As filed with the U.S. Securities and Exchange Commission on May 27, 2021.

Registration No. 333-250198​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 6
to
FORM S-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

iSpecimen Inc.
(Exact name of registrant as specified in its charter)

Delaware	8731	27-0480143
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

450 Bedford Street
Lexington, MA 02420
Telephone: (781) 301-6700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Christopher Ianelli
Chief Executive Officer
450 Bedford Street
Lexington, MA 02420
Telephone: (781) 301-6700
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Barry I. Grossman
Lijia Sanchez
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Telephone: (212) 370-1300 Brad L. Shiffman
Blank Rome LLP
1271 Avenue of the Americas
New York, NY 10020
Telephone: (212) 885-5000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
​	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

Title of Each Class of Security Being Registered	Proposed Maximum Aggregate Offering Price(1)(2)			Amount of Registration Fee(3)
Common Stock, $0.0001 par value	​	$	22,999,997.70	​	$	2,509.30
Common Stock underlying Representative’s Warrants, $0.0001 par value	​	$	1,149,999.89	​	$	125.46
Total	​	$	24,149,997.59	​	$	2,634.76

1)

Includes shares of our common stock that the underwriters have the option to purchase to cover over-allotments, if any. Pursuant to Rule 416 under the Securities Act of 1933, as amended (or the Securities Act), the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions. Includes shares of common stock that the underwriters have the option to purchase to cover over-allotments, if any.

2)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

3)

Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED MAY 27, 2021

2,222,222 Shares

Common Stock

iSpecimen Inc.

This is a firm commitment initial public offering of common stock of iSpecimen Inc. Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price of our shares will be between $8.00 and $10.00.

We have applied to list our common stock on the Nasdaq Capital Market under the symbol “ISPC.”

We are an “emerging growth company,” as that term is used in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risks. See “Risk Factors” beginning on page 15. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

​	Per Share	Total
Initial public offering price
Underwriting discount(1)	​	​
Proceeds, before expenses, to iSpecimen Inc.	​	​

1)

See “Underwriting” for a description of the compensation payable to the underwriters. We refer you to “Underwriting” beginning on page 124 for additional information regarding underwriters’ compensation.

We have granted a 45-day option to the representative to purchase up to an additional 333,333 shares of common stock solely to cover over-allotment, if any.

The underwriters expect to deliver the shares on or about            , 2021.

ThinkEquity
a division of Fordham Financial Management, Inc.

The date of this prospectus is            , 2021.

TABLE OF CONTENTS

​	Page
PROSPECTUS SUMMARY	​	1
RISK FACTORS	​	15
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	​	41
USE OF PROCEEDS	​	42
DIVIDEND POLICY	​	43
CAPITALIZATION	​	44
DILUTION	​	47
SELECTED FINANCIAL DATA	​	49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	​	52
BUSINESS	​	69
MANAGEMENT	​	95
EXECUTIVE COMPENSATION	​	101
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	​	106
PRINCIPAL STOCKHOLDERS	​	108
DESCRIPTION OF CAPITAL STOCK	​	110
SHARES ELIGIBLE FOR FUTURE SALE	​	119
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS	​	121
UNDERWRITING	​	124
LEGAL MATTERS	​	130
EXPERTS	​	130
WHERE YOU CAN FIND ADDITIONAL INFORMATION	​	130
INDEX TO FINANCIAL STATEMENTS	​	F-1

Neither we nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover page of this prospectus, or other earlier date stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

TRADEMARKS

This prospectus contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

i

PROSPECTUS SUMMARY

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “iSpecimen,” the “Company,” “our Company,” “we,” “us” and “our” in this prospectus refer to iSpecimen Inc.

We amended our Certificate of Incorporation on March 30, 2021 in order to effect a 1-for-5.545 reverse stock split of all outstanding shares of our common stock. Throughout this prospectus, each reference to a number of our issued and outstanding common stock gives effect to the reverse split, unless otherwise indicated.

Our Mission, Vision, and Core Values

iSpecimen’s mission is to accelerate life science research and development, or R&D, with a global marketplace platform that connects researchers to subjects, specimens, and associated data. Our vision is to create an “Amazon-like” global Marketplace of patients, biospecimens, and data for research to improve the quality of human life. We implement employee programs that foster a company culture predicated on the core values of corporate and individual growth; results and accountability; team before self; a can-do positive attitude; and the perseverance to succeed.

General

iSpecimen is technology-driven company founded to address a critical challenge: how to connect life science researchers who need human biofluids, tissues, and living cells (“biospecimens”) for their research, with the billions of biospecimens available (but not easily accessible) in healthcare provider organizations worldwide. Our ground-breaking iSpecimen Marketplace platform was designed to solve this problem and transform the biospecimen procurement process to accelerate medical discovery.

The iSpecimen Marketplace brings new capabilities to a highly fragmented and inefficient biospecimen procurement market. Our technology consolidates the biospecimen buying experience in a single, online marketplace that brings together healthcare providers who have biospecimens and researchers across industry, academia, and government institutions who need them. We are seeking to transform the world of biospecimen procurement much like the way travel websites changed the consumer buying process for flights, hotels, and rental cars.

Our iSpecimen Marketplace platform ingests de-identified healthcare data provided by our healthcare supply partners – including more than 12 million patient records, 66 million clinical specimen records, one million banked specimen records, 525 million laboratory test results, and 890,000 medical conditions as of March 31, 2021 – to allow researchers to easily search for and select research subjects, specimens, and associated data they need to drive their research programs. It then orchestrates and manages the biospecimen procurement workflows of both researchers and suppliers to bring efficiencies to the entire buying process. Through the iSpecimen Marketplace, researchers gain instant access to millions of specimens anytime,

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anywhere, while participating supply organizations gain an opportunity to contribute compliantly to medical research while increasing their revenue and sustainability.

The Opportunity

The overall demand for human biospecimens and related healthcare data (“annotated biospecimens”) continues to grow dramatically. Global spending on the procurement of annotated biospecimens is estimated by our management team to have been $3 billion to $4 billion in 2020, with a market growth rate estimated on the order of 10% to 15% annually through 2024. These expenditures are spread across the commercial, academic, and government sectors of the healthcare and life sciences industry, with the commercial sector (biopharmaceutical and in vitro diagnostics companies) representing the majority of the market. Market growth is primarily driven by advances in life science technologies and shifts in R&D spending aimed at identifying and aligning biomarkers with clinical outcomes — a key step towards the development of more targeted disease treatments and diagnostics. Both the precision medicine market (as defined below), with a growth rate of 11% per year from 2020 to 2026 according to a Global Market Insights report, and the regenerative medicine market (as defined below), with a growth rate of 26% per year from 2019 to 2026 according to a 2019 Fortune Business Insights report, rely heavily upon biospecimens for research and development programs.

Precision medicine, sometimes known as “personalized medicine,” is an innovative approach to tailoring disease prevention and treatment that takes into account differences in people’s genes, environments, and lifestyles. The precision medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of novel drugs, diagnostic tests, and technologies that boost the precision medicine workflow.

Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the Public Health Service Act (42 U.S.C. 264) and Title 21 of the Code of Federal Regulations Part 1271 (21 CFR Part 1271). The regenerative medicine market consists of numerous organizations engaged in the research, development, manufacturing, and commercialization of cell and immunotherapies, genetically modified cells, therapeutic tissue engineered products, human cell and tissue products, and combination products using any such therapies or products.

