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What changed in iSpecimen Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of iSpecimen Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+270 added−273 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-21)

Top changes in iSpecimen Inc.'s 2023 10-K

270 paragraphs added · 273 removed · 197 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

49 edited+10 added−4 removed120 unchanged
Biggest changeWe, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory compliance. 17 Table of Contents International Regulatory Environment Because iSpecimen procures specimens from and distributes specimens to countries outside of the United States, we are subject to international rules related to the protection of human subjects in research, data privacy and security, import and export regulations, tariffs, and foreign rules similar to any of the aforementioned U.S. rules, as well as those of which we are unaware.
Biggest changeInternational Regulatory Environment Because iSpecimen procures specimens from and distributes specimens to countries outside of the United States, we are subject to international rules related to the protection of human subjects in research, data privacy and security, import and export regulations, tariffs, and foreign rules similar to any of the aforementioned U.S. rules, as well as those of which we are unaware. 17 Table of Contents One of the more prominent international regulations is the General Data Protection Regulation (“GDPR’) which took effect in May 2018.
However, FDA does harmonize its regulations with the Common Rule whenever permitted by law (see section 1002 of the 21st Century Cures Act, Public Law 114-255). iSpecimen follows the FDA regulations related 15 Table of Contents to the protection of research subjects, so that its customers may submit data to the FDA resulting from research performed using data and specimens provided to the researcher by iSpecimen. 21 CFR Part 11 Electronic Records; Electronic Signatures 21 CFR Part 11 is relevant when submissions to the FDA include records in electronic form that are created, modified, maintained, archived, retrieved, or transmitted under any records requirements set forth in FDA regulations.
However, FDA does harmonize its regulations with the Common Rule whenever permitted by law (see section 1002 of the 21st Century Cures Act, Public Law 114-255). iSpecimen follows the FDA regulations related to the protection of research subjects, so that its customers may submit data to the FDA resulting from research performed using data and specimens provided to the researcher by iSpecimen. 15 Table of Contents 21 CFR Part 11 Electronic Records; Electronic Signatures 21 CFR Part 11 is relevant when submissions to the FDA include records in electronic form that are created, modified, maintained, archived, retrieved, or transmitted under any records requirements set forth in FDA regulations.
Moreover, the inclusion of competitors’ specimens in our iSpecimen Marketplace platform further strengthens our competitive position and value to our customers by further de-fragmenting our customers’ buying experience. Our Customers Our customer base is primarily comprised of three main segments: biopharmaceutical companies, in vitro diagnostic (“IVD”) companies, and government/academic institutions.
Moreover, the inclusion of competitors’ specimens in our iSpecimen Marketplace platform further strengthens our competitive position and value to our customers by further de-fragmenting our customers’ buying experience. Our Customers Our customer base is primarily comprised of three main segments: biopharmaceutical companies, in vitro diagnostic companies, and government/academic institutions.
We have derived substantially all of our revenue from biospecimen procurement and to date, have not charged our customers or suppliers fees for the use of the iSpecimen Marketplace platform, or for marketing, sales, contracting, or compliance functions that we provide as part of the specimen procurement process.
We have derived substantially all of our revenue from annotated biospecimen procurement and to date, have not charged our customers or suppliers fees for the use of the iSpecimen Marketplace platform, or for marketing, sales, contracting, or compliance functions that we provide as part of the specimen procurement process.
As of December 31, 2022, two of our supply sites provided us with cadaveric tissues and biofluids; and 11 Table of Contents Ø Clinical research centers — These organizations generally reside within healthcare facilities such as hospitals or clinics, or they operate as standalone entities providing access to subjects for research programs.
As of December 31, 2023, two of our supply sites provided us with cadaveric tissues and biofluids; and 11 Table of Contents Ø Clinical research centers — These organizations generally reside within healthcare facilities such as hospitals or clinics, or they operate as standalone entities providing access to subjects for research programs.
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. 7 Table of Contents Ø Search .
Our core business objective is to retain and grow both researcher and supplier engagement with iSpecimen and 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. 7 Table of Contents Ø Search .
In the event we are required to contact a client about a shipped specimen that is not supported by informed consent, which had not happened as of December 31, 2022, the client would then determine whether it could use the specimen without informed consent.
In the event we are required to contact a client about a shipped specimen that is not supported by informed consent, which had not happened as of December 31, 2023, the client would then determine whether it could use the specimen without informed consent.
The collection of these samples may require subjects to undergo apheresis procedures, bone marrow extraction procedures, and/or hematopoietic stem cell 10 Table of Contents (HSC) mobilization therapies. These products are generally priced to the researcher per collection depending upon collection type, specimen type, rarity (subject phenotype or attributes selected), required procedures, and requested data.
The collection of these samples may require subjects to undergo apheresis procedures, bone marrow extraction procedures, and/or hematopoietic stem cell (HSC) mobilization therapies. These products are generally priced to the researcher per collection depending upon collection type, specimen type, rarity (subject phenotype or attributes selected), required procedures, and requested data.
According to the Common Rule, as long as the physical sample and any associated dataset is de-identified before being used for research, the use of clinical remnant samples is not considered Human Subject Research and therefore does not need IRB review and approval, nor does it require patient consent.
According to the Common Rule, as long as the physical sample and 14 Table of Contents any associated dataset is de-identified before being used for research, the use of clinical remnant samples is not considered Human Subject Research and therefore does not need IRB review and approval, nor does it require patient consent.
We plan to continue technology investment to better connect healthcare researchers with our network of suppliers to enable the acquisition of human biospecimens and data to help accelerate research and expand the impact of our iSpecimen Marketplace platform from “inquiry to invoice” through the following key approaches: Ø Enhance the customer experience .
As investment allows, we plan to continue to better connect healthcare researchers with our network of suppliers to enable the acquisition of human biospecimens and data to help accelerate research and expand the impact of our iSpecimen Marketplace platform from “inquiry to invoice” through the following key approaches: Ø Enhance the customer experience .
Some of the aforementioned products are collected from healthy subjects or diagnosed (diseased) subjects and may be offered to researchers in fresh or cryopreserved format. They are prospectively collected primarily from our blood donor center partners or picked from banked inventory maintained by our supply site partners.
Some of the aforementioned products are collected from healthy subjects or diagnosed (diseased) subjects and may be offered to researchers in fresh or cryopreserved format. They are prospectively collected 10 Table of Contents primarily from our blood donor center partners or picked from banked inventory maintained by our supply site partners.
Subjects may be approached and consented to provide specimens when they are in for healthcare appointments (i.e. patient encounters) or may be called in to specifically participate in research projects. As of December 31, 2022, approximately 180 of our healthcare supply sites provided us with access to patients directly from over 1,000 hospitals and thousands of clinics and practice groups.
Subjects may be approached and consented to provide specimens when they are in for healthcare appointments (i.e. patient encounters) or may be called in to specifically participate in research projects. As of December 31, 2023, approximately 153 of our healthcare supply sites provided us with access to patients directly from over 1,000 hospitals and thousands of clinics and practice groups.
We believe with additional investment in technology development resources, we could make significant progress in scaling our iSpecimen Marketplace and, by the end of 2024, in addition to increased patient and specimen data integration, we expect to continue to improve the matchmaking across the platform and have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, increased automation, and direct pricing availability in the platform.
We believe with additional investment in technology development resources, we could make significant progress in scaling our iSpecimen Marketplace and, in addition to increased patient and specimen data integration, we expect to continue to improve the matchmaking across the platform and have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, increased automation, and direct pricing availability in the platform.
We de-identify, normalize, and harmonize our supplier network’s data for usage in our iSpecimen Marketplace, ensuring the highest level of patient privacy and compliance with HIPAA and all other applicable regulations that govern the research use of patient specimens and data.
We de-identify, normalize, and harmonize our supplier network’s data for usage in our iSpecimen Marketplace, ensuring the highest level of patient privacy and compliance with HIPAA (as defined below) and all other applicable regulations that govern the research use of patient specimens and data.
This supply network was built over a ten-year period and as of December 31, 2022, our supply network consisted of approximately 200 unique healthcare organizations and biospecimen providers under agreement, including healthcare systems, community hospitals, clinics, private practice groups, commercial laboratories, blood centers, commercial biobanks, clinical research sites, and cadaveric donation centers.
This supply network was built over a ten-year period and as of December 31, 2023, our supply network consisted of approximately 234 unique healthcare organizations and biospecimen providers under agreement, including healthcare systems, community hospitals, clinics, private practice groups, commercial laboratories, blood centers, commercial biobanks, clinical research sites, and cadaveric donation centers.
These specimens contributed to approximately 43% and 37% of our revenue in 2022 and 2021, respectively. Ø Research use only hematopoietic stem and immune cells — Research use only hematopoietic stem and immune cells includes bone marrow, cord blood, whole blood, or their cellular components, which are collected from subjects with their consent and under an IRB (or equivalent) protocol.
These specimens contributed to approximately 47% and 43% of our revenue in 2023 and 2022, respectively. Ø Research use only hematopoietic stem and immune cells — Research use only hematopoietic stem and immune cells includes bone marrow, cord blood, whole blood, or their cellular components, which are collected from subjects with their consent and under an IRB (or equivalent) protocol.
As of December 31, 2022, approximately 25 of our healthcare supply sites provided us with access to remnant tissue or cells originating in pathology labs; Ø Biorepositories — These organizations typically reside within larger healthcare systems or commercial organizations. Generally, they collect and store specimens for unspecified future research purposes.
As of December 31, 2023, approximately three of our healthcare supply sites provided us with access to remnant tissue or cells originating in pathology labs; Ø Biorepositories — These organizations typically reside within larger healthcare systems or commercial organizations. Generally, they collect and store specimens for unspecified future research purposes.
Government departments and agencies, at the federal, state, and local levels have regulations related to research activities that involve human subject research as well as regulations about the collection, storage, and dissemination of personal and healthcare data related to individuals.
Government departments and agencies, at the federal, state, and local levels have regulations related to research activities 13 Table of Contents that involve human subject research as well as regulations about the collection, storage, and dissemination of personal and healthcare data related to individuals.
In each of these cases, the landscape is extraordinarily fragmented, and our management estimates that most biospecimen providers have less than 1% market share each, and no single biospecimen provider has more than a 10% market share. Most competitors are smaller organizations with limited specimen procurement abilities.
In each of these cases, the landscape is extraordinarily fragmented, and our management estimates that most biospecimen providers have less than 5% market share each, and no single biospecimen provider has more than a 20% market share. Most competitors are smaller organizations with limited specimen procurement abilities.
As of December 31, 2022, approximately 50 of our healthcare supply sites provided us with access to remnant biofluids originating in clinical labs; Ø Pathology labs — This environment provides access to remnant tissue and remnant hematopoietic stem and immune cells and typically exists within hospitals or commercial laboratories.
As of December 31, 2023, approximately 34 of our healthcare supply sites provided us with access to remnant biofluids originating in clinical labs; Ø Pathology labs — This environment provides access to remnant tissue and remnant hematopoietic stem and immune cells and typically exists within hospitals or commercial laboratories.
These specimens contributed to approximately 15% and 8% of our revenue in 2022 and 2021, respectively. Ø Remnant tissue — These leftover anatomic pathology samples are procured from our pathology lab partners and typically are available years after they were first collected for clinical care.
These specimens contributed to approximately 13% and 15% of our revenue in 2023 and 2022, respectively. Ø Remnant tissue — These leftover anatomic pathology samples are procured from our pathology lab partners and typically are available years after they were first collected for clinical care.
As of December 31, 2022, seven of our supply sites provided us with access to large volume blood products; Ø Cadaveric donation centers — These organizations receive whole cadavers and provide access to cadaveric tissues, biofluids, and stem cells, specifically for research purposes.
As of December 31, 2023, eight of our supply sites provided us with access to large volume blood products; Ø Cadaveric donation centers — These organizations receive whole cadavers and provide access to cadaveric tissues, biofluids, and stem cells, specifically for research purposes.
