Collateral shall be applied as follows: (a) first, to reimburse the Collateral Agent and Secured Parties for their
reasonable expenses in connection with the collection and sale of the Collateral; (b) second, to the payment of all principal
and interest due on the Notes; provided, however, that all payments made under the Promissory Notes shall
be made pro rata, based on the principal amount owing under the Notes; and (c) third, any excess funds or property to the
Company.
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Notwithstanding anything
contained herein to the contrary, upon any Event of Default, the Secured Parties and the Collateral Agent may also avail themselves
of any other remedy available under the Uniform Commercial Code of Delaware or applicable law if the Company does not have the
resources to pay the amounts due as set forth above and herein. Such remedies include without limitation the marshalling of the
assets and collateral of the Company secured by the security interest set forth herein in a private sale, and taking possession
of such assets and collateral as remuneration, compensation and consideration for the financing provided hereby and the failure
to pay the Notes. Such remuneration shall include the assignment and transfer to the Secured Parties (or any assignee controlled
by the Secured Parties) of the assets secured hereby as satisfaction and accord of the Obligations, including an assignment, transfer
and recordation for the benefit of the Secured Parties (or any assignee controlled by the Secured Parties) of all intellectual
property rights owned by the Company and secured hereby.
3. Representations
and Warranties of the Company. The Company hereby makes the following representations in connection with the issuance of
the Notes.
3.1. Organization,
Good Standing and Authority of the Company; No Subsidiaries. The Company is a corporation duly organized, validly existing
and in corporate good standing under the laws of the State of Delaware, and has the requisite power and authority to own all of
its properties and assets and to carry on its business as it is now being conducted. The Company does not hold or own, directly
or indirectly, any capital stock or other equity securities of any other corporation, and is not a participant in any joint venture,
partnership or similar arrangement.
3.2. Authorization.
The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions of this
Agreement and the Note the valid and enforceable obligations they purport to be. The issuance and sale of the Note do not require
any further corporate action and will not be subject to preemptive rights of any present stockholders of the Company, and the Note
will, upon its issuance and sale to the Investor, be duly authorized, validly issued and enforceable in accordance with its terms.
This Agreement constitutes the valid and binding obligations of the Company, enforceable in accordance with its terms. Notwithstanding
anything in this Section to the contrary, enforcement of this Agreement and the Note may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to or affecting the rights of creditors generally and subject to the fact that equitable
remedies are discretionary and may not be granted by a court of competent jurisdiction.
3.3. No
Default. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by
the Company of the transactions contemplated hereby do not and will not constitute a default under any of the terms, conditions
or provisions of the Certificate of Incorporation or Bylaws of the Company, or any material contract, agreement or arrangement
to which the Company is a party or by which it is bound.
3.4. Compliance
with Laws; Permits. The Company holds all material licenses, approvals, certificates, permits and authorizations necessary
for the lawful conduct of its business and is in material compliance with all applicable laws, rules, regulations and ordinances.
The Company has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business, the absence
of which could materially and adversely affect the business, properties, prospects or financial condition of the Company (a “Material
Adverse Effect”). The Company is not in default in any material respect under any such franchise, permit, license
or other similar authority which could have a Material Adverse Effect.
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3.5. Litigation.
There is no action, suit, proceeding at law or in equity, arbitration or administrative or other proceeding by or before (or to
the knowledge, information and belief of the Company) any investigation by any governmental or other instrumentality or agency,
pending, or, to the Company’s knowledge, information and belief, threatened against or affecting the Company, or any of its
properties, intellectual property or other rights which could materially and adversely affect the right or ability of the Company
to carry on its business as now conducted, or which could have a Material Adverse Effect. The Company does not know of any valid
basis for any such action, proceeding or investigation.
3.6. Intellectual
Property; Proprietary Rights, Employee Restrictions. To the best of its knowledge, the Company has all patents, patent
licenses, copyrights, trademarks, service marks, trade names, trade secrets or other proprietary rights useful for its business
(collectively, “Intellectual Property Rights”) as presently conducted or contemplated. The Company’s
Intellectual Property Rights are sufficient to carry on the business of the Company as presently conducted or contemplated. To
the best of its knowledge, the Company has a license to use all of its Intellectual Property Rights and it has obtained any licenses,
releases or assignments necessary to use all third parties’ intellectual property rights in works embodied in its products
and material for the conduct of its business. The Company has not received any notice or other claim from any person asserting
that any of the Company’s present or contemplated activities infringe or may infringe any intellectual property rights of
such person or any third party. The Company has taken all reasonable measures to protect and preserve the security, confidentiality
and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All Intellectual
Property Rights necessary for the conduct of the Company’s business have been developed by employees, consultants or third
parties and have been properly assigned to the Company as the sole property of the Company. There are no outstanding options, licenses,
agreements, claims, encumbrances or shared ownership interests of any kind relating to the Intellectual Property Rights of the
Company used in the conduct of its businesses, nor is the Company bound by or a party to any options, licenses or agreements of
any kind with respect to the Intellectual Property Rights of any other person, other than those licenses and agreements set forth
on Exhibit B.
3.7. Absence
of Certain Developments. Since [December 31, 2016], there has been (i) no material adverse change in the condition
(financial or otherwise) of the Company or in the business, operations, financial condition, assets, liabilities, prospects or
contractual rights of the Company, except that the Company has continued to incur operating losses on approximately the same basis
as during prior months since such date, (ii) no declaration, setting aside or payment of any dividend or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any of the capital stock of the Company, (iii) no
waiver of any valuable right of the Company or cancellation of any debt or claim held by the Company, (iv) no loan by the
Company to any officer, director, employee or shareholder of the Company, or any agreement or commitment therefor (other than any
such loan or other indebtedness described in this Agreement), (v) no increase, direct or indirect, in the compensation paid
or payable to any officer or employee of the Company, other than as authorized by a majority of the disinterested members of the
Board of Directors, (vi) no material loss, destruction or damage to any property of the Company whether or not insured, (vii) no
material change in the personnel of the Company or the terms and conditions of their employment, (viii) no acquisition or
disposition of any assets greater than $20,000 in the aggregate, nor any other transaction by the Company otherwise than for fair
value in the ordinary course of business, and (ix) no contract, agreement, commitment, expenditure or hiring of new employees
or consultants involving a potential commitment in excess of $20,000 in the aggregate or which is otherwise material and not entered
into in the ordinary course of business.
3.8. Information
Supplied to Investor. Neither this Agreement, the Note, nor any document or certificate furnished to the Investor by or
on behalf of the Company contains any untrue statement of a material fact, and none of this Agreement, the Note, or such other
documents and certificates omits to state a material fact necessary in order to make the statements contained herein or therein
not misleading.
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4. Representations
and Warranties of the Undersigned. The undersigned understands and acknowledges that the Notes (the “Securities”),
are being offered and sold under one or more of the exemptions from registration provided for in Section 4(2) of the
Securities Act, including Regulation D promulgated thereunder, and any applicable state securities laws. The Investor is purchasing
the Securities without being offered or furnished any formal offering literature or prospectus other than the Offering Materials.
The Investor understands that this transaction has not been reviewed and approved by the Securities and Exchange Commission or
by any state regulatory authority.
4.1. Suitability.
The Investor confirms that it understands and has fully considered for purposes of this investment the risks of this investment
and understands that (i) this investment is suitable only for an investor who is able to bear the economic consequences of
losing its entire investment, (ii) the purchase of the Notes is a speculative investment which involves a high degree of risk,
and (iii) there are substantial restrictions on the transferability of, and there will be no immediate public market for,
the Notes, and accordingly, it may not be possible for the Investor to liquidate its investment. The Investor recognizes that the
Company is a development-stage enterprise with limited operating history and is currently developing and revising its business
strategy and marketing plan.
4.2. Lack
of Liquidity. The Investor confirms that it is able to bear the economic risk of this investment, and to hold the Notes
for an indefinite period of time. The Investor has sufficient liquid assets so that the illiquidity associated with this investment
will not cause any undue financial difficulties or affect the undersigned’s ability to provide for its current needs and
possible financial contingencies, and that its commitment to all speculative investments is reasonable in relation to its net worth
and annual income.
