iSpecimen Inc.

Previous wording

The Company’s financial performance is subject to global economic conditions and their impact on levels of spending by our customer research organizations, particularly discretionary spending for procurement of specimens used for research. Economic recessions may have adverse consequences across industries, including the health and biospecimen industries, which may adversely affect our business and financial condition. We increased our allowance for doubtful accounts in accounts receivables by $111,041 as of March 31, 2025 due to certain customers either lack liquidity or have filed for bankruptcy. We have enhanced procedures related to our credit check process for new and existing customers to mitigate the risk to future collectability of receivables.

Current wording

The Company’s financial performance is subject to global economic conditions and their impact on levels of spending by our customer research organizations, particularly discretionary spending for procurement of specimens used for research. Economic recessions may have adverse consequences across industries, including the health and biospecimen industries, which may adversely affect our business and financial condition. We increased our allowance for doubtful accounts in accounts receivables by $17,579 as of June 30, 2025 due to certain customers either lack liquidity or have filed for bankruptcy. We have enhanced procedures related to our credit check process for new and existing customers to mitigate the risk to future collectability of receivables.

Previous wording

Throughout the years ended December 31, 2024 and 2023, we have initiated efforts to decrease our capital and operational expenditures by cutting costs and right sizing the Company through reductions in our workforce while streamlining operations and rationalizing our resources to focus on key market opportunities. As a result, we began to experience significant decreases in expenditures starting in the second half of 2023. The reductions in workforce since January 1, 2023 through December 31, 2024, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146% and technology costs of approximately 64% during the year December 31, 2024 when compared to the year ended December 31, 2023. During the first quarter of 2025, the reductions in workforce resulted in an estimated reduction in monthly compensation costs of approximately 93% and technology costs of approximately 73% during the three months ended March 31, 2025, when compared to the three months ended March 31, 2024.

Current wording

Throughout the years ended December 31, 2024 and 2023, we have initiated efforts to decrease our capital and operational expenditures by cutting costs and right sizing the Company through reductions in our workforce while streamlining operations and rationalizing our resources to focus on key market opportunities. As a result, we began to experience significant decreases in expenditures starting in the second half of 2023. The reductions in workforce since January 1, 2023 through December 31, 2024, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146% and technology costs of approximately 64% during the year December 31, 2024 when compared to the year ended December 31, 2023. During the second quarter of 2025, the reductions in workforce resulted in an estimated reduction in monthly compensation costs of approximately 76% and technology costs of approximately 71% during the six months ended June 30, 2025, when compared to the six months ended June 30, 2024.

Previous wording

We completed the implementation of a next day quote system in the third quarter of 2023 and we continue to see positive results in 2024 and up to the first quarter of 2025, as evidenced by increased conversion ratios of quotes to purchase orders of 35%. Previously, it took an extended number of days to complete a feasibility study in order to provide a customer quote, which negatively impacted the time to convert a quote to a purchase order.

Current wording

We completed the implementation of a next day quote system in the third quarter of 2023 and we continue to see positive results in 2024 and up to the second quarter of 2025, as evidenced by increased conversion ratios of quotes to purchase orders of 43%. Previously, it took an extended number of days to complete a feasibility study in order to provide a customer quote, which negatively impacted the time to convert a quote to a purchase order.

Previous wording

While we are committed to developing our technology, we are investing at a significantly lower level in 2025 when compared to 2024 and prior years, while we focus on growing our revenues through key market opportunities and assessing our capital raise prospects. During the three months ended March 31, 2025 and 2024, we capitalized approximately $0 and $275,000, respectively, of internally developed software costs. These investments have resulted in multiple process improvements, streamlining workflows and providing deeper insights into orders for all users of our marketplace.

Current wording

While we are committed to developing our technology, we are investing at a significantly lower level in 2025 when compared to 2024 and prior years, while we focus on growing our revenues through key market opportunities and assessing our capital raise prospects. During the six months ended June 30, 2025 and 2024, we capitalized approximately $0 and $448,000, respectively, of internally developed software costs. These investments have resulted in multiple process improvements, streamlining workflows and providing deeper insights into orders for all users of our marketplace.

