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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2021

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

For the transition period from ___ to ___

Commission File No. 001-40501

iSpecimen Inc.

(Exact name of Registrant as specified in its Charter)

Delaware

    

27-0480143

(State or other jurisdiction of incorporation
or organization)

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

450 Bedford Street, Lexington, Massachusetts 02420

(Address of principal executive offices) (Zip Code)

(781) 301-6700

(Registrant’s telephone number, including area code)

N/A

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

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

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common Stock, par value $0.0001 per share

ISPC

The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of August 6, 2021, there were 6,922,628 shares of common stock, par value $0.0001 per share, issued and outstanding.

Table of Contents

iSPECIMEN INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION 

ITEM 1 .

Financial Statements

Condensed Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020

3

Unaudited Condensed Statements of Operations for the Three Months and Six Months Ended June 30, 2021 and 2020

4

Unaudited Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Six Months Ended June 30, 2021 and 2020

5

Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

6

Notes to Unaudited Condensed Financial Statements

7

ITEM 2 .

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

24

ITEM 3 .

Quantitative and Qualitative Disclosures About Market Risk

38

ITEM 4 .

Controls and Procedures

38

PART II – OTHER INFORMATION

ITEM 1 .

Legal Proceedings

40

ITEM 1A .

Risk Factors

40

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

ITEM 3.

Defaults Upon Senior Securities

40

ITEM 4.

Mine Safety Disclosures

41

ITEM 5.

Other Information

41

ITEM 6.

Exhibits

41

SIGNATURES

42

2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

iSpecimen Inc.

Condensed Balance Sheets

June 30, 2021

    

December 31, 2020

ASSETS

(Unaudited)

Current assets:

 

  

 

  

Cash

$

13,184,310

$

695,909

Accounts receivable – unbilled

 

1,125,789

 

652,761

Accounts receivable, net of allowance for doubtful accounts of $147,714 and $108,096 at June 30, 2021 and December 31, 2020, respectively

 

1,987,112

 

1,526,392

Prepaid expenses and other current assets

 

442,089

 

417,929

Tax credit receivable, current portion

 

179,376

 

179,376

Total current assets

 

16,918,676

 

3,472,367

Property and equipment, net

 

55,879

 

75,589

Internally developed software, net

 

2,602,886

 

2,634,139

Security deposits

 

27,601

 

27,601

Total assets

$

19,605,042

$

6,209,696

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

3,233,231

$

1,792,432

Accrued expenses

 

1,879,812

 

810,910

Accrued interest

 

9,864

 

3,696,944

Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs

 

 

5,490,811

Derivative liability for embedded conversion features on convertible notes payable

 

 

2,373,000

Bridge notes payable, net of debt issuance costs

 

 

4,589,228

Bridge notes payable, related parties

 

 

1,905,000

Derivative liability for embedded conversion feature on bridge notes payable and bridge notes, related parties

 

 

Note payable, current portion

 

 

604,109

Deferred revenue

 

802,860

 

873,254

Total current liabilities

 

5,925,767

 

22,135,688

Note payable, net of current portion

 

 

178,899

Bridge notes payable, net of debt issuance costs

2,675,000

Bridge notes payable, related parties

325,000

Total liabilities

 

8,925,767

 

22,314,587

Commitments and contingencies

 

  

 

  

Series B convertible preferred stock, $0.0001 par value, 3,200,000 shares authorized, 0 and 572,465 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

7,999,997

Series A-1 convertible preferred stock, $0.0001 par value, 556,550 shares authorized, 0 and 100,365 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

561,041

Series A convertible preferred stock, $0.0001 par value, 3,427,871 shares authorized, 0 and 618,182 issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

2,612,038

Total convertible preferred stock

 

 

11,173,076

Stockholders’ equity (deficit)

 

 

  

Common stock, $0.0001 par value, 200,000,000 shares authorized, 6,596,729 issued, and 6,565,729 outstanding at June 30, 2021, and 16,000,000 shares authorized, 967,213 issued and 936,213 outstanding at December 31, 2020

 

657

 

94

Additional paid-in capital

 

45,094,782

 

1,779,698

Treasury stock, 31,000 shares at June 30, 2021 and December 31, 2020, at cost

 

(172)

 

(172)

Accumulated deficit

 

(34,415,992)

 

(29,057,587)

Total stockholders’ equity (deficit)

 

10,679,275

 

(27,277,967)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

$

19,605,042

$

6,209,696

See accompanying notes to these unaudited interim financial statements.

3

Table of Contents

iSpecimen Inc.

Condensed Statements of Operations

(Unaudited)

    

Three months ended June 30, 

 

Six months ended June 30, 

    

2021

    

2020

    

2021

    

2020

Revenue

$

2,903,876

$

1,504,569

$

5,867,683

$

3,216,228

Operating expenses:

Cost of revenue

 

1,489,196

 

473,982

3,112,847

1,128,249

Technology

 

361,799

 

291,601

771,750

718,314

Sales and marketing

 

647,592

 

367,617

1,176,978

799,256

Supply development

 

100,693

 

147,588

212,269

262,193

Fulfillment

 

287,275

 

185,185

556,371

400,355

General and administrative

 

1,545,852

 

343,602

2,508,643

656,855

Total operating expenses

 

4,432,407

 

1,809,575

8,338,858

3,965,222

Loss from operations

 

(1,528,531)

 

(305,006)

(2,471,175)

(748,994)

Other income (expense), net

Interest expense

 

(1,133,479)

 

(459,005)

(1,986,407)

(1,048,220)

Change in fair value of derivative liability on convertible notes

 

(117,000)

 

583,000

(271,000)

(22,000)

Change in fair value of derivative liability on bridge notes and bridge notes,related parties

 

1,630,700

 

1,582,700

Gain (loss) on extinguishment of bridge notes and bridge notes, related parties

9,746

(2,740,425)

Loss on extinguishment of convertible notes and convertible notes, related parties

(260,185)

(260,185)

Gain on extinguishment of note payable

 

 

788,156

Other income (expense)

 

3,663

 

6,688

(69)

6,691

Interest income

 

172

 

86

309

Other income (expense), net

 

133,617

 

130,769

(2,887,230)

(1,063,220)

Net loss before benefit from income taxes

 

(1,394,914)

 

(174,237)

(5,358,405)

(1,812,214)

Benefit from income taxes

 

 

145

145

Net loss

$

(1,394,914)

$

(174,092)

$

(5,358,405)

$

(1,812,069)

Net loss per share

Basic and diluted

$

(0.87)

$

(0.19)

$

(4.21)

$

(1.94)

Weighted average common shares outstanding

Basic and diluted

 

1,611,774

 

936,213

1,273,993

936,213

See accompanying notes to these unaudited interim financial statements.

4

Table of Contents

iSpecimen Inc.

Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

    

    

    

  

  

    

    

    

    

Total

Series B Convertible

Series A-1 Convertible 

Series A Convertible 

Additional

 Stockholders'

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Treasury Stock

 Paid-In 

Accumulated 

Equity

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit)

Balance at December 31, 2020

 

572,465

$

7,999,997

 

100,365

$

561,041

 

618,182

$

2,612,038

 

936,213

$

94

 

31,000

$

(172)

$

1,779,698

$

(29,057,587)

$

(27,277,967)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

22,036

 

 

22,036

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(3,963,491)

 

(3,963,491)

Balance at March 31, 2021 (unaudited)

 

572,465

$

7,999,997

 

100,365

$

561,041

 

618,182

$

2,612,038

 

936,213

$

94

 

31,000

$

(172)

$

1,801,734

$

(33,021,078)

$

(31,219,422)

Conversion of redeemable convertible preferred stock into common stock upon initial public offering

 

(572,465)

 

(7,999,997)

 

(100,365)

 

(561,041)

 

(618,182)

 

(2,612,038)

 

1,291,012

 

129

 

 

 

11,172,947

 

 

11,173,076

Conversion of principal and accrued interest of convertible notes and bridge notes into common stock upon initial public offering

2,049,043

205

16,392,139

16,392,344

Issuance of common stock in connection with public offering

 

 

 

 

 

 

 

2,250,000

 

225

 

 

 

17,999,775

 

 

18,000,000

Offering costs in connection with public offering

 

 

 

 

 

 

 

 

 

 

 

(2,339,816)

 

 

(2,339,816)

Issuance of common stock through exercise of stock options

 

 

 

 

 

 

 

39,461

 

4

 

 

 

39,629

 

 

39,633

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

28,374

 

 

28,374

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(1,394,914)

 

(1,394,914)

Balance at June 30, 2021 (unaudited)

 

$

 

$

 

$

 

6,565,729

$

657

 

31,000

$

(172)

$

45,094,782

$

(34,415,992)

$

10,679,275

Series B Convertible

Series A-1 Convertible

Series A Convertible

Additional 

Total

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Treasury Stock

Paid-In 

Accumulated 

Stockholders’

Shares  

Amount  

Shares  

Amount  

Shares 

Amount

Shares

    

Amount  

Shares

    

 Amount  

 Capital 

Deficit

 Deficit

Balance at December 31, 2019

    

572,465

    

$

7,999,997

    

100,365

    

$

561,041

    

618,182

    

$

2,612,038

    

936,213

    

$

94

    

31,000

    

$

(172)

    

$

1,686,832

    

$

(24,405,503)

    

(22,718,749)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

22,045

 

 

22,045

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,637,979)

 

(1,637,979)

Balance at March 31, 2020 (unaudited)

 

572,465

$

7,999,997

 

100,365

$

561,041

 

618,182

$

2,612,038

 

936,213

$

94

31,000

$

(172)

$

1,708,877

$

(26,043,482)

$

(24,334,683)

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

29,287

 

 

29,287

Net loss

 

 

 

 

 

 

 

 

 

 

 

(174,092)

 

(174,092)

Balance at June 30, 2020 (unaudited)

 

572,465

$

7,999,997

 

100,365

$

561,041

 

618,182

$

2,612,038

 

936,213

$

94

31,000

$

(172)

$

1,738,164

$

(26,217,574)

$

(24,479,488)

See accompanying notes to these unaudited interim financial statements.

5

Table of Contents

iSpecimen Inc.

Condensed Statements of Cash Flows

(Unaudited)

Six months ended June 30, 

    

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(5,358,405)

$

(1,812,069)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

  

Share-based compensation

 

50,410

 

51,332

Amortization of internally developed software

 

471,584

 

420,257

Depreciation of property and equipment

 

22,260

 

28,680

Bad debt expense

 

39,618

 

Amortization of discount and debt issuance costs on convertible notes

 

1,088

 

139,232

Amortization of discount on bridge notes

 

869,600

 

Change in fair value of derivative liabilities

 

(1,311,700)

 

22,000

Loss on extinguishment on bridge notes

 

2,740,425

 

Loss on extinguishment of convertible notes

260,185

Gain on extinguishment on note payable

 

(788,156)

 

Change in operating assets and liabilities:

 

 

  

Accounts receivable

 

(500,338)

 

(183,117)

Accounts receivable – unbilled

 

(473,028)

 

(280,555)

Prepaid expenses and other current assets

 

(24,160)

 

(3,493)

Tax credit receivable

104,479

Accounts payable

 

1,440,799

 

146,202

Accrued expenses

 

1,068,902

 

157,086

Accrued interest

 

(1,707,225)

 

906,476

Deferred revenue

 

(70,394)

 

359,171

Net cash (used in) provided by operating activities

 

(3,268,535)

 

55,681

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

  

Purchase of property and equipment

 

(2,550)

 

(1,007)

Capitalization of internally developed software

 

(440,331)

 

(591,017)

Net cash used in investing activities

 

(442,881)

 

(592,024)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Proceeds from issuance of bridge notes payable

 

500,000

 

1,000,000

Proceeds from issuance of note payable

783,008

Proceeds from exercise of stock options

39,633

Proceeds from issuance of common stock in connection with public offering

18,000,000

Payment of offering cost in connection with the issuance of common stock in connection with public offering

(2,339,816)

Net cash provided by financing activities

 

16,199,817

 

1,783,008

Net increase in cash

 

12,488,401

 

1,246,665

Cash at beginning of period

 

695,909

 

53,893

Cash at end of period

$

13,184,310

$

1,300,558

Supplemental disclosure of cash flow information:

Cash paid for interest

$

2,824,032

$

Supplemental disclosure of non-cash investing and financing activities:

Conversion of redeemable convertible preferred stock into common stock

$

11,173,076

$

Conversion of convertible notes and accrued interest into common stock

$

6,748,729

$

Conversion of bridge notes and accrued interest into common stock

$

4,717,646

$

Issuance of common stock warrants as offering costs in connection with public offering of common stock

$

374,400

$

See accompanying notes to these unaudited interim financial statements.

6

Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

1.NATURE OF BUSINESS AND BASIS OF PRESENTATION

Business

iSpecimen Inc. (“iSpecimen” or the “Company”) was incorporated in 2009 under the laws of the state of Delaware. The Company has developed and launched a proprietary online marketplace platform that connects medical researchers who need access to subjects, samples, and data, with hospitals, laboratories, and other organizations who have access to them. iSpecimen is a technology-driven company founded to address a critical challenge: how to connect life science researchers who need human biofluids, tissues, and living cells (“biospecimens”) for their research, with biospecimens available (but not easily accessible) in healthcare provider organizations worldwide. The Company’s proprietary platform, the iSpecimen Marketplace platform, is designed to help 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, and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”), published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited 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, 2020 included in the Company’s final prospectus dated June 16, 2021, pursuant to Rule 424(b) under the Securities Act. 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.

On March 30, 2021, the Company effected a 1-for-5.545 reverse stock split (“reverse stock split”) of the Company’s common stock. All fractional shares as a result of the reverse stock split were rounded down and no fractional shares were issued in connection with the reverse stock split. The par value, authorized share amount, and other terms of the common stock and preferred stock were not affected by the reverse stock split. All share and per share amounts, including stock options, warrants, and restricted stock awards have been retroactively adjusted in these financial statements for all periods presented to reflect the reverse stock split. Further, exercise prices of stock options and warrants have been retroactively adjusted in these financial statements for all periods presented to reflect the reverse stock split.