Human biospecimens can be very difficult for researchers to acquire and for healthcare providers to distribute. There are over 10 million healthcare providers worldwide that possess collections of such human biospecimens or have access to patients and their biospecimens during clinical care, so many specimens exist that could potentially be used in research. However, researchers have little way to know which healthcare organizations are willing to make their specimens available for research and healthcare providers likewise have little access to the research community. Even if these organizations could identify each other, it takes time and money to execute contracts that allow them to then transact. Once organizations are under contract with each other, researchers must then ensure that the specimens have been collected under appropriate compliance frameworks, using collection protocols consistent with their research needs, and accompanied by required data. Our iSpecimen Marketplace compliantly connects each side of this highly fragmented market to reduce the costs, time, and risks for both suppliers and customers in the biospecimen supply chain. We know of no other commercial human biospecimen marketplace that provides instant online searchability of specimens across a network of specimen providers.

The biospecimen procurement market is poised for disruption and has many attractive characteristics of other markets with successful online marketplaces:

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Large and growing.   We estimate the biospecimen market to be $3 billion to $4 billion in size and growing rapidly, at an estimated 10 to 15% annually;

➢

Highly fragmented.   This market today is comprised of fragmented landscape of millions of healthcare providers who could potentially offer biospecimens and data for research, and hundreds of thousands of life science researchers who need access to them; and

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➢

Inefficient.   Researchers and healthcare providers today largely utilize manual processes such as email, phone calls, and spreadsheets to find each other, request specimens, and manage the specimen procurement process.

We believe our marketplace technology has the potential to disrupt the $3 billion to $4 billion human biospecimen supply chain industry.

Our Customers

Our customer base is primarily comprised of three main segments: biopharmaceutical companies, in vitro diagnostic (“IVD”) companies, and government/academic institutions. As of March 31, 2021, we have distributed our specimens to approximately 350 unique customer organizations, comprising of many of the large IVD and biopharma companies along with federal and state government agencies, such as the Centers for Disease Control and Prevention.

Additionally, in 2019, we entered the new and rapidly growing regenerative medicine segment, which according to a market research report published by Fortune Business Insights, the global regenerative medicine market was valued at $23.8 billion in 2018 and is expected to reach $152 billion by the end of 2026 thereby exhibiting an estimated CAGR of 26%. Moreover, according to the Alliance for Regenerative Medicine, global financing for the regenerative medicine sector set an annual record of $19.9 billion in 2020. This “rapid growth” of the regenerative medicine market is characterized by the double-digit annual revenue growth rate combined with record global financing levels. We continue to have and maintain site participation agreements with several provider partners which enable us to offer through our iSpecimen Marketplace, various types of annotated hematologic products that are used in the research and development of regenerative medicine therapies. Such products include for example, whole bone marrow aspirate, mononuclear cell fractions, and isolated immune cell products that have been collected from both healthy and diagnosed (diseased) human donors. Some of the aforementioned products are offered in both fresh and cryopreserved formats depending on the customer’s preference. Since entering the regenerative medicine market late 2019, we have acquired 24 customers representing 1.7% of our total revenue in 2019, 2.1% in 2020, and 2.5% in the first three months of 2021.

Our Supply Partners

Critical to the success of the iSpecimen Marketplace is the network of healthcare providers who make their patients, samples, and data available to researchers. This supply network was built over a nine-year period and as of March 31, 2021, our supply network consisted of more than 189 unique healthcare organizations and biospecimen providers, including healthcare systems, community hospitals, clinics, private practice groups, commercial laboratories, blood centers, commercial biobanks, and cadaveric donation centers. Our suppliers are located in 12 countries across the Americas, Europe, and Asia.

Each supplier organization may give us access to one or more of the following environments within their organization where specimens may be obtained:

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Clinical labs — This environment provides access to remnant biofluids and is typically found in hospitals, commercial laboratories, clinics, and private practice groups;

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Pathology labs — This environment provides access to remnant tissue and remnant hematopoietic stem and immune cells and typically exists within hospitals or commercial laboratories;

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Biorepositories — These organizations typically reside within larger healthcare systems or commercial organizations. Generally, they collect and store specimens for unspecified future research purposes;

➢

Blood donor centers — These organizations typically collect large volumes of blood and derivatives for therapeutic or research purposes. They own and operate donor centers and may manufacture a broad selection of isolated cell types (fresh or cryopreserved) from consented donors for research use;

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➢

Cadaveric donation centers — These organizations receive whole cadavers and provide access to cadaveric tissues, biofluids, and stem cells, specifically for research purposes; and

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Clinical research centers — These organizations within healthcare facilities or operating as standalone entities provide access to subjects for research programs. Patients may be approached and consented to provide specimens when they are in for healthcare appointments (i.e. patient encounters) or may be called in to specifically participate in research projects.

The iSpecimen Marketplace Solution

The iSpecimen Marketplace offers single-source access to millions of human biospecimens and patients across a diverse network of specimen providers quickly and compliantly, saving researchers time and money in their specimen procurement process while making it easier and more efficient for providers to get their specimens in the hands of researchers who need them. Our iSpecimen Marketplace technology makes it as easy to find specimens for research as it is to find flights on a travel website. We have adopted many of the same ease-of-use characteristics of these business-to-consumer, or B2C, marketplaces, from simple guided searches, to the ability to refine search criteria with sliders and checkboxes, to the ability to add chosen items to a cart in order to purchase them, to online order management. Our two-sided marketplace platform makes it easy for researchers and healthcare providers to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process.

Our iSpecimen Marketplace technology is groundbreaking in the human biospecimen procurement space. In a world where there are thousands of biospecimen providers who typically rely upon e-mail and spreadsheets to communicate with customers to manage the bioprocurement process, our iSpecimen Marketplace offers a more efficient user experience to life science researchers who are looking for better ways to access research subjects, specimens, and data, and to healthcare provider organizations, who are looking to realize their missions of supporting research while augmenting their bottom line. Our two-sided marketplace platform makes it easy for both sides to connect and transact, introducing efficiencies into what is otherwise a very time-consuming and manual process.

The iSpecimen Marketplace instantly shows researchers the available
specimens that meet their specific inclusion and exclusion criteria.

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As of March 31, 2021, we had more than 4,100 external registered users on the iSpecimen Marketplace platform, representing more than 1,700 unique internet domains. Collectively, these users logged into the iSpecimen Marketplace more than 90,000 times and performed more than 11,000 specimen searches yielding more than 1,100 quote requests since the launch of the marketplace in June 2017.

Planned Developments of our iSpecimen Marketplace

While the iSpecimen Marketplace currently supports our business model of providing access to search, find, and acquire human biospecimens and associated data from “inquiry to invoice” and positions us for future expanded business model exploration, there are a number of areas in which the iSpecimen Marketplace functionality could be enhanced to better support our stakeholders, including our prospects and customers, iSpecimen sales and operations staff, and our supply partners. We believe with additional investment in technology development resources, we could make significant progress in scaling our iSpecimen Marketplace and, by the end of 2022, we expect to have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform.