4.3. Knowledge
and Experience. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. The Investor is an investor in securities of companies in the development stage and acknowledges that
Investor is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of the investment in the Notes. If other than an individual, Investor
also represents it has not been organized for the purpose of acquiring the Notes.
4.4. Access
to Management. The Investor confirms that, in making its decision to purchase the Notes, it has relied solely upon independent
investigations made by him, and that it has been given the opportunity to ask questions of, and to receive answers from, management
of the Company concerning the Company and the terms and conditions of this offering. The Investor acknowledges that it is not relying
upon any person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.
4.5. Investment
Intent. The Notes are being acquired by the undersigned solely for its own personal account, for investment purposes only,
and not with a view to, or in connection with, any resale or distribution thereof. The Investor has no contract, undertaking, understanding,
agreement or arrangement, formal or informal, with any person to sell, transfer or pledge to any person the Notes for which it
hereby subscribes, or any part thereof, or any interest therein or any rights thereto. The Investor has no present plans to enter
into any such contract, undertaking, agreement or arrangement. The Investor must bear the economic risk of the investment for an
indefinite period of time because the Notes have not been registered under the Securities Act and applicable state securities laws
and, therefore, cannot be sold unless they are subsequently registered under the Securities Act and applicable state securities
laws or unless an exemption from such registration is available.
4.6. Brokers.
The Investor is under no obligation to pay any broker’s fee or commission in connection with its investment.
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4.7. Investment
Commitment Not Disproportionate to Net Worth. The Investor’s overall commitment to investments that are not readily
marketable is not disproportionate to the undersigned’s net worth and the Investor’s investment in the Company will
not cause such overall commitment to become excessive.
4.8. Liquid
Asset Value. The current value of the Investor’s liquid assets, including cash, freely marketable securities and
cash surrender value of life insurance, is sufficient to provide for such Investor’s current and anticipated needs and possible
contingencies, so that such Investor is capable of bearing the economic risk of this investment in the Company.
4.9. Purchase
Entirely for Own Account. This Agreement is made with the Investor in reliance upon the Investor’s representation
to the Company, by the Investor’s execution of this Agreement, that the Investor hereby confirms, that the Notes to be acquired
by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this Agreement, the Investor further represents that the Investor
does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations
to such person or to any third person, with respect to any of the Notes. The Investor has not been formed for the specific purpose
of acquiring the Notes.
4.10. No
General Solicitation. Neither the Investor nor any of its officers, directors, employees, agents, stockholders or partners
has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation with respect
to the offer and sale of the Notes, or (b) published any advertisement in connection with the offer and sale of the Notes.
5. Transferability.
The undersigned agrees not to transfer or assign this Agreement, or any of its interest herein, and further agrees that the assignment
and transfer of the Notes acquired pursuant hereto shall be made only in accordance with all applicable laws and the prior written
consent of the Company (which may not be unreasonably withheld).
6. Protective
Covenants. Until the repayment of the Notes in accordance with their terms, the Company covenants and agrees that it shall
not, without the agreement of the Majority Lenders, either directly or by amendment of the Certificate of Incorporation, Acquisition,
or otherwise: (i) liquidate, dissolve or wind up the affairs of the Company; (ii) amend, modify alter, or repeal any
provision of the Certificate of Incorporation or Bylaws which would adversely affect the rights, privileges, powers or preferences
of the holders of the Notes; (iii) create, or authorize the creation of, or issue any other debt security having rights, preferences
or privileges senior to the Notes offered in this Note Financing, except for any commercial credit, bank lines of credit, capital
equipment loans or other commercial financing loans entered into in the ordinary course of business and with the approval of the
Board of Directors; (iv) guarantee any indebtedness for money borrowed except for guarantees arising in the ordinary course
of business of the Company and pursuant to market-based terms with trade creditors, licensors of intellectual property, vendors
and suppliers; (v) change the principal business of the Company, enter new lines of business, or exit the current line of
business; (vi) create, incur, assume or suffer to exist any mortgage, deed of trust, pledge, lien, security interest or other
encumbrance of any nature, upon or with respect to any of the assets of the Company, or pledge, mortgage, encumber on, create a
security interest in the Intellectual Property Rights of the Company, except for licenses granted or contracts entered into the
ordinary course of business; or (vii) reclassify any existing debt or equity of the Company.
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7. Conditions
to Closing. The obligations of the Investor to fund the amounts set forth on the signature page hereof and the obligations
of the Company set forth herein at the Initial Closing shall be subject to the satisfaction of each of the following conditions:
(i) to the extent necessary, the requisite stockholders of the Company shall have provided any waivers, consents or approvals
necessary for the consummation of this Note Financing and issuance of the Notes, (ii) the parties shall have executed and
delivered this Agreement to one another, (iii) the Company shall have raised commitments for at least $[500,000] from Investors,
(iv) the Company shall have evidence that the existing convertible notes have been amended to extend their maturity dates
to a period of time at least three months following the Maturity Date, and (v) the Company and Collateral Agent shall have
entered into a subordination agreement in form and substance reasonably acceptable to the Majority Lenders.
8. Miscellaneous.
This Agreement and the Offering Materials and the documents referenced therein constitute the entire agreement between the parties
relative to the subject matter of the sale of the Notes, and supersede all proposals or agreements, written or oral, and all other
communications between the parties relating to the subject matter of this Agreement. For the avoidance of doubt, this Agreement
and the terms and conditions of the Notes may be amended, waived, modified or extended, and the Notes may be substituted, extended,
renewed, increased, converted or exchanged, by the written consent of the Company and the Majority Lenders. Any waiver shall be
limited to the particular instance and for the particular purpose when and for which it is given. The invalidity, illegality or
unenforceability of any provision of this Agreement shall in no way effect the validity, legality or enforceability of any other
provision of this Agreement and this Agreement shall be construed and reformed by any court of competent jurisdiction to give full
effect to the essential purposes of this Agreement. This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the general laws of the Commonwealth of Massachusetts and the federal securities laws.
All notices provided for in this Agreement shall be given in writing and shall be effective when served either by personal delivery,
express overnight courier service, electronic facsimile transmission, email transmission (with confirmation of receipt), or by
first class mail, postage prepaid, addressed to the parties at their respective addresses. This Agreement may be executed in duplicate
counterparts, which, when taken together, shall constitute one instrument and each of which shall be deemed to be an original instrument.
Any dispute, controversy or claim arising out of, in connection with, or in relation to this Agreement or the Notes or the breach
of any of the provisions, hereof or the Notes shall be settled by arbitration in Boston, Massachusetts, pursuant to the rules then
obtaining of JAMS/Endispute. Any award shall be final, binding and conclusive upon the parties and a judgment rendered thereon
may be entered in any court having competent jurisdiction thereof. The Company is expressly relying on the representations of each
Investor as to his, her or its status as an “accredited investor” under federal and state securities laws. If the representations
of the Investor set forth above as an “accredited investor” are inaccurate, the Company, in its sole discretion and
election, and without any liability or further obligation of the Company to the Investor, may refund to the Investor the purchase
price of the Notes.
9. Written
Consent of Preferred Stock Holders. To the extent that the undersigned Investor is a holder of the Company’s Series B
Preferred Stock entitled to vote hereon (each, a “Stockholder”), in accordance with Section 228
of the Delaware General Corporation Law (the “DGCL”), each undersigned Stockholder does hereby, pursuant
to this Agreement, vote, and provides his, her or its consent in respect of, all shares of the Company’s outstanding Series B
Preferred Stock held of record by such Stockholder (whether now owned or hereafter acquired) for the adoption and approval of the
following consent contained in this Section 11, without a formal meeting and without prior notice. The undersigned Stockholder
hereby consents to, adopts, approves and waives the Note Financing in accordance with the terms of this Agreement and the applicable
provisions of the Company’s Third Amended & Restated Certificate of Incorporation, and hereby adopts and approves
each of this Agreement, the Notes and each of the transactions contemplated hereby. The undersigned Stockholder agrees and acknowledges
that the foregoing consent shall take immediate effect once adopted, approved and consented to by the Stockholders holding at least
a majority of the issued and outstanding Series B Preferred Stock of the Company.