Initial Public Offering

On June 21, 2021, the Company consummated its initial public offering (“IPO”) in which the Company issued and sold 2,250,000 shares of its common stock at a public offering price of $8.00 per share, for aggregate gross proceeds of $18 million. The net proceeds from the IPO were $15.7 million after deducting underwriting discounts of $1.7 million and other offering costs of $0.6 million. The shares of common stock commenced trading on the Nasdaq Stock Market LLC on June 17, 2021 under the ticker symbol “ISPC.”

On July 1, 2021, the Company sold an additional 337,500 shares of its common stock, pursuant to the underwriters’ full exercise of the option, at a public offering price of $8.00 per share, for aggregate gross proceeds of $2.7 million. In aggregate, the Company received approximately $18.2 million after deducting for all underwriting discounts of $1.9 million and other offering costs of $0.6 million.

Upon closing of the IPO, all of the then-outstanding shares of redeemable convertible preferred stock automatically converted into common stock at a ratio of 1:1, resulting in the issuance of 1,291,012 shares of common stock. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

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Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Upon closing of the IPO, the Company converted all $5.5 million of its outstanding principal and all unpaid and accrued interest of approximately $1.3 million of the Convertible Notes (as defined below) into 1,206,614 shares of common stock at a conversion price of $5.60 per share. The Company incurred an approximately $0.3 million loss on conversion of the Convertible Notes during the period ended June 30, 2021. As of June 30, 2021, there were no Convertible Notes outstanding.

Additionally, upon closing of the IPO, the Company converted $4 million of its outstanding principal and accrued and unpaid interest of approximately $0.7 million of the Bridge Notes (as defined below), as amended, into 842,429 shares of common stock at a conversion price of $5.60 per share. As of June 30, 2021, there was a remaining principal balance of $3.0 million on the Bridge Notes. The remaining principal of $3.0 million accrues interest at a rate of fifteen percent (15%) per annum with a maturity date of December 16, 2022.

Liquidity and Going Concern

The Company has recognized recurring losses and at June 30, 2021, the Company had working capital of $10,992,909, an accumulated deficit of $34,415,992, cash of $13,184,310 and accounts payable and accrued expenses of $5,113,043.

Management believes that the Company’s existing cash and cash equivalents, which include the net proceeds from the IPO, will allow the Company to continue its operations for at least the next 12 months from the date these financial statements are issued and therefore the conditions raising substantial doubt raised in prior periods has been alleviated. As a result of recurring losses, the continued viability of the Company beyond August 2022 may be dependent on its ability to continue to raise additional capital to finance its operations.

Impact of the COVID-19 Pandemic on the Company’s 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.

The Company is subject to the risks arising from the COVID-19 outbreak’s social and economic impacts on the healthcare services industry. The Company’s management believes that the social and economic impacts could have a significant impact on future financial condition, liquidity, and results of operations, which include but are not limited to the following: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders; (ii) inability to source specimens from the Company’s suppliers arising from shelter-in-place, or similar isolation orders; (iii) reduced capacity if personnel are infected or quarantined; (iv) decline in researcher demand for specimens; and (v) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.

The COVID-19 outbreak has continued to impact the Company’s operations during the six months ended June 30, 2021. In response to the COVID-19 outbreak, the Company initially 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. While research continues in this area, through June 2021, specimen requests for COVID-19 samples are declining, when compared to the same period in 2020. Given the evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company expects this matter to continue to have an impact on its results of operations, financial condition, and liquidity. However, the extent of the financial impact and the duration cannot be reasonably estimated at this time.

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Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies and recent accounting standards are summarized in Note 2 of the Company’s financial statements for the year ended December 31, 2020. There were no significant changes to these accounting policies during the six months ended June 30, 2021.

Use of Estimates

The preparation of the Company’s unaudited interim condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company utilizes certain estimates in the determination of the fair value of its warrants, deferred tax valuation allowances, revenue recognition, share-based compensation, derivative liabilities for embedded conversion features, and accrued expenses amongst others. 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 June 30, 2021 and December 31, 2020, 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 June 30, 2021, two customers represented approximately 14% and 10% of the Company’s revenues and comprised 15% and 4% of accounts receivable and 0% and 0% of accounts receivable-unbilled at June 30, 2021. During the three months ended June 30, 2020, one customer represented approximately 31% of the Company’s revenues and comprised 1% of accounts receivable, and 0% of accounts receivable-unbilled at June 30, 2020.

During the six months ended June 30, 2021, two customers represented approximately 14% and 11% of the Company’s revenues and comprised 4% and 2% of accounts receivable and 0% and 0% of accounts receivable-unbilled at June 30, 2021. During the six months ended June 30, 2020, two customers represented approximately 30% and 18% of the Company’s revenues and comprised 1% and 0% of accounts receivable, and 0% and 53% of accounts receivable-unbilled at June 30, 2020.

During the three months ended June 30, 2021 and 2020, revenue attributable to customers located in foreign countries represented approximately 11% and 4% of revenue, respectively. During the three months ended June 30, 2021 and 2020, accounts receivable attributable to customers located in foreign countries represented approximately 8% and 6% of accounts receivable, respectively. During the three months ended June 30, 2021 and 2020, accounts receivable-unbilled attributable to customers located in foreign countries represented approximately 6% and 1% of accounts receivable-unbilled, respectively.

During the six months ended June 30, 2021 and 2020, revenue attributable to customers located in foreign countries represented approximately 8% and 7% of revenue, respectively. During the six months ended June 30, 2021 and 2020, accounts receivable attributable to customers located in foreign countries represented approximately 8% and 6% of accounts receivable, respectively. During the six months ended June 30, 2021 and 2020, accounts receivable-unbilled attributable to customers located in foreign countries represented approximately 6% and 1% of accounts receivable-unbilled, respectively.

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Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Fair Value Measurements

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

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

For certain financial instruments, including cash, accounts receivable, and accounts payable, the carrying amounts approximate their fair values as of June 30, 2021 and December 31, 2020 because of their short-term nature. The liability in connection with conversion features included within certain of the Company’s convertible notes payable and bridge notes payable are classified as a derivative liability for embedded conversion features on the balance sheets and were considered to be a Level 3 liability.

Deferred Initial Public Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred initial public offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred initial public offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations. On June 21, 2021, the Company consummated its IPO; accordingly, the Company recognized deferred initial public offering costs of approximately $0.6 million as a reduction from gross proceeds associated with the IPO through additional paid-in capital in the accompanying condensed consolidated balance sheet. The Company recorded approximately $2.3 million of offering costs in additional paid-in capital in connection with the IPO. Accordingly, there were no deferred offering costs as of June 30, 2021. The Company had approximately $265,000 of deferred offering costs related to the IPO which were recorded in other current assets on the balance sheet as of December 31, 2020.

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 instruments 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.

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.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

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

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

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

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

Customers are 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 accessioned over time. However, specimens are generally shipped as soon as possible after they have been accessioned.

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

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

11

Table of Contents

iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

The following table summarizes the Company’s revenue for the following periods:

Three months ended June 30, 

Six months ended June 30, 

    

2021

    

2020

    

2021

    

2020

Specimens – contracts with customers

$

2,829,214

$

1,483,613

$

5,776,509

$

3,184,955

Shipping and other

 

74,662

 

20,956

91,174

31,273

Revenue

$

2,903,876

$

1,504,569

$

5,867,683

$

3,216,228

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 June 30, 2021 and December 31, 2020, the Company had an allowance for doubtful accounts of $147,714 and $108,096, respectively.

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

Common Stock Warrants

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

Net Loss Per Share

Basic net loss per share is calculated by dividing 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 common stock equivalents excluded from diluted net loss per share for the following periods:

Six months ended June 30, 

    

2021

    

2020

Shares issuable upon conversion of preferred stock

 

1,291,012

Shares issuable upon exercise of stock options

 

224,914

253,575

Shares issuable upon exercise of warrants to purchase common stock

 

23,309

23,309

Shares issuable upon exercise of Underwriter Warrants to purchase common stock

 

90,000

Recent Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are 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.

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Notes to Unaudited Condensed Financial Statements

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. The Company has 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, the Company 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 the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

3.FACTORING OF ACCOUNTS RECEIVABLE

On January 1, 2021 the Company entered into a factoring agreement (the “Factoring Agreement”) with Versant Funding LLC (“Versant”), in which the Company agreed to sell a minimum of $1.2 million of its accounts receivable without recourse, and which the Company granted Versant a security interest in substantially all of the Company’s assets, in accordance with the terms of the Factoring Agreement.

During the six months ended June 30, 2021, total net receivables sold under the Factoring Agreement was approximately $3.4 million. Without recourse indicates that the Company assigns and transfers its rights, title, and interest in and to the accounts receivable to Versant, meaning that the Company will not be liable to repay all or any portion of the advance amount if any portion of the accounts receivable is not paid by the Company’s customer(s). Information on accounts receivable identified for factoring are provided and verified by Versant prior to being accepted for factoring. Pursuant to the Factoring Agreement, the Company will receive an advance of 75% of the value of the purchased accounts receivable upfront with the remaining 25% holdback being classified as due from factoring in the condensed balance sheets. Upon receipt of the payment from the customer, Versant will calculate the applicable factoring fee from invoice date through the actual collection date, and will remit the remaining 25% holdback of the value of the factored accounts receivable, less their factoring fees, to the Company. The factoring fees range from 2.5% to 15% of the purchase price of the accounts receivable based on the age of the accounts receivable when collected. The Company is also charged for certain reimbursable administrative fees incurred on its behalf for the management of the program. In connection with the Factoring Agreement, the Company entered into a security agreement, granting to Versant a security interest in substantially all of the Company’s assets to secure the Company’s obligations under the Factoring Agreement. The sales of accounts receivable in accordance with the factoring arrangements are recognized as a reduction of accounts receivable, net in the balance sheet.

The Company pays factoring fees associated with the sale of receivables based on the dollar value of the receivables sold. Factoring fees paid under these arrangements totaled approximately $104,653 for the three months ended June 30, 2021, and $256,899 for the six months ended June 30,2021 which were recorded in general and administrative expenses in the condensed statements of operations. Upon termination of the Factoring Agreement on June 30, 2021, the Company paid Versant $139,374 in settlement of its balance payable to Versant pursuant to the Factoring Agreement. Upon termination of the Factoring Agreement, all future payments of accounts receivable shall be made directly to the Company.

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Notes to Unaudited Condensed Financial Statements

4.PROPERTY AND EQUIPMENT, NET

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

    

June 30, 

    

December 31, 

    

2021

    

2020

(unaudited)

Website

$

107,926

$

105,376

Computer equipment and purchased software

 

84,589

 

84,589

Equipment

 

35,449

 

35,449

Furniture and fixtures

 

87,184

 

87,184

Leasehold improvements

 

24,935

 

24,935

Total property and equipment

 

340,083

 

337,533

Accumulated depreciation

 

(284,204)

 

(261,944)

Total property and equipment, net

$

55,879

$

75,589

Depreciation expense for property and equipment was $11,130 and $14,340 for the three months ended June 30, 2021 and 2020, respectively, and $22,260 and $28,680 for the six months ended June 30, 2021 and 2020, respectively.

5.INTERNALLY DEVELOPED SOFTWARE, NET

During the six months ended June 30, 2021 and 2020, the Company capitalized $440,331 and $591,017, 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 $236,355 and $213,749 of amortization expense associated with capitalized internally developed software costs during the three months ended June 30, 2021 and 2020, respectively. The Company recognized $471,584 and $420,257 of amortization expense associated with capitalized internally developed software costs during the six months ended June 30, 2021 and 2020, respectively.

6.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”).

Under the terms of the promissory note (the “PPP Note”) and the PPP Loan, interest accrued on the outstanding principal at the rate of 1% per annum. Interest expense under the PPP Loan amounted to $0 and $558 for the three months ended June 30, 2021 and 2020, respectively. Interest expense under the PPP Loan amounted to $279 and $558 for the six months ended June 30, 2021 and 2020, respectively.

The Company received full forgiveness of all outstanding principal of, and accrued and unpaid interest on the PPP Loan as of January 13, 2021. The forgiveness of the PPP Loan qualified for debt extinguishment and as a result, the outstanding principal and accrued and unpaid interest on the PPP Loan was recorded as a net gain on extinguishment of the PPP Loan totaling $788,156 for the six months ended June 30, 2021 and the debt was eliminated from the Company’s balance sheet.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

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 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”). 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 2021, 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, 2020 and 2019. The conversion rate shall be equal to the issue price of the IPO Stock less a thirty percent (30)% discount.

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) 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. On March 8, 2021, the maturity date was further extended to June 30, 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 7).

Interest expense on the Convertible Notes totaled $74,137 and 82,274 for the three months ended June 30, 2021 and 2020, respectively.

Interest expense on the Convertible Notes totaled $156,411 and $164,548 for the six months ended June 30, 2021 and 2020, respectively.

Unamortized debt issuance costs on the Convertible Notes totaled $0 and $9,189 at June 30, 2021 and December 31, 2020, respectively.

Debt discounts on the Convertible Notes totaled $0 and $0 as of June 30, 2021 and December 31, 2020, respectively. During the six months ended June 30, 2021 and 2020, amortization of debt discounts amounted to $1,088 and $139,232, respectively.

Conversion of Convertible Notes Payable

In connection with the consummation of the IPO, the Company converted all $5,491,663 of its outstanding principal and all unpaid and accrued interest of $1,257,066 of the Convertible Notes into 1,206,614 shares of common stock on June 21, 2021 at a conversion price of $5.60 per share. As of June 30, 2021, there were no Convertible Notes outstanding. The Company incurred an approximate $260,000 loss on conversion of the Convertible Notes during the three months ended June 30, 2021.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Bridge Financing

During 2020, 2019 and 2018, the Company issued certain Secured Promissory Notes (the “Bridge Notes”) to new investors and existing stockholders in an amount of $6,500,000 in order to finance the Company’s interim working capital needs. Of this amount, $1,905,000 was issued to related parties (“Related Party Bridge Notes”). The Bridge Notes, including the Related Party Bridge Notes, have identical terms.