As of December 31, 2022, approximately 60 of our supply sites provided us with access to specimens stored in biorepositories; Ø Blood donor centers — These organizations typically collect large volumes of blood and derivatives for therapeutic or research purposes.
As of December 31, 2023, approximately 34 of our supply sites provided us with access to specimens stored in biorepositories; Ø Blood donor centers — These organizations typically collect large volumes of blood and derivatives for therapeutic or research purposes.
We contract once with each participating customer and with each supplier organization and a single agreement then enables all users in that organization to instantly connect and work with all other organizations in the iSpecimen network.
We contract once with each participating customer and with each supplier organization and a single agreement then enables all users in that 6 Table of Contents organization to instantly connect and work with all other organizations in the iSpecimen network.
Research use only hematopoietic stem and immune cells were a relatively new product to us in 2019. These specimens accounted for approximately 2% of our revenue in 2022 and 2021.
Research use only hematopoietic stem and immune cells were a relatively new product to us in 2019. These specimens accounted for approximately 1% and 2% of our revenue in 2023 and 2022, respectively.
Our employees are primarily located in Lexington, Massachusetts with twenty-three remote sales, marketing, and supply development personnel located elsewhere in the U.S.
Our employees are primarily located in Lexington, Massachusetts with sixteen remote sales, marketing, and supply development personnel located elsewhere in the U.S. ​
There were four suppliers that accounted for 11.3% ,10.5% ,10.4% and 10.4% of our total cost of revenue during the year ended December 31, 2021. ​ Each supplier organization may give us access to one or more of the following environments within their organization where specimens may be obtained: ​ Ø Clinical labs — This environment provides access to remnant biofluids and is typically found in hospitals, commercial laboratories, clinics, and private practice groups.
There was one supplier that accounted for 12.3% of our total cost of revenue during the year ended December 31, 2022. ​ Each supplier organization may give us access to one or more of the following environments within their organization where specimens may be obtained: ​ Ø Clinical labs — This environment provides access to remnant biofluids and is typically found in hospitals, commercial laboratories, clinics, and private practice groups.
They are typically collected during a clinically required surgical procedure. We obtain these specimens from our biorepository partners, anatomic pathology laboratories, or clinical research centers that have relationships with surgical facilities. These samples are priced to the researcher per sample, depending upon specimen type, rarity, and requested data.
We obtain these specimens from our biorepository partners, anatomic pathology laboratories, or clinical research centers that have relationships with surgical facilities. These samples are priced to the researcher per sample, depending upon specimen type, rarity, and requested data.
Our iSpecimen Marketplace platform has compiled de-identified healthcare data provided by our healthcare supply partners’ approximately 17 million patient records, 89 million clinical specimen records, one million banked specimen records, 700 million laboratory test results, and 1,000,000 medical conditions as of December 31, 2022 — to allow researchers to easily search for and select research subjects, specimens, and associated data they need to drive their research programs.
Our iSpecimen Marketplace platform has compiled de-identified healthcare data provided by our healthcare supply partners’ approximately 18 million patient records, 101 million clinical specimen records, 1.3 million banked specimen records, 730 million laboratory test results, and 1,100,000 medical conditions as of December 31, 2023 — to allow researchers to easily search for and select research subjects, specimens, and associated data they need to drive their research programs.
As of December 31, 2022, we have distributed our specimens to approximately 631 customers such as the Centers for Disease Control and Prevention. Since entering the regenerative medicine market late 2019, we have acquired 33 customers representing 4% of our total revenue in 2021, and 2% in 2022.
As of December 31, 2023, we had distributed our specimens to approximately 709 customers, such as the Centers for Disease Control and Prevention. Since entering the regenerative medicine market late 2019, we have acquired 33 customers representing 4% of our total revenue in 2022, and 0.7% in 2023.
We also audit our suppliers to confirm they have proper Institutional Review Board (“IRB”) (or equivalent) protocols in place where required by law. 6 Table of Contents As of December 31, 2022, we had more than 6,703 external registered users on the iSpecimen Marketplace platform, representing more than 2,622 unique internet domains.
We also audit our suppliers to confirm they have proper Institutional Review Board (“IRB”) (or equivalent) protocols in place where required by law. As of December 31, 2023, we had more than 7,428 external registered users on the iSpecimen Marketplace platform, representing more than 2,817 unique internet domains.
As of December 31, 2022, we have delivered more than 190,000 specimens in support of nearly 2,670 unique projects since inception. Ø Data. We power search and orchestrate the procurement workflow through our ability to acquire, ingest, generate, and use big data from our healthcare provider partners.
As of December 31, 2023, we had delivered more than 210,000 specimens in support of nearly 3,000 unique projects since inception. Ø Data. We power search and orchestrate the procurement workflow through our ability to acquire, ingest, generate, and use big data from our healthcare provider partners.
Employees As of December 31, 2022, we had seventy-five employees (not including co-ops or summer interns), nine of whom were engaged in research and development activities, twenty-two of whom were engaged in sales and marketing activities, twenty-one of whom were engaged in operations and fulfillment activities, ten of whom were engaged in supply development and management activities, and six of whom were engaged in general and administrative functions.
Employees As of December 31, 2023, we had fifty-three employees (not including co-ops or summer interns), ten of whom were engaged in research and development activities, eleven of whom were engaged in sales and marketing activities, eighteen of whom were engaged in operations and fulfillment activities, five of whom were engaged in supply development and management activities, and nine of whom were engaged in general and administrative functions.
Our suppliers are located in 18 countries across the Americas, Europe, and Asia and our cost of revenue for the years ended December 31, 2022 and 2021, break out as follows geographically: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Americas ​ 90.52 % 92.52 % Europe, Middle East, and Africa (“EMEA”) ​ 6.91 % 6.51 % Asia Pacific (“APAC”) ​ 2.57 % 0.98 % ​ There was one supplier that accounted for 12.3% of our total cost of revenue during the year ended December 31, 2022.
Our suppliers are located in 19 countries across the Americas, Europe, and Asia and our cost of revenue for the years ended December 31, 2023 and 2022, break out as follows geographically: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Americas ​ 64.87 % 90.52 % Europe, Middle East and Africa ​ 23.08 % 6.91 % Asia Pacific ​ 12.05 % 2.57 % ​ There was one supplier that accounted for 12.7% of our total cost of revenue during the year ended December 31, 2023.
Year-over-year, our top customers have been different because their specimen needs tend to be project-based and depending upon where they are in their research and development cycle, they may not need large numbers of specimens each year. Regardless, our customer retention rates are high, with 22 of our top 25 customers (88%) in 2021 also procuring specimens in 2022.
Year-over-year, our top customers have been different because their specimen needs tend to be project-based and depending upon where they are in their research and development cycle, they may not need large numbers of specimens each year.
While we believe the IRB composition and operations to be 21 CFR Part 56 compliant, there may be gaps that make them incompatible with this regulation. 16 Table of Contents Other Information Laws and Regulations Other information laws and regulations include all applicable laws concerning the privacy and/or security of personal information including, but not limited to, state data breach notification laws; personal data protection laws such as the California Consumer Privacy Act of 2018, Nevada Senate Bill 220 (an amendment to the state’s existing online privacy policy statute) and Maine’s Act to Protect the Privacy of Online Consumer Information; and all applicable Payment Card Industry Security Standards with respect to account data protection.
Other Information Laws and Regulations Other information laws and regulations include all applicable laws concerning the privacy and/or security of personal information including, but not limited to, state data breach notification laws; personal data protection laws such as the California Consumer Privacy 16 Table of Contents Act of 2018, Nevada Senate Bill 220 (an amendment to the state’s existing online privacy policy statute) and Maine’s Act to Protect the Privacy of Online Consumer Information; and all applicable Payment Card Industry Security Standards with respect to account data protection.
It receives de-identified specimen and patient data from electronic medical records, laboratory information systems, biobank inventory systems, and other healthcare data sources (either in real time via data feeds or regularly via file extracts) and harmonizes this “big data” across all participating organizations into a common dataset.
It receives de-identified specimen and patient data from electronic medical records, laboratory information systems, biobank inventory systems, and other healthcare data sources (either in real time via data feeds or regularly via file extracts) and harmonizes this “big data” across all participating organizations into a common dataset, which now incorporates external clinical content to further optimize and standardize the biospecimen data on iSpecimen’s proprietary Marketplace platform.
Collectively, these users logged into the iSpecimen Marketplace more than 135,266 times and performed nearly 17,679 specimen searches yielding more than 1,985 quote requests since its launch.
Collectively, these users logged into the iSpecimen Marketplace more than 161,565 times and performed nearly 18,700 specimen searches yielding more than 2,475 quote requests since its launch.
From our inception through December 31, 2022, we have distributed more than 190,000 specimens to 21 countries and our geographical revenues distribution for the years ended December 31, 2022 and 2021, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Americas ​ 89.54 % 92.7 % Europe, Middle East, and Africa (EMEA) ​ 7.43 % 6.69 % Asia Pacific (APAC) ​ 2.78 % 0.61 % ​ During the year ended December 31, 2022, there were two customers that accounted for approximately 14% and 12% of our total revenue generated.
From our inception through December 31, 2023, we had distributed more than 210,000 specimens to 23 countries and our geographical revenues distribution for the years ended December 31, 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Americas ​ 89.93 % 89.54 % Europe, Middle East and Africa ​ 9.10 % 7.68 % Asia Pacific ​ 0.97 % 2.78 % ​ During the year ended December 31, 2023, there was one customer that accounted for approximately 25% of our total revenue generated.
We believe factors such as the technological and creative skills of our people; our existing and evolving partnerships; the creation of new features, functionality, and services; and the frequent enhancements to our platform have helped us to establish and will help us maintain our technology leadership position. 13 Table of Contents Regulations iSpecimen works with the healthcare industry and with clinical researchers, both highly regulated environments in the United States and other countries.
We believe factors such as the technological and creative skills of our people; our existing and evolving partnerships; the creation of new features, functionality, and services; and the frequent enhancements to our platform have helped us to establish and will help us maintain our technology leadership position.
When iSpecimen is not the study sponsor (i.e., when research use only specimens are collected at participating healthcare providers under their own IRB-approved protocols), we audit the site before we start procuring specimens to ensure that appropriate IRB approvals are in place. 14 Table of Contents For international specimen collection sites, we rely on those sites to ensure they are collecting specimens in accordance with the laws in their own jurisdictions, in addition to following basic U.S. rules related to Human Subjects Research.
When iSpecimen is not the study sponsor (i.e., when research use only specimens are collected at participating healthcare providers under their own IRB-approved protocols), we audit the site before we start procuring specimens to ensure that appropriate IRB approvals are in place.
They are generally priced to the researcher per collection, depending upon specimen type, rarity, and requested data. These specimens contributed to approximately 38% and 52% of our revenue in 2022 and 2021, respectively. Ø Research use only tissue — Research use only tissues are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol.
These specimens contributed to approximately 39% and 38% of our revenue in 2023 and 2022, respectively. Ø Research use only tissue — Research use only tissues are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol. They are typically collected during a clinically required surgical procedure.
Our ability to leverage network effects will enable us to realize increasing returns from our investments and expand into adjacent markets such as clinical trial patient recruitment, data as a product, and software-as-a-service (SaaS). Ø Administrative, Compliance, and Reporting. Administrative, compliance, and reporting functions are critical components to enable users to properly evaluate and manage the bioprocurement process.
Our ability to leverage network effects will enable us to realize increasing returns from our investments and expand into adjacent markets such as clinical trial patient recruitment, data as a product, software-as-a-service (“SaaS”), and Next Generation Sequencing (an initiative launched in late 2023).
During the year ended December 31, 2021, no customers represented greater than 10% of the Company’s revenues. We continuously engage with all customers when we receive inbound requests from them, whether they are within or outside of the Americas.
During the year ended December 31, 2022, there were two customers that accounted for approximately 14% and 12% of our total revenue generated, respectively. We continuously engage with all customers when we receive inbound requests from them, whether they are within or outside of the Americas.