Previous wording

Financial Operations Overview and Analysis for the Three Months Ended March 31, 2025 and 2024 (Unaudited)

Current wording

Financial Operations Overview and Analysis for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)

Previous wording

Revenue decreased by approximately $1,232,000, or 54%, from approximately $2,290,000 for the three months ended March 31, 2024 to approximately $1,058,000 for the three months ended March 31, 2025. This was primarily due to the decrease of 2,932, or approximately 56%, in specimen count from 5,241 specimens in the three months ended March 31, 2024 to 2,309 specimens in the three months ended March 31, 2025. The significant decrease in specimen count was mainly due to the change in revenue recognition during the fourth quarter of 2024. The specimen counts during the first quarter of 2024 consists of accessioned specimens that were both delivered and not yet delivered specimens to customers, while the specimen counts during the first quarter of 2025 consists only of delivered specimens.

Current wording

Revenue decreased by approximately $2,151,000, or 75%, from approximately $2,864,000 for the three months ended June 30, 2024 to approximately $713,000 for the three months ended June 30, 2025. This was primarily due to the decrease of 3,385, or approximately 57%, in specimen count from 5,918 specimens in the three months ended June 30, 2024 to 2,533 specimens in the three months ended June 30, 2025. The significant decrease in specimen count was mainly due to the change in revenue recognition during the fourth quarter of 2024. The specimen counts during the second quarter of 2024 consists of accessioned specimens that were both delivered and not yet delivered specimens to customers, while the specimen counts during the second quarter of 2025 consists only of delivered specimens.

Previous wording

The effect of the decrease in specimen count was partially offset by a change in the specimen mix which caused the average selling price per specimen to increase by approximately $21, or 5%, from approximately $437 in the three months ended March 31, 2024 to approximately $458 in the three months ended March 31, 2025.

Current wording

The effect of the decrease in specimen count have also caused a decrease to the average selling price by approximately $202, or 42%, from approximately $484 in the three months ended June 30, 2024 to approximately $282 in the three months ended June 30, 2025.

Previous wording

Technology expenses decreased by approximately $367,000, or 40%, from approximately $912,000 for thethree months ended March 31, 2024 to approximately $545,000 for the three months ended March 31, 2025. The decrease was related to professional fees of approximately $73,000, amortization expense of internally developed software of approximately $165,000 and payroll and related expenses of approximately $129,000.

Current wording

Technology expenses decreased by approximately $376,000, or 41%, from approximately $912,000 for the three months ended June 30, 2024 to approximately $536,000 for the three months ended June 30, 2025. The decrease was related to decrease in amortization expense of internally developed software of approximately $175,000 and payroll and related expenses of approximately $214,000, which was partially offset by the increase in professional fees of approximately $13,000.

Previous wording

Technology expenditures capitalized as internally developed software costs decreased by approximately $275,000, or 100%, from approximately $275,000 for thethree months ended March 31, 2024 to $0 for the three months ended March 31, 2025 due to reductions in workforce stemming from our decision to invest in the software at a significantly lower level in 2025 when compared to 2024 and prior years.

Current wording

Technology expenditures capitalized as internally developed software costs decreased by approximately $172,000, or 100%, from approximately $172,000 for the six months ended June 30, 2024 to $0 for the three months ended June 30, 2025 due to reductions in workforce stemming from our decision to invest in the software at a significantly lower level in 2025 when compared to 2024 and prior years.

Previous wording

Sales and marketing expenses decreased by approximately $319,000, or 48%, from approximately $666,000 for thethree months ended March 31, 2024 to approximately $347,000 for the three months ended March 31, 2025. The decrease was primarily attributable to decrease in payroll and related expenses of approximately $270,000 and advertising and promotions expense of approximately $79,000, which were partially offset by the increases in external marketing expense of approximately $28,000 and general operating expenses related to sales and marketing of approximately $2,000.

Current wording

Sales and marketing expenses decreased by approximately $825,000, or 76%, from approximately $1,083,000 for the three months ended June 30, 2024 to approximately $258,000 for the three months ended June 30, 2025. The decrease was primarily attributable to decrease in payroll and related expenses of approximately $668,000, advertising and promotions expense of approximately $97,000 and external marketing expense of approximately $62,000, which was partially offset by the increase in general operating expenses related to sales and marketing of approximately $2,000.

Previous wording

General and administrative expenses decreased by approximately $1,345,000, or 64%, from approximately $2,104,000 for the three months ended March 31, 2024 to approximately $759,000 for the three months ended March 31, 2025. The decrease was attributable to a decrease in compensation costs of approximately $588,000, general operating expenses of approximately $33,000, professional fees of approximately $213,000, utilities and facilities expenses of approximately $33,000, doubtful account expense of approximately $87,000 and taxes and insurance of approximately $903,000, which were partially offset by increases in depreciation and amortization of approximately $1,000 and franchise tax of $903,000.