On April 16, 2021 and May 20, 2021, the Company issued additional Related Party Bridge Notes to related parties in the aggregate amount of $500,000 in order to finance the Company's working capital needs. The terms of the notes are identical to the Amended Bridge Notes (see further details below).

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. In June 2020, the Bridge Notes were amended to further 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. On March 15, 2021, the Company entered into an Amendment to the Bridge Notes and the maturity date was further extended to April 30, 2021. 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 security interest in substantially all assets of the Company (“Collateral”).

On March 15, 2021, the Company entered into a Fifth Amendment (the “Amendment”) to the Note Subscription Agreements and Secured Promissory Notes. The Bridge Notes are hereafter referred to as the “Amended Bridge Notes”.

The terms of the Amendment are as follows:

Maturity Date

The Amended Bridge Notes shall bear interest, on a non-compounding basis, 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 an initial public offering yielding gross proceeds in excess of $18,000,000, exclusive of any existing Convertible Notes (a “Qualified IPO”), (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) April 30, 2021. The Majority Lenders may, with the approval of the Company, elect to extend the maturity date one or more times, at their discretion. On April 28, 2021, the maturity date was further extended to May 31, 2021. On May 12, 2021, the maturity date was further extended to June 30, 2021.

Elective Conversion Upon a Qualified IPO

The holders of the Amended Bridge Notes may voluntarily elect, at any time prior the maturity date and up to March 19, 2021, to convert 50% or more of the outstanding unpaid principal plus any amount of outstanding unpaid interest at the time of the Qualified IPO, into the same class or series of securities of the Company to be offered and issued in the Qualified IPO (the “IPO Stock”). The conversion rate shall be equal to the issue price of the IPO Stock less a thirty percent (30%) discount (“the Elective Conversion Stock”). The elective conversion amount shall be deducted from the amount of principal and interest outstanding in order to arrive at an adjusted principal and interest repayment amount. The sum of the amounts being converted on the Amended Bridge Notes shall first convert the outstanding principal and then the outstanding interest second.

Repayment of Adjusted Outstanding Interest and Principal Upon a Qualified IPO

If a Qualified IPO is consummated prior to the maturity date, and the holders have not voluntarily converted, the Company shall make a cash payment to the holders of the Amended Bridge Notes equal to the greater of either the total adjusted outstanding interest or one and one-half times (1.50X) the Third-Party Loan Proceeds (“Note Repayment Proceeds”). Third-Party Loan Proceeds are defined as

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

the net cash proceeds received by the Company from an institutional lender, commercial bank, or other similar lender consummated on or about the time of the Qualified IPO (or contingent upon the closing of the Qualified IPO).

Repayments shall first be applied to the adjusted outstanding interest due in cash to the holders of the Amended Bridge Notes . The residual value shall be next applied to the adjusted outstanding principal (the “Principal Repayment Proceeds”). The remaining cash repayment shall be calculated by multiplying the Principal Repayment Proceeds by a fraction, the numerator of which is equal to the adjusted principal repayment amount of such note holder, and the denominator of which is equal to the total adjusted outstanding principal to all note holders. In no event shall any cash payment be made to any note holder exceed the sum of the adjusted interest repayment amount plus the adjusted principal repayment amount for such note holder.

Automatic Conversion or Debt Extension

Any remaining unpaid principal, calculated by subtracting the Principal Repayment Proceeds from the total adjusted outstanding principal (the “Automatic Principal Conversion Amount”), shall then automatically convert into IPO Stock at a rate equal to the issue price of the IPO Stock less a ten percent (10%) discount (that is, at a rate of ninety percent (90%) of the issue price of the IPO Stock; such discounted IPO Stock; the “Automatic Conversion Stock”). If the Company is unable to repay at least twenty-five percent (25%) of the total adjusted outstanding principal of the Amended Bridge Notes (“the “Principal Repayment Floor”), then no Automatic Conversion Stock shall be issued and the total adjusted outstanding principal on the Amended Bridge Notes shall remain on the books of the Company under their existing Bridge Notes which shall automatically be amended to (i) have their interest rates adjusted to a rate of fifteen percent (15%) per annum and (ii) have their maturity date set to a date that is eighteen (18) months from the date of the Qualified IPO.

Amended Bridge Notes Embedded Conversion Features

The Company has determined that the terms related to the elective and automatic conversion features (collectively, the “Amended Bridge Notes Embedded Conversion Features”) were determined to not be clearly and closely related to the Amended Bridge Notes host instrument and meet the definition of a derivative. Therefore, the Amended Bridge Notes Embedded Conversion Features were bifurcated from the Amended Bridge 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 Amended Bridge Notes Embedded Conversion Features were initially recorded as a component of the loss on debt extinguishment with an offset to the derivative liability at fair value. No related discount will be recorded on the Amended Bridge Notes, and the derivative liability will not be amortized using the effective interest rate over the term of the Amended Bridge Notes.

Debt Extinguishment

The Company evaluated the terms of the March 15, 2021 Amendment. This evaluation included analyzing whether there are significant and consequential changes to the economic substance of the Bridge Notes. If the change is deemed insignificant then the change is considered a debt modification, whereas if the change is substantial the change is reflected as a debt extinguishment. A modification or an exchange that adds or eliminates a substantive conversion option as of the conversion date would always be considered substantial and require extinguishment accounting. The addition of the elective and mandatory conversion options, as described above, would be considered substantive based on the likelihood of the option being exercised in the near future in connection with a Qualified IPO event. Accordingly, the Company accounted for the amendment of the Notes as an extinguishment of the original Bridge Notes.

As a result, the Company recorded a loss on extinguishment of $2,740,425. The extinguishment loss also included a write-off of unamortized debt issuance costs of approximately $5,700. Additionally, the Company recorded a discount on the Amended Bridge Notes of approximately $869,600, which was amortized through interest expense over the life of the Amended Bridge Notes (i.e., March 15, 2021 through April 30, 2021).

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

Interest expense on the Bridge Notes, including $175,241 and $99,028 of related party interest expense, totaled $484,931 and $373,972 for the three months ended June 30, 2021 and 2020, respectively.

Interest expense on the Bridge Notes, including $314,593 and $198,056 of related party interest expense, totaled $960,410 and $741,370 for the six months ended June 30, 2021 and 2020, respectively.

Unamortized debt issuance costs on the Bridge Notes totaled $0 and $7,222 for the three and six months ended June 30, 2021 and 2020, respectively.

Amortization of the debt discount on the Amended Bridge Notes totaled approximately $579,733 and $0 for the three months ended June 30, 2021 and 2020, respectively. Amortization of the debt discount on the Amended Bridge Notes totaled approximately $869,600 and $0 for the six months ended June 30, 2021 and 2020, respectively.

Conversion of Bridge Notes

Upon the completion of the IPO, the Company converted $4,000,000 of its outstanding principal and accrued interest of $717,646 of the Bridge Notes, as amended, into 842,429 shares of common stock at a conversion price of $5.60 per share. The Company recognized a gain on the conversion of $9,746. As of June 30, 2021, there was a remaining principal balance of $3.0 million on the Bridge Notes. The remaining principal of $3,000,000 accrues interest at a rate of fifteen percent (15%) per annum with a maturity date of December 16, 2022.

The conversion of the Amended Bridge Notes and Convertible Notes upon the consummation of the IPO resulted in an increase in total stockholder’s equity of $16,392,344. The components of this non-cash transaction are as follows

Derivative liability on the Convertible Notes reclassified to equity

$

2,644,000

Extinguishment of Convertible Notes principal

 

5,486,199

Accrued and unpaid interest on the Convertible Notes

 

1,257,066

Accumulated amortization on debt issuance costs

 

33,035

Loss on extinguishment of Convertible Notes

 

260,183

Write off of debt issuance costs

 

(27,571)

Derivative liability the Bridge Notes reclassified to equity

 

2,031,300

Extinguishment of Bridge Notes principal

 

4,000,000

Accrued and unpaid interest on the Bridge Notes

 

717,646

Gain on extinguishment of Bridge Notes

 

(9,514)

Total conversion of Convertible Notes and Bridge Notes into common stock

$

16,392,344

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

7.FAIR VALUE OF DERIVATIVE LIABILITIES

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 June 30, 2021

    

Total

    

Level 1

    

Level 2

Level 3

Liabilities:

    

    

    

    

 

Derivative liability on convertible notes payable, related parties

$

$

$

$

Derivative liability on bridge notes payable and bridge notes payable, related parties

 

 

 

$

Total liabilities

$

$

$

$

Fair value at December 31, 2020

    

Total

    

Level 1

    

Level 2

    

Level 3

Liabilities:

    

    

    

    

Derivative liability on convertible notes payable, related parties

$

2,373,000

$

$

$

2,373,000

Total liabilities

$

2,373,000

$

$

$

2,373,000

The table below provides a summary of the changes in fair value of the derivative liabilities measured on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30:

    

2021

    

2020

Balance, beginning of period

    

$

2,373,000

    

$

2,214,000

Derivative liability on bridge notes payable and bridge notes payable, related parties

 

3,614,000

 

(Gain) loss included in earnings

 

(1,311,700)

 

22,000

Reclassification to equity in connection with debt conversion

(4,675,300)

Balance, end of period (unaudited)

$

$

2,236,000

Derivative Liability on Convertible Notes Payable, Related Parties

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. The scenario-based analysis estimates the fair value of the Convertible 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 was amortized over the original term of the Convertible Notes.

Immediately prior to the IPO, the derivative liability was marked to fair value resulting in a loss of $117,000 for the three months ended June 30, 2021. The derivative liability on the related party convertible notes payable was reclassified to equity on June 21, 2021, upon the conversion of the Convertible Notes to common stock in connection with the consummation of the IPO.

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Notes to Unaudited Condensed Financial Statements

Derivative Liability on Bridge Notes Payable and Bridge Notes Payable, Related Parties

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 Amended Bridge Notes. The scenario-based analysis estimates the fair value of the Amended Bridge 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, and settlement 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 Amended Bridge Notes Embedded Conversion Features were initially recorded as a component of the loss on debt extinguishment with an offset to the derivative liability at fair value. No related discount will be recorded on the Amended Bridge Notes, and the derivative liability will not be amortized using the effective interest rate over the term of the Amended Bridge Notes.

Immediately prior to the IPO, the derivative liability was marked to fair value. A portion of the Bridge Note holders did not elect to convert at the IPO, as a result, the Company recorded a gain of $1,630,700 for the three months ended June 30, 2021. The derivative liability balance on the Amended Bridge Notes payable was reclassified to equity on June 21, 2021, upon the conversion of the Amended Bridge Notes to common stock in connection with the consummation of the IPO, as the Amended Bridge Notes did not contain any further conversion features subsequent to the IPO.

8.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 by year in the table 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 June 30, 2021.

Year Ending December 31, 

    

Operating Leases

2021 (remaining)

$

80,706

2022

 

163,158

2023

 

165,254

2024

 

27,601

Total

$

436,719

Rent expense for the three months ended June 30, 2021 and 2020 amounted to $26,902 and $26,553, respectively. Rent expense for the six months ended June 30, 2021 and 2020 amounted to $67,080, and $69,518, 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 June 30, 2021, there was no material litigation against the Company.

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Notes to Unaudited Condensed Financial Statements

9.CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

Immediately following the closing of the IPO, pursuant to the Company’s fourth amended and restated certificate of incorporation, the Company’s authorized capital is 250,000,000 shares, of which (1) 200,000,000 shares are common stock, par value $0.0001 per share and (2) 50,000,000 are preferred stock, par value $0.0001 per share, which may, at the sole discretion of the Company’s board of directors be issued in one or more series.

Redeemable Convertible Preferred Stock

Upon the consummation of the IPO, 1,291,012 shares of outstanding preferred stock automatically converted into 1,291,012 shares of common stock. As of June 30, 2021, there were no shares of preferred stock outstanding.

Common Stock

The Company issued 2,250,000 shares of common stock in connection with the IPO during the six months ended June 30, 2021. Additionally, the Company issued 1,206,614 shares of common stock in connection with the conversion of all the Convertible Notes and accrued interest and 842,429 shares of common stock in connection with the conversion of $4.7 million of the outstanding principal and accrued interest on the Bridge Notes.

Underwriter Warrants

In connection with the Company’s underwriting agreement with ThinkEquity, the Company entered into a warrant agreement to purchase up to 90,000 shares of common stock, par value $0.0001 (the “Underwriter Warrant”). The Underwriter Warrant is exercisable at a per share exercise price of $10.00, and is 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. The Warrant becomes exercisable on or after December 16, 2021 (six months from the effective date of the offering) and expires on June 15, 2026. Upon issuance of these warrants, as partial compensation for its services as an underwriter, the fair value of approximately $0.4 million was recorded as equity issuance costs.

Warrants

At June 30, 2021, and excluding the Underwriter Warrant, the Company had outstanding warrants to purchase 23,309 shares of common stock at an exercise price of $0.06 per share, which expire in September 2021. The weighted average exercise price is $0.06 and the weighted average time to expiration is 0.25 years.

During the six months ended June 30, 2021, no warrants to purchase common stock were issued, except those issued to the Underwriter. Additionally, during the six months ended June 30, 2021, no warrants to purchase common stock were exercised or expired.

10.SHARE-BASED COMPENSATION

Stock Options

As of June 30, 2021, there were 99,061 shares available for future grants under the Company’s 2013 Stock Incentive Plan.

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Notes to Unaudited Condensed Financial Statements

The following assumptions were used to estimate the fair value of stock options granted using the Black- Scholes-Merton option pricing model during the six months ended June 30:

    

2021

    

2020

 

Assumptions:

 

  

 

  

Risk-free interest rate

 

0.47% – 0.66

%

1.35% – 1.41

%

Expected term (in years)

 

5.815.89

 

5.576.14

Expected volatility

 

49.83% – 49.98

%

43.11% – 43.91

%

Expected dividend yield

 

%

%

A summary of stock option activity under the Plans is as follows:

    

    

    

Weighted Average 

     

Remaining 

 

Options

Weighted Average

Contractual Term 

 

Aggregate

Outstanding

Exercise Price

in Years

 

Intrinsic Value

Balance at December 31, 2020

 

251,847

$

1.00

 

8.06

$

89,100

Granted

 

14,515

$

3.83

 

9.52

Exercised

 

(39,461)

$

1.00

 

Cancelled/forfeited

 

(1,987)

$

1.00

 

Balance at June 30, 2021

 

224,914

$

1.18

 

7.85

$

1,392,403

Options exercisable at June 30, 2021

 

198,521

$

1.00

 

7.54

$

1,234,801

The aggregate intrinsic value in the table above represents the difference between the Company’s stock price as of the balance sheet date and the exercise price of each in-the-money option on the last day of the period. The total intrinsic value of stock options exercised was approximately $245,447 during the three and six months ended June 30, 2021, respectively.