One of the more prominent international regulations is the General Data Protection Regulation (“GDPR’) which took effect in May 2018. The GDPR regulates the collection, use, disclosure, transfer, and/or other processing of personal data of identified or identifiable individuals located in the European Economic Areas, including the European Union (“EU”).
The GDPR regulates the collection, use, disclosure, transfer, and/or other processing of personal data of identified or identifiable individuals located in the European Economic Areas, including the European Union (“EU”). This data specifically includes personal health data that generally is provided as part of biospecimen collection studies.
As of December 31, 2022, the iSpecimen Marketplace had ingested and harmonized 8 Table of Contents data on approximately 17 million patients, 89 million clinical specimens, one million banked specimens, 700,000 million laboratory test results, and 1 million medical conditions.
As of December 31, 2023, the iSpecimen Marketplace had ingested and harmonized data on approximately 18 million patients, 101 million clinical specimens, 1.3 million banked specimens, 730,000 million laboratory test results, and 1.1 million medical conditions. 8 Table of Contents In addition, our platform gathers usage data that enables us to granularly understand supply and demand as well as provide value-added insights to our business partners.
In addition, our platform gathers usage data that enables us to granularly understand supply and demand as well as provide value-added insights to our business partners. For example, our biobanking partners often have access to more samples than they can economically store.
For example, our biobanking partners often have access to more samples than they can economically store.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory compliance.
These samples may be obtained from clinical and anatomic pathology labs. Ø Research use only biofluids — Research use only biofluids are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol. We obtain these samples via a variety of sources, including our biorepository and clinical research center partners.
Tissues used for the program are a combination of remnant waiver of consent tissue blocks along with RUO fully consented blocks. Ø Research use only biofluids — Research use only biofluids are collected directly from subjects, with their consent, and under an IRB (or equivalent) protocol.
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This data specifically includes personal health data that generally is provided as part of biospecimen collection studies.
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Additional inventory and capabilities data collected in the year ended December 31, 2023 as part of our data initiatives has dramatically reduced, or entirely eliminated the need to perform a feasibility assessment, increasing conversion rates and decreasing sales and fulfillment time leading to increased revenue.
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Audit questionnaires are distributed every two years after the initial site audit. COVID-19 and its Impact In response to the COVID-19 pandemic, we have put in place additional health and safety protocols. We continue to monitor and revise these protocols as appropriate to address the evolving nature of the pandemic.
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With additional data comes additional security risks we worked to mitigate through shoring up existing security processes and protocols and the addition of a 24x7 managed risk vendor. Ø Administrative, Compliance, and Reporting. Administrative, compliance, and reporting functions are critical components to enable users to properly evaluate and manage the bioprocurement process.
Removed
While we have seen a return to business as usual in our industry, we continue to monitor the future impact of the COVID-19 pandemic on the Company, which includes such factors as length of time of the pandemic; the responses of federal, state and local government; the impact of future variants that may emerge; vaccination rates among the population; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy and consumer behavior; and the effect on our employees, vendors and suppliers.
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These samples may be obtained from clinical and anatomic pathology labs. Ø Next generation sequenced (“NGS”) tissues – NGS tissues include various cancer types that have been fully DNA/RNA sequenced to identify specific biomarkers of interest. The tissues screened are tumor only FFPE specimens.
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We will continue to monitor and evaluate the ongoing COVID-19 pandemic and will work to respond appropriately to the impact of COVID-19 on our business, as well as customers’ and suppliers’ businesses.
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Results are analyzed and paired with clinical annotation to create a robust data package that has some utility even without the need for the specimen itself.
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We obtain these samples via a variety of sources, including our biorepository and clinical research center partners. They are generally priced to the researcher per collection, depending upon specimen type, rarity, and requested data.
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Regardless, our customer retention rates are high, with 22 of our top 25 customers (88%) in the year ended December 31, 2022 also procuring specimens in the year ended December 31, 2023.
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Regulations iSpecimen works with the healthcare industry and with clinical researchers, both highly regulated environments in the United States and other countries.
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For international specimen collection sites, we rely on those sites to ensure they are collecting specimens in accordance with the laws in their own jurisdictions, in addition to following basic U.S. rules related to Human Subjects Research.
Added
While we believe the IRB composition and operations to be 21 CFR Part 56 compliant, there may be gaps that make them incompatible with this regulation.
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Audit questionnaires are distributed every two years after the initial site audit.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

93 edited+26 added−27 removed246 unchanged
Biggest changeWe may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations.
Biggest changeOur failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that may lead to a restatement of our financial statements or cause us to fail to meet our reporting obligations for the year ended December 31, 2023, any of which could diminish investor confidence in us and cause a decline in our stock price. ​ We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations.
International expansion exposes us to additional risks, including: Ø changes in local political, economic, social, and labor conditions, which may adversely affect our business; Ø risks associated with trade restrictions and foreign import requirements, including the importation and exportation of our solutions, as well as changes in trade, tariffs, restrictions or requirements; Ø heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies; Ø fluctuations in currency exchange rates, which may make doing business with us less appealing as our contracts are generally denominated in U.S. dollars; Ø greater difficulty in enforcing contracts; 21 Table of Contents Ø lack of brand awareness that can make commercializing our products more difficult and expensive; Ø management communication and integration problems resulting from cultural differences and geographic dispersion; Ø the uncertainty and limitation of protection for intellectual property rights in some countries; Ø increased financial accounting and reporting burdens and complexities as a result of being a public company; Ø lack of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or partners; Ø potentially different pricing environments, longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud; Ø uncertainty regarding liability for products and services, including uncertainty as a result of local laws and lack of legal precedent; Ø different employee/employer relationships, existence of workers’ councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions; Ø compliance with complex foreign and U.S. laws and regulations applicable to international operations may increase the cost of doing business in international jurisdictions.
International expansion exposes us to additional risks, including: Ø changes in local political, economic, social, and labor conditions, which may adversely affect our business; Ø risks associated with trade restrictions and foreign import requirements, including the importation and exportation of our solutions, as well as changes in trade, tariffs, restrictions or requirements; Ø heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies; 21 Table of Contents Ø fluctuations in currency exchange rates, which may make doing business with us less appealing as our contracts are generally denominated in U.S. dollars; Ø greater difficulty in enforcing contracts; Ø lack of brand awareness that can make commercializing our products more difficult and expensive; Ø management communication and integration problems resulting from cultural differences and geographic dispersion; Ø the uncertainty and limitation of protection for intellectual property rights in some countries; Ø increased financial accounting and reporting burdens and complexities as a result of being a public company; Ø lack of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or partners; Ø potentially different pricing environments, longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud; Ø uncertainty regarding liability for products and services, including uncertainty as a result of local laws and lack of legal precedent; Ø different employee/employer relationships, existence of workers’ councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions; Ø compliance with complex foreign and U.S. laws and regulations applicable to international operations may increase the cost of doing business in international jurisdictions.
New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and/or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms.
New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and/or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms.
Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly .
Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly .
The ability of the Board of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.
The ability of the Board to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.
While we have security measures in place to protect our information and our customers’ information and to prevent data loss and other security breaches, there can be no assurance that in the future we will be able to anticipate or prevent security breaches or unauthorized access of our information technology systems or the information technology systems of the third-party providers upon which we rely.
While we have security measures in place to protect our information and our customers’ and suppliers’ information and to prevent data loss and other security breaches, there can be no assurance that in the future we will be able to anticipate or prevent security breaches or unauthorized access of our information technology systems or the information technology systems of the third-party providers upon which we rely.
As a consequence, only a minority of the Board of Directors will be considered for election at every annual meeting of stockholders, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
As a consequence, only a minority of the Board will be considered for election at every annual meeting of stockholders, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our certificate of incorporation, as amended, authorizes the Board of Directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders.
Our certificate of incorporation, as amended, authorizes the board of directors (the “Board”) to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board without further action by the stockholders.
This can limit our ability to grow in existing lines of business and expand into new lines of business; 20 Table of Contents Ø We may not obtain new customers or may lose existing customers if we cannot offer products and services that they need on a timely basis or at all; Ø We may fail in the development of our technology and it may not adequately keep pace to support an expansion of our existing line of business or our entry into new lines of businesses; Ø The market adoption rate of our marketplace technology may be too slow, and we may fail to get our customers and suppliers to transact for products and services using our technology; Ø We may fail to continue to expand outside of the United States, especially if we are required to comply with laws and regulations that differ from geographies in which we currently operate; Ø We may fail to gain market acceptance for new products or services; and/or Ø We may lose to competitors, some of whom may have greater resources than we do.
This can limit our ability to grow in existing lines of business and expand into new lines of business; Ø We may not obtain new customers or may lose existing customers if we cannot offer products and services that they need on a timely basis or at all; Ø We may fail in the development of our technology and it may not adequately keep pace to support an expansion of our existing line of business or our entry into new lines of businesses; Ø The market adoption rate of our marketplace technology may be too slow, and we may fail to get our customers and suppliers to transact for products and services using our technology; Ø We may fail to continue to expand outside of the United States, especially if we are required to comply with laws and regulations that differ from geographies in which we currently operate; Ø We may fail to gain market acceptance for new products or services; and/or Ø We may lose to competitors, some of whom may have greater resources than we do.
In addition, compliance with future legislation could impose additional requirements on the Company which may be costly . 35 Table of Contents Failure to comply with federal and state laws around environmental, health and safety, biohazards and dangerous goods, and imports/exports could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
In addition, compliance with future legislation could impose additional requirements on the Company which may be costly . 34 Table of Contents Failure to comply with federal and state laws around environmental, health and safety, biohazards and dangerous goods, and imports/exports could result in fines, penalties, and litigation, and have a material adverse effect upon our business.
Additional provisions that may discourage unsolicited takeover proposals include (i) board 39 Table of Contents vacancies may be filled by a majority of the remaining board members, (ii) the board may adopt, repeal, rescind, alter or amend our bylaws without stockholder approval, (iii) stockholders holding more than 15% of the outstanding shares may call a special meeting, (iv) a director may be removed from office only by the affirmative vote of a majority of the issued and outstanding stock entitled to vote; and (v) no cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors.
Additional provisions that may discourage unsolicited takeover proposals include (i) board vacancies may be filled by a majority of the remaining board members, (ii) the board may adopt, repeal, rescind, alter or amend our bylaws without stockholder approval, (iii) stockholders holding more than 15% of the outstanding shares may call a special meeting, (iv) a director may be removed from office only by the affirmative vote of a majority of the issued and outstanding stock entitled to vote; and (v) no cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various risk factors, including the following: Ø changes in our industry; 41 Table of Contents Ø ability to enhance our platform or to add new functionality; Ø regulatory changes; Ø competitive pricing or other pressures; Ø failures of our suppliers to deliver product on time; Ø loss of supply partners; Ø additions or departures of key personnel; Ø sales of our common stock; Ø our ability to execute our business plan; Ø operating results that fall below expectations; Ø loss of any strategic relationship including customers, suppliers and channel partners; and/or Ø economic and other external factors.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various risk factors, including the following: Ø changes in our industry; Ø ability to enhance our platform or to add new functionality; Ø regulatory changes; Ø competitive pricing or other pressures; Ø failures of our suppliers to deliver product on time; Ø loss of supply partners; Ø additions or departures of key personnel; Ø sales of our common stock; Ø our ability to execute our business plan; Ø operating results that fall below expectations; Ø loss of any strategic relationship including customers, suppliers and channel partners; and/or Ø economic and other external factors.
Potential adverse effect from changes in the healthcare industry, including consolidations and regulatory changes, could affect access to subjects, samples, and data and affect our growth. Changing healthcare-related legislation and regulation may impact the fiscal stability and sustainability of our supply partners. Additionally, many healthcare providers are consolidating to create larger healthcare systems and/or integrated healthcare delivery systems.