We plan to continue technology investment to better connect healthcare researchers with our network of suppliers to enable the acquisition of human biospecimens and data to help accelerate research and expanding the impact of our iSpecimen Marketplace platform from “inquiry to invoice” through the following key approaches: 

➢

Enhance the customer experience.   By working with our prospects and customers to understand their needs, we strive to provide a platform that more easily enables them to specify and find human biospecimens and data that meet the requirements of their research.

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Improve operational efficiency.   By measuring the results of our operational workflows, we endeavor to reduce the friction and manual efforts in our processes and systems.

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Increase our supplier engagement.   By continuing to engage with our supply partners to deliver solutions that make their interactions with us more fulfilling, we become more seamlessly integrated into their workflows and daily operations.

We continue to prioritize and release updated versions of the iSpecimen Marketplace platform in alignment with these approaches and believe that continuing to focus on these approaches will enable us to scale our business model more effectively. 

Our Technology

Technology Components

The iSpecimen Marketplace technology is comprised of four major functional areas: search; workflow; data; and administration and reporting. We continue to invest in the evolution of these areas to improve customer and supplier engagement with the platform; provide operational efficiencies for our suppliers, our customers, and our internal operations; and increase the liquidity of products and services obtained through the platform. Our core business objective is to retain and grow both researcher and supplier usage of our platform to support biospecimen procurement, as well as to position our Company to explore other adjacent business opportunities that can benefit from the use of the iSpecimen Marketplace.

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Search.   The primary purpose of the iSpecimen Marketplace is to matchmake between those with access to subjects, specimens, and data, and those with a need for them to power their research. By entering subject and sample selection requests through the iSpecimen Marketplace, researchers can instantly search across the available medical records of large populations within iSpecimen’s healthcare provider network to create customized patient and specimen cohorts. Researchers can specify their criteria and either refine and review results to select specific specimens instantly, or they can request that iSpecimen find patients, specimens, and associated data to satisfy their needs when specimens do not currently exist in our network. Using our own proprietary algorithms, we enable researchers to explore both biospecimens that are currently available and view projections of those that are likely to become available in the future based on historic statistical analysis of data.

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This allows researchers to quickly and easily determine how we can fulfill their requirements, which is especially useful for project planning and budgeting.

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Workflow.   Our workflow engine supports the unique bioprocurement workflows of our suppliers, customers, and internal iSpecimen operations users. For our suppliers, our ability to easily integrate into their environments and automate key parts of their bioprocurement workflow enables us to maintain a level of engagement and responsiveness necessary to successfully deliver on specimen requests from our research customers. We make it easy for suppliers to list their specimens in our iSpecimen Marketplace by receiving their data in the most commonly used data transmission formats for healthcare data, such as HL7 feeds (a healthcare data interchange standard), JSON files (a standard data interchange format), and CSV files (a comma separated values file used for tabular data), and then by harmonizing this data into standard terminology sets that allows their specimens to be searchable by our research customers. We provide these onboarding services at no charge to our supply partners. Additionally, our iSpecimen Marketplace technology enables suppliers to track and manage all of their specimen requests from feasibility assessment through the ordering and fulfillment process in a single web application, thereby streamlining their bioprocurement workflow. Because the work that we do with our suppliers is often a secondary concern to their primary mission of providing patient care, we believe that seamlessly integrating into their workflow is critical to its use and ongoing success.

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Data.   We power search and orchestrate the procurement workflow through our ability to acquire, ingest, generate, and use big data from our healthcare provider partners. Working with a global, centralized set of healthcare providers, we receive this data in a variety of different formats and quality levels. We de-identify, normalize, and harmonize our supplier network’s data for usage in our iSpecimen Marketplace, ensuring the highest level of patient privacy and compliance with HIPAA and other applicable regulations that govern the research use of patient specimens and data. As of March 31, 2021, the iSpecimen Marketplace had ingested and harmonized data on more than 12 million patients, 66 million clinical specimens, one million banked specimens, 525 million laboratory test results, and 890,000 medical conditions.

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Administrative, Compliance, and Reporting.   Administration, compliance, and reporting functions are critical components to enable users to properly evaluate and manage the bioprocurement process. Our administrative capabilities include functions such as user management to assign users and roles and password management to ensure passwords are updated regularly, among other capabilities. Compliance management includes manual and technology-based processes that allow iSpecimen to track and manage unique regulatory and legal requirements across customers and suppliers (such as consent requirements versus consents granted, required specimen and data uses versus allowable specimen and data uses, resale or distribution requirements versus resale or distribution rights) to make sure that customer requirements and supplier requirements match before transferring specimens and data. Additionally, we conduct regular audits of supply sites capabilities and confirm that supply sites have Institutional Review Board (“IRB”) (or equivalent) protocols in place where required by law. Our reporting tools turn operational data into useful information by enabling users to view operational data in tables and other visualizations. Together, they help manage and streamline administration, compliance, and operational functions.

Technology Development

The iSpecimen Marketplace software was developed over nine years with more than 80 staff-years invested in research and development. It comprises an orchestration of SaaS solutions, commercial and open source components, and custom developed software deployed in the cloud on a third-party hosting platform built and maintained through a combination of full-time staff and outsourced partners. The team uses agile practices to develop and improve the platform. We continue to enhance and improve the performance, functionality, and reliability of the iSpecimen Marketplace platform based on a user-informed roadmap that is actively updated based on internal and external feedback aligned with our goals.

The iSpecimen Marketplace relies on third parties for certain technology to support development, delivery, and operations of the platform including product management, software development, cloud hosting, data processing, content mapping, and security services. iSpecimen uses software (including source code) and

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other materials that are distributed under a “free,” “open source,” or similar licensing model, including software distributed under the Apache License, Version 2.0, The MIT License, Mozilla Public License 2.0 (MPL-2.0), GNU General Public License version 2, GNU Lesser General Public License version 2.1, Eclipse Public License 1.0 (EPL-1.0), Common Development and Distribution License 1.0. In addition, iSpecimen uses software and services from commercial providers. We do not believe any of them are not generally commercially available to us from other parties. iSpecimen does not have any technology licensing contracts signed within the last two years upon which our business is substantially dependent. We continue to evaluate partners whose capabilities can help us deliver our iSpecimen Marketplace solution in areas such as functionality, efficiency, and security and expect to continue to leverage and consider additional third-party capabilities in our ongoing Marketplace development.

Our Competitive Advantages

When successfully implemented, online marketplaces are a highly efficient supply chain that offer many advantages to both suppliers and customers, including lower costs, reduced procurement timeframes, increased revenue (for suppliers), increased access to a large and growing supply network (for customers), and reduced risks. While our iSpecimen Marketplace is driving these benefits now, we believe they will become even more apparent when the iSpecimen Marketplace achieves greater scale by the end of 2022, when we expect to have capabilities such as more direct support for our prospective collections, deeper search and workflow capabilities, and direct pricing availability in the platform. As a result of these advantages, as of March 31, 2021, we have delivered more than 150,000 specimens in support of nearly 2,000 unique customer projects since shipping our first specimens in 2012. We have also provided our healthcare provider partners with more than $10 million in revenue during that time.

To date, we have been unable to operate the marketplace profitably. For the three month period ended March 31, 2021 and the year ended December 31, 2020, we reported net losses of $3,963,491 and $4,652,084, respectively.