The weighted-average grant date fair value of stock options issued in the six months ended June 30, 2021 and 2020 was $1.77 and $0.72, respectively. The Company recorded $28,374 and $29,287 of compensation expense for the three months ended June 30, 2021 and 2020, respectively. The Company recorded $50,410 and $51,332 of compensation expense for six months ended June 30, 2021 and 2020, respectively. A total of $67,575 of unamortized compensation expense at June 30, 2021, will be recognized over the remaining requisite service period of 1.76 years. During the first six months of 2021 and 2020, the Company received proceeds of $39,633 and $0 from the exercise of stock options, respectively.

2021 Stock Incentive Plan

On June 16, 2021, the Company adopted the iSpecimen Inc. 2021 Stock Incentive Plan (“the 2021 Plan”). The 2021 Plan was adopted to enhance the Company’s ability to attract, retain and motivate employees, officers, directors, consultants and advisors by providing such persons with equity ownership opportunities and performance-based incentives. The 2021 Plan authorizes options, restricted stock, restricted stock units and other stock-based awards. The Company’s Board of Directors, or any committee to which the Board of Directors delegates such authority, has the sole discretion in administering, interpreting, amending or accelerating the 2021 Plan. Awards may be made under the 2021 Plan for up to 608,000 shares of the Company’s common stock, and the 2021 Plan was made effective with the completion of the IPO. No equity awards were issued from the 2021 Plan during the six months ended June 30, 2021.

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iSpecimen Inc.

Notes to Unaudited Condensed Financial Statements

11.INCOME TAXES

As of June 30, 2021, the Company had federal net operating loss carryforwards of approximately $30,200,000 of which approximately $13,000,000 expire at various periods through 2037 and approximately $11,600,000 can be carried forward indefinitely. As of June 30, 2021, the Company had state net operating loss carryforwards of approximately $20,300,000 that expire at various periods through 2040. At June 30, 2021, the Company had federal and state tax credits of approximately $765,000 available for future periods that expire at various periods through 2041. Due to changes 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 has recorded a full valuation allowance against net deferred income tax assets due to a history of losses generated since inception.

12.SUBSEQUENT EVENTS

On July 1, 2021, the Company issued and sold 337,500 additional shares of common stock, pursuant to the underwriters’ exercise of its overallotment option, at a public offering price of $8.00 per share, for aggregate gross proceeds of $2.7 million. The net proceeds from the overallotment were $2.5 million after deducting underwriting discounts of $0.2 million. Inclusive of the underwriters’ option to purchase additional shares, the Company received approximately $18.2 million in net proceeds from the IPO, after deducting underwriting discounts of $1.9 million and other offering costs of $0.6 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to iSpecimen Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its initial public offering filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 21, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

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, the iSpecimen Marketplace, 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 iSpecimen Marketplace 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 generate revenue by procuring various specimens from hospitals, laboratories, and other supply sites comprising

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our network, and delivering them to our medical research customers using our proprietary software to identify and locate the required specimens. 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.

On March 30, 2021, we effected a 1-for-5.545 reverse stock split of our issued and outstanding shares of common stock, as well as effected a proportional adjustment to the existing conversion ratios for our redeemable convertible preferred stock. All historical share and per share information shown herein and in our unaudited condensed financial statements and related notes have been retroactively adjusted to give effect to the reverse stock split.

On June 16, 2021, we completed an IPO in which we issued and sold 2,250,000 shares of our common stock at a public offering price of $8.00 per share, resulting in aggregate gross proceeds of $18.0 million. On July 1, 2021, we issued and sold 337,500 additional shares of common stock, pursuant to the underwriters’ exercise of its overallotment option, at a public offering price of $8.00 per share, for aggregate gross proceeds of $2.7 million. The net proceeds from the overallotment were $2.5 million after deducting underwriting discounts of $0.2 million. Inclusive of the underwriters’ option to purchase additional shares, we received approximately $18.2 million in net proceeds from the IPO after deducting underwriting discounts of $1.9 million and other offering costs of $0.6 million.

Upon completion of the IPO, the Company converted all 1,291,012 shares of outstanding redeemable convertible preferred stock into 1,291,012 shares of common stock, all $5.5 million of its outstanding principal and all unpaid and accrued interest of approximately $1.3 million of convertible notes into 1,206,614 shares of common stock at a conversion price of $5.60 per share, and $4 million of its outstanding principal and accrued interest of $0.7 million of bridge notes, as amended, into 842,429 shares of common stock at a conversion price of $5.60 per share. As of June 30, 2021, there were no convertible notes outstanding. As of June 30, 2021, there was a remaining principal balance of $3.0 million on bridge notes. The remaining principal of $3.0 million accrues interest at a rate of fifteen percent (15%) per annum with a maturity date of December 16, 2022.

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, could have a significant impact on future financial condition, liquidity, and results of operations, which include but are not limited to the following: (i) restrictions on in-person activities arising from shelter-in- place, or similar isolation orders, that limit our ability to procure specimens through our supply chain; (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 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 less than 35% 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 June 30, 2021, we fulfilled 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

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for COVID-19 specimens to sites in areas of outbreak. As a result, during the three and six months ended June 30, 2021 and 2020, approximately 22%, 39%, 47%, and 28% , respectively of our total purchase orders were related to COVID-19 specimens. There were no COVID-19 related purchase orders for the first quarter of the prior year.

With the easing of restrictions, our supply sites are mostly operational as of June 30, 2021, and we are starting to experience an increase in non-COVID-19 specimen collections. There is still 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 continue 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, for our medical research customers using our proprietary software, the iSpecimen Marketplace, to identify, locate, and ultimately validate the required specimens to our customers’ requested specifications. The Company’s performance obligation is to procure a specimen meeting the customer specification(s) from a supplier, on a “best efforts” basis, for our customer at the agreed price per specimen as indicated in the customer contract with the Company. We do not currently charge suppliers or customers for the use of our proprietary software. Each customer will execute a material and data use agreement with the Company or agrees to online purchase terms, each of which includes terms such as specimen and data use, shipment terms, payment and cancellation terms. These are then supplemented by purchase orders that specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent the Company’s contracts with its customer. Generally, contracts have fixed unit pricing. For certain specimen orders, a refundable customer deposit may be required prior to order fulfillment depending on project set-up requirements, presented as deferred revenue. The Company expects to recognize the deferred revenue within the next twelve months.

We recognize revenue over time, as we have created an asset with no alternative use and we have an enforceable right to payment for performance completed to date. At contract inception, we review a contract and related order upon receipt to determine if the specimen ordered has an alternative use by us. Generally, specimens ordered do not have an alternative future use to us and our performance obligation is satisfied when the related specimens are accessioned. We use an output method to recognize revenue for specimens with no alternative future use. The output is measured based on the number of specimens accessioned. 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 accessioned over time. However, specimens are generally shipped as soon as possible after they have been accessioned.

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 accessioned and the diversity of our pricing.

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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.

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Financial Operations Overview and Analysis for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

Comparison of the Three Months Ended June 30, 2021 and 2020

Three months ended June 30, 

Change

    

2021

    

2020

    

Dollars

    

Percentage

(unaudited)

Revenue

$

2,903,876

$

1,504,569

$

1,399,307

93

%

Operating expenses:

 

  

 

  

 

  

Cost of Revenue

 

1,489,196

 

473,982

 

1,015,214

 

214

%

Technology

 

361,799

 

291,601

70,198

 

24

%

Sales and marketing

 

647,592

 

367,617

 

279,975

 

76

%

Supply development

 

100,693

 

147,588

 

(46,895)

 

(32)

%

Fulfillment

 

287,275

 

185,185

 

102,090

 

55

%

General and administrative

 

1,545,852

 

343,602

 

1,202,250

 

350

%

Total operating expenses

 

4,432,407

 

1,809,575

 

2,622,832

 

145

%

Loss from operations

 

(1,528,531)

 

(305,006)

 

(1,223,525)

 

(401)

%

Other income (expense), net

 

  

 

  

 

  

Interest expense

 

(1,133,479)

 

(459,005)

 

(674,474)

 

(147)

%

Change in fair value of derivative liability on convertible notes

(117,000)

 

583,000

 

(700,000)

 

(120)

%

Change in fair value of derivative liability on bridge notes and bridge notes, related parties

1,630,700

 

 

1,630,700

 

100

%

Gain on extinguishment of bridge notes and bridge notes, related parties

 

9,746

 

9,746

100

%

Loss on extinguishment of convertible notes and convertible notes, related parties

 

(260,185)

 

(260,185)

(100)

%

Other income

 

3,663

6,688

 

(3,025)

(100)

%

Interest income

 

172

86

 

86

100

%

Other income (expense), net

 

133,617

130,769

 

2,848

2

%

Benefit from income taxes

 

145

 

(145)

(100)

%

Net loss

$

(1,394,914)

$

(174,092)

$

(1,220,822)

(701)

%

Revenue

Revenue increased by approximately $1,399,000 or 93%, from approximately $1,505,000 for the three months ended June 30, 2020 to approximately $2,904,000 for the three months ended June 30, 2021 primarily due to a more seasoned sales team, continued demand for specimens from patients with known COVID-19 test results, and an increasing demand for specimens in non-COVID-19 research areas. For the three months ended June 30, 2021 and 2020,our revenue derived from specimens related to COVID-19 accounted for approximately 31% and 42%, respectively, of our total revenue. Specimens accessioned during the second quarter of the current year increased by approximately 467 or 8% to approximately 6,266, compared to approximately 5,799 of specimens accessioned during the second quarter of 2020, as well as a change in specimen mix that resulted in an increase in the average selling price per specimen of approximately $204 or 79% compared to the same prior year’s period.

Cost of Revenue

Cost of revenue increased by approximately $1,015,000, or 214%, from approximately $474,000 for the three months ended June 30, 2020 to approximately $1,489,000 for the three months ended June 30, 2021 which was attributable to a 191% increase in the average cost per specimen impacted by the specimen mix as well as the increase in specimens accessioned for the current period compared to the same prior year’s period. The substantial increase in the average cost per specimen is the result of a significant project in 2020 which yielded lower average costs per specimen.

Technology

Technology expenses increased by approximately $70,000 or 24% from approximately $292,000 for the three months ended June 30, 2020 to approximately $362,000 for the three months ended June 30, 2021. The increase was primarily related to an increase in operating and maintenance expenses of approximately $51,000 and an increase in depreciation and amortization of approximately $22,000.

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Sales and Marketing Expenses

Sales and marketing expenses increased approximately $280,000, or 76%, from approximately $368,000 for the three months ended June 30, 2020 to approximately $648,000 for the three months ended June 30, 2021. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during the second half of 2020 and the first half of 2021, which totaled approximately $262,000, an increase in external marketing efforts of approximately $28,000, partially offset by a decrease in general operating expenses related to sales and marketing of approximately $7,000, and by reductions to general expenses related to sales and marketing of approximately $3,000.

Supply Development

Supply development expenses decreased approximately $47,000, or 32%, from approximately $148,000 for the three months ended June 30, 2020 to approximately $101,000 for the three months ended June 30, 2021. The decrease was primarily attributable to a decrease in operating and maintenance expenses of approximately $39,000 and a decrease in payroll and related expenses of approximately $7,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak.

Fulfillment

Fulfillment costs increased approximately $102,000, or 55%, from approximately $185,000 for the three months ended June 30, 2020 to approximately $287,000 for the three months ended June 30, 2021. The increase was primarily attributable to an increase in payroll and related expenses of approximately $82,000 for personnel engaged in pre-sales feasibility assessments, and an increase in post-sales activities such as order processing and management, shipping and receiving, and customer service of approximately $18,000.

General and Administrative Expenses

General and administrative expenses increased approximately $1,202,000 or 350%, from approximately $344,000 for the three months ended June 30, 2020 to approximately $1,546,000 for the three months ended June 30, 2021. The increase was primarily attributable to an increase in cost related to becoming a public company including an increase in legal and accounting expenses of approximately $112,000, an increase of other general and administrative expenses of approximately $101,000 related to amortization of internally developed software, associated software licenses, human resource related expenses, insurance costs and facility expenses, an increase in director and officer insurance of approximately $98,000, and an increase in payroll related costs for the chief financial officer of approximately $72,000. Additionally, the remaining increase is related to costs not expected to recur in the future, such as payroll expenses of approximately $555,000 for a special IPO bonus provided to all employees and increased legal, accounting and consulting expenses of approximately $264,000 that did not qualify as offering costs.

Other Income (Expense), net

Other income (expense), net increased approximately $3,000, or 2%, from approximately $131,000 for the three months ended June 30, 2020 to approximately $134,000 for the three months ended June 30, 2021. The increase in other expense, net was primarily the result of the change in fair value of derivative liabilities related to the Bridge Notes and Related Party Bridge Notes of approximately $1,631,000 and a gain on extinguishment of Bridge Notes and Related Party Bridge Notes of approximately $10,000, partially offset by a change in fair value of derivative liabilities related to the Convertible Notes of approximately $700,000 a decrease in interest expense of approximately $674,000 related to accrued interest on the Bridge Notes and Convertible Notes, an approximately $260,000 loss on extinguishment of Convertible Notes, and a decrease in other income of approximately $3,000.