Potential adverse effects from changes in the healthcare industry, including consolidations and regulatory changes, could affect access to subjects, samples, and data and affect our growth. Changing healthcare-related legislation and regulation may impact the fiscal stability and sustainability of our supply partners. Additionally, many healthcare providers are consolidating to create larger healthcare systems and/or integrated healthcare delivery systems.
However, if inflation continues, it may have an adverse impact on the costs of our samples in the future. ​ Our timely fulfillment of customer orders may be adversely impacted due to constraints in the supply chain. ​ Our operations are heavily reliant on specimen availability and delays or shortages in obtaining specimens caused by constraints in the supply chain, may adversely impact the timing and extent of our ability to fulfill our customer orders which could adversely impact our results of operations and financial condition. ​ We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.
However, if inflation continues, it may have an adverse impact on the costs of our samples in the future. ​ Our timely fulfillment of customer orders may be adversely impacted due to constraints in the supply chain. ​ Our operations are heavily reliant on specimen availability and delays or shortages in obtaining specimens caused by constraints in the supply chain, may adversely impact the timing and extent of our ability to fulfill our customer orders which could adversely impact our results of operations and financial condition. ​ 31 Table of Contents We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.
As of December 31, 2022, the Company’s supply sites in Russia that had not been under sanctions were now accessible and the Company’s supply sites in Ukraine had mostly reopened. However, due to the uncertainty caused by the ongoing war, Ukraine suppliers may again become inaccessible to the Company.
As of December 31, 2023, the Company’s supply sites in Russia that had not been under sanctions were now accessible and the Company’s supply sites in Ukraine had mostly reopened. However, due to the uncertainty caused by the ongoing war, Ukraine suppliers may again become inaccessible to the Company.
In addition, changes in our products and services or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and services to international markets, prevent our customers from procuring our products and 37 Table of Contents services or, in some cases, prevent the export or import of our products and services to certain countries, governments or persons altogether.
In addition, changes in our products and services or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and services to international markets, prevent our customers from procuring our products and 36 Table of Contents services or, in some cases, prevent the export or import of our products and services to certain countries, governments or persons altogether.
Our certificate of incorporation, as amended, and bylaws, as amended, also provide for the indemnification of our directors, 40 Table of Contents officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company.
Our certificate of incorporation, as amended, and bylaws, as amended, also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our Company.
This concentration of ownership may have the effect of delaying or preventing a change of control, impeding a merger, consolidation or other business combination transaction involving us and discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company and might adversely affect the market price of our common stock.
This concentration of ownership may have the effect of delaying or preventing a change of control, impeding a merger, consolidation or other business combination transaction involving us and discouraging a potential 38 Table of Contents acquiror from making a tender offer or otherwise attempting to obtain control of the Company and might adversely affect the market price of our common stock.
Our security measures may be breached due to the actions of outside parties, employee error, malfeasance, security flaws in the third party hosting service that we rely upon, or any number of other reasons and, as a result, an unauthorized party may obtain access to our suppliers’ or customers’ data.
Our security measures may be breached due to the actions of outside parties, employee 23 Table of Contents error, malfeasance, security flaws in the third party hosting service that we rely upon, or any number of other reasons and, as a result, an unauthorized party may obtain access to our suppliers’ or customers’ data.
Our platforms and the network infrastructure that are hosted by third-party providers involve the storage and transmission of healthcare data as well as proprietary information about organizations and programs, and security breaches could expose us to a risk of loss of this 23 Table of Contents information, litigation, and potential liability.
Our platforms and the network infrastructure that are hosted by third-party providers involve the storage and transmission of healthcare data as well as proprietary information about organizations and programs, and security breaches could expose us to a risk of loss of this information, litigation, and potential liability.
In addition, our certificate of incorporation, as amended, provides for a staggered Board of Directors.
In addition, our certificate of incorporation, as amended, provides for a staggered Board.
Each of the following risk factors, either alone or taken together, could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our 18 Table of Contents Company. The risks and uncertainties described below are not the only ones we face.
Each of the following risk factors, either alone or taken together, could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our Company. The risks and uncertainties described below are not the only ones we face.
We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our controls over financial reporting.
We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our controls over financial reporting.
Our trade secrets also could be independently discovered by competitors, in which case we may not be able to prevent the use of such trade secrets 34 Table of Contents by our competitors.
Our trade secrets also could be independently discovered by competitors, in which case we may not be able to prevent the use of such trade secrets 33 Table of Contents by our competitors.
Quarterly revenue has been difficult to predict, has historically fluctuated, and may vary from quarter to quarter due to a variety of factors, many of which are beyond our control. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful.
Quarterly revenue has been difficult to predict, has historically fluctuated, and may vary from quarter to quarter due to a variety of factors, many of which are beyond our control. Accordingly, comparing our operating results on a period-to-period basis may not be 40 Table of Contents meaningful.
We entered into contracts with U.S. government agencies and contractors, representing approximately 8.3% and 1.6% of our total revenue for 2022 and 2021, respectively , that may contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which subjects us to additional risks.
We entered into contracts with U.S. government agencies and contractors, representing approximately 1.0% and 8.3% of our total revenue for 2023 and 2022, respectively , that may contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which subjects us to additional risks.
In addition to investing in personnel growth commensurate with business growth, we believe we must continue to invest in the development of our iSpecimen Marketplace platform to enhance and improve its performance, functionality, ease of use, and reliability 19 Table of Contents to carry out our business strategies.
In addition to investing in personnel growth commensurate with business growth, we believe we must continue to invest in the development of our iSpecimen Marketplace platform to enhance and improve its performance, functionality, ease of use, and reliability to carry out our business strategies.
These claims could result in litigation that could be expensive to defend or result in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition, and results of operations.
These claims could result in litigation that could be expensive to defend or result 29 Table of Contents in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition, and results of operations.
Our supply partners’ inventories may become obsolete, which could have a material adverse effect upon our ability to generate revenue. During the year ended December 31, 2022, approximately 56% of our revenue was derived from specimens that were procured from our supply partners’ existing sample inventories in their biobanks.
Our supply partners’ inventories may become obsolete, which could have a material adverse effect upon our ability to generate revenue. During the year ended December 31, 2023, approximately 52% of our revenue was derived from specimens that were procured from our supply partners’ existing sample inventories in their biobanks.
These organizations may lack adequate resources 28 Table of Contents to quickly respond to our requests for specimens now and into the future. Should we and our customers experience slow turnaround times on specimen requests, our reputation may be damaged and there may be an adverse impact on our revenue and profitability.
These organizations may lack adequate resources to quickly respond to our requests for specimens now and into the future. Should we and our customers experience slow turnaround times on specimen requests, our reputation may be damaged and there may be an adverse impact on our revenue and profitability.
Despite our implementation of network security measures and internal information security policies, data stored on personnel computer systems is also vulnerable to similar security breaches, unauthorized tampering or human error. Many governments have enacted laws requiring companies to provide notice of data security incidents involving certain types of data, including personal data.
Despite our implementation of network security measures and internal information security policies, data stored on personnel computer systems is also vulnerable to similar security breaches, unauthorized tampering or human error. Many governments and other regulatory bodies including the SEC have enacted laws requiring companies to provide notice of data security incidents involving certain types of data, including personal data.
Even if we achieve profitability in a future period, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have adverse effects on our stockholders’ equity (deficit) and working capital.
Even if we achieve profitability in a future period, we may not be able to sustain 18 Table of Contents profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have adverse effects on our stockholders’ equity (deficit) and working capital.
Each of these functional areas need continual development to both enable our current business to scale and to enable us to enter new markets. Our intention is to focus most of our engineering resources on the development of the iSpecimen Marketplace platform for the foreseeable future.
Each of these functional areas need continual development to both enable our current business to scale and to enable us to enter new markets. As financial resources become available, our intention is to focus most of our engineering resources on the development of the iSpecimen Marketplace platform for the foreseeable future.
To generate revenue, we need to expand our sales, marketing, and distribution capabilities to support our operations in North America, Europe, and Asia Pacific and proceeds raised in our initial public and in our private placement offering closed in December 2021 has allowed to enhance our sales, marketing, and distribution capabilities.
To generate revenue, we need to expand our sales, marketing, and distribution capabilities to support our operations in North America, Europe, and Asia Pacific and proceeds raised in our initial public and in our private placement offering closed in December 2021 has 25 Table of Contents allowed to enhance our sales, marketing, and distribution capabilities.
Failure to comply with international laws related to data protection, such as the GDPR could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business. We may be required to comply with international laws, such as the EU GDPR.
Failure to comply with international laws related to data protection, such as the General Data Protection Regulation (“GDPR”) could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business. We may be required to comply with international laws, such as the GDPR.
In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards 38 Table of Contents relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt.
In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt.
We have reserved 608,000 shares to issue stock options, restricted stock or other awards under our 2021 Stock Incentive Plan (as defined below). Sales of a substantial number of shares of our common stock could cause the price of our common stock to fall and could impair our ability to raise capital by selling additional securities.
We have reserved 1,869,500 shares to issue stock options, restricted stock or other awards under our 2021 Stock Incentive Plan (as defined below). Sales of a substantial number of shares of our common stock could cause the price of our common stock to fall and could impair our ability to raise capital by selling additional securities.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving 39 Table of Contents such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid.
As a result, it may be more difficult and costly for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. Item 1B. Unresolved Staff Comments Not Applicable.
As a result, it may be more difficult and costly for us to attract and retain qualified persons to serve on our Board or as executive officers. 42 Table of Contents Item 1B. Unresolved Staff Comments Not Applicable.
Our overall business results may suffer from an economic downturn. We rely upon researchers from biopharma companies as the primary source of our revenue. During an economic downturn, the biopharma industry typically experiences a drop in the annual growth rate of research and development spending and allocates fewer resources towards it.
We rely upon researchers from biopharma companies as the primary source of our revenue. During an economic downturn, the biopharma industry typically experiences a drop in the annual growth rate of research and development spending and allocates fewer resources towards it.
If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
If we fail to remediate this material weakness or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
These NOLs may be used to offset future taxable income, to the extent we generate any taxable income, 32 Table of Contents and thereby reduce or eliminate our future federal income taxes otherwise payable.
These NOLs may be used to offset future taxable income, to the extent we generate any taxable income, and thereby reduce or eliminate our future federal income taxes otherwise payable.
As of December 31, 2022, we had federal net operating loss carryforwards (“NOLs”) of approximately $40.8 million for federal income tax purposes of which approximately $13 million expires at various periods through 2037 and approximately $27.8 million can be carried forward indefinitely.
As of December 31, 2023, we had federal net operating loss carryforwards (“NOLs”) of approximately $50.8 million for federal income tax purposes of which approximately $13 million expires at various periods through 2037 and approximately $37.8 million can be carried forward indefinitely.
Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. As of December 31, 2022 our officers, directors and principal stockholders each holding more than 5% of our common stock collectively controls approximately 41.5% of our outstanding common stock.
Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders. As of December 31, 2023, our officers, directors and principal stockholders each holding more than 5% of our common stock collectively controlled approximately 33.7% of our outstanding common stock.
These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance or may incur significant costs in obtaining or maintaining regulatory compliance.
These laws cover several areas of our business and are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance or may incur significant costs in obtaining or maintaining regulatory compliance.
Additionally, overall customer demand could decrease if we fail to: Ø provide high quality products and services; Ø provide products and services at a competitive price; Ø deliver products and services in a reasonable amount of time; Ø offer high levels of customer service; Ø offer adjacent services that researchers want to procure along with our existing products and services; Ø adequately invest in sales and marketing programs and teams to drive demand or operational support to fulfill requests; Ø develop a large and diverse supply network to satisfy demand; or Ø provide a technology solution that simplifies the biospecimen procurement process for researchers and specimen providers alike. 25 Table of Contents Challenges or unanticipated costs in establishing the sales, marketing, and distribution capabilities necessary to successfully commercialize our products globally could affect profitability.