The Regulatory Environment

iSpecimen works with the healthcare industry and with clinical researchers, both highly regulated environments in the United States and other countries. Government departments and agencies, at the federal, state, and local levels have regulations related to research activities that involve human subjects as well as regulations that govern the privacy and security of personal and healthcare data about individuals, including the collection, storage, and dissemination of that data. To support compliance with regulations, we have both internal personnel and external resources who provide us with expertise in various areas of compliance including a Chief Information Security Officer, Chief Privacy Officer, contracts manager, biospecimen counsel (external), general counsel (external), IRB (external), and other employees with expertise and oversight of site compliance, lab compliance, and operational compliance.

Our Growth Strategy

We believe we will continue to accelerate our revenue growth by improving and expanding our iSpecimen Marketplace platform to become the most convenient, efficient, and trusted resource for researchers to acquire, and suppliers to share research subjects, biological samples, and data for life science research. We plan to continue to build value by pursuing strategic objectives in five key areas:

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Marketplace technology innovation — We continue to innovate our proprietary iSpecimen Marketplace technology with search and workflow automation features that dramatically improve the buyer’s journey of searching for and compliantly acquiring annotated biospecimens from “inquiry to invoice”, and the supplier’s journey of sharing patient and specimen data, confirming project feasibility, and fulfilling orders.

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Increased patient data — Healthcare data is an important underlying asset of our marketplace business model. Gaining access to increasing levels of healthcare data at our supply partner organizations will allow us to increase the efficiency of our operations from inquiry-to-invoicing while also accelerating the overall biospecimen procurement process. Additionally, our ability to use increasing volumes of patient data to identify and engage with patients for biospecimen research also provides additional opportunities to move into adjacent spaces — including recurring revenue

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business models — such as premium search subscriptions, patient data subscriptions, the patient recruitment for clinical trials, and software licensing;

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Supply chain expansion — In order to better support worldwide research, we continue to increase access to global patient populations, inventories of banked specimens, patient data, and prospective collection capabilities by expanding our network of high-value suppliers combined with a direct-to-patient specimen collection capability. We are agile in identifying and onboarding new global supply partners who can provide specimens and related services to meet rapidly emerging market needs such as our recent expansion into COVID-19 biomaterials for SARs-CoV-2 research, and into diagnostic, vaccine, and therapeutic development;

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High growth markets — We are focusing on servicing high growth market sectors such as COVID-19 research, precision medicine, regenerative medicine, biopharma/vaccine development, diagnostics development (e.g. oncology liquid biopsy and infectious disease), and specialized areas of life science research (e.g. cancer and autoimmune disease); and

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Organizational capacity — We continue to strengthen our organizational capacity with the right experience, training, skill sets, and resources for developing our iSpecimen Marketplace platform, expanding our marketplace of high-value suppliers and customers located in key geographies, ensuring regulatory compliance, and tracking key performance indicators while fostering a data-driven mindset.

Additionally, we have deployed a multi-faceted go-to-market strategy to support our customer and supplier growth initiatives. This strategy includes a focus on:

➢

Sales and marketing capabilities — Our sales organization will continue to grow and evolve to better focus on targeted market sectors and key stages of sales development to increase sales funnel conversion rates;

➢

High value customers and suppliers — We will continue to grow and retain high-value customers and suppliers by delivering excellent service and pursuing deeper relationships. For example, we are developing preferred supplier contracts to increase purchase volume, customer retention/loyalty, and growth in the number of researchers served within a parent account. We are also investing more resources in customer service personnel, site management personnel, and related processes; and

➢

Channel partners — We will continue to collaborate with channel partners located in key non-U.S. markets to reach more end-users of biospecimens and data, strengthen our brand visibility, increase market share, and drive iSpecimen Marketplace utilization. These partnerships also help mitigate our risk of sales volatility in the case of an economic downturn or other factors that negatively impact sales and market demand in the U.S.

We have articulated our growth plan using a strategy map balanced scorecard approach which identifies strategic objectives and connects internal processes with desired outcomes that align with our mission and vision.

COVID-19 Impact

On January 30, 2020, the WHO announced a global health emergency because of a new strain of coronavirus (COVID-19) originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The pandemic had and still has both positive and negative effects on iSpecimen’s business.

On the downside, starting in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully-disabled, (i.e. these suppliers had halted the fulfillment of specimen requests); more than 40% was partially-disabled, (i.e. these suppliers were fulfilling specimen requests at a slower rate than before the pandemic); and less than 15% was fully-operational. Consequently, the overall rate at which we could fulfill specimen requests was slowed due to

8

COVID-19 and during the three months beginning April 2020, while our purchase order value increased by more than 300% compared to same period in 2019, our revenue increased by less than 30% compared to the same period in 2019. However, over the course of the pandemic, many supply sites began to recover and became operational by August and even more so by November 2020.

On the positive side, a new market for COVID-19 samples emerged as a result of the pandemic and we responded to the demand and matched requests for COVID-19 specimens to supply sites in areas of outbreak. As a result, COVID-19 specimens accounted for more than 35% of our purchase orders in 2020 and more than 40% of our purchase orders in the first three months of 2021. We also employed a mobile phlebotomy service provider to allow us to collect specimens from research subjects in their homes should this pandemic or other circumstances in the future drive more social distancing that limits our supply sites’ ability to collect specimens.

These actions helped us to grow revenue by 73% in the three months ended March 31, 2021, when compared to the three months ended March 31, 2020.

In addition, in May 2020, we applied for and received a loan in the amount of $783,008 from the Paycheck Protection Program under the CARES Act, and in January 2021 the loan was fully forgiven.

Risks Associated with Our Business

Our business is subject to numerous risks described in “Risk Factors” immediately following this prospectus summary and elsewhere in this prospectus. Some of the more significant risks are:

➢

We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability;

➢

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern;

➢

We may need additional capital in the future and an inability to meet future capital needs could adversely impact our ability to operate;

➢

We have a relatively short operating history which can lead to difficulty in accurately forecasting future results;

➢

Our growth strategy may not prove viable and we may not realize expected results;

➢

The continued COVID-19 pandemic could continue to adversely affect our business;

➢

Sustainable future revenue growth is dependent upon the development of technology solutions that enable scale and address new markets;

➢

Failure to comply with applicable federal and state laws around data protection, of research subjects, import/export regulations, occupational health and safety biohazards and dangerous goods, environmental, and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business; and

➢

Failure to comply with applicable international laws around data protection (such as the EU General Data Protection Regulation), protection of research subjects, import/export regulations, occupational health and safety, biohazards and dangerous goods, environmental and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.

Our Management Team

We have assembled a highly experienced management team to execute on our mission to accelerate life science research and development via a global marketplace platform that connects researchers to subjects, specimens, and associated data. The following are our executive officers as of March 31, 2021.

➢

Christopher Ianelli, PhD, MD, our Founder, President, Director, and Chief Executive Officer, has over 20 years of experience in medicine, healthcare investment banking, and startups.

9

➢

Jill Mullan, our Treasurer, Secretary, Director, and Chief Operating Officer, is a member of the founding team and has been with us since 2010. She has over 30 years of experience in the high-tech industry including numerous startups, with a focus on strategy, business development, operations, and marketing.

➢

Benjamin Bielak, Chief Information Officer, has been with us since 2018. He has over 25 years of executive and senior information technology experience with a focus on the healthcare space.