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Comparison of the Six Months Ended June 30, 2021 and 2020

Six months ended June 30, 

Change

 

    

2021

    

2020

    

Dollars

    

Percentage

 

 

Revenue

$

5,867,683

$

3,216,228

$

2,651,455

 

82

%

Operating expenses:

  

  

  

  

Cost of Revenue

3,112,847

1,128,249

1,984,598

176

%

Technology

771,750

718,314

53,436

7

%

Sales and marketing

1,176,978

799,256

377,722

47

%

Supply development

212,269

262,193

(49,924)

(19)

%

Fulfillment

556,371

400,355

156,016

39

%

General and administrative

2,508,643

656,855

1,851,788

282

%

Total operating expenses

8,338,858

3,965,222

4,373,636

110

%

Loss from operations

(2,471,175)

(748,994)

(1,722,181)

(230)

%

Other income (expense), net

Interest expense

(1,986,407)

(1,048,220)

(938,187)

(90)

%

Change in fair value of derivative liability

(271,000)

(22,000)

(249,000)

(1132)

%

Change in fair value of derivative liability on bridge notes and bridge notes, related parties

1,582,700

1,582,700

100

%

Loss on extinguishment of bridge notes and bridge notes, related parties

(2,740,425)

(2,740,425)

(100)

%

Loss on extinguishment of convertible notes and convertible notes, related parties

(260,185)

(260,185)

(100)

%

Gain on extinguishment of note payable

788,156

788,156

100

%

Other (expense) income

(69)

6,691

(6,760)

(101)

%

Interest income

309

(309)

(100)

%

Other income (expense), net

(2,887,230)

(1,063,220)

(1,824,010)

(172)

%

Benefit from income taxes

145

(145)

(100)

%

Net loss

$

(5,358,405)

$

(1,812,069)

$

(3,546,336)

(196)

%

Revenue

Revenue increased by approximately $2,651,000 or 82%, from approximately $3,216,000 for the six months ended June 30, 2020 to approximately $5,868,000 for the six months ended June 30, 2021 primarily due to a more seasoned sales team, continued demand for specimens from patients with known COVID-19 test results, and an increasing demand for specimens in non COVID-19 research areas. For the six months ended June 30, 2021 and 2020 our revenue derived from specimens related to COVID-19 accounted for approximately 27% and 20%, respectively, of our total revenue. There was no COVID-19 related revenue for the first quarter of the prior year. Specimens accessioned during the second quarter of the current year decreased by approximately 368 or 3% to approximately 11,384, compared to approximately 11,752 of specimens accessioned during the second quarter of 2020. However, a change in specimen mix resulted in an increase in average selling price per specimen of approximately $242 or 88% compared to the same prior year’s period.

Cost of Revenue

Cost of revenue increased by approximately $1,985,000, or 176%, from approximately $1,128,000 for the six months ended June 30, 2020 to approximately $3,113,000 for the six months ended June 30, 2021 which was attributable to a 185% increase in the average cost per specimen impacted by the specimen mix during the current six month period over the prior year period, offset by the 2% decrease in the number of specimens accessioned during the current six month period over the same prior year period. The substantial increase in the average cost per specimen is the result of a significant project in 2020 which yielded lower average costs per specimen.

Technology

Technology expenses increased by approximately $53,000 or 7% from approximately $718,000 for the six months ended June 30, 2020 to approximately $772,000 for the six months ended June 30, 2021. The increase was primarily related to an increase in operating and maintenance expenses of approximately $84,000, an increase in depreciation and amortization of approximately $49,000, partially offset by a decrease in project expenses for development of the Company’s technology that were not capitalizable of approximately $80,000.

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Sales and Marketing Expenses

Sales and marketing expenses increased approximately $378,000, or 47%, from approximately $799,000 for the six months ended June 30, 2020 to approximately $1,177,000 for the six months ended June 30, 2021. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during 2020 and the first half of 2021, which amounted to approximately $335,000, an increase to external marketing efforts of approximately $35,000, an increase in general operating expenses related to sales and marketing of approximately $27,000, partially offset by a reduction in general expenses related to sales and marketing of approximately $18,000.

Supply Development

Supply development expenses decreased approximately $50,000, or 19%, from approximately $262,000 for the six months ended June 30, 2020 to approximately $212,000 for the six months ended June 30, 2021. The decrease was primarily attributable to a decrease in operating and maintenance expenses of approximately $33,000 and a decrease in payroll and related expenses of approximately $10,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak.

Fulfillment

Fulfillment costs increased approximately $156,000, or 39%, from approximately $400,000 for the six months ended June 30, 2020 to approximately $556,000 for the six months ended June 30, 2021. The increase was primarily attributable to an increase in payroll and related expenses of approximately $156,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment.

General and Administrative Expenses

General and administrative expenses increased approximately $1,852,000 or 282%, from approximately $657,000 for the six months ended June 30, 2020 to approximately $2,509,000 for the six months ended June 30, 2021. The increase was primarily attributable to an increase in cost related to becoming a public company including an increase of general and administrative expenses of approximately $166,000 related to amortization of internally developed software, associated software licenses, human resource related expenses, insurance costs and facility expenses, an increase in payroll related costs for the chief financial officer of approximately $144,000, an increase in legal and accounting expenses of approximately $136,000, and an increase in director and officer insurance of approximately $98,000. There was also an increase in utilities and facilities of approximately $13,000, partially offset by a decrease in depreciation and amortization expenses of approximately $4,000. Additionally, the remaining increase is related to costs not expected to recur in the future, such as payroll expenses of approximately $555,000 for a special IPO bonus provided to all employees and increased legal, accounting and consulting expenses of approximately $744,000 that did not qualify as offering costs.

Other Income (Expense), net

Other income (expense), net increased approximately $1,824,000, or 172%, from approximately $1,063,000 for the six months ended June 30, 2020 to approximately $2,887,000 for the six months ended June 30, 2021. The increase in other income (expense), net was primarily the result of a loss on the extinguishment of Bridge Notes and Related Party Bridge Notes of approximately $2,740,000, an increase in interest expense of approximately $938,000 related to accrued interest on the issuance of additional Bridge Notes, a loss on extinguishment of Convertible Notes of approximately $260,000, a difference in the change in fair value of the derivative liability related to the Convertible Notes of approximately $249,000, and a decrease in other income of approximately $7,000, partially offset by a change in fair value of the derivative liability related to the Bridge Notes and Related Party Bridge Notes of approximately $1,583,000 and a gain on the extinguishment of note payable of approximately $788,000 due to the forgiveness of the total outstanding balance of the Paycheck Protection Program Loan.

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Liquidity and Capital Resources

Capital Resources

As of June 30, 2021, our available cash totaled approximately $13,184,000 which represented an increase of approximately $12,488,000 compared to December 31, 2020. As of June 30, 2021, we had working capital of approximately $10,993,000 which represents an increase of approximately $29,656,000 compared to December 31, 2020. Since inception, we have relied upon raising capital to finance our operations. On June 21, 2021, we completed our IPO in which we issued and sold 2,250,000 shares of our common stock at a public offering price of $8.00 per share, for aggregate gross proceeds of $18 million. The net proceeds from the IPO were $15.7 million after deducting underwriting discounts of $1.7 million and other offering costs of $0.6 million. On July 1, 2021, we sold an additional 337,500 shares of our common stock, pursuant to the underwriters’ full exercise of its overallotment option, at a public offering price of $8.00 per share, for aggregate gross proceeds of $2.7 million. The net proceeds from the overallotment were $2.5 million after deducting underwriting discounts of $0.2 million. In aggregate, we received approximately $18.2 million after deducting underwriting discounts of $1.9 million and other offering costs of $0.6 million. 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.

Management believes that the Company’s existing cash and cash equivalents, which include the net proceeds from the IPO, will allow the Company to continue its operations for at least the next 12 months from the date these financial statements are issued and therefore the conditions raising substantial doubt raised in prior periods has been alleviated. As a result of recurring losses, the continued viability of the Company beyond August 2022 may be dependent on its ability to continue to raise additional capital to finance its operations.

Factoring Agreement

On January 1, 2021, we entered into a factoring agreement with Versant Funding, LLC (“Versant”), pursuant to which we agreed to sell a minimum of $1.2 million of our accounts receivable without recourse. Through June 30, 2021, we have sold, without recourse, total net receivables of approximately $2.3 million under the Factoring Agreement to Versant. Without recourse indicates that we assign and transfer our rights, title, and interest in and to the accounts receivable to Versant, meaning that we are not liable to repay all or any portion of the advance amount if any portion of the accounts receivable is not paid by our customer(s). Information on accounts receivable identified for factoring are provided and verified by Versant prior to being accepted for factoring. Pursuant to the Factoring Agreement, we receive an advance of 75% of the value of the purchased accounts receivable upfront. Upon receipt of the payment from the customer, Versant calculates the applicable factoring fee from invoice date through the actual collection date, and remits the remaining 25% holdback of the value of the factored accounts receivable, less their factoring fees, to us. The factoring fees range from 2.5% to 15% of the purchase price of the accounts receivable based on the age of the accounts receivable when collected. We are also charged for certain reimbursable administrative fees incurred on our behalf for the management of the program. In connection with the Factoring Agreement, we entered into a Security Agreement, granting to Versant a security interest in substantially all of our assets to secure our obligations under the Factoring Agreement.

Upon termination of the Factoring Agreement on June 30, 2021, the Company paid Versant $139,374 in settlement of its balance payable to Versant pursuant to the Factoring Agreement. Upon termination of the Factoring Agreement, all future payments of accounts receivable shall be made directly to the Company.

Note Payable Loan Forgiveness

On January 13, 2021, the Paycheck Protection Program Loan and related interest of $788,156 was fully forgiven by the U.S. Small Business Administration.

Cash Flows

Six Months Ended June 30, 2021 and 2020

Six months ended June 30, 

Change

 

2021

2020

Dollars

Percentage

 

Net cash flows (used in) provided by operating activities

    

$

(3,268,535)

    

$

55,681

    

$

(3,324,216)

    

(5970)

%

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Net cash flows used in investing activities

 

(442,881)

 

(592,024)

 

149,143

 

(25)

%

Net cash flows provided by financing activities

 

16,199,817

 

1,783,008

 

14,416,809

 

809

%

Net increase in cash and cash equivalents

$

12,488,401

$

1,246,665

$

11,241,736

Operating Activities

For the six months ended June 30, 2021, net cash used in operating activities was $3,268,535, which consisted of a net loss of $5,358,405 offset by non-cash charges of approximately $2,355,000, which primarily includes a $2,740,425 loss on extinguishment of Bridge Notes, $869,600 of amortization of discount on Amended Bridge Notes, $471,584 related to amortization of internally developed software, a $260,185 loss on extinguishment of Convertible Notes, $50,410 in stock based compensation, $39,618 in bad debt expense, $22,260 related to depreciation and amortization of property and equipment, and $1,088 of amortization of discount and debt issuance costs on Convertible Notes partially offset by a $1,311,700 loss on derivative liabilities, and a $788,156 gain on the extinguishment of the note payable. Total changes in assets and liabilities of approximately $265,444 were primarily driven by a $1,707,225 decrease in accrued interest, a $500,338 increase in accounts receivable, a $473,028 increase in accounts receivable-unbilled, a $70,394 decrease in deferred revenue, and a $24,160 increase in prepaid expenses and other current assets, partially offset by a $1,440,799 increase in accounts payable, and an increase in accrued expenses of $1,068,902.

For the six months ended June 30, 2020, net cash provided by operating activities was $55,681 which consisted of a net loss of $1,812,069, offset by non-cash charges of approximately $662,000, which primarily includes $420,257 related to amortization of internally developed software, $139,232 of amortization of discount and debt issuance costs on Convertible Notes, $51,332 of share-based compensation, $28,680 of depreciation and amortization of property and equipment, and a change in fair value of derivative liabilities of $22,000. Total changes in working capital assets and liabilities of approximately $1,206,249 were primarily driven by an increase in accrued interest of $906,476, an increase in deferred revenue of $359,171, an increase in accrued expenses of $157,086, an increase in accounts payable of $146,202, and a decrease in tax credit receivable of $104,479, partially offset by a $280,555 increase in accounts receivable-unbilled, an increase in accounts receivable of $183,117, and a $3,493 increase in prepaid expenses and other current assets.

Investing Activities

Net cash used in investing activities was $442,881 and $592,024 for the six months ended June 30, 2021 and 2020, respectively. Net cash used in investing activities for the six months ended June 30, 2021 consisted of $440,331 of capitalization of internally developed software and $2,550 for purchases of property and equipment. Net cash used in investing activities for the six months ended June 30, 2020 consisted of $591,017 of capitalization of internally developed software, and $1,007 for purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $16,199,817 and $1,783,008 for the six months ended June 30, 2021 and 2020, respectively. Net cash provided by financing activities for the six months ended June 30, 2021 consisted of $18,000,000 of proceeds received from the issuance of common stock in connection with the IPO, $500,000 of proceeds received from the issuance of Bridge Notes payable, and $39,633 of proceeds received from the exercise of stock options, partially offset by $2,339,816 for the payment of offering costs in connection with the issuance of common stock in connection with the IPO. Net cash provided by financing activities for the six months ended June 30, 2020 consisted of proceeds received from the issuance of Bridge Notes payable totaling $1,000,000 and proceeds received from the Paycheck Protection Program of $783,008.

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 liabilities, loss on extinguishment of Bridge Notes and Related Party Bridge Notes, gain on extinguishment of note payable, interest expense, depreciation and amortization, and share-based compensation expense.