[Signature Page Follows]
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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iSpecimen, Inc.
NOTE SUBSCRIPTION AGREEMENT
Signature Page
IN WITNESS WHEREOF,
the undersigned has hereby executed this Note Subscription Agreement as of this __th
day of _______, 201_.
Name & Signature of Investor:
Address:
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Signature
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Name/Entity: ___________________________
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Title (if for an Entity): ____________________
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Telephone: (617)
285-6000
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Email Contact: ________@_________
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Federal Income Tax I.D. No. (SSN for Indi. Investors): 023-44-2439
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Investment
Amount: $ 000,000.00
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If the Investor is a Stockholder,
and to the fullest extent permitted by law, this Agreement has been duly executed as of the date first set forth above. The consent
contained in Section 11 hereof shall be irrevocable and shall be effective immediately, provided that such consent shall be
deemed revoked if it has not become effective within 60 days of the actual date of the signature below, which actual date of signature
is the date on which provision for the effectiveness of the consent has been made.
* * *
The Company hereby
accepts the subscription of the Investor pursuant to this Note Subscription Agreement, subject to the terms and conditions set
forth herein, as of this 14th day of September, 2018.
iSpecimen Inc.
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By:
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/s/
Christopher Ianelli
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Name: Christopher Ianelli
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Title: Chief Executive Officer
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
iSpecimen Inc.
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED,
iSpecimen Inc., a Delaware corporation (the “Company”), hereby promises to pay, on the written demand
of the combined Majority Lenders at any time on or after the earlier of (i) the closing of a new permanent equity financing
yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes), (ii) the sale of the Company,
(iii) prepayment by the Company, or (iv) December 31, 2019 (which date may be extended for two successive three
month periods with the approval of the Board of Directors of the Company) (the “Maturity Date”), to XXXXXXXX
(the “Lender”) the principal sum of XXXX XXXX XXXX ($XXX,XXX) or such lesser principal amount
then outstanding, together with all accrued and unpaid interest thereon as set forth below. This Note is being issued in connection
with an interim debt financing of the Company by Lender and other lenders in an amount of up to $4,000,000, pursuant to the terms
of certain Note Subscription Agreements (the “Note Subscription Agreements”). Terms not defined herein
shall have the meanings set forth in the Note Subscription Agreements between the Company and the Lender, and other lenders who
have executed similar Note Subscription Agreements.
Section 1. Interest.
Interest on the principal amount of this Note will accrue from and including the date hereof until and including the date such
principal amount is paid, at a rate equal to twenty four percent (24%) per annum, without compounding. Principal and interest shall
be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the
Lender or at such other place as the legal holder may designate from time to time in writing to the Company. Interest shall be
computed on the basis of a 365-day year, for the actual days elapsed. Notwithstanding any other provision of this Note, the Lender
hereof does not intend to charge, and the Company shall not be required to pay, any interest or other fees or charges in excess
of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the Company or credited
to reduce principal hereunder.
Section 2. Prepayment
and Prepayment Penalty. The Company may pay this Note in whole or in part at any time prior to the Maturity Date without
the prior approval or consent of the Majority Lenders and without penalty, except if this Note is prepaid by the Company within
ninety (90) days of its issuance, the Company shall pay a prepayment penalty equal to the amount of interest required to be paid
such that under no circumstances will the Lender have received less than ninety (90) days of interest under this Note in the aggregate.
The Lender will note all partial payments of principal and accompanying payments of interest on the face or reverse side of this
Note.
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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Section 3. Subordination.
The obligations represented by this Note shall be subordinated in right of payment and priority and subject, in the manner
and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as defined herein),
so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed or otherwise obligated
to extend credit to the Company under any loan agreement. The term “Senior Debt” shall mean all present
and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit companies, commercial banks,
credit unions, and government agencies, which may be, from time to time, incurred by the Company, including, but not limited to,
any negotiable instruments evidencing the same, all guaranties, debts, demands, monies, indebtedness, liabilities and obligations
owed or to become owing, including interest, principal, costs, and other charges, and all claims, rights, causes of action, judgments,
decrees, remedies, or other obligations of any kind whatsoever and howsoever arising, whether voluntary, involuntary, absolute,
contingent, direct, indirect, or by operation of law.
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Notes agrees that each such holder shall not: (i) collect,
or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or hereafter existing under
the Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Notes; (iii) enforce or apply any
security, now or hereafter existing for the Notes; (iv) commence, prosecute or participate in any administrative, legal, or
equitable action against the Company concerning the obligations under the Notes; (v) join in any petition for bankruptcy,
assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain or enforce any lien or security,
which is senior to the Senior Debt lender’s interest, in any property, real or personal, to secure the obligations under
the Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends, payments of any kind or gifts from,
the Company with respect to the obligations under the Notes; provided, however, that this paragraph shall not apply
to (a) any filing by the holder of the Notes of any proof of claim or any other similar filing or action to protect such lender’s
rights in bankruptcy, or (b) any action by the Company or the holders of the Notes that results solely in the issuance and/or
receipt of capital stock or other equity security of the Company.
Section 4. Events
of Default. The outstanding balance of this Note shall be immediately due and payable prior to maturity in case of any
of the following events, each of which shall be an “Event of Default”: (a) any failure of the Company
to pay all outstanding principal and accrued interest on this Note, together with any other amounts otherwise due and owing (collectively,
“Obligations”), on demand of the Major Holders at any time on or after the Maturity Date; (b) any
Event of Bankruptcy; (c) a dissolution, termination of existence, suspension or discontinuance of business, or ceasing
to operate as a going concern; (d) the issuance of any injunction or restraining order which results in a Material Adverse
Effect on any aspect of the business or assets of the Company, or levy on or attachment of any funds or other property, real or
personal, of the Company, in an amount in excess of $100,000, if, in each case, the same is not dismissed, discharged, released,
satisfied or vacated within a period of sixty (60) days; (e) the failure to perform any material covenant by the Company under
the Note Subscription Agreement for a period of 45 days; or (f) a material default (following expiration of any applicable
notice and cure periods) under any other material agreement of the Company, and in which the default results in a liability or
obligation against the Company greater than $100,000. As used herein, an “Event of Bankruptcy” means
any of the following events impacting the Company or its operating subsidiaries: (i) any assignment by the Company for the
benefit of its creditors; (ii) an admission in writing by the Company of its inability to pay its debts as they become due;
(iii) filing by the Company of a voluntary petition in bankruptcy; (iv) seeking or consenting to, or acquiescing in,
the appointment of any trustee, receiver, custodian, liquidator or similar official for the Company or a substantial part of its
property; (v) the elapse of 90 days after the commencement of an action against the Company seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief without such action being dismissed; (vi) the insolvency
or other cessation of existence of the Company and its operating subsidiaries; or (vii) any corporate action by the Company
to authorize or effect any of the foregoing actions. Upon any Event of Default, the interest rate on the Notes shall be computed
at an annual rate of thirty percent (30%) from and after the Event of Default. Upon the occurrence of an Event of Default, the
Lender’s remedies shall include the rights to declare the entire principal balance of this Note and any accrued and unpaid
interest immediately due and payable, without notice or presentment, or exercise any other remedies available to a lender under
the Uniform Commercial Code and the Note Subscription Agreement.
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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-2-
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Section 5. Remedies
upon Default. Upon the occurrence of an Event of Default which is not cured by the Company within the applicable notice and
cure period or otherwise waived by the Major Holders, all Obligations of the company shall be immediately due and payable in full
and the Secured Parties (as defined in the Note Subscription Agreements) shall have the rights and remedies of a secured party
under the Code. The waiver of the Major Holders of a Default shall not constitute a waiver of any other occurrence that constitutes
an Event of Default. Any actions taken by the Secured Parties or the Collateral Agent pursuant to this Agreement shall require
the consent of the Major Holders, and the Collateral Agent shall deliver to the Secured Parties a good faith estimate of the expenses
it expects to incur in connection with such actions prior to or contemporaneous with receiving the consent of the Major Holders.