➢

Tracy Curley, Chief Financial Officer, joined our Company in 2020. She has over 30 years of experience in public accounting and corporate finance, with expertise in initial public offerings, public company financial compliance, business combinations, capital transactions, technical accounting, internal controls, budgeting, forecasting, business process and reporting.

Scientific Advisory Board

Our scientific advisory board is composed of six physicians, data scientists, and entrepreneurs known for their work in the area of biospecimens or in the area of online marketplaces. Our scientific advisory board provides us with advice and guidance on scientific and industry matters.

We believe our team, with its deep technical and scientific background, biospecimen industry experience, and business capabilities, has allowed us to become a leading online marketplace for biospecimen procurement.

Corporate Information

Our corporate headquarters are located at 450 Bedford Street, Lexington, MA 02420. Our telephone number is (781) 301-6700. Our website address is www.ispecimen.com. The information on or accessed through our website is not incorporated in this prospectus or the registration statement of which this prospectus forms a part. You should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.

JOBS Act

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an “emerging growth company” until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.

We are also a “smaller reporting company” as defined in the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these

10

scaled disclosures for so long as the value of our voting and non-voting common stock held by non-affiliates on the last business day of our second fiscal quarter is less than $250.0 million, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the value of our voting and nonvoting common stock held by non-affiliates on the last business day of our second fiscal quarter in that fiscal year is less than $700.0 million.

11

THE OFFERING

Common stock offered by us

2,222,222 shares of our common stock

Over-allotment option

The underwriters have an option for a period of 45 days to purchase up to 333,333 additional shares of our common stock to cover over-allotments, if any.

Common stock to be outstanding after this offering

6,240,351 shares (or 6,573,684 shares if the underwriters exercise their option to purchase additional shares in full).

Use of proceeds

We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $17.9 million (or approximately $20.7 million if the underwriters’ option to purchase 333,333 additional shares of our common stock is exercised in full), based upon the assumed initial public offering price of $9.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering to further develop our technology, grow our supply network, increase our marketing and sales presence, scale our operations, for working capital and general corporate purposes, and to repay the accrued and unpaid interest of the Bridge Notes (as defined below). See the section titled “Use of Proceeds” for additional information.

Risk factors

See “Risk Factors” beginning on page 15 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

Proposed Trading Symbol

We have applied to list our common stock on the                    under the symbol “ISPC”.

The number of shares of common stock to be outstanding after this offering gives effect to the 1-for-5.545 reverse stock split and is based on 936,213 shares of our common stock outstanding as of March 31, 2021, and includes an additional 3,081,916 shares of our common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended, and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended; and 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021; and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and excludes:

➢

an aggregate of 265,102 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and the 2013 Stock Incentive Plan (the “2013 Plan”), at a weighted average exercise price of $1.00 per share as of March 31, 2021;

➢

98,334 shares of common stock available for future issuance under the 2013 Plan as of March 31, 2021;

➢

608,000 shares of common stock available for future issuance under our 2021 Stock Incentive Plan (the “2021 Plan”);

➢

88,889 shares of common stock underlying warrants to be issued to the representative of the underwriters upon the consummation of this offering; and

➢

23,309 shares of our common stock issuable upon the exercise of warrants outstanding as of March 31, 2021, at a weighted-average exercise price of $0.06 per share.

12

SUMMARY FINANCIAL DATA

The following tables present our summary financial data. We have derived the summary statements of operations data for the year ended December 31, 2020 and 2019 and the summary balance sheet data as of December 31, 2020 and 2019 from our audited financial statements included elsewhere in this prospectus.

The following summary financial data as of March 30, 2021 and for the three months ended March 31, 2020 and 2021 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited financial statements.

You should read this data together with our consolidated financial statements and related notes included elsewhere in this prospectus and the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results for any prior periods are not necessarily indicative of our future results.

​

Three Months Ended March 31,

Years Ended December 31,

​

2021

2020

2020

2019

​

(Unaudited)

​

Statement of Operations Data:

​

​

​

​

​

​

​

​

​

​

​

​

Revenue

​

$

2,963,807

​

$

1,711,660

​

$

8,184,106

​

$

4,298,350

Total operating expenses

​

​

3,906,451

​

​

2,157,193

​

​

10,590,486

​

​

8,178,439

Loss from operations

​

​

(942,644)

​

​

(445,533)

​

​

(2,406,380)

​

​

(3,880,089)

Other expense, net

​

​

(3,020,847)

​

​

(1,192,446)

​

​

(2,245,704)

​

​

(1,003,961)

Net loss

​

​

(3,963,491)

​

​

(1,637,979)

​

​

(4,652,084)

​

​

(4,727,050)

Net loss per common share – basic and diluted(1)

​

$

(4.23)

​

$

(1.75)

​

$

(4.97)

​

$

(5.05)

Weighted average common shares outstanding – basic and diluted(1)

​

​

936,213

​

​

936,213

​

​

936,213

​

​

936,096

Pro forma net loss (unaudited)(2)

​

$

(4,419,905)

​

​

​

​

​

​

​

​

​

Pro forma net loss per common share – basic and diluted (unaudited)(2)

​

$

(1.10)

​

​

​

​

​

​

​

​

​

Pro forma weighted average common shares outstanding – basic and diluted (unaudited)(2)

​

​

4,018,129

​

​

​

​

​

​

​

​

​

1)

See Note 2 to our audited financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per common share.

2)

To give effect to the issuance of 3,081,916 shares of common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended, and 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021; and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and (ii) reflecting an approximate $0.3 million loss on conversion of the Bridge Notes in connection with the unamortized discount on the Bridge Notes and an approximate $0.2 million loss in connection with the loss on conversion of the Bridge Notes issued subsequent to March 31, 2021.

The following table sets forth our summary balance sheet data:

13

➢

on an actual basis;

➢

on a pro forma basis to give effect to the issuance of 3,081,916 shares of common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended, and 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021, and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and (ii) reflecting an approximate $0.3 million loss on conversion of the Bridge Notes in connection with the unamortized discount on the Bridge Notes and an approximate $0.2 million loss in connection with the loss on conversion of the Bridge Notes issued subsequent to March 31, 2021.

➢

on a pro forma, as adjusted, basis, giving effect to the pro forma adjustments set forth above and (i) the sale and issuance by us of 2,222,222 shares of our common stock in this offering, based upon the assumed initial public offering price of $9.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us totaling approximately $17.9 million of net proceeds; and (ii) the repayment of approximately $2.5 million of accrued and unpaid interest on the Bridge Notes from the proceeds of this offering.

​	As of March 31, 2021
​	Actual			Pro Forma			Pro Forma As Adjusted(2)
Balance Sheet Data:	​	​	​	​	​	​	​	​	​
Cash	​	$	355,126	​	$	855,126	​	$	16,286,861
Working capital(1)	​	​	(22,751,850)	​	​	(5,591,620)	​	​	12,308,378
Total assets	​	​	5,823,755	​	​	6,323,755	​	​	21,755,490
Total liabilities	​	​	25,870,101	​	​	9,209,871	​	​	6,741,607
Convertible preferred stock	​	​	11,173,076	​	​	—	​	​	—
Total stockholders’ (deficit) equity	​	​	(31,219,422)	​	​	(2,886,116)	​	​	15,013,882

1)

We define working capital as current assets less current liabilities.