Current wording

General and administrative expenses decreased by approximately $107,000, or 10%, from approximately $1,055,000 for the three months ended June 30, 2024 to approximately $948,000 for the three months ended June 30, 2025. The decrease was attributable to a decrease in general operating expenses of approximately $38,000, utilities and facilities expenses of approximately $33,000, doubtful account expense of approximately $100,000 and taxes and insurance of approximately $169,000, which were partially offset by increases in compensation costs of approximately $84,000, professional fees of approximately $68,000, depreciation and amortization of approximately $1,000 and franchise tax of $80,000.

Previous wording

Other income, net, decreased by approximately $118,000, or 120%, from an income of approximately $98,000 for the three months ended March 31, 2024 to an expense of approximately $20,000 for the three months ended March 31, 2025. The decrease in other income (expense), net, was attributable to a decrease of other income of approximately $75,000, decrease in interest and penalties on sales tax liability of approximately $18,000, and a decrease in interest income of approximately $28,000, partially offset by increase in interest expense of approximately $3,000.

Current wording

Other income, net, increased by approximately $702,000, or 966%, from an income of approximately $73,000 for the three months ended June 30, 2024 to approximately $774,000 for the three months ended June 30, 2025. The increase in other income, net, was attributable to an increase of other income of approximately $696,000 and increase in recovery of interest and penalties on sales tax liability of approximately $10,000, which was partially offset by a decrease in interest income of approximately $9,000 and decrease in interest expense of approximately $4,000.

Previous wording

Cost of revenue decreased by approximately $343,000, or 34%, from approximately $1,000,000 for thethree months ended March 31, 2024 to approximately $657,000 for the three months ended March 31, 2025, which was attributable to an approximately 56% decrease in the number of specimens delivered for the current period as compared to the accessioned specimens in the same period in the prior year, offset by an approximately $94, or 49%, increase in the average cost per specimen.

Current wording

Cost of revenue decreased by approximately $1,323,000, or 55%, from approximately $2,424,000 for the six months ended June 30, 2024 to approximately $1,101,000 for the six months ended June 30, 2025, which was attributable to an approximately 57% decrease in the number of specimens delivered for the current period as compared to the accessioned specimens in the same period in the prior year, offset by an approximately $10, or 5%, increase in the average cost per specimen.

Previous wording

Fulfillment costs decreased by approximately $117,000, or 28%, from approximately $411,000 for thethree months ended March 31, 2024 to approximately $294,000 for the three months ended March 31, 2025. The decrease was primarily attributable to a decrease in professional fees of approximately $3,000 and payroll and related expenses of approximately $116,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment, which was partially offset by the increase in general operating expenses related to fulfillment of approximately $2,000.

Current wording

Fulfillment costs decreased by approximately $302,000, or 36%, from approximately $844,000 for the six months ended June 30, 2024 to approximately $542,000 for the six months ended June 30, 2025. The decrease was primarily attributable to a decrease in professional fees of approximately $7,000 and payroll and related expenses of approximately $296,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment, which was partially offset by the general operating expenses related to fulfillment of approximately $1,000.

Previous wording

We have recurring losses since inception. As of March 31, 2025, our available cash and cash equivalents totaled approximately $783,000, which represented a decrease of approximately $1,096,000 from approximately $1,878,000, as of December 31, 2024. We had working capital deficit of approximately $3,392,000, an accumulated deficit of approximately $73,521,000, cash and cash equivalents of approximately $783,000 and accounts payable and accrued expenses of approximately $4,604,000. Our continued viability is dependent on the ability to successfully obtain additional working capital and/or ultimately attain profitable operations. During the three months ended March 31, 2025, the Company continued its efforts, which had begun in 2023, to decrease its capital and operational expenditures by cutting costs and right sizing the Company through a reduction in workforce while streamlining operations and rationalizing resources to focus on key market opportunities. The reductions in workforce since January 1, 2023 through December 31, 2024, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146% and technology costs of approximately 64% during the year December 31, 2024 when compared to the year ended December 31, 2023. During the first quarter of 2025, the reductions in workforce resulted in an estimated reduction in monthly compensation costs of approximately 93% and technology costs of approximately 73% during the three months ended March 31, 2025, when compared to the three months ended March 31, 2024. While we plan to improve our sales and revenues, we are taking steps to significantly reduce and manage expenditures to improve our financial position and ensure continued funding of operations. However, as certain elements of our operating plan are not within our control, we are unable to assess their probability. During the year ended December 31, 2024, we engaged in raising capital through debt financing as discussed in Note 7 and through public equity as discussed in Note 10.