Upon a Default, the Secured Parties may but are not required to do any one or more of the following: (i) without notice or
demand to the Company declare the Obligations to be immediately due and payable; (ii) exercise the rights and remedies accorded
a secured party by the Uniform Commercial Code or by any instrument securing the Obligations (including but not limited to, taking
immediate possession of the Collateral); or (iii) perform any warranty, covenant or agreement which the Company has failed
to perform under the Subscription Agreement. Upon a Default, if the Secured Parties exercise their rights and remedies under the
Code, the proceeds received from the disposition of the Collateral shall be applied as follows: (a) First, to reimburse the
Secured Parties for their reasonable expenses in connection with the collection and sale of the Collateral; (b) Second, to
the payment of all principal and interest due on the Notes; provided, however, that all payments made under the Promissory
Notes shall be made pro rata, based on the principal amount owing under the Notes; and (c) Third, any excess funds to the
Company.
Section 6. Payment
of Costs of Enforcement. The Company agrees to pay all costs, charges and expenses incurred by the Lender (including, without
limitation, costs of collection, court costs, and reasonable attorneys’ fees and disbursements) in connection with the successful
enforcement of the Lender’s rights under this Note (all such costs, charges and expenses being herein referred to as “Costs”).
The Company agrees that any delay on the part of the Lender in exercising any rights hereunder will not operate as a waiver of
such rights, and further agrees that any payments received hereunder will be applied first to Costs, then to interest, and the
balance to principal. The Lender shall not by any act, delay, omission, or otherwise be deemed to waive any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the Lender. Presentment for payment, demand, protest,
notice of protest and notice of nonpayment are hereby waived.
Section 7. Miscellaneous.
This Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto. This Note is made under
and shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts. This Note may
be amended, substituted, altered, waived, modified or extended, and the Note may be substituted, extended, converted or exchanged,
by the written consent of the Company and the Majority Lenders.
{Signature Page Follows}
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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-3-
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IN WITNESS WHEREOF,
the Company has executed this Promissory Note as an instrument under seal as of the date first written above.
ATTEST:
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iSpecimen Inc.
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XXXXXXXXXXXXXXXXXX
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By:
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/s/ Christopher Ianelli
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Title:
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Christopher Ianelli, Chief Executive Officer
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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Exhibit 10.18
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
iSpecimen Inc.
SECURED PROMISSORY NOTE
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$ 000,000.00
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_________
__, 201_
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FOR VALUE RECEIVED,
iSpecimen Inc., a Delaware corporation (the “Company”), hereby promises to pay, on the written demand
of the combined Majority Lenders at any time on or after the earlier of (i) the closing of a new permanent equity financing
yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes), (ii) the sale of the Company,
(iii) prepayment by the Company, or (iv) December 31, 2019 (which date may be extended for two successive three
month periods with the approval of the Board of Directors of the Company) (the “Maturity Date”), to [NAME]
(the “Lender”) the principal sum of [WRITTEN AMOUNT]
dollars ($000,000) or such lesser principal amount then outstanding, together
with all accrued and unpaid interest thereon as set forth below. This Note is being issued in connection with an interim debt financing
of the Company by Lender and other lenders in an amount of up to $4,000,000, pursuant to the terms of certain Note Subscription
Agreements (the “Note Subscription Agreements”). Terms not defined herein shall have the meanings set
forth in the Note Subscription Agreements between the Company and the Lender, and other lenders who have executed similar Note
Subscription Agreements.
Section 1. Interest.
Interest on the principal amount of this Note will accrue from and including the date hereof until and including the date such
principal amount is paid, at a rate equal to twenty four percent (24%) per annum, without compounding. Principal and interest shall
be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the
Lender or at such other place as the legal holder may designate from time to time in writing to the Company. Interest shall be
computed on the basis of a 365-day year, for the actual days elapsed. Notwithstanding any other provision of this Note, the Lender
hereof does not intend to charge, and the Company shall not be required to pay, any interest or other fees or charges in excess
of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to the Company or credited
to reduce principal hereunder.
Section 2. Prepayment
and Prepayment Penalty. The Company may pay this Note in whole or in part at any time prior to the Maturity Date without
the prior approval or consent of the Majority Lenders and without penalty, except if this Note is prepaid by the Company within
ninety (90) days of its issuance, the Company shall pay a prepayment penalty equal to the amount of interest required to be paid
such that under no circumstances will the Lender have received less than ninety (90) days of interest under this Note in the aggregate.
The Lender will note all partial payments of principal and accompanying payments of interest on the face or reverse side of this
Note.
Section 3. Subordination.
The obligations represented by this Note shall be subordinated in right of payment and priority and subject, in the manner
and to the extent described below, to any and all obligations owed by the Company to holders of the Senior Debt (as defined herein),
so long as any Senior Debt remains unpaid, in whole or in part, or the holder of any Senior Debt is committed or otherwise obligated
to extend credit to the Company under any loan agreement. The term “Senior Debt” shall mean all present
and future indebtedness for money borrowed of the Company from institutional lenders, commercial credit companies, commercial banks,
credit unions, and government agencies, which may be, from time to time, incurred by the Company, including, but not limited to,
any negotiable instruments evidencing the same, all guaranties, debts, demands, monies, indebtedness, liabilities and obligations
owed or to become owing, including interest, principal, costs, and other charges, and all claims, rights, causes of action, judgments,
decrees, remedies, or other obligations of any kind whatsoever and howsoever arising, whether voluntary, involuntary, absolute,
contingent, direct, indirect, or by operation of law.
iSpecimen Inc.
Note Subscription Agreement, July 2018
So long as any of the
Senior Debt remains unpaid and outstanding, in whole or in part, or so long as a Senior Debt lender is committed or otherwise obligated
to extend credit to the Company under any loan agreement, the holders of the Notes agrees that each such holder shall not: (i) collect,
or receive payment upon, by setoff or in any other manner, all or any portion of the obligations now or hereafter existing under
the Notes; (ii) sell, assign, transfer, pledge, or give a security interest in the Notes; (iii) enforce or apply any
security, now or hereafter existing for the Notes; (iv) commence, prosecute or participate in any administrative, legal, or
equitable action against the Company concerning the obligations under the Notes; (v) join in any petition for bankruptcy,
assignment for the benefit of creditors, or creditors’ agreement; (vi) take, maintain or enforce any lien or security,
which is senior to the Senior Debt lender’s interest, in any property, real or personal, to secure the obligations under
the Notes; or (vii) incur any obligation to, or receive any loans, advances, dividends, payments of any kind or gifts from,
the Company with respect to the obligations under the Notes; provided, however, that this paragraph shall not apply
to (a) any filing by the holder of the Notes of any proof of claim or any other similar filing or action to protect such lender’s
rights in bankruptcy, or (b) any action by the Company or the holders of the Notes that results solely in the issuance and/or
receipt of capital stock or other equity security of the Company.
Section 4. Events
of Default. The outstanding balance of this Note shall be immediately due and payable prior to maturity in case of any
of the following events, each of which shall be an “Event of Default”: (a) any failure of the Company
to pay all outstanding principal and accrued interest on this Note, together with any other amounts otherwise due and owing (collectively,
“Obligations”), on demand of the Major Holders at any time on or after the Maturity Date; (b) any
Event of Bankruptcy; (c) a dissolution, termination of existence, suspension or discontinuance of business, or ceasing
to operate as a going concern; (d) the issuance of any injunction or restraining order which results in a Material Adverse
Effect on any aspect of the business or assets of the Company, or levy on or attachment of any funds or other property, real or
personal, of the Company, in an amount in excess of $100,000, if, in each case, the same is not dismissed, discharged, released,
satisfied or vacated within a period of sixty (60) days; (e) the failure to perform any material covenant by the Company under
the Note Subscription Agreement for a period of 45 days; or (f) a material default (following expiration of any applicable
notice and cure periods) under any other material agreement of the Company, and in which the default results in a liability or
obligation against the Company greater than $100,000. As used herein, an “Event of Bankruptcy” means
any of the following events impacting the Company or its operating subsidiaries: (i) any assignment by the Company for the
benefit of its creditors; (ii) an admission in writing by the Company of its inability to pay its debts as they become due;
(iii) filing by the Company of a voluntary petition in bankruptcy; (iv) seeking or consenting to, or acquiescing in,
the appointment of any trustee, receiver, custodian, liquidator or similar official for the Company or a substantial part of its
property; (v) the elapse of 90 days after the commencement of an action against the Company seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief without such action being dismissed; (vi) the insolvency
or other cessation of existence of the Company and its operating subsidiaries; or (vii) any corporate action by the Company
to authorize or effect any of the foregoing actions. Upon any Event of Default, the interest rate on the Notes shall be computed
at an annual rate of thirty percent (30%) from and after the Event of Default. Upon the occurrence of an Event of Default, the
Lender’s remedies shall include the rights to declare the entire principal balance of this Note and any accrued and unpaid
interest immediately due and payable, without notice or presentment, or exercise any other remedies available to a lender under
the Uniform Commercial Code and the Note Subscription Agreement.