2)

On March 15, 2021, the Company entered into a Fifth Amendment to the Note Purchase Agreement and the Bridge Notes, (the “Amendment”) to convert, effective with this offering, approximately $4.1 million of the outstanding principal of and accrued interest on the Bridge Notes. We will use a portion of the proceeds from this offering to repay the approximately $2.5 million of the remaining accrued and unpaid interest of the Bridge Notes as of March 31, 2021. The remaining approximately $3.0 million principal amount of Bridge Notes outstanding as of March 31, 2021 shall, pursuant to the terms of the Amendment, automatically be amended to adjust (i) the interest rates to 15% per annum and (ii) the maturity date to a date that is 18 months from the closing date of this offering. On April 16, 2021 and May 20, 2021, the Company issued additional Related Party Bridge Notes to related parties in the aggregate amount of $500,000 in order to finance the Company's working capital needs. The note holders have agreed to convert the outstanding principal and accrued and unpaid interest of the notes into shares of common stock upon the consummation of this offering. See Certain Relationships and Related Party Transactions section.

14

RISK FACTORS

Risks related to our Business

We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability.

We were founded in 2009 and completed our first commercial sale in 2012. We did not start generating revenues until 2016. We are not profitable and have incurred losses in each period since our inception in 2009. For the three month period ended March 31, 2021 and year ended December 31, 2020, we reported net losses of $3,963,491 and $4,652,084, respectively. We had an accumulated deficit of $33,021,078 as of March 31, 2021.

We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue to invest in the growth of our business. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The magnitude of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate and grow revenue. Even if we achieve profitability in a future period, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have adverse effects on our stockholders’ equity (deficit) and working capital.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the years ended December 31, 2020 and 2019 with respect to this uncertainty. While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, we have based these estimates on assumptions that may prove to be wrong, and we may need to raise additional funds. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce, or eliminate our technology development programs, our commercialization efforts, general hiring, or to cease operations.

We will likely require additional capital in the future and an inability to meet future capital needs could adversely impact our ability to operate.

We require substantial capital to fund our business growth and we will likely need additional capital in the future to fund our operations. In addition to investing in personnel growth commensurate with business growth, we believe we must continue to invest in the development of our iSpecimen Marketplace platform to enhance and improve its performance, functionality, ease of use, and reliability to carry out our business strategies. New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and/or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms. Our success will depend, in part, on our ability to develop new products and services and make corresponding technology enhancements that address the increasingly sophisticated and varied needs of our suppliers and customers and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. We cannot be certain that additional financing will be available to us when required on favorable terms or at all. To the extent that we cannot raise capital, we may not be able to continue operations.

We have a relatively short operating history which can lead to difficulty in accurately forecasting future results.

While we had a small amount of revenue beginning in 2012, we did not have any full-time sales and marketing personnel to build our commercial operations until 2016. As a result of our relatively short history of revenue generation, our ability to accurately forecast future results is limited and is impacted by a number of factors, including:

15

➢

Our revenue is transactional and not recurring. Researchers pay us to provide specimens when they have a need for specimens. We do not currently charge our customer or supply chain for access to the iSpecimen Marketplace;

➢

Our revenue is significantly concentrated and varies by customer year-over-year. In the first three months of 2021, there were two customers that accounted for approximately 36% of our revenue. One customer was different than the two customers that represented approximately 63% of our revenue in the first three months of 2020;

➢

Researcher needs may change over the lifetime of a project, based on the stage of the project. A research customer in one time period may not have a need for specimens again in the next;

➢

Research projects get terminated or suspended for a variety of reasons, including funding issues or unexpected results. Any termination or suspension of a project may cause a corresponding cancellation or delay in purchase orders we have received for specimens;

➢

Suppliers may not accurately estimate how long it will take them to fulfill specimen requests, making it more difficult to accurately forecast when we will recognize revenue on these specimen requests; and

➢

Most of our sales team joined iSpecimen in the fourth quarter of 2019 and therefore we have limited historical selling data per salesperson upon which to generate future revenue forecasts.

Many of these are outside of our control and all of which may change from time to time. Our historical revenue results should not be taken as predictive of future performance. There are many risks that could impact future performance resulting in variations in expected results which could lead to a negative business impact.

Our growth strategy may not prove viable and we may not realize expected results.

Our business strategy is to grow by improving and expanding iSpecimen’s Marketplace platform. This growth is expected to come through: (i) expansion of our platform capabilities to drive increased acquisition of annotated biospecimens through the platform, (ii) further expansion of our customer and supplier base in and outside the United States, and (iii) expansion into new lines of business such as patient recruitment and data licensing. Expansion of our existing business and entry into new lines of business will require a significant investment in technology development, supply development, operations, and marketing and sales. We may not achieve market expansion and acceptance and we may incur problems introducing new solutions and services. We may experience losses related to these investments, which could have a material adverse effect on our results of operations.

Our growth strategy involves a number of risks and uncertainties, including:

➢

We may not successfully enter into contracts with healthcare providers to gain access to specimens, subjects, and data on terms favorable to us or at all. This can limit our ability to grow in existing lines of business and expand into new lines of business;

➢

We may not obtain new customers or may lose existing customers if we cannot offer products and services that they need on a timely basis or at all;

➢

We may fail in the development of our technology and it may not adequately keep pace to support an expansion of our existing line of business or our entry into new lines of businesses;

➢

The market adoption rate of our marketplace technology may be too slow, and we may fail to get our customers and suppliers to transact for products and services using our technology;

➢

We may fail to continue to expand outside of the United States, especially if we are required to comply with laws and regulations that differ from geographies in which we currently operate;

➢

We may fail to gain market acceptance for new products or services; and/or

➢

We may lose to competitors, some of whom may have greater resources than we do. This competition may intensify due to the ongoing consolidation in the biospecimen industry, which may increase our costs to pursue opportunities.

16

If we fail to properly evaluate and execute existing and new business opportunities properly, we may not achieve anticipated benefits and may incur increased costs. There can be no assurance that we will be able to successfully capitalize on growth opportunities, which may adversely impact our business model, revenues, results of operations, and financial condition.

The continued COVID-19 pandemic could continue to adversely affect our business.

We are subject to the risks arising from the COVID-19 outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders, that limit our ability to procure specimens through our supply chain: (ii) decline in researcher demand for specimens; and (iii) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.

Beginning in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 1, 2020, more than 40% of our worldwide supply was fully disabled, more than 40% was partially disabled, and less than 15% was fully operational. As of August 2020, less than 10% of our worldwide supply was fully disabled, approximately 50% was partially disabled, and nearly 40% was fully operational. While our supply sites were mostly operational as of March 31, 2021, we expect that while the pandemic lasts, we will continue to experience a slowdown in non-COVID-19 specimen collections due to social distancing on the part of research subjects, supply partner site employees, and customer research organizations. There is considerable uncertainty around the duration of this COVID-19 outbreak and its future impact. While we implemented measures to help stabilize revenue as well as measures to reduce costs in response to the COVID-19 outbreak, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we expect this matter to have an impact on our results of operations, financial condition, or liquidity, which cannot be reasonably estimated at this time.

International operation expansion could expose us to additional risks which could harm our business, prospects, results of operation, and financial condition.