Additionally, overall customer demand could decrease if we fail to: Ø provide high quality products and services; Ø provide products and services at a competitive price; Ø deliver products and services in a reasonable amount of time; Ø offer high levels of customer service; Ø offer adjacent services that researchers want to procure along with our existing products and services; Ø adequately invest in sales and marketing programs and teams to drive demand or operational support to fulfill requests; Ø develop a large and diverse supply network to satisfy demand; or Ø provide a technology solution that simplifies the biospecimen procurement process for researchers and specimen providers alike.
As a result of our relatively short history of revenue generation, our ability to accurately forecast future results is limited and is impacted by a number of factors, including: Ø Our revenue is transactional and not recurring. Researchers pay us to provide specimens when they have a need for specimens.
Our revenue trend is not predictive and our ability to accurately forecast future results is limited and is impacted by a number of factors, including: Ø Our revenue is transactional and not recurring. Researchers pay us to provide specimens when they have a need for specimens.
Additionally, some competitors may have cost advantages on some types of collections either because 31 Table of Contents of more favorable supply relationships or because they have their own collection centers, and they can likewise exert pricing pressure in the market. Lower prices will adversely impact our revenue and gross margins.
Additionally, some competitors may have cost advantages on some types of collections either because of more favorable supply relationships or because they have their own collection centers, and they can likewise exert pricing pressure in the market. Lower prices will adversely impact our revenue and gross margins. Our overall business results may suffer from an economic downturn.
We cannot be certain that additional financing will be available to us if required on favorable terms or at all. To the extent that we cannot raise capital if needed, we may not be able to continue operations. We have a relatively short operating history which can lead to difficulty in accurately forecasting future results.
We cannot be certain that additional financing will be available to us if required on favorable terms or at all. To the extent that we cannot raise capital if needed, we may not be able to continue operations. Our revenue trend is not predictive which can lead to difficulty in accurately forecasting future results.
We operate internationally and expect to expand internationally. For example, we procure specimens from sites outside of the United States and we also distribute samples to organizations located around the world. As of December 31, 2022, we had customers in 21 countries, supply sites in 18 countries, and two international distributors.
For example, we procure specimens from sites outside of the United States and we also distribute samples to organizations located around the world. As of December 31, 2023, we had customers in 23 countries, supply sites in 19 countries, and two international distributors.
Although we have allocated proceeds of our initial public offering closed in June 2021 and our private placement offering closed in December 2021 to supply development and commensurately grow our supply network capabilities to keep pace with demand, this supply-demand imbalance could increase in the future if we do not continue or increase our investment in this area. ​ Additionally, demand for specimens we receive is becoming more specific, requiring access to a greater population of subjects, samples, and data to find those that meet a researcher’s inclusion and exclusion criteria.
Although we continue to allocate resources to supply development and commensurately grow our supply network capabilities to keep pace with demand, this supply-demand imbalance could increase in the future if we do not continue or increase our investment in this area. 27 Table of Contents ​ Additionally, demand for specimens we receive is becoming more specific, requiring access to a greater population of subjects, samples, and data to find those that meet a researcher’s inclusion and exclusion criteria.
Failure of our Company or our suppliers to comply with international, federal, state, and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which could have a material adverse effect on our business. 36 Table of Contents Our lack of knowledge of all the laws and regulations related to our business operations may result in our failure to abide by these rules.
Failure of our Company or our suppliers to comply with international, federal, state, and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which could have a material adverse effect on our business. 35 Table of Contents Our failure to comply with other laws and regulations related to our business operations also have a material adverse effect upon our business.
This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
If so, the use of our NOLs, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of our NOLs before utilization. A pandemic, epidemic, or outbreak of an infectious disease in the United States or worldwide could adversely affect our business.
If so, the use of our NOLs, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of our NOLs before utilization.
We do not currently charge our customer or supply chain for access to the iSpecimen Marketplace; Ø Our revenue is significantly concentrated and varies by customer year-over-year. There were two customers that represented approximately 14% and 12% of our revenue in 2022.
We do not currently charge our customer or supply chain for access to the iSpecimen Marketplace; Ø Our revenue is significantly concentrated and varies by customer year-over-year. There was one customer that accounted for approximately 25% of our revenue in 2023.
In 2022, the percent of specimens that met specifications was 99% for clinical remnant specimens, 99% for banked research specimens and 99% for custom research collections. In 2021, the percent of specimens that met specifications was 98% for clinical remnant specimens, 99% for banked research specimens and 97% for custom research collections.
In 2022, the percent of specimens that met specifications was 99% for clinical remnant specimens, 99% for banked research specimens and 99% for custom research collections. Percentage of specimens that met specifications decreased year over year from 2022.
Although we have not had any government audits and reviews to date, future audits and reviews could cause adverse effects. 27 Table of Contents Sustainable future revenue growth is dependent on growth in the capabilities of our supply network which we may not be able to achieve.
We could also suffer serious harm to our reputation if allegations of impropriety were made against us. Although we have not had any government audits and reviews to date, future audits and reviews could cause adverse effects. Sustainable future revenue growth is dependent on growth in the capabilities of our supply network which we may not be able to achieve.
The Sarbanes-Oxley Act requires, among other things, that we maintain disclosure controls and procedures and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place, as well as maintaining these controls and procedures, is a costly and time-consuming effort that needs to be re-evaluated frequently.
Ensuring that we have adequate internal financial and accounting controls and procedures in place, as well as maintaining these controls and procedures, is a costly and time-consuming effort that needs to be re-evaluated frequently.
In addition, our limited directors’ and officers’ liability insurance may affect our ability to attract and retain directors and officers. The requirements of being a U.S. public company may strain our resources and divert management’s attention.
Any significant claims would have a material adverse effect on our business, financial condition, and results of operations. In addition, our limited directors’ and officers’ liability insurance may affect our ability to attract and retain directors and officers. The requirements of being a U.S. public company may strain our resources and divert management’s attention.
For the year ended December 31, 2022 and 2021, we reported net losses of $10,245,922 and $8,961,815, respectively. We had an accumulated deficit of $48,265,324 as of December 31, 2022. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue to invest in the growth of our business.
For the years ended December 31, 2023 and 2022, we reported net losses of $11,099,488 and $10,245,922, respectively. We had an accumulated deficit of $59,364,812 as of December 31, 2023. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue to invest in the growth of our business.
Many of these are outside of our control and all of which may change from time to time. Our historical revenue results should not be taken as predictive of future performance. There are many risks that could impact future performance resulting in variations in expected results which could lead to a negative business impact.
Many of these are outside of our control and all of which may change from time to time. Our historical revenue results should not be taken as predictive of future performance.
The requirements of these rules and regulations result in significant legal and financial compliance costs, including costs associated with the employment of personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources and divert management’s attention.. 42 Table of Contents The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and financial condition.
The requirements of these rules and regulations result in significant legal and financial compliance costs, including costs associated with the employment of personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources and divert management’s attention..
Additionally, the number of shares of common stock that are outstanding after our initial public offering also includes up to an aggregate of 1,312,500 shares of common stock underlying the warrants to be offered and sold by the selling stockholders of the Company.
Additionally, the number of shares of common stock that are outstanding after our IPO also includes up to an aggregate of 1,312,500 shares of common stock underlying the warrants to be offered and sold by the selling stockholders of the Company, all of which were subsequently repurchased by us on February 13, 2024, and are no longer outstanding.
Our business may be materially and adversely impacted by the reduction, delay or cancellation of orders from our customers. Our contracts with our customers generally allow them to reduce, delay, or cancel the unfulfilled portion of their specimen order with a two-week notice.
Our contracts with our customers generally allow them to reduce, delay, or cancel the unfulfilled portion of their specimen order with a two-week notice.
Any termination or suspension of a project may cause a corresponding cancellation or delay in purchase orders we have received for specimens; Ø Suppliers may not accurately estimate how long it will take them to fulfill specimen requests, making it more difficult to accurately forecast when we will recognize revenue on these specimen requests; and Ø We created our first sales team in the fourth quarter of 2019, which we have continued to expand, and therefore we have limited historical selling data per salesperson upon which to generate future revenue forecasts.
Any termination or suspension of a project may cause a corresponding cancellation or delay in purchase orders we have received for specimens; and Ø Suppliers may not accurately estimate how long it will take them to fulfill specimen requests, making it more difficult to accurately forecast when we will recognize revenue on these specimen requests.
Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, or other sources. We do not currently have any committed external source of funds.
Until such time, if ever, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, or other sources. Other than our current ATM, which provides for financing of up to $1.5 million in gross proceeds, we do not currently have any other committed external source of funds.
In the event that our common stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock because it may be considered a penny stock and thus be subject to the penny stock rules.
Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange. 37 Table of Contents In the event that our common stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock because it may be considered a penny stock and thus be subject to the penny stock rules.
We have derived, and believe that we may continue to derive, a significant portion of our revenues from products we procure from a limited number of supply sites.
Reliance on relatively few supply partners for significant supplies and services could affect our ability to operate and grow. We have derived, and believe that we may continue to derive, a significant portion of our revenues from products we procure from a limited number of supply sites.
Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on the Company’s business and the companies from which the Company obtains supplies and distributes specimens. Recent changes in our management may lead to instability and negatively affect our business.
Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on the Company’s business and the companies from which the Company obtains supplies and distributes specimens. Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.
The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant.
The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment will only occur if our stock price appreciates .
For the year ended December 31, 2021, there were two suppliers who each accounted for 11% of our total cost of revenue and two other suppliers who, together, accounted for an additional 20% of our total cost of revenue.
For the year ended December 31, 2023, there was one supplier who accounted for 13% of our total cost of revenue and three other suppliers who, together, accounted for an additional 23% of our total cost of revenue.
There can be no assurance that we will be able to successfully capitalize on growth opportunities, which may adversely impact our business model, revenues, results of operations, and financial condition. The continued COVID-19 pandemic could continue to adversely affect our business.
There can be no assurance that we will be able to successfully capitalize on growth opportunities, which may adversely impact our business model, revenues, results of operations, and financial condition. International operation expansion could expose us to additional risks which could harm our business, prospects, results of operation, and financial condition. We operate internationally and expect to expand internationally.
While for the year ended December 31, 2022, two customers represented 14% and 12% of the Company’s revenues, for the year ended December 31, 2021, no customer represented more than 10% of our revenue.
During the year ended December 31, 2023, one customer represented 25% of the Company’s revenues, and during the year ended December 31, 2022, two customers represented 14% and 12% of our revenue, respectively.
In certain situations, products are shipped directly from the supply sites to our customers. When we receive products from our supply sites, we perform a visual inspection of the products, but we do not perform an in-depth quality control check to ensure that products meet all specifications.
When we receive products from our supply sites, we perform a visual inspection of the products, but we do not perform an in-depth quality control check to ensure that products meet all specifications. 28 Table of Contents Instead, we rely upon our customers to perform quality checks themselves and offer refunds or replacements for products that do not meet specification.
Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.
Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all. 32 Table of Contents Risks Related to Intellectual Property We use third-party technology licenses as part of our technology solution.
As of December 31, 2022, we had 8,925,808 shares of common stock outstanding; outstanding stock options to purchase 297,559 shares of common stock at an average price of $2.69 per share; outstanding restricted stock units of 267,505 shares issuable upon vesting at an average price of $5.43; outstanding warrants to purchase 102,500 shares of common stock at an average price of $9.00 per share.
As of December 31, 2023, we had 9,083,371 shares of common stock outstanding; outstanding stock options to purchase 296,268 shares of common stock at an average price of $2.17 per share; outstanding restricted stock units of 116,357 shares issuable upon vesting at an average price of $5.67; outstanding warrants to purchase 102,500 shares of common stock at an average price of $9.88 per share.
Research subjects or their legally authorized representative may file claims related to a specimen collection and these claims could result in litigation that could be expensive, and time consuming to defend or result in judgements that exceed the resources of the Company and its insurance coverage. 29 Table of Contents We procure specimens and data from organizations outside of the U.S. and as such, we rely upon these organizations to collect and distribute specimens and data in accordance with their local regulations as well as our contractual requirements.