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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-2-
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Section 5. Remedies
upon Default. Upon the occurrence of an Event of Default which is not cured by the Company within the applicable notice and
cure period or otherwise waived by the Major Holders, all Obligations of the company shall be immediately due and payable in full
and the Secured Parties (as defined in the Note Subscription Agreements) shall have the rights and remedies of a secured party
under the Code. The waiver of the Major Holders of a Default shall not constitute a waiver of any other occurrence that constitutes
an Event of Default. Any actions taken by the Secured Parties or the Collateral Agent pursuant to this Agreement shall require
the consent of the Major Holders, and the Collateral Agent shall deliver to the Secured Parties a good faith estimate of the expenses
it expects to incur in connection with such actions prior to or contemporaneous with receiving the consent of the Major Holders.
Upon a Default, the Secured Parties may but are not required to do any one or more of the following: (i) without notice or
demand to the Company declare the Obligations to be immediately due and payable; (ii) exercise the rights and remedies accorded
a secured party by the Uniform Commercial Code or by any instrument securing the Obligations (including but not limited to, taking
immediate possession of the Collateral); or (iii) perform any warranty, covenant or agreement which the Company has failed
to perform under the Subscription Agreement. Upon a Default, if the Secured Parties exercise their rights and remedies under the
Code, the proceeds received from the disposition of the Collateral shall be applied as follows: (a) First, to reimburse the
Secured Parties for their reasonable expenses in connection with the collection and sale of the Collateral; (b) Second, to
the payment of all principal and interest due on the Notes; provided, however, that all payments made under the Promissory
Notes shall be made pro rata, based on the principal amount owing under the Notes; and (c) Third, any excess funds to the
Company.
Section 6. Payment
of Costs of Enforcement. The Company agrees to pay all costs, charges and expenses incurred by the Lender (including, without
limitation, costs of collection, court costs, and reasonable attorneys’ fees and disbursements) in connection with the successful
enforcement of the Lender’s rights under this Note (all such costs, charges and expenses being herein referred to as “Costs”).
The Company agrees that any delay on the part of the Lender in exercising any rights hereunder will not operate as a waiver of
such rights, and further agrees that any payments received hereunder will be applied first to Costs, then to interest, and the
balance to principal. The Lender shall not by any act, delay, omission, or otherwise be deemed to waive any of its rights or remedies,
and no waiver of any kind shall be valid unless in writing and signed by the Lender. Presentment for payment, demand, protest,
notice of protest and notice of nonpayment are hereby waived.
Section 7. Miscellaneous.
This Note applies to, inures to the benefit of, and binds the successors and assigns of the parties hereto. This Note is made under
and shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts. This Note may
be amended, substituted, altered, waived, modified or extended, and the Note may be substituted, extended, converted or exchanged,
by the written consent of the Company and the Majority Lenders.
{Signature Page Follows}
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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IN WITNESS WHEREOF,
the Company has executed this Promissory Note as an instrument under seal as of the date first written above.
ATTEST:
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iSpecimen Inc.
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By:
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/s/
Christopher Ianelli
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Title:
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Christopher Ianelli, Chief Executive Officer
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iSpecimen Inc.
Note Subscription Agreement, July 2018
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Exhibit 10.19
iSpecimen
Inc.
Amendment
to Note Subscription Agreements and Secured Promissory Notes
Approved
by the Board of Directors on April 26, 2019
This Amendment to
the Note Subscription Agreements and Secured Promissory Notes (this “Amendment”) is made and entered
into and effective as of May 1, 2019, by and among iSpecimen Inc., a Delaware corporation (the “Company”),
and those investors who are holders (the “Note Investors”) of the Company’s Secured Promissory
Notes in the aggregate principal amount of $3,195,000 (as described below).
Whereas,
the Company and the Note Investors have previously and separately entered into various Note Subscription Agreements executed at
various times between August 2018 and April 2019 (the “Note Subscription Agreements”), pursuant to which
the Company issued and sold $3,195,000 in aggregate principal amount of Secured Promissory Notes (the “Secured Promissory
Notes”);
Whereas,
the Note Subscription Agreements and the Secured Promissory Notes may be amended with the consent of the Company and the holders
of greater than fifty-percent (50%) in principal amount of outstanding Secured Promissory Notes (the “Majority Lenders”
as defined in the Note Subscription Agreements prior to this Amendment);
Now,
Therefore, in consideration of the mutual promises and covenants set forth herein,
and for other good and valuable consideration, the receipt of and sufficiency of which are hereby acknowledged, the Company and
the undersigned Note Investors agree as follows:
1. Defined Terms. Except as specifically provided herein, capitalized terms not defined herein shall have the
meanings ascribed to them in the Note Subscription Agreements and the Secured Promissory Notes.
2. Amendments to the Note Subscription Agreements and the Secured Promissory Notes. The Note Subscription Agreements
and the Secured Promissory Notes are hereby amended as follows:
|
|
A.
|
Note Subscription Agreement: Section 1.2, Initial Closing Date and Serial Closings
|
|
|
Delete:
|
“A minimum capital requirement
for the initial closing shall be $500,000.00 (the “Initial Closing”). The Initial Closing shall take
place as soon as practicable but no later than September 30, 2018 (the “Closing Date”) following satisfaction
of the conditions set forth in Section 6 below. At any time, and from time to time, during the one-year period immediately following
the Initial Closing, the Company may, at one or more additional closings (each a “Closing”), offer,
sell and issue additional Notes to Investors upon the same terms and conditions hereof, provided that in no event shall the
Company issue more than $4,000,000 in aggregate principal amount of Notes across all Closings, including at the Initial Closing.
Additional Closings may be held at the discretion of the Board of Directors, and at each such Closing, any Investor shall execute
an agreement in form and substance similar to this Agreement, and the Company shall issue to such Investor a Note in the amount
of such investment at such additional Closing. Notwithstanding the foregoing, the Board of Directors may extend the period for
additional Closings beyond one-year in its sole discretion.”
|
|
|
Insert:
|
“A minimum capital requirement
for the initial closing shall be $500,000.00 (the “Initial Closing”). The Initial Closing shall take
place as soon as practicable but no later than September 30, 2018 (the “Closing Date”) following satisfaction
of the conditions set forth in Section 6 below. At any time, and from time to time, during the eighteen (18) month period immediately
following the Initial Closing, the Company may, at one or more additional closings (each a “Closing”),
offer, sell and issue additional Notes to Investors upon the same terms and conditions hereof, provided that in no event shall
the Company issue more than $5,000,000 in aggregate principal amount of Notes across all Closings, including at the Initial
Closing. Additional Closings may be held at the discretion of the Board of Directors, and at each such Closing, any Investor shall
execute an agreement in form and substance similar to this Agreement, and the Company shall issue to such Investor a Note in the
amount of such investment at such additional Closing. Notwithstanding the foregoing, the Board of Directors may extend the period
for additional Closings beyond one-year in its sole discretion.”
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iSpecimen Inc.
Amendment to Note Subscription Agreements and Secured Promissory Notes, April 2019
|
Page 1
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B.