We operate internationally and expect to expand internationally. For example, we procure specimens from sites outside of the United States and we also distribute samples to organizations located around the world. As of March 31, 2021, we have customers in 18 countries, supply sites in 12 countries, and two international distributors. International expansion exposes us to additional risks, including:

➢

changes in local political, economic, social, and labor conditions, which may adversely affect our business;

➢

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;

➢

heightened risks of unethical, unfair or corrupt business practices, actual or claimed, in certain geographies;

➢

fluctuations in currency exchange rates, which may make doing business with us less appealing as our contracts are generally denominated in U.S. dollars;

➢

greater difficulty in enforcing contracts;

➢

lack of brand awareness that can make commercializing our products more difficult and expensive;

➢

management communication and integration problems resulting from cultural differences and geographic dispersion;

➢

the uncertainty and limitation of protection for intellectual property rights in some countries;

17

➢

increased financial accounting and reporting burdens and complexities as a result of being a public company;

➢

lack of familiarity with local laws, customs and practices, and laws and business practices favoring local competitors or partners;

➢

potentially different pricing environments, longer payment cycles in some countries, increased credit risk, and higher levels of payment fraud;

➢

uncertainty regarding liability for products and services, including uncertainty as a result of local laws and lack of legal precedent;

➢

different employee/employer relationships, existence of workers’ councils and labor unions, and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions; and

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compliance with complex foreign and U.S. laws and regulations applicable to international operations may increase the cost of doing business in international jurisdictions. These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy requirements, research ethics and compliance laws, anti-corruption laws, and anti-competition regulations, among others. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries, and could also materially affect our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.

The occurrence of any one of these risks could harm our international business and, consequently, our results of operations. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to operate in other countries will produce desired levels of revenue or profitability.

We rely upon our technology solution for the operation of our business and if our technology platform contains defects or fails to perform as expected, we may need to suspend its availability and divert development resources, and our business and reputation may be harmed.

Technology as complex as ours may contain unknown and undetected errors or performance problems. There could be numerous reasons for performance and quality issues including new and updated features, defects in integrated commercial and open source technologies, outages and disruptions in the cloud infrastructure on which our platform relies, human error or malfeasance, scale constraints, design flaws, and bad actions by external factors including security and performance related incidents. Many serious defects are frequently found during the period immediately following introduction and initial release of new capabilities or enhancements to existing platforms. Although we attempt to resolve errors that we believe would be considered serious by our users before making our platforms available to them, our products are not error-free. If a significant failure occurs that prevents our customers, suppliers, or our Company from using the iSpecimen Marketplace, our operations may be disrupted, and it may be difficult or, in certain cases, impossible for us to continue our business for a period of time until the failure is corrected. We experienced one such issue when we released our new workflow software in 2018 and it did not deliver the expected value. As a result, our ability to move specimen requests through the sales pipeline was limited, and therefore we elected to delay the planned growth of our sales team until critical software updates were completed in mid-2019. As a result, our revenue remained flat from 2018 to 2019. Any performance or quality problem could result in lost revenues or delays in user acceptance that would be detrimental to our business and reputation. We may not be able to detect and correct errors before releasing our product commercially. Undetected errors or performance problems in our existing or future products may be discovered in the future and known errors, considered minor by us, may be considered serious by our customers, resulting in a loss of customers and a decrease in our revenues.

Sustainable future revenue growth is dependent upon the development of technology solutions that enable scale and address new markets.

Our iSpecimen Marketplace technology consists of four major functional areas: data ingestion and harmonization, search, workflow management, and administration/reporting. Each of these functional

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areas need continual development to both enable our current business to scale and to enable us to enter new markets. Our intention is to focus most of our engineering resources on the development of the iSpecimen Marketplace platform for the foreseeable future. In fiscal 2020, we incurred $1.4 million in technology expenses, and capitalized $1.1 million for internally developed software. While we are spending, and expect to continue to spend, a significant amount of time and resources on the development of this platform, we cannot provide any assurances of our iSpecimen Marketplace’s short or long-term success or growth. While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, there is no assurance that the resources being allocated for the platform will be sufficient to complete planned additional capabilities, or that such completion will result in significant revenues or profit for us. If our customers or suppliers do not perceive this platform to be of high value and quality, we may not be able to retain them or acquire new customers or suppliers.

Our platform may become technologically obsolete or commoditized.

We must continue to enhance and improve the performance, functionality, ease of use, and reliability of our iSpecimen Marketplace platform or it may become obsolete or commoditized. New industry standards, the availability of alternative products, and evolving life science research needs could render our products and services obsolete and /or new third-party marketplace technology may be introduced that makes it easier for our competitors to create their own marketplace platforms. Our success will depend, in part, on our ability to develop new products and services that address the increasingly sophisticated and varied needs of our suppliers and customers and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of our technology involves significant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to user requirements or emerging industry standards. If we are unable to adapt to changing market conditions, user requirements, or emerging industry standards, we may not be able to increase our revenue and expand our business. Additionally, if existing or future competitors develop or offer products or services that provide significant performance, price, creative or other advantages over this platform, demand for our services through the iSpecimen Marketplace may decrease and our business, prospects, results of operations and financial condition could be adversely affected.

We use third-party technology licenses as part of our technology solution.

The iSpecimen Marketplace uses third parties for certain technology to support development, delivery, and operations of the platform including product management, software development, cloud hosting, data processing, content mapping, and security services and may need to license additional technology in the future for use in the ongoing operations as part of our technology solution. Most of the software (including source code) and other materials we use are distributed under a “free,” “open source,” or similar licensing model. We also use software and services from commercial providers. However, we believe all of them are generally commercially available to us from other parties. We continue to evaluate partners whose capabilities can help us deliver our iSpecimen Marketplace solution in areas such as functionality, efficiency, and security and expect to continue to leverage and consider additional third-party capabilities in our ongoing Marketplace development. However, there is no assurance that these third-party technology licenses will continue to be available to us on acceptable commercial terms or at all which could significantly harm our business, financial condition, and operating results.

We use open source licenses as part of our technology solution, which may subject us to claims from third parties claiming ownership and unauthorized use.

We use open source software in our software solutions and technology-enabled services. We may encounter claims from third parties claiming ownership and unauthorized use of the software purported to be licensed under the open source terms, demanding release of derivative works of open source software that could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source licenses. These claims could result in litigation that could be expensive to defend. If we become liable to third parties for such claims, we could be required to make our software source code available under the applicable open source license, utilize or develop alternative technology, or cease using, selling, offering for sale, licensing, implementing or supporting the applicable solutions or technology-enabled services. In

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addition, use of certain open source software may pose greater risks than use of third-party commercial software, as most open source licensors and distributors do not provide commercial warranties or indemnities or controls on the origin of the software.

We may become subject to third parties’ claims alleging infringement of their patents and proprietary rights, which could be costly, time consuming, and prevent the use of our technology solution.

We cannot assure you that third parties will not claim our current or future products or services infringe their intellectual property rights. Any such claims, with or without merit, could cause costly litigation that could consume significant management time. As the number of product and services offerings in our market increases and functionalities increasingly overlap, companies such as ours may become increasingly subject to infringement claims. These claims also might require us to enter into royalty or license agreements. If required, we may not be able to obtain such royalty or license agreements or obtain them on terms acceptable to us.