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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 the change in fair value of derivative liabilities on the Bridge Notes and Convertible Notes 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:

Ø 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, Bridge Notes, and Related Party Bridge Notes;
Ø Adjusted EBITDA excludes the loss on the extinguishment of Bridge Notes and Relates Party Bridge Notes;
Ø Adjusted EBITDA excludes the loss on the extinguishment of Convertible Notes
Ø Adjusted EBITDA excludes the gain on the extinguishment of note payable;
Ø Adjusted EBITDA excludes amortization of debt issuance costs and discounts on Convertible Notes which are components to interest expense;
Ø 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
Ø 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:

Three months ended June 30, 

Six months ended June 30, 

2021

2020

2021

2020

(unaudited)

(unaudited)

Net loss

    

$

(1,394,914)

    

$

(174,092)

    

$

(5,358,405)

    

$

(1,812,069)

Income tax benefit

 

 

(145)

 

 

(145)

Change in fair value of derivative liability on convertible notes

 

117,000

 

(583,000)

 

271,000

 

22,000

Change in fair value of derivative liability on bridge notes and bridge notes, relates parties

 

(1,630,700)

 

 

(1,582,700)

 

Loss on extinguishment of bridge notes and bridge notes, related parties

 

(9,746)

 

 

2,740,425

 

Loss on extinguishment of convertible notes and convertible notes, related parties

260,185

260,185

Gain on extinguishment of note payable

 

 

 

(788,156)

 

Interest expense

 

1,133,479

 

459,005

 

1,986,407

 

1,048,220

Depreciation & amortization

 

247,485

 

228,089

 

493,844

 

448,937

Share-based compensation

 

28,374

 

22,045

 

50,410

 

51,332

Adjusted EBITDA

$

(1,248,837)

$

(48,098)

$

(1,926,990)

$

(241,725)

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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. The following accounting policies involve estimates that are considered critical due to the level of subjectivity and judgment involved, as well as the impact on our financial position and results of operations.

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

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

We have evaluated principal versus agent considerations as part of our revenue recognition policy. We have concluded that we act as principal in the arrangement as we manage the procurement process from beginning to end and determine which suppliers will be used to fulfill an order, usually take physical possession of the specimens, set prices for the specimens, and bear the responsibility for customer credit risk.

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

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,

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reflecting the specimens being accessioned over time. However, specimens are generally shipped as soon as possible after they have been accessioned.

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

Customers are generally given fourteen days from the receipt of specimens to inspect the specimens to ensure compliance with specifications set forth in the purchase order documentation. Customers are entitled to either receive replacement specimens or receive reimbursement of payments made for such specimens. 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 requisite service period. Forfeitures are recognized when they occur.

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. 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

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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 its common stock.

Common Stock Valuations

For all periods prior to our initial public offering, there was no public market for our common stock, and, as a result, the fair value of the shares of common stock underlying our share-based awards was estimated on each grant date by our board of directors. To determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, input from management, valuations of our common stock prepared by unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant. These factors included, but were not limited to:

Ø our results of operations and financial position, including our levels of available capital resources;
Ø our stage of development and material risks related to our business;
Ø our business conditions and projections;
Ø the valuation of publicly traded companies in the life sciences and Scientific Research & Development sectors, as well as recently completed mergers and acquisitions of peer companies;
Ø the lack of marketability of our common stock as a private company;
Ø the prices at which we sold shares of our convertible preferred stock to outside investors in arm’s length transactions;
Ø the rights, preferences, and privileges of our convertible preferred stock relative to those of our common stock;
Ø the likelihood of achieving a liquidity event for our securityholders, such as an initial public offering or a sale of our company, given prevailing market conditions;
Ø the hiring of key personnel and the experience and expertise of management;
Ø trends and developments in our industry; and
Ø external market conditions affecting the life sciences and Scientific Research & Development industry sectors.

For our valuations of common stock performed, we used a hybrid method of the Option Pricing Method (“OPM”) and the Probability-Weighted Expected Return Method (“PWERM”). PWERM considers various potential liquidity outcomes. Our approach included the use of an initial public offering scenario and a scenario assuming continued operation as a private entity. Under the hybrid OPM and PWERM, the per share value calculated under the OPM and PWERM are weighted based on expected exit outcomes and the quality of the information specific to each allocation methodology to arrive at a final estimated fair value per share of the common stock before a discount for lack of marketability is applied.

To determine the fair value of our common stock, we first determined our enterprise value using accepted valuation approaches; adjusted these valuation approaches with relevant discounts; weighted the results appropriately; and then allocated the equity value to our common stock and common stock equivalents. Our enterprise value was estimated using two generally accepted approaches: the income approach and the market approach. The income approach estimates enterprise value based on the estimated present value of future cash flows the business is expected to generate over its remaining life. The estimated present value is calculated using a discount rate reflective of the risks associated with an investment in a similar company in a similar industry or having a similar history of revenue growth. The market approach measures the value of a business through an analysis of recent sales or offerings of comparable investments or assets, and in our case, focused on comparing us to a group of our peer companies. In applying this method, valuation multiples are derived from historical and projected operating data of the peer company group. We then apply the

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selected multiples to our operating data to arrive at a range of indicated enterprise values of the Company. We then subtracted the net debt to determine equity value.

As a result of the IPO in June 2021, it is not necessary to determine the fair value of our common stock, as our shares are traded in the public market.

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 audited financial statements included in our final prospectus filed on June 21, 2021.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such

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information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

IPO

On June 21, 2021, we completed our IPO in which we issued and sold 2,250,000 shares of our common stock at a public offering price of $8.00 per share, for aggregate gross proceeds of $18 million. The net proceeds from the IPO were $15.7 million after deducting underwriting discounts of $1.7 million and other offering costs of $0.6 million. On July 1, 2021, we sold an additional 337,500 shares of our common stock, pursuant to the underwriters’ partial exercise of their overallotment option, at a public offering price of $8.00 per share, for aggregate gross proceeds of $2.7 million. In aggregate, we received approximately $18.2 million after deducting for all underwriting discounts of $1.9 million and other offering costs of $0.6 million.

Conversion of Convertible Promissory Notes

We previously issued an aggregate of $5.5 million principal amount of convertible promissory notes (collectively, the “Convertible Notes”) in several private placements. Pursuant to the terms of the Convertible Notes, upon the completion of the IPO on June 21, 2021, the outstanding principal and accrued interest of $6,757,066 of the Convertible Notes were automatically converted into an aggregate of 1,206,614 shares of our common stock (the “Conversion Shares”) at a conversion price of $5.60 per share.

Conversion of Bridge Notes

We previously issued an aggregate of $7.0 million principal amount of bridge promissory notes (collectively, the “Bridge Notes”) in several private placements. Pursuant to the terms of the Bridge Notes, upon the completion of the IPO on June 21, 2021, the outstanding principal of $4,000,000 and accrued interest of $717,646 of the Bridge Notes were automatically converted into an aggregate of 842,429 shares of our common stock (the “Bridge Shares”) at a conversion price of $5.60 per share.

The Conversion Shares and Bridge Shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, since the issuance did not involve a public offering. The Convertible Notes and Bridge Notes were originally issued in private offerings in reliance on Rule 506 of Regulation D and Section 4(2) of the Securities Act.

Conversion of Preferred Stock

In connection with the IPO, on June 21, 2021, all of the outstanding shares of Series A Preferred Stock, Series A-1 Preferred Stock and Series B Preferred Stock were converted into 1,291,012 shares of common stock. The conversion of the Series A Preferred Stock, Series A-1 Preferred Stock and Series B Preferred Stock into shares of common stock was exempt from registration pursuant to Section 3(a)(9) of the Securities Act.

Use of Proceeds

For a description of the use of the proceeds generated in our IPO, see Part I, Item 2 of this Quarterly Report on Form 10-Q. There has been no material change in the planned use of the proceeds from our IPO as is described in our final prospectus related to the IPO.

Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

During a meeting of the Company’s Board of Directors in July 2021, Tracy Curley, Chief Financial Officer, was formally elected as Treasurer of the Company.

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

No.

Description of Exhibit

3.1

Fourth Amended and Restated Certificate of Incorporation. (1)

3.2

Second Amended and Restated Bylaws. (1)

10.1

Form of Indemnification Agreement, by and between iSpecimen Inc. and certain directors and executive officers. (2)

10.2

Form of Confidentiality, Non-Competition And Assignment Agreement, by and between iSpecimen Inc. and each of its employees. (2)

10.3

iSpecimen Inc. 2021 Stock Incentive Plan*

10.4

Employment Agreement by and between iSpecimen Inc. and Christopher Ianelli. (3)

10.5

Employment Agreement by and between iSpecimen Inc. and JillMullan. (3)

10.6

Employment Agreement by and between iSpecimen Inc. and Tracy Curley. (3)

10.7

Employment Agreement by and between iSpecimen Inc. and Benjamin Bielak. (3)

31.1*

Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

Inline XBRL Instance Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File

* Filed herewith.

**

Furnished.

(1) Previously filed as an exhibit to our Current Report on Form 8-K filed on June 22, 2021 and incorporated by reference herein.
(2) Previously filed as an exhibit to our Registration Statement on Form S-1/A filed on December 31, 2020 and incorporated by reference herein.
(3) Previously filed as an exhibit to our Registration Statement on Form S-1/A3 filed on April 2, 2021 and incorporated by reference herein.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

iSpecimen, Inc.

Date: August 10, 2021

By:

/s/ Christopher Ianelli

Name:

Christopher Ianelli

Title:

Chief Executive Officer and President (Principal Executive Officer)

Date: August 10, 2021

By:

/s/ Tracy Curley

Name:

Tracy Curley

Title:

Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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EXHIBIT 10.3

iSPECIMEN INC.

AMENDED AND RESTATED

2021 STOCK INCENTIVE PLAN

1. Purpose. The purpose of this 2021 Stock Incentive Plan, as amended from time to time (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(f) 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”).

2. Definitions. The following definitions shall be applicable throughout this Plan:

(a) “Affiliate” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest as determined by the Committee in its discretion. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.

(b) “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Stock Bonus Award or Performance Compensation Award granted under this Plan.

(c) “Award Agreement” means an agreement made and delivered in accordance with Section 16(a) of this Plan evidencing the grant of an Award hereunder.

(d) “Board” shall have the meaning given in Section 1.

(e)Business Day means any day other than a Saturday, a Sunday or a day on which banking institutions in Massachusetts are authorized or obligated by federal law or executive order to be closed.

(f) “Cause” means, in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) the Company or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting agreement or similar document or policy between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement, document or policy (or the absence of any definition of “Cause” contained therein), (A) a continuing material breach or material default (including, without limitation, any material dereliction of duty) by Participant of any agreement between the Participant and the Company, except for any such breach or default which is caused by the physical disability of the Participant (as determined by a neutral physician), or a continuing failure by the Participant to follow the direction of a duly authorized representative of the Company; (B) gross negligence, willful misfeasance or breach of fiduciary duty to the Company or Affiliate of the Company by the Participant; (C) the commission by the Participant of an act of fraud, embezzlement or any felony or other crime of dishonesty in connection with the Participant’s duties to the Company or Affiliate of the Company; (D) conviction of the Participant of a felony or any other crime that would materially and adversely affect: (i) the business reputation of the Company or Affiliate of the Company or (ii) the performance of the Participant’s duties to the Company or an Affiliate of the Company; (E) gross misconduct by the Participant which results in loss, damage or injury to the Company or an Affiliate of the Company, their goodwill, business or reputation; (F) the commission of an act which induces any customer or prospective customer of the Company to breach a contract with the Company or an Affiliate of the Company or to decline to do business with the Company or an Affiliate; (G) the 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 or an Affiliate of the Company, which results in harm to the Company, an Affiliate of the Company, or their customers or suppliers; (H) the engagement, whether directly or indirectly, by the Participant, during the period of his or her employment, engagement or relationship with the Company or an Affiliate of the Company 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 or an Affiliate of the Company; (I)  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 an Affiliate of 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 or an Affiliate 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 or an Affiliate of the Company on behalf of a competitive enterprise (prospective customer shall mean any person or entity being solicited by the Company or an Affiliate of the Company during the time the Participant was employed or engaged by the Company or an Affiliate of the Company); (J) 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 or an Affiliate of the Company, of any employee or consultant of the Company or an Affiliate of the Company; (K) the use of controlled substances, illicit drugs, alcohol or other substances or behavior which interferes with the Participant’s ability to perform his or her services for the Company or an Affiliate of the Company or which otherwise results in loss, damage or injury to the Company or an Affiliate of the Company, their goodwill, business or reputation; or (L) the repeated failure of the Participant to adequately perform his or her employment, advisory or consulting services, duties and obligations following a notice of such failure from management or the Board and an inability to cure such failure after thirty (30) days, unless otherwise precluded by disability. Any determination of whether Cause exists shall be made by the Committee in its sole discretion.

(g) “Change in Control” shall, in the case of a particular Award, unless the applicable Award Agreement states otherwise or contains a different definition of “Change in Control,” be deemed to occur upon: (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. A Change in Control caused by an increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the Company acquires its stock in exchange for property is not treated as a Change in Control for purposes of the Plan.

(h) “Code” shall have the meaning given in Section 1.

(i) “Committee” means a committee of at least two people as the Board may appoint to administer this Plan or, if no such committee has been appointed by the Board, the Board. Unless altered by an action of the Board, the Committee shall be the Compensation Committee of the Board.

(j) “Common Stocks” means the common stock, par value $0.0001 per share, of the Company (and any stock or other securities into which such Common Stocks may be converted or into which they may be exchanged).

(k) “Company” shall have the meaning given in Section 1.

(l) “Current Board Members” means the individuals who, as of the date hereof, constitute the members of the Board.


(m) “Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

(n) “Disability” means a “permanent and total” disability incurred by a Participant while in the employ or service of the Company or an Affiliate or as otherwise as determined under procedures established by the Committee for purposes of the Plan. For this purpose, a permanent and total disability shall mean that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. The determination of whether a Participant has incurred a permanent and total disability shall be made by a physician designated by the Committee, whose determination shall be final and binding.

(o) “Effective Date” means the date as of which this Plan is adopted by the Board, subject to Section 3 of this Plan.

(p) “Eligible Director” means a person who is a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.

(q) “Eligible Person” means any (i) individual employed by the Company or an Affiliate; providedhowever, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director of the Company or an Affiliate; or (iii) consultant or advisor to the Company or an Affiliate, provided that if the Securities Act applies such persons must be eligible to be offered securities registrable on Form S-8 under the Securities Act.

(r) “Exchange Act” means the Securities and Exchange Act of 1934, as amended.

(s) “Exercise Price” has the meaning given such term in Section 7(b) of this Plan.

(t) “Fair Market Value”, unless otherwise provided by the Committee in accordance with all applicable laws, rules regulations and standards, means, on a given date, (i) if the Common Stocks are listed on a national securities exchange, the closing sales price on the principal exchange of the Common Stocks on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Common Stocks are not listed on a national securities exchange, the mean between the bid and offered prices as quoted by any nationally recognized interdealer quotation system for such date, provided that if the Common Stocks are not quoted on an interdealer quotation system or it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A.