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Note Subscription Agreement: Section 1.4, Amendment of Notes
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|
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Delete:
|
“This Agreement and the Notes
may be amended, extended, converted, substituted, or otherwise modified on behalf of all holders of Notes issued in connection
with this Note Financing with the written consent or approval of the Company and the holders of at least a majority in aggregate
principal amount of all Notes issued in this Note Financing (the “Majority Lenders”). No individual
Note holder shall have the right to block any corporate action unless acted upon by the Majority Lenders and the Company, as set
forth above. The Notes issued to the undersigned Investor and all other Notes issued by the Company in this Note Financing shall
rank pari passu in all respects (including repayment).”
|
|
|
Insert:
|
“This Agreement and the Notes
may be amended, extended, converted, substituted, or otherwise modified on behalf of all holders of Notes issued in connection
with this Note Financing with the written consent or approval of the Company and the holders of no less than seventy five percent
(75%) in aggregate principal amount of all Notes issued in this Note Financing (the “Majority Lenders”).
No individual Note holder shall have the right to block any corporate action unless acted upon by the Majority Lenders and the
Company, as set forth above. The Notes issued to the undersigned Investor and all other Notes issued by the Company in this Note
Financing shall rank pari passu in all respects (including repayment).”
|
3. Effect of Amendment. The parties hereby agree and acknowledge that except as provided in this Amendment, the
Note Subscription Agreements and the Secured Promissory Notes remain in full force and effect, it being the intention of the parties
that this Amendment, the Note Subscription Agreements, and the Secured Promissory Notes, as applicable, be read, construed and
interpreted as one and the same integrated instrument. This Amendment shall automatically take effect when executed, signed and
delivered by those Note Investors holding greater than fifty-percent (50%) in principal amount of the outstanding Secured Promissory
Notes. The undersigned parties hereby acknowledge and agree that, except as provided in this Amendment, the Note Subscription Agreements,
the Secured Promissory Notes, and the respective agreements, covenants and obligations thereunder, are hereby expressly ratified
and confirmed as of the date hereof.
4. Counterparts; Facsimile and Electronic Signatures. This Amendment may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute
a single integrated agreement. For purposes of this Amendment, a document (or signature page thereto) signed and transmitted by
facsimile machine, portable document format, or other electronic means is to be treated as an original document. The signature
of any party on any such document, for purposes hereof, is to be considered as an original signature, and the document transmitted
is to be considered to have the same binding effect as an original signature on an original document. No party may raise the use
of a facsimile machine or other electronic means, or the fact that any signature was transmitted through the use of a facsimile
machine or other electronic means, as a defense to the enforcement of this Amendment.
[REST OF PAGE INTENTIONALLY LEFT BLANK
-- SIGNATURE PAGE FOLLOWS]
|
iSpecimen Inc.
Amendment to Note Subscription Agreements and Secured Promissory Notes, April 2019
|
Page 2
|
iSpecimen
Inc.
Amendment
TO THE
NOTE
SUBSCRIPTION AGREEMENTS and secured promissory notes
Approved
by the Board of Directors on April 26, 2019
In
Witness Whereof, the parties hereto have executed this Amendment to the Note Subscription Agreements and Secured
Promissory Notes as of the date and year first written above, as an instrument under seal.
|
|
Company:
|
|
|
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iSpecimen
Inc.
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|
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By:
|
/s/ Christopher Ianelli, MD, PhD
|
|
|
|
|
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Name:
|
Christopher Ianelli, MD, PhD
|
|
|
|
|
|
|
|
|
Title:
|
Chief Executive Office
|
This
Amendment shall take effect when executed by the Company and those Note Investors holding greater than fifty-percent (50%) in principal
amount of all outstanding Secured Promissory Notes and shall be binding on all other holders of the Secured
Promissory Notes.
Note
Investors:
|
If Entity, Please Print Name of Entity & Title:
|
|
If Individual, Print Name of Investor:
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Name of Entity:
|
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Print Name:
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By:
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By:
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Signature
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Signature
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Title:
|
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|
Date: _________________________, 2019
|
|
Date: ________________________, 2019
|
Principal amount of Notes
held on date above:
iSpecimen Inc.
Amendment to Note Subscription Agreements and Secured Promissory Notes, April 2019
Exhibit 10.20
iSpecimen
Inc.
Amendment
to Note Subscription Agreements and Secured Promissory Notes
Approved
by the Board of Directors on October 25, 2019
This Amendment to
the Note Subscription Agreements and Secured Promissory Notes (this “Amendment”) is made and entered
into and effective as of November 15, 2019, by and among iSpecimen Inc., a Delaware corporation (the “Company”),
and those investors who are holders (the “Note Investors”) of the Company’s Secured Promissory
Notes in the aggregate principal amount of $4,945,000 (as described below).
Whereas, the
Company and the Note Investors have previously and separately entered into various Note Subscription Agreements executed at various
times between August 2018 and October 2019 (the “Note Subscription Agreements”), pursuant to which the
Company issued and sold $4,945,000 in aggregate principal amount of Secured Promissory Notes (the “Secured Promissory
Notes”);
Whereas,
the Note Subscription Agreements and the Secured Promissory Notes may be amended with the consent of the Company and the holders
of greater than seventy-five percent (75%) in principal amount of outstanding Secured Promissory Notes (the “Majority
Lenders” as defined in the Note Subscription Agreements prior to this Amendment);
Now, Therefore,
in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt
of and sufficiency of which are hereby acknowledged, the Company and the undersigned Note Investors agree as follows:
1. Defined Terms. Except as specifically provided herein, capitalized terms not defined herein shall have the
meanings ascribed to them in the Note Subscription Agreements and the Secured Promissory Notes.
2. Amendments to the Note Subscription Agreements and the Secured Promissory Notes. The Note Subscription Agreements
and the Secured Promissory Notes are hereby amended as follows:
|
|
A.
|
Note Subscription Agreement: Section 1.2, Initial Closing Date and Serial Closings
|
|
|
Delete:
|
“A minimum capital requirement for the initial closing shall be $500,000.00 (the “Initial
Closing”). The Initial Closing shall take place as soon as practicable but no later than September 30, 2018 (the
“Closing Date”) following satisfaction of the conditions set forth in Section 6 below. At any time, and
from time to time, during the eighteen (18) month period immediately following the Initial Closing, the Company may, at one or
more additional closings (each a “Closing”), offer, sell and issue additional Notes to Investors upon
the same terms and conditions hereof, provided that in no event shall the Company issue more than $5,000,000 in aggregate principal
amount of Notes across all Closings, including at the Initial Closing. Additional Closings may be held at the discretion of
the Board of Directors, and at each such Closing, any Investor shall execute an agreement in form and substance similar to this
Agreement, and the Company shall issue to such Investor a Note in the amount of such investment at such additional Closing. Notwithstanding
the foregoing, the Board of Directors may extend the period for additional Closings beyond one-year in its sole discretion.”
|
|
|
Insert:
|
“A minimum capital requirement for the initial closing shall be $500,000.00 (the “Initial
Closing”). The Initial Closing shall take place as soon as practicable but no later than September 30, 2018 (the
“Closing Date”) following satisfaction of the conditions set forth in Section 6 below. At any time, and
from time to time, during the eighteen (18) month period immediately following the Initial Closing, the Company may, at one or
more additional closings (each a “Closing”), offer, sell and issue additional Notes to Investors upon
the same terms and conditions hereof, provided that in no event shall the Company issue more than $7,000,000 in aggregate principal
amount of Notes across all Closings, including at the Initial Closing. Additional Closings may be held at the discretion of
the Board of Directors, and at each such Closing, any Investor shall execute an agreement in form and substance similar to this
Agreement, and the Company shall issue to such Investor a Note in the amount of such investment at such additional Closing. Notwithstanding
the foregoing, the Board of Directors may extend the period for additional Closings beyond eighteen months in its sole discretion.”
|
|
iSpecimen Inc.
Second Amendment to Note Subscription Agreements and Secured Promissory Notes, November 2019
|
Page 1
|
3. Effect of Amendment. The parties hereby agree and acknowledge that except as provided in this Amendment, the
Note Subscription Agreements and the Secured Promissory Notes remain in full force and effect, it being the intention of the parties
that this Amendment, the Note Subscription Agreements, and the Secured Promissory Notes, as applicable, be read, construed and
interpreted as one and the same integrated instrument. This Amendment shall automatically take effect when executed, signed and
delivered by those Note Investors holding greater than seventy-five percent (75%) in principal amount of the outstanding Secured
Promissory Notes. The undersigned parties hereby acknowledge and agree that, except as provided in this Amendment, the Note Subscription
Agreements, the Secured Promissory Notes, and the respective agreements, covenants and obligations thereunder, are hereby expressly
ratified and confirmed as of the date hereof.