Research subjects or their legally authorized representative may file claims related to a specimen collection and these claims could result in litigation that could be expensive, and time consuming to defend or result in judgements that exceed the resources of the Company and its insurance coverage.
In 2021, there were no customers that accounted for more than 10% of our revenue; Ø Researcher needs may change over the lifetime of a project, based on the stage of the project.
In 2022, there were two customers that represented approximately 14% and 12% of our revenue, respectively; Ø Researcher needs may change over the lifetime of a project, based on the stage of the project.
Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in 41 Table of Contents our industry.
These organizations are currently acquiring smaller biospecimen businesses and have larger customer bases, their own collection centers, biospecimen inventories, larger marketing and sales budgets, and an international presence. They may also be developing their own technology solution that could be better or less costly to develop than our own iSpecimen Marketplace, thereby eliminating one of our key competitive advantages.
They may also be developing their own technology solution that could be better or less costly to develop than our own iSpecimen Marketplace, thereby eliminating one of our key competitive advantages.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe will need additional office space in the future as we continue to build our development, commercial and support teams. We believe we can find suitable additional space in the future on commercially reasonable terms. 43 Table of Contents
Biggest changeWe will need additional office space in the future as we continue to build our development, commercial and support teams. We believe we can find suitable additional space in the future on commercially reasonable terms.
Item 2. Properties Our principal executive office is located in 450 Bedford Street, Lexington, Massachusetts. We occupy approximately 8,835 square feet of office and laboratory space in Lexington, Massachusetts under a lease that expires on February 28, 2024.
Item 2. Properties Our principal executive office is located in 450 Bedford Street, Lexington, Massachusetts. We occupy approximately 8,835 square feet of office and laboratory space in Lexington, Massachusetts under a lease that expires on February 28, 2025.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on us because of diversion of management time and attention as well as the financial costs related to resolving such disputes. Item 4. Mine Safety Disclosures Not Applicable. PART II
Biggest changeWe cannot predict the results of any such disputes, and despite the potential outcomes, the existence thereof may have an adverse material impact on us because of diversion of management time and attention as well as the financial costs related to resolving such disputes. 43 Table of Contents Item 4. Mine Safety Disclosures Not Applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our Board of Directors may deem relevant. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days after December 31, 2022, and which is incorporated by reference herein. ​ Use of Proceeds from Registered Securities For a description of the use of the proceeds generated in our initial public offering (“IPO”), see Part I, Item 2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our Board may deem relevant. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ The information required by Item 201(d) of Regulation S-K is set forth in Part III of this Annual Report on Form 10-K and is incorporated herein. ​ Purchases of Equity Securities by the Issuer and Affiliated Parties None. ​ Item 6.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board of Directors, subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness.
Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board, subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information ​ Our common stock trades on the Nasdaq Capital Market under the symbol “ISPC.” Trading commenced on the Nasdaq on June 17th, 2021. ​ Holders ​ On March 16, 2023, there were 65 holders of record of our common stock. ​ Dividends ​ We currently intend to retain all available funds and any future earnings to fund the development, commercialization, and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on any class of our common stock in the foreseeable future.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information ​ Our common stock trades on the Nasdaq Capital Market under the symbol “ISPC.” Trading commenced on the Nasdaq on June 17, 2021. ​ Holders ​ On March 11, 2024, there were 63 holders of record of our common stock. ​ Dividends ​ We currently intend to retain all available funds and any future earnings to fund the development, commercialization, and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on any class of our common stock in the foreseeable future.
Removed
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. Purchases of Equity Securities by the Issuer and Affiliated Parties None. ​ 44 Table of Contents Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to stockholders. 52 Table of Contents ​ Cash Flows Operating Activities For the year ended December 31, 2022, net cash used in operating activities was approximately $5,818,000, which consisted of a net loss of approximately $10,246,000 offset by non-cash charges of approximately $2,074,000 which included approximately $1,183,000 related to amortization of internally developed software, approximately $679,000 in stock-based compensation, approximately $107,000 in bad debt expense, approximately $22,000 related to depreciation of property and equipment, approximately $77,000 of amortization of debt issuance cost on the Term Loan, and approximately $6,000 of proceeds from issuance of common stock in exchange for services. ​ Total changes in assets and liabilities of approximately $2,354,000 were primarily driven by a $1,297,946 decrease in accounts receivable, a $148,431 decrease in operating lease right-of-use asset, a $26,601 decrease in prepaid expenses and other current assets, a $1,626,385 increase in accounts payable, a $521,435 increase in accrued expenses, offset by a $588,769 increase in accounts receivable-unbilled, a $522,411 decrease in deferred revenue, a $147,276 decrease in operating lease liability and a $8,167 decrease in accrued interest. ​ For the year ended December 31, 2021, net cash used in operating activities was approximately $10,668,000, which consisted of a net loss of approximately $8,962,000 offset by non-cash charges of approximately $3,576,000, which primarily includes an approximately $2,740,000 loss on extinguishment of Bridge Notes, approximately $959,000 related to amortization of internally developed software, approximately $870,000 of amortization of discount on Amended Bridge Notes, approximately $622,000 in stock based compensation, an approximately $260,000 loss on extinguishment of Convertible Notes, approximately $161,000 in bad debt expense, approximately $45,000 related to depreciation and amortization of property and equipment, $12,500 of common stock issued in exchange for services, $4,605 of amortization of debt issuance costs on a note payable, and $1,088 of amortization of discount and debt issuance costs on Convertible Notes, partially offset by an approximately $1,312,000 loss on derivative liabilities, and an approximately $788,000 gain on extinguishment on note payable. ​ Total changes in assets and liabilities of approximately $5,282,000 were primarily driven by a $1,708,922 decrease in accrued interest, a $1,637,124 increase in accounts receivable, a $1,086,259 increase in accounts receivable-unbilled, a $959,754 decrease in accounts payable, and a $218,508 decrease in deferred revenue, offset by a $198,893 increase in accrued expenses, a $90,894 decrease in prepaid expenses and other current assets, and a $38,503 decrease in tax credit receivable. ​ Investing Activities ​ Net cash used in investing activities was $3,191,190 and $1,037,917 for the years ended December 31, 2022 and 2021, respectively.
Biggest changeAs a result, management’s plans cannot be considered probable and thus do not alleviate substantial doubt about our ability to continue as a going concern. ​ Cash Flows Operating Activities For the year ended December 31, 2023, net cash used in operating activities was approximately $5,808,000, which consisted of a net loss of approximately $11,099,000 offset by non-cash charges of approximately $2,703,000, which included approximately $1,948,000 related to amortization of internally developed software, approximately $460,000 in stock-based compensation, approximately $305,000 in bad debt expense, approximately $118,000 related to depreciation of property and equipment, and approximately $50,000 related to amortization of other intangible assets, which were offset by approximately $177,000 of accretion of discount on available-for-sale securities. ​ Total changes in assets and liabilities of approximately $2,589,000 were attributable to an approximately $1,466,000 increase in accounts payable, an approximately $564,000 decrease in accounts receivable, an approximately $283,000 increase in deferred revenue, an approximately $157,000 increase in operating lease right-of-use asset, an approximately $141,000 decrease in tax credit receivable, an approximately $115,000 decrease in accounts receivable-unbilled, an approximately $9,000 increase in accrued expenses, and an 51 Table of Contents approximately $8,000 decrease in prepaid expenses and other current assets, offset by an approximately $156,000 decrease in operating lease liability. ​ For the year ended December 31, 2022, net cash used in operating activities was approximately $5,818,000, which consisted of a net loss of approximately $10,246,000 offset by non-cash charges of approximately $2,074,000 which included approximately $1,183,000 related to amortization of internally developed software, approximately $679,000 in stock-based compensation, approximately $107,000 in bad debt expense, approximately $22,000 related to depreciation of property and equipment, approximately $77,000 of amortization of debt issuance costs on the Term Loan, and approximately $6,000 of proceeds from issuance of common stock in exchange for services. ​ Total changes in assets and liabilities of approximately $2,354,000 were primarily driven by an approximately $1,298,000 decrease in accounts receivable, an approximately $148,000 decrease in operating lease right-of-use asset, an approximately $27,000 decrease in prepaid expenses and other current assets, an approximately $1,626,000 increase in accounts payable, an approximately $521,000 increase in accrued expenses, offset by an approximately $589,000 increase in accounts receivable-unbilled, an approximately $522,000 decrease in deferred revenue, an approximately $147,000 decrease in operating lease liability and an approximately $8,000 decrease in accrued interest. ​ Investing Activities ​ During the year ended December 31, 2023, we invested approximately $3.8 million of cash in further developing our iSpecimen Marketplace technology with plans to invest at a lower level in 2024.
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.
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 to us.
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.
For these analyses, companies with comparable characteristics are selected, including enterprise value and position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards.
We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its share-based awards. The risk-free interest rate is determined by reference to U.S. Treasury zero-coupon issues with remaining maturities similar to the expected term of the options.
We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its stock-based awards. The risk-free interest rate is determined by reference to U.S. Treasury zero-coupon issues with remaining maturities similar to the expected term of the options.
While we mobilized to shift these purchase orders to other suppliers in our network, the process of getting specimen collections from other supply sites took time, which has caused a delay in the fulfillment of such purchase orders. Alternate suppliers do not have the same favorable unit economics or specimen collection rates and this impacted our margins.
While we mobilized to shift these purchase orders to other suppliers in the network, the process of specimen collections from other supply sites took time, which caused a delay in the fulfillment of such purchase orders. Alternate suppliers do not have the same favorable unit economics or specimen collection rates, and this also impacted our margins.
While the Company is subject to these types of supply chain constraints that are specific to the specimen industry, we are not affected by the more common supply chain issues currently affecting the economy, specifically surrounding transportation.
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.
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 2026; (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.
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 $1.235 billion or more; (ii) December 31, 2026; (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 7A.
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 taps into healthcare provider data to gain insights into the 44 Table of Contents available samples in biobanks or laboratories, or to gain insights into the patient populations to support specimen collections directly from research subjects.
Additionally, it also diverted key resources from operations to resolving the re-fulfillment issues caused by the conflict. As of December 31, 2022, the supply sites in Russia that had not been under sanctions are now accessible and our supply sites in Ukraine are mostly reopened.
Additionally, key resources were diverted from operations to resolving the re-fulfillment issues caused by the conflict. ​ As of December 31, 2023, our supply sites in Russia that had not been under sanctions were accessible and our supply sites in Ukraine were mostly reopened.
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 55 Table of Contents are classified as technology and expensed to operations as incurred.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. ​ ​ 56 Table of Contents
Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. ​ ​ 54 Table of Contents
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.
JOBS Act Transition Period On April 5, 2012, 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 for complying with new or revised accounting standards.
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.
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.
At the start of the war, we had approximately $1 million of purchase orders that were slated to be fulfilled by our supply network in Ukraine and Russia. This supply network shut down quickly at the start of the war.
At the start of the war, we had approximately $1 million of purchase orders that were slated to be fulfilled by our supply network in Ukraine and Russia. This supply network was shut down at the start of the war. Ukrainian suppliers were disabled due to war conditions and evacuations and some of our Russian suppliers were disabled by sanctions.
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.
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.
Costs that do not meet the capitalization criteria are expensed as incurred. ​ 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.
The costs paid to the third party sequencer are the only costs capitalized and all other costs are expensed as incurred. ​ Stock-based Compensation We record stock-based compensation for options granted to employees, non-employees, and to members of the Board for their services on the Board 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.
The short and long-term implications of the war are difficult to predict at this time. The imposition of more sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the businesses of our supply partners, especially those in Ukraine and Russia.
The imposition of more sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the businesses of our supply partners, especially those in Ukraine and Russia.
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.
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, costs paid to the supply sites to support sample collections, amortization of capitalized sequenced data costs and other assets related to sequenced data.
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.