(u) “Immediate Family Members” shall have the meaning set forth in Section 16(b) of this Plan.

(v) “Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in this Plan.

(w) “Indemnifiable Person” shall have the meaning set forth in Section 4(e) of this Plan.

(x) “Negative Discretion” shall mean the discretion authorized by this Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.

(y) “Nonqualified Stock Option” means an Option that is not designated by the Committee as an Incentive Stock Option.

(z) “Option” means an Award granted under Section 7 of this Plan.

(aa) “Option Period” has the meaning given such term in Section 7(c) of this Plan.


(ab) “Participant” means an Eligible Person who has been selected by the Committee to participate in this Plan and to receive an Award pursuant to Section 6 of this Plan.

(ac) “Performance Compensation Award” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of this Plan.

(ad) “Performance Criteria” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under this Plan.

(ae) “Performance Formula” shall mean, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

(af) “Performance Goals” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

(ag) “Performance Period” shall mean the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

(ah) “Permitted Transferee” shall have the meaning set forth in Section 16(b) of this Plan.

(ai) “Person” has the meaning given such term in the definition of “Change in Control.”

(aj) “Plan” means this iSpecimen Inc. 2021 Stock Incentive Plan, as amended from time to time.

(ak) “Repurchase Period” shall have the meaning set forth in Section 15(a) of this Plan.

(al) “Repurchase Option” shall have the meaning set forth in Section 15(a) of this Plan.

(am) “Retirement” means the fulfillment of each of the following conditions: (i) the Participant is in good standing with the Company and/or an Affiliate of the Company as determined by the Committee; (ii) the voluntary termination by a Participant of such Participant’s employment or service to the Company and/or an Affiliate and (iii) that at the time of such voluntary termination, the sum of: (A) the Participant’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (B) the Participant’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of such Retirement, the Participant shall be at least 55 years of age and shall have been employed by or served with the Company for no less than five years).

(an) “Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.

(ao) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver Common Stocks, cash, other securities or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of this Plan.

(ap) “Restricted Stock” means Common Stocks, subject to certain specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of this Plan.


(aq) “SAR Period” has the meaning given such term in Section 8(c) of this Plan.

(ar) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in this Plan to any section of the Securities Act shall be deemed to include any rules, regulations or other official interpretative guidance issued by any governmental authority under such section, and any amendments or successor provisions to such section, rules, regulations or guidance.

(as) “Stock Appreciation Right” or SAR means an Award granted under Section 8 of this Plan which meets all of the requirements of Section 1.409A-1(b)(5)(i)(B) of the Treasury Regulations.

(at) “Stock Bonus Award” means an Award granted under Section 10 of this Plan.

(au) “Strike Price” means, except as otherwise provided by the Committee in the case of Substitute Awards, (i) in the case of a SAR granted in tandem with an Option, the Exercise Price of the related Option, or (ii) in the case of a SAR granted independent of an Option, the Fair Market Value of Common Stocks on the Date of Grant.

(av) “Subsidiary” shall have the meaning given in Section 1.

(aw) “Substitute Award” has the meaning given such term in Section 5(e).

(ax) “Treasury Regulations” means any regulations, whether proposed, temporary or final, promulgated by the U.S. Department of Treasury under the Code, and any successor provisions.

3. Effective Date; Duration. The Plan shall be effective on June 16, 2021, the date on which it is approved by the stockholders of the Company, which date shall be within twelve (12) months before or after the date of the Plan’s adoption by the Board. The expiration date of this Plan, on and after which date no Awards may be granted hereunder, shall be June 16, 2031, the tenth anniversary of the date on which the Plan was approved by the stockholders of the Company; providedhowever, that such expiration shall not affect Awards then outstanding, and the terms and conditions of this Plan shall continue to apply to such Awards.

4. Administration.

(a) The Committee shall administer this Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under this Plan), it is intended that each member of the Committee shall, at the time he takes any action with respect to an Award under this Plan, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under this Plan. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. Whether a quorum is present shall be determined based on the Committee’s charter as approved by the Board.

(b) Subject to the provisions of this Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by this Plan and its charter, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Common Stocks to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Common Stocks, other securities, other Awards or other property, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stocks, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on,


Awards; (x) to reprice existing Awards or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan.

(c) The Committee may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and types of Awards, to (i) designate officers and/or employees of the Company or any of its Affiliates to be recipients of Awards under this Plan, and (ii) to determine the number of such Awards to be received by any such Participants; provided, however, that such delegation of duties and responsibilities may not be made with respect to grants of Awards to persons (i) subject to Section 16 of the Exchange Act or (ii) who are, or who are reasonably expected to be, “covered employees” for purposes of Section 162(m) of the Code. The acts of such delegates shall be treated as acts of the Committee, and such delegates shall report regularly to the Board and the Committee regarding the delegated duties and responsibilities and any Awards granted.

(d) Unless otherwise expressly provided in this Plan, all designations, determinations, interpretations, and other decisions under or with respect to this Plan or any Award or any documents evidencing Awards granted pursuant to this Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

(e) No member of the Board, the Committee, delegate of the Committee or any employee, advisor or agent of the Company or the Board or the Committee (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to this Plan or any Award hereunder. Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from (and the Company shall pay or reimburse on demand for) any loss, cost, liability, or expense (including court costs and attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken under this Plan or any Award Agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which any such Indemnifiable Person may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.

(f) Notwithstanding anything to the contrary contained in this Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer this Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under this Plan.

5. Grant of Awards; Shares Subject to this Plan; Limitations.

(a) The Committee may, from time to time, grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Bonus Awards and/or Performance Compensation Awards to one or more Eligible Persons.

(b) Subject to Section 12 of this Plan, the Committee is authorized to deliver under this Plan an aggregate of 608,000 Common Stocks, plus an annual increase on each anniversary of the Effective Date thereafter while this Plan is in effect so that the aggregate amount of shares of Common Stock the Committee is authorized to


deliver under this Plan equals to 5% of the total issued and outstanding number of Common Stocks as of such anniversary (or such lesser number of Common Stocks as may be determined by the Committee).

(c) Common Stocks underlying Awards under this Plan that are forfeited, cancelled, expire unexercised, or are settled in cash shall be available again for Awards under this Plan at the same ratio at which they were previously granted. Notwithstanding the foregoing, the following Common Stocks shall not be available again for Awards under the Plan: (i) shares tendered or held back upon the exercise of an Option or settlement of an Award to cover the Exercise Price of an Award; (ii) shares that are used or withheld to satisfy tax withholding obligations of the Participant; and (iii) shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the SAR upon exercise thereof.

(d) Common Stocks delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or any combination of the foregoing.

(e) Subject to compliance with Section 1.409A-3(f) of the Treasury Regulations, Awards may, in the sole discretion of the Committee, be granted under this Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute Awards”). The number of Common Stocks underlying any Substitute Awards shall be counted against the aggregate number of Common Stocks available for Awards under this Plan.

(f) Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 12), the Committee shall not grant to any one Eligible Person in any one calendar year Awards (i) for more than 50% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $10,000,000 in the aggregate.

6. Eligibility. Participation shall be limited to Eligible Persons who have entered into an Award Agreement or who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in this Plan.

7. Options.

(a) Generally. Each Option granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. All Options granted under this Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Notwithstanding any designation of an Option, to the extent that the aggregate Fair Market Value of Common Stocks with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company or any Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonqualified Stock Options. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless this Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under this Plan.

(b) Exercise Price. The exercise price (“Exercise Price”) per Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant; provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option,


owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Affiliate, the Exercise Price per share shall not be less than 110% of the Fair Market Value per share on the Date of Grant; and, provided further, that notwithstanding any provision herein to the contrary, the Exercise Price shall not be less than the par value per Common Stock.

(c) Vesting and Expiration. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and as set forth in the applicable Award Agreement, and shall expire after such period, not to exceed ten (10) years from the Date of Grant, as may be determined by the Committee (the “Option Period”); providedhowever, that the Option Period shall not exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Affiliate; and, providedfurther, that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of such Option other than with respect to exercisability. Unless otherwise provided by the Committee in an Award Agreement:

(i) an Option shall vest and become exercisable with respect to 100% of the Common Stocks subject to such Option on each anniversary of the Date of Grant;

(ii) the unvested portion of an Option shall expire upon termination of employment or service of the Participant granted the Option, and the vested portion of such Option shall remain exercisable for:

(A) one year following termination of employment or service by reason of such Participant’s death or Disability (with the determination of Disability to be made by the Committee on a case by case basis), but not later than the expiration of the Option Period;

(B) for directors, officers and employees of the Company only, for ninety (90) days following termination of employment or service by reason of such Participant’s Retirement;

(C) 90 calendar days following termination of employment or service for any reason other than such Participant’s death, Disability or Retirement, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the Option Period; and

(iii) both the unvested and the vested portion of an Option shall immediately expire upon the termination of the Participant’s employment or service by the Company for Cause. Notwithstanding the foregoing provisions of Section 7(c) and consistent with the requirements of applicable law, the Committee, in its sole discretion, may extend the post-termination of employment period during which a Participant may exercise vested Options.

(d) Method of Exercise and Form of Payment. No Common Stocks shall be delivered pursuant to the exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any federal, state, local and/or foreign income and employment taxes required to be withheld. Options that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award Agreement accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check (subject to collection), cash equivalent and/or vested Common Stocks valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of Common Stocks in lieu of actual delivery of such shares to the Company); provided, however, that such Common Stocks are not subject to any pledge or other security interest and; (ii) by such other method as the Committee may permit in accordance with applicable law, in its sole discretion, including without limitation: (A) in other property having a fair market value (as determined by the Committee in its discretion) on the date of exercise equal to the Exercise Price or (B) if there is a public market for the Common Stocks at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the Common Stocks otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price or (C) by a “net exercise” method whereby the Company withholds from the delivery of the Common Stocks for which the Option was exercised that number of Common Stocks having a Fair Market Value equal to the aggregate Exercise Price for the Common Stocks for which the Option was exercised. Any fractional Common Stocks shall be settled in cash.


(e) Notification upon Disqualifying Disposition of an Incentive Stock Option. Each Participant awarded an Incentive Stock Option under this Plan shall notify the Company in writing immediately after the date he makes a disqualifying disposition of any Common Stocks acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stocks before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession of any Common Stocks acquired pursuant to the exercise of an Incentive Stock Option as agent for the applicable Participant until the end of the period described in the preceding sentence.

(f) Compliance with Laws, etc. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner that the Committee determines would violate the Sarbanes-Oxley Act of 2002, if applicable, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

8. Stock Appreciation Rights.

(a)Generally. Each SAR granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. Any Option granted under this Plan may include tandem SARs (i.e., SARs granted in conjunction with an Award of Options under this Plan). The Committee also may award SARs to Eligible Persons independent of any Option.

(b) Exercise Price. The Exercise Price per Common Stock for each Option granted in connection with a SAR shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant.

(c) Vesting and Expiration. A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “SAR Period”); provided, however, that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any SAR, which acceleration shall not affect the terms and conditions of such SAR other than with respect to exercisability. Unless otherwise provided by the Committee in an Award Agreement:

(i) a SAR shall vest and become exercisable with respect to 100% of the Common Stocks subject to such SAR on the third anniversary of the Date of Grant;

(ii) the unvested portion of a SAR shall expire upon termination of employment or service of the Participant granted the SAR, and the vested portion of such SAR shall remain exercisable for:

(A) one year following termination of employment or service by reason of such Participant’s death or Disability (with the determination of Disability to be made by the Committee on a case by case basis), but not later than the expiration of the SAR Period;

(B) for directors, officers and employees of the Company only, for the remainder of the SAR Period following termination of employment or service by reason of such Participant’s Retirement;

(C) 90 calendar days following termination of employment or service for any reason other than such Participant’s death, Disability or Retirement, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the SAR Period; and


(iii) both the unvested and the vested portion of a SAR shall expire immediately upon the termination of the Participant’s employment or service by the Company for Cause.

(d) Method of Exercise. SARs that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded. Notwithstanding the foregoing, if on the last day of the Option Period (or in the case of a SAR independent of an Option, the SAR Period), the Fair Market Value exceeds the Strike Price, the Participant has not exercised the SAR or the corresponding Option (if applicable), and neither the SAR nor the corresponding Option (if applicable) has expired, such SAR shall be deemed to have been exercised by the Participant on such last day and the Company shall make the appropriate payment therefor.

(e) Payment. Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of Common Stocks subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one Common Stock on the exercise date over the Strike Price, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld. The Company shall pay such amount in cash, in Common Stocks valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional Common Stock shall be settled in cash.

9. Restricted Stock and Restricted Stock Units.

(a) Generally. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each such grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. Restricted Stock and Restricted Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, for example, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of Performance Goals or otherwise, as the Committee determines at the time of the grant of an Award or thereafter. Except as otherwise provided in an Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Restricted Stock Units until such time as Common Stocks are paid in settlement of such Awards.

(b) Restricted Accounts; Escrow or Similar Arrangement. Unless otherwise determined by the Committee, upon the grant of Restricted Stock, a book entry in a restricted account shall be established in the Participant’s name at the Company’s transfer agent and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than held in such restricted account pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate share power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank share power within the amount of time specified by the Committee, the Award shall be null and void ab initio. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock and the right to receive dividends, if applicable. To the extent shares of Restricted Stock are forfeited, any share certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.

(c) Vesting; Acceleration of Lapse of Restrictions. Unless otherwise provided by the Committee in an Award Agreement: (i) the Restricted Period shall lapse with respect to 100% of the Restricted Stock and Restricted Stock Units on the first anniversary of the Date of Grant; and (ii) the unvested portion of Restricted Stock and Restricted Stock Units shall terminate and be forfeited upon the termination of employment or service of the Participant granted the applicable Award.

(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units.


(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his beneficiary, without charge, the share certificate evidencing the shares of Restricted Stock that have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such shares of Restricted Stock and, if such shares of Restricted Stock are forfeited, the Participant shall have no right to such dividends (except as otherwise set forth by the Committee in the applicable Award Agreement).