4. Counterparts; Facsimile and Electronic Signatures. This Amendment may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute
a single integrated agreement. For purposes of this Amendment, a document (or signature page thereto) signed and transmitted by
facsimile machine, portable document format, or other electronic means is to be treated as an original document. The signature
of any party on any such document, for purposes hereof, is to be considered as an original signature, and the document transmitted
is to be considered to have the same binding effect as an original signature on an original document. No party may raise the use
of a facsimile machine or other electronic means, or the fact that any signature was transmitted through the use of a facsimile
machine or other electronic means, as a defense to the enforcement of this Amendment.
[REST OF PAGE INTENTIONALLY LEFT BLANK
-- SIGNATURE PAGE FOLLOWS]
|
iSpecimen Inc.
Second Amendment to Note Subscription Agreements and Secured Promissory Notes, November 2019
|
Page 2
|
iSpecimen
Inc.
Amendment
TO THE
NOTE
SUBSCRIPTION AGREEMENTS and secured promissory notes
Approved
by the Board of Directors on October 25, 2019
In
Witness Whereof, the parties hereto have executed this Amendment to the Note Subscription Agreements and Secured
Promissory Notes as of the date and year first written above, as an instrument under seal.
|
|
Company:
|
|
|
|
|
|
iSpecimen
Inc.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Christopher Ianelli, MD, PhD
|
|
|
|
|
|
|
|
Name:
|
Christopher Ianelli, MD, PhD
|
|
|
|
|
|
|
|
|
Title:
|
Chief Executive Office
|
This Amendment
shall take effect when executed by the Company and those Note Investors holding greater than seventy-five percent (75%) in principal
amount of all outstanding Secured Promissory Notes and shall be binding on all other holders of the Secured Promissory Notes.
Note Investors:
|
If Entity, Please Print Name of Entity & Title:
|
|
If Individual, Print Name of Investor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Entity:
|
|
|
Print Name:
|
|
|
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
Signature
|
|
|
Signature
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
Date: _________________________, 2019
|
|
Date: ________________________, 2019
|
Principal amount of Notes held on date above:
|
iSpecimen Inc.
Second Amendment to Note Subscription Agreements and Secured Promissory Notes, November 2019
|
Exhibit 10.21
iSpecimen
Inc.
Third
Amendment to Note Subscription Agreements and Secured Promissory Notes
Approved by the Board of Directors on
June 2, 2020
This Third Amendment to the Note Subscription
Agreements and Secured Promissory Notes (this “Amendment”) is made and entered into and effective
as of June 15, 2020, by and among iSpecimen Inc., a Delaware corporation (the “Company”),
and those investors who are holders (the “Note Investors”) of the Company’s Secured Promissory
Notes in the aggregate principal amount of $6,250,000 (as described below).
Whereas, the
Company and the Note Investors have previously and separately entered into various Note Subscription Agreements executed at various
times between August 2018 and January 2020 (the “Note Subscription Agreements”), pursuant to
which the Company issued and sold $6,250,000 in aggregate principal amount of Secured Promissory Notes (the “Secured
Promissory Notes”);
Whereas,
the Note Subscription Agreements and the Secured Promissory Notes may be amended with the consent of the Company and the holders
of greater than seventy-five percent (75%) in principal amount of outstanding Secured Promissory Notes (the “Majority
Lenders” as defined in the Note Subscription Agreements prior to this Amendment);
Now, Therefore,
in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt
of and sufficiency of which are hereby acknowledged, the Company and the undersigned Note Investors agree as follows:
1. Defined
Terms. Except as specifically provided herein, capitalized terms not defined herein shall have the meanings ascribed to
them in the Note Subscription Agreements and the Secured Promissory Notes.
2. Amendments
to the Note Subscription Agreements and the Secured Promissory Notes. The Note Subscription Agreements and the Secured
Promissory Notes are hereby amended as follows:
|
|
A.
|
Note Subscription Agreement: Section 1, Subscription for Note
|
|
|
Delete:
|
“Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Secured Promissory Notes, in the form attached hereto as Exhibit A
(the “Notes”), in the amount set forth on the signature page of this Agreement. The Notes shall
bear interest at a rate of twenty four percent (24%) per annum, on a non-compounding basis, and due on maturity on the earlier
of (i) the closing of a new permanent equity financing yielding gross proceeds in excess of $10,000,000 (inclusive of existing
convertible notes), (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) December 31, 2019
(which date may be extended for two successive three month periods with the approval of the Board of Directors of the Company)
(the “Maturity Date”). The Notes will be repayable upon demand of the Majority Lenders at any time on
or after the Maturity Date, provided that the Notes have not been otherwise repaid in accordance with their terms. The Notes will
be secured obligations of the Company. The Majority Lenders may, with the approval of the Company, elect to extend the Maturity
Date one or more times, at their discretion. The Notes will be issued by the Company solely to “accredited investors”
(as defined under Rule 501 of Regulation D of the Securities Act of 1933, as amended, the “Securities Act”).”
|
|
iSpecimen Inc.
Third Amendment to Note Subscription Agreements and Secured Promissory Notes, June 2020
|
Page 1
|
|
|
Insert:
|
“Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Secured Promissory Notes, in the form attached hereto as Exhibit A
(the “Notes”), in the amount set forth on the signature page of this Agreement. The Notes shall
bear interest at a rate of twenty four percent (24%) per annum, on a non-compounding basis, and due on maturity on the earlier
of (i) the closing of a new permanent equity financing yielding gross proceeds in excess of $10,000,000 (inclusive of existing
convertible notes), (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) December 31, 2019
(which date may be extended for three successive three month periods with the approval of the Board of Directors of the
Company) (the “Maturity Date”). The Notes will be repayable upon demand of the Majority Lenders at any
time on or after the Maturity Date, provided that the Notes have not been otherwise repaid in accordance with their terms. The
Notes will be secured obligations of the Company. The Majority Lenders may, with the approval of the Company, elect to extend the
Maturity Date one or more times, at their discretion. The Notes will be issued by the Company solely to “accredited investors”
(as defined under Rule 501 of Regulation D of the Securities Act of 1933, as amended, the “Securities Act”).”
|
3. Effect
of Amendment. The parties hereby agree and acknowledge that except as provided in this Amendment, the Note Subscription
Agreements and the Secured Promissory Notes remain in full force and effect, it being the intention of the parties that this Amendment,
the Note Subscription Agreements, and the Secured Promissory Notes, as applicable, be read, construed and interpreted as one and
the same integrated instrument. This Amendment shall automatically take effect when executed, signed and delivered by those Note
Investors holding greater than seventy-five percent (75%) in principal amount of the outstanding Secured Promissory Notes. The
undersigned parties hereby acknowledge and agree that, except as provided in this Amendment, the Note Subscription Agreements,
the Secured Promissory Notes, and the respective agreements, covenants and obligations thereunder, are hereby expressly ratified
and confirmed as of the date hereof.
4. Counterparts;
Facsimile and Electronic Signatures. This Amendment may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute a single integrated agreement.
For purposes of this Amendment, a document (or signature page thereto) signed and transmitted by facsimile machine, portable
document format, or other electronic means is to be treated as an original document. The signature of any party on any such document,
for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the
same binding effect as an original signature on an original document. No party may raise the use of a facsimile machine or other
electronic means, or the fact that any signature was transmitted through the use of a facsimile machine or other electronic means,
as a defense to the enforcement of this Amendment.
[REST OF PAGE INTENTIONALLY LEFT BLANK
-- SIGNATURE PAGE FOLLOWS]
|
iSpecimen Inc.
Third Amendment to Note Subscription Agreements and Secured Promissory Notes, June 2020
|
Page 2
|
iSpecimen
Inc.