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 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.
General and Administrative Expenses General and administrative expenses increased approximately $1,319,000 or 24%, from approximately $5,613,000 for the year ended December 31, 2021 to approximately $6,933,000 for the year ended December 31, 2022.
General and Administrative Expenses General and administrative expenses decreased by approximately $998,000, or 14%, from approximately $6,933,000 for the year ended December 31, 2022 to approximately $5,935,000 for the year ended December 31, 2023.
Additionally, costs of supplies have been affected by inflation, however, these costs are not significant to the Company’s results. ​ Inflation has not had a significant impact on the cost of specimens due to our long-term contracts maintained with vendors, which include revenue sharing plans. ​ Non-GAAP Financial Measure To supplement our financial statements, which are prepared and presented in accordance with U.S.
Additionally, the costs of supplies have been affected by inflation; however, these costs are not significant to the Company’s results. ​ Inflation has not had a significant impact on the cost of specimens due to our long-term contracts maintained with vendors, which include revenue sharing plans. ​ 52 Table of Contents Critical Accounting Policies and Estimates We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with GAAP.
Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on our business and the companies from which we obtain supplies and distribute specimens. Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business We are committed to investing in and developing our technology.
Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on our business and the companies from which we obtain supplies and distribute specimens. ​ Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business Chief Executive Officer Initiatives ​ The Company’s mission remains to accelerate life sciences research and development, pursuant to a single global marketplace platform.
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.
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. 48 Table of Contents 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.
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.
Each customer will execute a material and data use agreement with the Company or agree to online purchase terms, each of which includes terms such as specimen and data use, shipment terms, payment and cancellation terms.
Due to the small size of the packages that we ship, our carriers have been able to continue making timely deliveries during the year ended December 31, 2022. ​ We have experienced negative effects of inflation in certain areas of our business due to the high rates of inflation in the world’s current economy.
Due to the small size of the packages that we ship, our carriers were able to continue making timely deliveries during the year ended December 31, 2023.
Other Expense, net Other expense, net decreased by approximately $2,977,000 or 98%, from approximately $3,037,000 for the year ended December 31, 2021 to approximately $60,000 for the year ended December 31, 2022.
Other Income (Expense), net Other income (expense), net, increased by approximately $130,000, or 217%, from approximately $60,000 of other expense, net, for the year ended December 31, 2022 to approximately $70,000 of other income, net, for the year ended December 31, 2023.
We have not paid, and do not anticipate paying, cash dividends on shares of our common stock. Recent Accounting Standards For information on recent accounting standards, see Note 2 to our financial statements. JOBS Act Transition Period On April 5, 2012, the JOBS Act, was enacted.
We have not paid, and do not anticipate paying, cash dividends on shares of our common stock. There were no material changes to our estimates as of December 31, 2023. 53 Table of Contents Recent Accounting Standards For information on recent accounting standards, see Note 2 to our financial statements.
The increase was primarily attributable to increases in payroll and related expenses of approximately $576,000 for personnel engaged in pre-sales feasibility assessments and post-sales fulfillment activities, professional fees of approximately $40,000, general and administrative expense of approximately $11,000 and promotions and advertising expenses of approximately $5,000.
The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $369,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment, which was partially offset by increases in professional fees of approximately $143,000 and general operating expenses related to fulfillment of approximately $19,000.
Although there was a 32% increase in the number of specimens accessioned during the year ended December 31, 2022, over the same prior year period, the average cost per specimen decreased by 31% from $252 for the year ended December 31, 2021 to $173 for the year ended December 31, 2022. 50 Table of Contents Technology Technology expenses increased by approximately $818,000 or 45% from approximately $1,838,000 for the year ended December 31, 2021 to approximately $2,656,000 for the year ended December 31, 2022.
Although there was an 11% decrease in the number of specimens accessioned during the year ended December 31, 2023, over the same prior year period, the average cost per specimen increased by 13% from $173 for the year ended December 31, 2022 to $196 for the year ended December 31, 2023.
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. 48 Table of Contents 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.
Technology Technology costs include consulting fees, 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, amortization of internally developed software, and other expenses necessary to support technology initiatives.
However, due to the uncertainty caused by the ongoing war, Ukraine suppliers may again become inaccessible to us. Therefore, as long as the uncertainty continues, our policy is to ensure at a purchase order level, that an order is not solely sourced from the two countries.
Therefore, as long as the uncertainty continues, our policy is to ensure at a purchase order level that an order is not solely sourced from the two countries. The short and long-term implications of the war are difficult to predict as of the date of this Annual Report.
Sales and Marketing Expenses Sales and marketing expenses increased approximately $1,023,000 or 42%, from approximately $2,423,000 for the year ended December 31, 2021 to approximately $3,445,000 for the year ended December 31, 2022.
Technology Technology expenses increased by approximately $911,000, or 34%, from approximately $2,656,000 for the year ended December 31, 2022 to approximately $3,567,000 for the year ended December 31, 2023.
In addition, changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy, recession and inflation, as are being currently experienced, may result in a decline in researchers’ demand for specimens due to the research organization’s inability to obtain funding through grants. ​ We believe that our business will continue to be resilient through a continued economic downturn or recession, or slowing or stalled recovery therefrom, and that we have the liquidity to address the Company’s financial obligations and alleviate possible adverse effects on the Company’s business, financial condition, results of operations or prospects. ​ Impact of the Russian-Ukrainian War on Our Operations Our business was negatively impacted during the first half of 2022 by the ongoing war between Russia and Ukraine .
We have enhanced procedures related to our credit check process for new and existing customers in fiscal year 2023 to mitigate the risk to future collectability of receivables. ​ Changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy and inflation, as are being currently experienced, may result in a reduction in researchers’ demand for specimens due to the research organization’s inability to obtain funding. ​ To further address the current market conditions, we have taken steps, which include but are not limited to, reevaluating our pricing in order to be more competitive, creating campaigns to highlight and fast-track high demand items, enhancing internal team communications to accelerate the sales cycle, moving to a new line of business structure organized by our internal categorization of biospecimen suppliers capabilities to increase efficiency in operations, implementation of next day quotes to increase conversion ratios of quotes to purchase orders, and initiation of efforts to decrease expenditures through reductions in our workforce. ​ We believe that our business will continue to be resilient through a continued industry-wide economic slowdown in life science research, and that we will continue to work on improving our liquidity to address our financial obligations and alleviate possible adverse effects on our business, financial condition, results of operations or prospects. ​ Impact of the Russian-Ukrainian War on Our Operations Our business was negatively impacted during the first half of 2022 by the ongoing war between Russia and Ukraine.
We anticipate that over time, these investments will increase revenue opportunities and result in operational efficiencies, positively impacting our liquidity, capital resources and results of operations in the future with a less than two-year rate of return on the investment. We continue to experience declines in our COVID-19 revenue.
We anticipate that these investments will increase revenue opportunities and result in operational efficiencies, positively impacting our liquidity, capital resources and results of operations in the future. ​ During the year ended December 31, 2023, while still onboarding new suppliers, we shifted to the quality of our network.
Additionally, we are working with our current bank to place our remaining cash balance into investment products that will fall within FDIC insurance limits, as well as other opportunities to insure the safeguarding of our assets. ​ 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.
We now have a key supplier program whereby we proactively engage with the suppliers to promote our business through marketing campaigns and supplier organizations’ offerings. ​ 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.
Net cash used in investing activities for the year ended December 31, 2022 consisted of $2,975,686 of capitalization of internally developed software and $215,504 for purchase of property and equipment. ​ Net cash used in investing activities for the year ended December 31, 2021 consisted of $1,035,367 of capitalization of internally developed software, and $2,550 for purchases of property and equipment. ​ Financing Activities ​ Net cash used in financing activities was $3,421,359 for the year ended December 31, 2022 which consisted of $3,500,000 for the payoff of the Term loan, which was offset by $78,641 of proceeds from the exercise of stock options. ​ Net cash provided by financing activities was $38,749,397 for the year ended December 31, 2021 which consisted of $20,999,988 of proceeds received from the issuance of common stock in connection with the PIPE, $18,000,000 of proceeds received from the issuance of common stock in connection with the IPO, $3,500,000 of proceeds received from the issuance of a note payable, $2,497,501 of net proceeds from the issuance of over-allotment shares of common stock, $500,000 of proceeds received from the issuance of Bridge Notes payable, $58,648 of proceeds received from the exercise of stock options, and $992 of proceeds received from the exercise of warrants, which was partially offset by the $3,000,000 payment of principal to the holders of the Bridge Notes, $2,339,816 for the payment of offering costs in connection with the issuance of common stock in connection with the IPO, $1,434,999 for the payment of offering 53 Table of Contents costs in connection with the issuance of common stock in connection with PIPE, and $32,917 for the payment of debt issuance costs in connection with a note payable. ​ Effects of Inflation and Supply Chain Shortages ​ Our operations are heavily reliant on specimen availability, and as a result, we often receive more requests than we can fulfill.
Net cash used in investing activities for the year ended December 31, 2023 consisted of approximately $13,040,000 of purchases of available-for-sale securities, approximately $3,767,000 of capitalization of internally developed software, approximately $958,000 of capitalization of other intangible assets and approximately $19,000 of purchases of property and equipment, which were offset by $10,556,000 of proceeds from sale and maturities of available-for-sale securities. ​ Net cash used in investing activities for the year ended December 31, 2022 consisted of approximately $2,976,000 of capitalization of internally developed software and approximately $216,000 for purchase of property and equipment. ​ Financing Activities ​ Net cash provided by financing activities was approximately $71,000 for the year ended December 31, 2023, which consisted of approximately $71,000 received from the exercise of stock options. ​ Net cash used in financing activities was approximately $3,421,000 for the year ended December 31, 2022, which consisted of $3,500,000 for the payoff of the Term Loan, which was offset by approximately $79,000 of proceeds from the exercise of stock options. ​ Effects of Inflation and Supply Chain Shortages ​ Our operations are heavily reliant on specimen availability, and as a result, we often receive more requests than we can fulfill.
However, a change in specimen mix resulted in a decrease in average selling price per specimen of approximately $157 or 29% compared to the same prior year period. ​ Cost of Revenue Cost of revenue decreased by approximately $492,000 or 9%, from approximately $5,249,000 for the year ended December 31, 2021 to approximately $4,757,000 for the year ended December 31, 2022.
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 $26, or 7%, from approximately $378 during the year ended December 31, 2022 to $404 during the year ended December 31, 2023. ​ Cost of Revenue Cost of revenue increased by approximately $63,000, or 1%, from approximately $4,757,000 for the year ended December 31, 2022 to approximately $4,820,000 for the year ended December 31, 2023.
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.
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. ​ Term Loan ​ On August 13, 2021, we entered into a loan agreement (the “Term Loan”) and as a result, received proceeds of $3,500,000.
The increase was primarily attributable to increases in payroll and related expenses of approximately $747,000 due to hiring of more sales personnel, professional fees of approximately $434,000, general expenses related to sales and marketing of approximately $45,000, offset by decreases of approximately $180,000 website costs capitalized as fixed assets and external marketing efforts of approximately $23,000. ​ Supply Development Supply development expenses increased approximately $227,000 or 40%, from approximately $574,000 for the year ended December 31, 2021 to approximately $801,000 for the year ended December 31, 2022.
The increase was primarily attributable to increases in payroll and related expenses of approximately $345,000, external marketing expense of approximately $201,000, and general operating expenses related to sales and marketing of approximately $6,000, which were partially offset by a decrease in advertising and promotions expense of approximately $41,000. ​ Supply Development Supply development expenses increased by approximately $229,000, or 29%, from approximately $801,000 for the year ended December 31, 2022 to approximately $1,030,000 for the year ended December 31, 2023.
In the year ended December 31, 2022, we capitalized approximately $2,975,686 of internally developed software costs and have plans to continue investing at this or greater levels in the future.
We are committed to investing in and developing our technology. During the year ended December 31, 2023, we capitalized approximately $3,767,000 of internally developed software costs with plans to invest at significantly lower levels in 2024.