(ii) Unless otherwise provided by the Committee in an Award Agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his beneficiary, without charge, one Common Stock for each such outstanding Restricted Stock Unit; providedhowever, that the Committee may, in its sole discretion and subject to the requirements of Section 409A of the Code, elect to (i) pay cash or part cash and part Common Stock in lieu of delivering only Common Stocks in respect of such Restricted Stock Units or (ii) defer the delivery of Common Stocks (or cash or part Common Stocks and part cash, as the case may be) beyond the expiration of the Restricted Period if such delivery would result in a violation of applicable law until such time as is no longer the case. If a cash payment is made in lieu of delivering Common Stocks, the amount of such payment shall be equal to the Fair Market Value of the Common Stocks as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld.

10. Stock Bonus Awards. The Committee may issue unrestricted Common Stocks, or other Awards denominated in Common Stocks, under this Plan to Eligible Persons, either alone or in tandem with other awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Stock Bonus Award granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Stock Bonus Award so granted shall be subject to such conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement.

11. Performance Compensation Awards.

(a) Discretion of Committee with Respect to Performance Compensation Awards. With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply and the Performance Formula. Within the first 90 calendar days of a Performance Period, the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

(c) Performance Criteria. The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company and/or one or more Affiliates, divisions or operational units, or any combination of the foregoing, as determined by the Committee, which criteria may be based on one or more of the following business criteria: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction;


(xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation. Any one or more of the Performance Criteria adopted by the Committee may be used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any business unit(s) of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph.

(d) Modification of Performance Goal(s). In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. The Committee is authorized at any time during the first 90 calendar days of a Performance Period in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; and (ix) a change in the Company’s fiscal year.

(e) Payment of Performance Compensation Awards.

(f)

(i) Condition to Receipt of Payment. Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by, or in service to, the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

(ii) Limitation. A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.

(iii) Certification. Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.

(iv) Use of Negative Discretion. In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. The Committee shall not have the discretion, except as is otherwise provided in this Plan, to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of this Plan.

(f) Timing of Award Payments. Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11, but in no event later than two-and-one-half months following the end of the fiscal year


during which the Performance Period is completed in order to comply with the short-term deferral rules under Section 1.409A-1(b)(4) of the Treasury Regulations. Notwithstanding the foregoing, payment of a Performance Compensation Award may be delayed, as permitted by Section 1.409A-2(b)(7)(i) of the Treasury Regulations, to the extent that the Company reasonably anticipates that if such payment were made as scheduled, the Company’s tax deduction with respect to such payment would not be permitted due to the application of Section 162(m) of the Code.

12. Changes in Capital Structure and Similar Events. In the event of (a) any dividend or other distribution (whether in the form of cash, Common Stocks, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, split-up, split-off, combination, repurchase or exchange of Common Stocks or other securities of the Company, issuance of warrants or other rights to acquire Common Stocks or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the Common Stocks, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate in order to prevent dilution or enlargement of rights, then the Committee shall make any such adjustments that are equitable, including without limitation any or all of the following:

(i) adjusting any or all of (A) the number of Common Stocks or other securities of the Company (or number and kind of other securities or other property) that may be delivered in respect of Awards or with respect to which Awards may be granted under this Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of this Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of Common Stocks or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals);

(ii) subject to the requirements of Section 409A of the Code, providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event; and

(iii) subject to the requirements of Section 409A of the Code, canceling any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, Common Stocks, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Common Stocks subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor); providedhowever, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) or ASC Topic 718, or any successor thereto), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner that does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

13. Effect of Change in Control. Except to the extent otherwise provided in an Award Agreement, in the event of a Change in Control, notwithstanding any provision of this Plan to the contrary, with respect to all or any portion of a particular outstanding Award or Awards:


(a) all of the then outstanding Options, SARs and Restricted Stock Units held by an Eligible Director shall immediately vest and become immediately exercisable as of a time prior to the Change in Control by such Eligible Director (unless otherwise specified in any Award Agreement);

(b) the Restricted Period of any Award to an Eligible Director shall expire as of a time prior to the Change in Control (including without limitation a waiver of any applicable Performance Goals); and

(c) Performance Periods in effect on the date the Change in Control occurs shall end on such date, and the Committee shall (i) determine the extent to which Performance Goals with respect to each such Performance Period have been met based upon such audited or unaudited financial information or other information then available as it deems relevant and (ii) cause the Participant to receive partial or full payment of Awards for each such Performance Period based upon the Committee’s determination of the degree of attainment of the Performance Goals, or assuming that the applicable “target” levels of performance have been attained or on such other basis determined by the Committee. To the extent practicable, any actions taken by the Committee under the immediately preceding clauses (a) through (c) shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control transactions with respect to the Common Stocks subject to their Awards.

14. Amendments and Termination.

(a) Amendment and Termination of this Plan. The Board may amend, alter, suspend, discontinue, or terminate this Plan or any portion thereof at any time; provided, that (i) no amendment to the definition of Eligible Person in Section 2(q), Section 5(b), Section 11(b) or Section 14(b) (to the extent required by the proviso in such Section 14(b)) shall be made without stockholder approval and (ii) no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to this Plan (including, without limitation, as necessary to comply with any rules or requirements of any national securities exchange or inter-dealer quotation system on which the Common Stocks may be listed or quoted or to prevent the Company from being denied a tax deduction under Section 162(m) of the Code); and, providedfurther, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the prior written consent of the affected Participant, holder or beneficiary.

(b) Amendment of Award Agreements. The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively; provided, however that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.

15. 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 15(b) below occur, then, within twelve (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 acquired pursuant to an Award 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.

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 herein, for each share of Common Stock to be repurchased by the Company hereunder. Upon timely exercise of the Repurchase Option in the manner provided in this Section 15(a), the Participant, or his or her legal representative,


shall deliver to the Company the stock certificate or certificates representing the shares purchased by the Participant under this Plan, as set forth in (i) and (ii) above, and to be repurchased by the Company hereunder, duly endorsed and free and clear of any and all liens, charges and encumbrances. 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 15 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 15(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. The Board or, in the case of an employee that is not an executive officer, the President may waive or modify the provisions of this Section with respect to any individual Participant, with regard to the facts and circumstances of any particular situation involving a determination under this Section.

(b) Triggering Events. The Company shall have the Repurchase Option in the event that any events for Cause shall occur, as determined in good faith by the Board.

(c) Repurchase Price. In the event that at the time the Company wishes to exercise its Repurchase Option, the Participant ceases to own a sufficient number of shares of Common Stock acquired by him or her under the Plan to satisfy the Company’s Repurchase Option, in addition to performing any obligations necessary to satisfy the Company’s exercise of its Repurchase Option of those shares of Common Stock available for repurchase, the Participant shall be required to deliver to the Company, for each share of Common Stock that is the subject of the Repurchase Option and is not available for repurchase as it has been sold or transferred, 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. The Fair Market Value of each share of Common Stock sold or transferred by the Participant shall be determined as of the date of such sale or transfer.

16. General.

(a) Award Agreements. Each Award under this Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)) and shall specify the terms and conditions of the Award and any rules applicable thereto, including without limitation, the effect on such Award of the death, Disability or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. The Company’s failure to specify any term of any Award in any particular Award Agreement shall not invalidate such term, provided such terms was duly adopted by the Board or the Committee.

(b) Nontransferability; Trading Restrictions.

(i) Each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, with or without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of this Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; or (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) any other transferee as may be approved either (I) by the Board or the Committee in its sole discretion, or (II) as provided in the applicable


Award Agreement (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of this Plan.

(iii) The terms of any Award transferred in accordance with subparagraph (ii) above shall apply to the Permitted Transferee and any reference in this Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the Common Stocks to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under this Plan or otherwise; and (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of this Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in this Plan and the applicable Award Agreement.

(iv) The Committee shall have the right, either on an Award-by-Award basis or as a matter of policy for all Awards or one or more classes of Awards, to condition the delivery of vested Common Stocks received in connection with such Award on the Participant’s agreement to such restrictions as the Committee may determine.

(c) Tax Withholding.

(i) A Participant shall be required to pay to the Company or any Affiliate, or the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, Common Stocks, other securities or other property deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Stocks, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under this Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes. In addition, the Committee, in its discretion, may make arrangements mutually agreeable with a Participant who is not an employee of the Company or an Affiliate to facilitate the payment of applicable income and self-employment taxes.

(ii) Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of Common Stocks (which are not subject to any pledge or other security interest) owned by the Participant having a fair market value equal to such withholding liability or (B) having the Company withhold from the number of Common Stocks otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a fair market value equal to such withholding liability (but no more than the maximum individual statutory rate for the applicable tax jurisdiction).

(d) No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under this Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under this Plan, unless otherwise expressly provided in this Plan or any Award Agreement. By accepting an Award under this Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under this


Plan or any Award Agreement, notwithstanding any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

(e) International Participants. With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may in its sole discretion amend the terms of this Plan or outstanding Awards (or establish a sub-plan) with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for such Participants, the Company or its Affiliates.

(f) Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under this Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation filed with the Committee shall be controlling; providedhowever, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. Upon the occurrence of a Participant’s divorce (as evidenced by a final order or decree of divorce), any spousal designation previously given by such Participant shall automatically terminate.

(g) Termination of Employment/Service. Unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice-versa) shall be considered a termination of employment or service with the Company or an Affiliate; and (ii) if a Participant’s employment with the Company and its Affiliates terminates, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity (or vice-versa), such change in status shall not be considered a termination of employment with the Company or an Affiliate for purposes of this Plan unless the Committee, in its discretion, determines otherwise.

(h) No Rights as a Stockholder. Except as otherwise specifically provided in this Plan or any Award Agreement, no person shall be entitled to the privileges of ownership in respect of Common Stocks that are subject to Awards hereunder until such shares have been issued or delivered to that person.

(i) Government and Other Regulations.

(i) The obligation of the Company to settle Awards in Common Stocks or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any Common Stocks pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the Common Stocks to be offered or sold under this Plan. The Committee shall have the authority to provide that all certificates for Common Stocks or other securities of the Company or any Affiliate delivered under this Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under this Plan, the applicable Award Agreement, the federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system upon which such shares or other securities are then listed or quoted and any other applicable federal, state, local or non-U.S. laws, and, without limiting the generality of Section 9 of this Plan, the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. Notwithstanding any provision in this Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under this Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.


(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of Common Stocks from the public markets, the Company’s issuance of Common Stocks to the Participant, the Participant’s acquisition of Common Stocks from the Company and/or the Participant’s sale of Common Stocks to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, unless doing so would violate Section 409A of the Code, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the Common Stocks subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of Common Stocks (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof. The Committee shall have the discretion to consider and take action to mitigate the tax consequence to the Participant in cancelling an Award in accordance with this clause.

(j) Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under this Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

(k) Nonexclusivity of this Plan. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or other equity-based awards otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

(l) No Trust or Fund Created. Neither this Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of this Plan or any Award shall require the Company, for the purpose of satisfying any obligations under this Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under this Plan other than as general unsecured creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

(m) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and/or its Affiliates and/or any other information furnished in connection with this Plan by any agent of the Company or the Committee or the Board, other than himself.

(n) Relationship to Other Benefits. No payment under this Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

(o) Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the conflict of laws provisions.

(p) Severability. If any provision of this Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify this Plan or any Award under any law deemed applicable by the Committee, such provision shall be


construed or deemed amended to conform to the applicable laws in the manner that most closely reflects the original intent of the Award or the Plan, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of this Plan and any such Award shall remain in full force and effect.

(q) Obligations Binding on Successors. The obligations of the Company under this Plan shall be binding upon any successor corporation or organization resulting from the merger, amalgamation, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

(r) Expenses; Gender; Titles and Headings. The expenses of administering this Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in this Plan are for convenience of reference only, and in the event of any conflict, the text of this Plan, rather than such titles or headings shall control.

(s) Other Agreements. Notwithstanding the above, the Committee may require, as a condition to the grant of and/or the receipt of Common Stocks under an Award, that the Participant execute lock-up, stockholder or other agreements, as it may determine in its sole and absolute discretion.

(t) Section 409AThe Plan and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, the requirements of Section 409A of the Code. The Plan and all Awards granted under this Plan shall be administered, interpreted, and construed in a manner consistent with Section 409A of the Code to the extent necessary to avoid the imposition of additional taxes under Section 409A(a)(1)(B) of the Code. Notwithstanding anything in this Plan to the contrary, in no event shall the Committee exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes deferred compensation within the meaning of Section 409A of the Code unless, and solely to the extent that, such accelerated payment or settlement is permissible under Section 1.409A-3(j)(4) of the Treasury Regulations. If a Participant is a “specified employee” (within the meaning of Section 1.409A-1(i) of the Treasury Regulations) at any time during the twelve (12)-month period ending on the date of his termination of employment, and any Award hereunder subject to the requirements of Section 409A of the Code is to be satisfied on account of the Participant’s termination of employment, satisfaction of such Award shall be suspended until the date that is six (6) months after the date of such termination of employment.

(u) PaymentsParticipants shall be required to pay, to the extent required by applicable law, any amounts required to receive Common Stocks under any Award made under this Plan.

*      *      *


EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher Ianelli, certify that:

1. I have reviewed this quarterly report on Form 10-Q of iSpecimen Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2021

 

    

/s/ Christopher Ianelli

 

Christopher Ianelli

 

Chief Executive Officer and President

 

(Principal Executive Officer)


EXHIBIT 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Tracy Curley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of iSpecimen Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2021

 

/s/ Tracy Curley

 

Tracy Curley

 

Chief Financial Officer and Treasurer

 

(Principal Accounting and Financial Officer)


EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of iSpecimen Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Christopher Ianelli, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: August 10, 2021

 

/s/ Christopher Ianelli

 

Christopher Ianelli

 

Chief Executive Officer and President

 

(Principal Executive Officer)


EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of iSpecimen Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Tracy Curley, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: August 10, 2021

 

/s/ Tracy Curley

 

Tracy Curley

 

Chief Financial Officer and Treasurer

 

(Principal Accounting and Financial Officer)