Current wording

We have recurring losses since inception. As of June 30, 2025, our available cash and cash equivalents totaled approximately $589,000, which represented a decrease of approximately $1,290,000 from approximately $1,878,000, as of December 31, 2024. We had working capital deficit of approximately $4,005,000, an accumulated deficit of approximately $74,568,000, cash and cash equivalents of approximately $589,000 and accounts payable and accrued expenses of approximately $4,961,000. Our continued viability is dependent on the ability to successfully obtain additional working capital and/or ultimately attain profitable operations. During the six months ended June 30, 2025, the Company continued its efforts, which had begun in 2023, to decrease its capital and operational expenditures by cutting costs and right sizing the Company through a reduction in workforce while streamlining operations and rationalizing resources to focus on key market opportunities. The reductions in workforce since January 1, 2023 through December 31, 2024, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146% and technology costs of approximately 64% during the year December 31, 2024 when compared to the year ended December 31, 2023. During the second quarter of 2025, the reductions in workforce resulted in an estimated reduction in monthly compensation costs of approximately 76% and technology costs of approximately 71% during the six months ended June 30, 2025, when compared to the six months ended June 30, 2024. While we plan to improve our sales and revenues, we are taking steps to significantly reduce and manage expenditures to improve our financial position and ensure continued funding of operations. However, as certain elements of our operating plan are not within our control, we are unable to assess their probability. During the year ended December 31, 2024, we engaged in raising capital through debt financing as discussed in Note 7 and through public equity as discussed in Note 10.

Previous wording

For the three months ended March 31, 2025, net cash used in operating activities was approximately $1,096,000, which consisted of a net loss of approximately $1,658,000 offset by non-cash charges of approximately $486,000, which included approximately of $368,000 related to amortization of internally developed software, approximately $16,000 in stock-based compensation, approximately $111,000 in bad debt expense, approximately $17,000 related to depreciation of property and equipment, and approximately $48,000 related to amortization of other intangible assets.

Current wording

For the six months ended June 30, 2025, net cash used in operating activities was approximately $1,288,000, which consisted of a net loss of approximately $2,706,000 offset by non-cash charges of approximately $901,000, which included approximately of $735,000 related to amortization of internally developed software, approximately $18,000 in stock-based compensation, approximately $18,000 in bad debt expense, approximately $34,000 related to depreciation of property and equipment, and approximately $96,000 related to amortization of other intangible assets.

Previous wording

Total changes in assets and liabilities of approximately $3,000 were attributable to an approximately $752,000 decrease in accounts receivable, an approximately $101,000 decrease in prepaid expenses, an approximately $14,000 decrease in operating lease right-of-use asset, and an approximately $90,000 decrease in deferred revenue, offset by an approximately $411,000 decrease in accounts payable, an approximately $351,000 decrease in accrued expenses and an approximately $12,000 decrease in operating lease liability.

Current wording

Total changes in assets and liabilities of approximately $517,000 were attributable to an approximately $1,055,000 decrease in accounts receivable, an approximately $60,000 decrease in prepaid expenses, an approximately $29,000 decrease in operating lease right-of-use asset, and an approximately $197,000 decrease in deferred revenue, offset by an approximately $117,000, increase in accounts payable, an approximately $523,000 decrease in accrued expenses and an approximately $24,000 decrease in operating lease liability.

Previous wording

For the three months ended March 31, 2024, net cash used in operating activities was approximately $2,072,000, which consisted of a net loss of approximately $2,902,000 offset by non-cash charges of approximately $861,000, which included approximately $533,000 related to amortization of internally developed software, approximately $198,000 in bad debt expense, approximately $94,000 in stock-based compensation, approximately $48,000 related to amortization of other intangible assets, and approximately $16,000 related to depreciation of property and equipment, which were offset by approximately $27,000 of accretion of discount on available-for-sale securities.