The increase was attributable to increases in payroll and related expenses of approximately $74,000, severance costs for our former Chief Executive Officer and former Chief Operating Officer, in the aggregate amount of $782,000, taxes and insurance of approximately $577,000, software and subscriptions costs of approximately $154,000, utilities and facilities expenses of approximately $44,000, marketing and advertising costs of approximately $35,000, other general expenses of approximately $17,000, offset by decreases in bad debt expense of approximately $343,000 and depreciation and amortization expenses of $21,000.
The decrease was attributable to decreases in severance costs of former executives of approximately $782,000, compensation costs of approximately $248,000, general operating expenses of approximately $156,000, professional fees of $69,000, and utilities and facilities expenses of approximately $47,000, which were partially offset by increases in bad debt expense of approximately $198,000, depreciation and amortization of approximately $95,000, and taxes and insurance of approximately $11,000.
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.
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.
Since inception, we have relied upon raising capital to finance our operations. We intend to use our existing cash to further develop our technology, grow our supply network, increase our marketing and sales presence, scale our operations, and for working capital and general corporate purposes.
We intend to continue to use our existing cash to grow our supply network, increase our marketing and sales presence, scale our operations, and for working capital and general corporate purposes. Net cash used in investing activities was approximately $7,228,000 and $3,191,000 for the years ended December 31, 2023 and 2022, respectively.
This funding was used to settle the remaining balance of $3,000,000 on the Bridge Notes. ​ On December 1, 2021, we closed on a private placement offering (“PIPE”) for gross proceeds of approximately $21 million, before deducting approximately $1.4 million for underwriting discounts and commissions and estimated offering expenses, for (i) an aggregate of 1,749,999 shares of common stock and (ii) warrants, which are exercisable for an aggregate of up to 1,312,500 shares of common stock. ​ On November 3, 2022, the Company settled in cash the remaining principal balance plus accrued and unpaid interest of the Term Loan in the amount of $3.4 million.
This funding was used to settle the remaining balance of $3,000,000 on the then outstanding bridge notes, as amended (“the Bridge Notes”). On November 3, 2022, the Company settled in cash the remaining principal balance plus accrued and unpaid interest of the Term Loan in the amount of $3.4 million.
The increase was related to increases in headcount and payroll and related expenses of approximately $624,000, amortization of internally developed software of approximately $223,000, increase in general and administrative expenses of approximately $7,000, offset by a decrease in professional fees unrelated to internally developed software of approximately $36,000.
The increase was primarily attributable to an increase in professional fees of approximately $372,000, which was partially offset by decreases in payroll and related expenses of approximately $141,000 and general supply development expenses of approximately $2,000.
Upon repayment of the Term Loan, the Loan Facility was terminated and the security interest in the assets of the Company was released. As of December 31, 2022, no Bridge Notes remained outstanding. ​ Impact of the COVID-19 Pandemic on Our Operations In response to the COVID-19 pandemic, we have put in place additional health and safety protocols.
Upon repayment of the Term Loan, the Loan Facility was terminated and the security interest in the assets of the Company was released.
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.
We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note 2 of our financial statements. 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.
For the year ended December 31, 2022 and 2021, our non-COVID-19 revenue significantly increased by $1,499,000 or 18.7%, from approximately $8,036,000 for the year ended December 31, 2021 to $9,535,000 for the year ended December 31, 2022.
Fulfillment Fulfillment costs decreased by approximately $207,000, or 10%, from approximately $1,996,000 for the year ended December 31, 2022 to approximately $1,789,000 for the year ended December 31, 2023.
Inflation and Recession ​ 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 bio-specimen industries, which may adversely affect our business and financial condition.
We intend to sell Shares, from time to time, pursuant to the ATM Agreement, in transactions that are “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act. ​ 45 Table of Contents Impact of the Current Economy ​ 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.
Removed
All historical share and per share information shown herein and in our 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 $18,000,000.
Added
As of December 31, 2023, no Bridge Notes remained outstanding. ​ Private Placement Offering ​ On December 1, 2021, we closed on a private placement offering (“PIPE”) for gross proceeds of approximately $21 million, before deducting approximately $1.4 million for underwriting discounts and commissions and estimated offering expenses, for (i) an aggregate of 1,749,999 shares of common stock and (ii) warrants, which are exercisable for an aggregate of up to 1,312,500 shares of common stock, all of which were subsequently repurchased by us on February 13, 2024, and are no longer outstanding. ​ At the Market Offering On March 5, 2024, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with Rodman & Renshaw LLC as agent (the “Sales Agent”) pursuant to which we may issue and sell shares of our common stock, having an aggregate offering price of up to $1,500,000 (the “ATM Shares”), from time to time through the Sales Agent.
Removed
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 45 Table of Contents aggregate gross proceeds of $2,700,000. The net proceeds from the overallotment were $2,500,000 after deducting underwriting discounts of $200,000.
Added
The ATM Shares when issued will be registered pursuant to our shelf registration statement on Form S-3 (File No 333-265976) , which became effective on July 12, 2022.
Removed
Inclusive of the underwriters’ option to purchase additional shares, we received approximately $18,200,000 in net proceeds from the IPO after deducting underwriting discounts of $1,900,000 and other offering costs of $600,000. ​ Upon completion of the IPO, the Company converted a) all 1,291,012 shares of outstanding redeemable convertible preferred stock into 1,291,012 shares of common stock, b) all $5,500,000 of its outstanding principal and all unpaid and accrued interest of approximately $1,300,000 of the then outstanding convertible notes into 1,206,614 shares of common stock at a conversion price of $5.60 per share, and c) $4,000,000 of its outstanding principal and accrued interest of $700,000 of the then outstanding bridge notes as amended (‘Bridge Notes”), into 842,429 shares of common stock at a conversion price of $5.60 per share. ​ On August 13, 2021, we entered into a loan agreement (the “Term Loan”) and as a result, received proceeds of $3,500,000.
Added
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 $289,898 as of December 31, 2023 due to certain boutique life sciences customers either lack liquidity or have filed for bankruptcy.
Removed
We continue to monitor and revise these protocols as appropriate to address the evolving nature of the pandemic.
Added
However, logistics and transportation of specimens out of the country of Ukraine remains challenging and not as economically feasible as they were prior to the beginning of the war. Due to the uncertainty caused by the ongoing war, Ukrainian and Russian suppliers may again become inaccessible to us.
Removed
While we have seen a return to business as usual in our industry, we continue to monitor the future impact of the COVID-19 pandemic on the Company, which includes such factors as length of time of the pandemic; the responses of federal, state and local government; the impact of future variants that may emerge; vaccination rates among the population; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy and consumer behavior; and the effect on our employees, vendors and suppliers.
Added
Executive management of the Company continues to review the Company’s structure, processes, and resources to evaluate and identify areas for improvement, and has been focused on creating and ensuring a runway for growth and scale for the business. ​ We have initiated efforts to decrease our capital and operational expenditures by cutting costs and right sizing the Company through reductions in our workforce.
Removed
We will continue to monitor and evaluate the ongoing COVID-19 pandemic and will work to respond appropriately to the impact of COVID-19 on our business, as well as customers’ and suppliers’ businesses.
Added
Throughout the year of 2023 and primarily on September 6, 2023, we executed a reduction in workforce, 46 Table of Contents resulting in an estimated reduction in monthly compensation costs of 29% and additional expenditure reductions estimated to be over 50% of monthly expenditures for the remainder of the year, after streamlining operations and rationalizing resources to focus on key market opportunities.
Removed
As a result of the ongoing cost-of-living crisis, tightening financial conditions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic, there is substantial uncertainty about the strength of the global economy, which have increased the uncertainty about the pace of potential recovery.
Added
As a result, we experienced a significant decrease in expenditures during the second half of 2023 compared to the first half of 2023. One of our key new revenue enhancement initiatives is to identify, through sequencing, high value cancer patients which possess specific mutations in donor Formalin-Fixed Paraffin-Embedded (“FFPE”) blocks.
Removed
Ukrainian suppliers were disabled due to war conditions and evacuations 46 Table of Contents and some of our Russian suppliers were disabled by sanctions.
Added
We have invested in active repetitive screening to create a virtual inventory of availability for our research customers in areas of high value. This initiative is extremely valuable, not only to our business, but we believe, for the entire industry.
Removed
While our non-COVID-19 revenue significantly increased by $1,499,000 or 18.7% from approximately $8,036,000 for the year ended December 31, 2021 to $9,535,000 for the year ended December 31, 2022, our COVID-19 revenue was approximately $867,000 in the year ended December 31, 2022 compared to approximately $3,099,000 for the same period in 2021, a $2,232,000, or 72%, decrease in COVID-19 revenue.
Added
We have entered into contracts with qualified suppliers to provide specific high value FFPE blocks which, we believe, could result in significant revenue share options. The power of our supplier network makes this initiative possible and when paired with the search functionality of our proprietary iSpecimen Marketplace, it provides an easier solution than what currently exists in our industry.
Removed
We anticipate that our non-COVD-19 revenue will continue to increase while our COVID-19 revenue will continue to decline, which may impact our results of operations at a level that is not currently determinable due to the uncertainty of the continued impact of COVID-19.
Added
We formally launched this initiative towards the end of the third quarter of 2023 and have recognized a modest level of revenue since then. We now have opportunities and purchase orders, most of which are expected to be fulfilled in 2024.
Removed
As disclosed in a Current Report on Form 8-K filed on September 22, 2022, the Company received notices of departure from the Company’s then Chief Executive Officer and its then Chief Operating Officer effective as of October 24, 2022.
Added
We own the data generated from sequencing of the FFPE blocks, and we are now creating a database of research content of our specific high value sequenced data that, we believe, will generate additional reiterative revenue by selling to researchers access to the database. ​ Our iSpecimen Marketplace Onsite Program, which offers additional support to our biospecimen supplier partners, is underway and we have begun to appoint iSpecimen Marketplace Onsite coordinators, whose responsibility is to field all requests made by the supplier partner and submit proposals on behalf of the supplier partner, resulting in the acceleration of fulfillment with streamlined sample-related management and reduced strain on existing supplier staff and product pipelines.
Removed
The Company’s Chief Financial Officer was named Interim Chief Executive Officer on September 21, 2022 while also continuing as our Chief Financial Officer, and was subsequently named our Chief Executive Officer (“CEO”) on January 9, 2023.
Added
During the year ended December 31, 2023, we have had ongoing operational process improvement activities to increase collaboration within and between departments. In the second quarter of 2023, we moved to a line of business structure organized by our internal categorization of biospecimen suppliers capabilities, which has increased efficiency in our operations and throughout the Company.
Removed
The focus of our new CEO in her first 100 days was to assess the capabilities of the Company’s resources with the launch of a significant initiative to reorganize our sales approach, placing a renewed focus on our sales pipeline and positioning it to scale in a post COVID-19 environment.
Added
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.
Removed
We evaluated our existing commercial and operational structure as well as processes to identify existing shortfalls and identify areas for improvement to drive revenue. Specifically, we conducted a top-down analysis of our commercial organization and our sales fulfillment pipeline.
Added
We completed the implementation of a next day quote system in the third quarter and we have already started to see positive results, as evidenced by increased conversion ratios of quotes to purchase orders which has contributed to the increased revenue results for the second half of 2023. ​ During the first half of 2023, technology projects were green-lighted to accelerate development timelines.
Removed
This resulted in 20% of the work force being realigned within the Company to enable the appropriate structure and support of our online marketplace. This realignment was also in support of increasing our cross-functional team communications and collaborations to improve execution.
Added
These investments have already resulted in meaningful progress which includes an updated search functionality, improved user interface, increased automation, and an enhanced matchmaking function of the iSpecimen Marketplace platform.
Removed
Additionally, during the first 100 days, our CEO developed strategies, plans, goals and objectives all focused on continuing to invest in the Company on various fronts while achieving a cash flow positive position.

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