Third
Amendment TO THE
NOTE
SUBSCRIPTION AGREEMENTS and secured promissory notes
Approved by the Board of Directors on
June 2, 2020
In
Witness Whereof, the parties hereto have executed this Amendment to the Note Subscription Agreements and Secured
Promissory Notes as of the date and year first written above, as an instrument under seal.
|
|
Company:
|
|
|
|
|
|
iSpecimen Inc.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Christopher Ianelli, MD, PhD
|
|
|
|
|
|
|
|
Name:
|
Christopher Ianelli, MD, PhD
|
|
|
|
|
|
|
|
|
Title:
|
Chief Executive Office
|
This Amendment shall take effect
when executed by the Company and those Note Investors holding greater than seventy-five percent (75%) in principal amount of all
outstanding Secured Promissory Notes and shall be binding on all other holders of the Secured Promissory Notes.
Note Investors:
|
If Entity, Please Print Name of Entity & Title:
|
|
If Individual, Print Name of Investor:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Entity:
|
|
|
Print Name:
|
|
|
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
Signature
|
|
|
Signature
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
Date: __________________________, 2019
|
|
Date: ________________________, 2019
|
Principal amount of Notes held on date above:
Exhibit 10.22
iSpecimen
Inc.
Fourth
Amendment to Note Subscription Agreements and Secured Promissory
Notes
Approved
by the Board of Directors on September 30, 2020
This Fourth Amendment
to the Note Subscription Agreements and Secured Promissory Notes (this “Amendment”) is made and entered
into and effective as of October 1, 2020 (the “Effective Amendment Date”), by and among iSpecimen
Inc., a Delaware corporation (the “Company”), and those investors who are holders (the “Note
Investors”) of the Company’s Secured Promissory Notes in the aggregate principal amount of $6,500,000 (as described
below).
Whereas, the
Company and the Note Investors have previously and separately entered into various Note Subscription Agreements executed at various
times between August 2018 and September 2020 (the “Note Subscription Agreements”), pursuant to which
the Company issued and sold $6,500,000 in aggregate principal amount of Secured Promissory Notes (the “Secured Promissory
Notes”);
Whereas,
the Note Subscription Agreements and the Secured Promissory Notes may be amended with the consent of the Company and the holders
of greater than seventy-five percent (75%) in principal amount of outstanding Secured Promissory Notes (the “Majority
Lenders” as defined in the Note Subscription Agreements prior to this Amendment);
Now, Therefore,
in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt
of and sufficiency of which are hereby acknowledged, the Company and the undersigned Note Investors agree as follows:
1.
Defined Terms. Except as specifically provided herein, capitalized terms not defined herein shall have the
meanings ascribed to them in the Note Subscription Agreements and the Secured Promissory Notes.
2.
Amendments to the Note Subscription Agreements and the Secured Promissory Notes. The Note Subscription Agreements
and the Secured Promissory Notes are hereby amended as follows:
|
|
A.
|
Note Subscription Agreement: Section 1, Subscription for Note
|
|
|
Delete:
|
“Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Secured Promissory Notes, in the form attached hereto as Exhibit A (the
“Notes”), in the amount set forth on the signature page of this Agreement. The Notes shall bear interest
at a rate of twenty four percent (24%) per annum, on a non-compounding basis, and due on maturity on the earlier of (i) the closing
of a new permanent equity financing yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes),
(ii) the sale of the Company, (iii) prepayment by the Company, or (iv) December 31, 2019 (which date may be extended for three
successive three month periods with the approval of the Board of Directors of the Company) (the “Maturity Date”).
The Notes will be repayable upon demand of the Majority Lenders at any time on or after the Maturity Date, provided that the Notes
have not been otherwise repaid in accordance with their terms. The Notes will be secured obligations of the Company. The Majority
Lenders may, with the approval of the Company, elect to extend the Maturity Date one or more times, at their discretion. The Notes
will be issued by the Company solely to “accredited investors” (as defined under Rule 501 of Regulation D of the Securities
Act of 1933, as amended, the “Securities Act”).”
|
|
iSpecimen Inc.
|
|
|
Fourth Amendment to Note Subscription Agreements and Secured Promissory Notes, October 2020
|
Page 1
|
|
|
Insert:
|
“Subject to the terms and conditions contained herein, the undersigned Investor hereby subscribes
for and agrees to purchase the principal amount of Secured Promissory Notes, in the form attached hereto as Exhibit A (the
“Notes”), in the amount set forth on the signature page of this Agreement. The Notes shall bear interest,
on a non-compounding basis, at a rate of twenty four percent (24%) per annum prior to October 1, 2020 and at a rate of thirty percent
(30%) per annum from and after October 1, 2020, due on maturity on the earlier of (i) the closing of a new permanent equity financing
yielding gross proceeds in excess of $10,000,000 (inclusive of existing convertible notes), (ii) the sale of the Company, (iii)
prepayment by the Company, or (iv) March 31, 2021 (the “Maturity Date”). The Notes will be repayable
upon demand of the Majority Lenders at any time on or after the Maturity Date, provided that the Notes have not been otherwise
repaid in accordance with their terms. The Notes will be secured obligations of the Company. The Majority Lenders may, with the
approval of the Company, elect to extend the Maturity Date one or more times, at their discretion. The Notes will be issued by
the Company solely to “accredited investors” (as defined under Rule 501 of Regulation D of the Securities Act of 1933,
as amended, the “Securities Act”).”
|
3. Effect
of Amendment. The parties hereby agree and acknowledge that except as provided in this Amendment, the Note Subscription
Agreements and the Secured Promissory Notes remain in full force and effect, it being the intention of the parties that this Amendment,
the Note Subscription Agreements, and the Secured Promissory Notes, as applicable, be read, construed and interpreted as one and
the same integrated instrument. This Amendment shall automatically take effect when executed, signed and delivered by those Note
Investors holding greater than seventy-five percent (75%) in principal amount of the outstanding Secured Promissory Notes. The
undersigned parties hereby acknowledge and agree that, except as provided in this Amendment, the Note Subscription Agreements,
the Secured Promissory Notes, and the respective agreements, covenants and obligations thereunder, are hereby expressly ratified
and confirmed as of the date hereof.
4. Counterparts;
Facsimile and Electronic Signatures. This Amendment may be executed in any number of counterparts, and each such counterpart
hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute a single integrated agreement.
For purposes of this Amendment, a document (or signature page thereto) signed and transmitted by facsimile machine, portable document
format, or other electronic means is to be treated as an original document. The signature of any party on any such document, for
purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same
binding effect as an original signature on an original document. No party may raise the use of a facsimile machine or other electronic
means, or the fact that any signature was transmitted through the use of a facsimile machine or other electronic means, as a defense
to the enforcement of this Amendment.
[REST OF PAGE INTENTIONALLY LEFT BLANK
-- SIGNATURE PAGE FOLLOWS]
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iSpecimen Inc.
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Fourth Amendment to Note Subscription Agreements and Secured Promissory Notes, October 2020
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Page 2
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iSpecimen
Inc.
Fourth
Amendment TO THE
NOTE
SUBSCRIPTION AGREEMENTS and secured promissory notes
Approved
by the Board of Directors on September 30, 2020
In
Witness Whereof, the parties hereto have executed this Amendment to the Note Subscription Agreements and Secured
Promissory Notes as of the Effective Amendment Date, as an instrument under seal.
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By:
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/s/ Christopher Ianelli, MD, PhD
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Name:
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Christopher Ianelli, MD, PhD
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Title:
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Chief Executive Office
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This Amendment
shall take effect when executed by the Company and those Note Investors holding greater than seventy-five percent (75%) in principal
amount of all outstanding Secured Promissory Notes and shall be binding on all other holders of the Secured Promissory Notes.
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Note Investor:
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Name:
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Principal amount of Notes held as of October 1, 2020:
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By:
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Name:
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Signature
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Title:
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Address:
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Date:
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iSpecimen Inc.
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Fourth Amendment to Note Subscription Agreements and Secured Promissory Notes, October 2020
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Exhibit 23.1
Consent of Independent Registered Public
Accounting Firm
We consent to the use in this Registration Statement on Form S-1
of iSpecimen Inc. of our report dated November 19, 2020 relating to the financial statements of iSpecimen Inc., appearing
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our firm under the heading
"Experts" in such Prospectus.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
December 31, 2020
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