Current wording

For the six months ended June 30, 2024, net cash used in operating activities was approximately $3,612,000, which consisted of a net loss of approximately $5,011,000 offset by non-cash charges of approximately $1,553,000, which included approximately $1,076,000 related to amortization of internally developed software, approximately $205,000 in bad debt expense, approximately $174,000 in stock-based compensation, approximately $96,000 related to amortization of other intangible assets, approximately $32,000 related to depreciation of property and equipment, and approximately $1,000 of losses from sales of available-for-sale securities, which were offset by approximately $29,000 of accretion of discount on available-for-sale securities.

Previous wording

Total changes in assets and liabilities of approximately $31,000 were attributable to an approximately $365,000 decrease in accounts payable, an approximately $143,000 decrease in deferred revenue, an approximately $40,000 decrease in operating lease liability, and an approximately $22,000 increase in prepaid expenses and other current assets, offset by an approximately $234,000 decrease in accounts receivable-unbilled, an approximately $170,000 increase in accrued expenses, an approximately $93,000 decrease in accounts receivable, and an approximately $41,000 decrease in operating lease right-of-use asset.

Current wording

Total changes in assets and liabilities of approximately $154,000 were attributable to an approximately $369,000 increase in accounts receivable, an approximately $221,000 decrease in accrued expense, an approximately $157,000 decrease in deferred revenue, and an approximately $81,000 decrease in lease liability, offset by an approximately $280,000 increase in accounts payable, an approximately $259,000 decrease in accounts receivable-unbilled, an approximately $82,000 decrease in operating lease right-of-use asset, and an approximately $55,000 decrease in prepaid expenses and other current assets.

Previous wording

Net cash provided by investing activities was approximately $1,937,000 for the three months ended March 31, 2024, which consisted of approximately $2,683,000 of proceeds from sales and maturities of available-for-sale securities, which were offset by approximately $461,000 of purchases of available-for-sale securities, approximately $275,000 of capitalization of internally developed software, and approximately $9,000 of purchase of property and equipment.

Current wording

Net cash provided by investing activities was approximately $2,233,000 for the six months ended June 30, 2024, which consisted of approximately $3,150,000 of proceeds from sales and maturities of available-for-sale securities, which were offset by approximately $461,000 of purchases of available-for-sale securities, approximately $448,000 of capitalization of internally developed software, and approximately $9,000 of purchase of property and equipment.

Previous wording

Net cash used in financing activities was approximately $119,000 for the three months ended March 31, 2024, which consisted of approximately $205,000 for the payment of offering costs in connection with the issuance of common stock in connection with the ATM Offering and approximately $53,000 for the repurchase of common stock exercisable under PIPE Warrants, offset by approximately $138,000 of proceeds received from the issuance of common stock in connection with the ATM Offering.

Current wording

Net cash provided by financing activities was approximately $1,187,000 for the six months ended June 30, 2024, which consisted of approximately $1,494,000 of proceeds received from the issuance of common stock in connection with the ATM Offering, offset by approximately $255,000 for the payment of offering costs in connection with the issuance of common stock in connection with the ATM Offering and approximately $53,000 for the repurchase of common stock exercisable under PIPE Warrants.

Previous wording

Our operations are heavily reliant on specimen availability, and as a result, we often receive more requests than we can fulfill. While the Company is subject to these types of supply chain constraints that are specific to the specimen industry, we have not been materially affected by the more common supply chain issues currently affecting the economy, specifically surrounding transportation. Due to the small size of the packages that we ship, our carriers were able to continue making timely deliveries during the three months ended March 31, 2025. However, there had been an increase in our shipping costs period over period during the three months ended March 31, 2025.

Current wording

Our operations are heavily reliant on specimen availability, and as a result, we often receive more requests than we can fulfill. While the Company is subject to these types of supply chain constraints that are specific to the specimen industry, we have not been materially affected by the more common supply chain issues currently affecting the economy, specifically surrounding transportation. Due to the small size of the packages that we ship, our carriers were able to continue making timely deliveries during the six months ended June 30, 2025. However, there had been an increase in our shipping costs period over period during the six months ended June 30, 2025.

Previous wording

The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our unaudited condensed financial statements or are the most sensitive to change from outside factors, are discussed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in our critical accounting policies and procedures during the three months ended March 31, 2025.

Current wording

The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our unaudited condensed financial statements or are the most sensitive to change from outside factors, are discussed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes in our critical accounting policies and procedures during the six months ended June 30, 2025.