We do not have any patents protecting our intellectual property and if we are unable to protect the confidentiality of our trade secrets, know-how and other proprietary and internally developed technology, our business could be adversely affected.

Our success depends upon our proprietary technology. We do not have registered patents on any of our technology because we do not believe that we could obtain blocking patents and that the costs of patent monitoring and prosecution outweigh the benefits. Instead, we rely upon software copyright laws, service marks, trade secret laws, confidentiality procedures, and contractual provisions to establish and protect our proprietary rights as well as the skills, knowledge and experience of our technical and operational personnel, our consultants and advisors, and contractors. Because we operate in a highly competitive industry, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect.

We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, collaborators, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third-parties confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to protect our rights. These confidentiality, inventions and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we may not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive and time consuming and the outcome would be unpredictable. In addition, effective protection of intellectual property rights is unavailable or limited in certain foreign countries. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

If our security measures are breached, or if our services are subject to attacks that degrade or deny the ability of users to access our platforms, our platforms and applications may be perceived as not being secure, customers and suppliers may curtail or stop using our services, and we may incur significant legal and financial exposure.

Our platforms and the network infrastructure that are hosted by third-party providers involve the storage and transmission of healthcare data as well as proprietary information about organizations and programs, and security breaches could expose us to a risk of loss of this information, litigation, and potential liability. Our security measures may be breached due to the actions of outside parties, employee error, malfeasance, security flaws in the third party hosting service that we rely upon, or any number of other reasons and, as a result, an unauthorized party may obtain access to our suppliers’ or customers’ data. Although we have never had any breach of data in our third-party provider’s environment, any future breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our platforms and applications that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorized access, disable or degrade service, or

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sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures on a timely basis. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose suppliers and customers and we may have difficulty obtaining merchant processors or insurance coverage essential for our operations.

Changes in demand for our products and services could affect profitability.

We are fundamentally a matchmaking service provider between researchers who have needs for access to subjects, samples, and data, and healthcare providers and other organizations that have them. Any change that either reduces the demand for our services or changes the composition of the demand could adversely impact our financial results.

Overall customer demand could change for many reasons outside of our control, reducing demand or making it more difficult to match up to our supply chain’s capabilities. These reasons include:

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general economic downturn that impacts the R&D budgets of biopharma;

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changes in the disease landscape, like COVID-19, that affect the types of products and services needed;

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changes in drugs and therapies and the desire to study subjects on these drugs and therapies;

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changes in diagnostic tests performed (like genomic sequencing) that drive the need for subjects and samples with these new or novel test results;

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changes in data requirements, such as the need to know specific outcomes data;

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overall changes in biomarker research, such as emerging liquid biopsy or cell therapy research, that drives the need for different products and services;

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leadership changes within our customers resulting in loss of sponsorship;

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new (alternative) products introduced by competitors and/or developed by customers, which may have potential to reduce or replace the need for certain types of biospecimens that we provide;

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competitive forces, which make it easier for customers to find products and services elsewhere; and/or

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cancellation or delay of research programs, due to funding issues or preliminary research result issues.

If we fail to address these factors in a timely manner or at all, our financial results could be adversely affected.

Additionally, overall customer demand could decrease if we fail to:

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provide high quality products and services;

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provide products and services at a competitive price;

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deliver products and services in a reasonable amount of time;

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offer high levels of customer service;

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offer adjacent services that researchers want to procure along with our existing products and services;

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adequately invest in sales and marketing programs and teams to drive demand or operational support to fulfill requests;

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develop a large and diverse supply network to satisfy demand; or

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provide a technology solution that simplifies the biospecimen procurement process for researchers and specimen providers alike.

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Challenges or unanticipated costs in establishing the sales, marketing, and distribution capabilities necessary to successfully commercialize our products globally could affect profitability.

To generate revenue, we need to expand our sales, marketing, and distribution capabilities to support our operations in North America, Europe, and Asia Pacific and we expect approximately $2 million of the proceeds raised in this offering will be allocated to enhance our sales, marketing, and distribution capabilities. It may be expensive and difficult for us to develop a global sales and marketing presence and therefore, we will likely seek distributors to the life sciences industry to market and sell some of our products and services outside of the United States. In 2020, we started the process of identifying potential distributors to market and sell our products and services to key geographic areas outside the United States. We have entered into agreements with two non-exclusive distributors in the country of Japan and will continue to look for distributor partnership opportunities covering other rest-of-world markets. We may not be able to provide adequate compensation to these distributors for them to spend time and resources marketing and selling our products and some of our products may be too complex for them to adequately represent them. In addition, any third-party distributors with whom we work may not successfully sell our products and services, thereby exposing us to potential expenses in exiting such distribution agreements. We, and any distributors, must also market our services in compliance with federal, state, local and international laws relating to the provision of incentives and inducements. Violation of these laws can result in substantial penalties.

We incur credit risk with our customers, and we may provide them with products and services for which we do not get paid.

Our customers generally place orders for our products and services using a purchase order and we invoice our customers after they have received the products or services from us. During this procurement process, we become obligated to pay our suppliers for any products or services we procure from them on behalf of our customers regardless of our whether our customers ultimately pay us for these products or services. Therefore, we bear the responsibility for the credit risk of our customers. We mitigate this credit risk through procedures that evaluate the creditworthiness of customers prior to accepting a purchase order from them. However, our procedures may not successfully identify all those who ultimately fail to pay us for our products and services and any non-payments may negatively impact our revenues, results of operations, and financial condition.

Our customer mix increases the risk of customers not paying our invoices.

We derive, and believe that we may continue to derive, a significant portion of our revenues from privately held, investor-backed biopharma companies that are not profitable and have little operating history. These organizations may be at a higher risk of not paying for provided products and services on a timely basis or at call. If these companies fail to pay our invoices, our profitability will be adversely impacted.

We rely upon relatively few customers for a significant portion of revenue and do not have a recurring revenue business model. A loss of large customers could affect our ability to operate.

We have derived, and believe that we may continue to derive, a significant portion of our revenue from a limited number of customers that vary each year. For the three months ended March 31, 2021, our two largest customers accounted for 18% and 18% of our revenue. For the year ended December 31, 2020, our two largest customers accounted for 11% and 10% of our revenue. For the year ended December 31, 2019, our three largest customers accounted for 20%, 11% and 10% of our revenue. We do not have a recurring revenue model and our customers may buy less of our products or services depending on their research and development cycles, internal budget cycles, product and service requirements, and competitive offerings. A major customer in one year may not purchase any of our products or services in another year, which may adversely affect our financial performance.

Customers and customer prospects may be averse to using a self-service marketplace to procure specimens and may continue to require iSpecimen personnel in the procurement process, impacting our scalability and profitability.

The iSpecimen Marketplace functions as a lead generation system to capture customer requests for specimens and as a workflow engine to allow customers, suppliers, and our Company to track and manage

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specimen requests. Currently, it does not fully support self-service eCommerce because key capabilities required to satisfy these transactions across all of our product lines, such as a pricing engine and patient-level search, have yet to be incorporated. Therefore, currently all customer requests for specimens require assistance from iSpecimen sales personnel. At a minimum, our sales personnel are involved in the generation of customer quotes, but they often also act in a consulting role to help develop specimen request specifications on more complex projects or to perform searches on the customer or customer prospect’s behalf.

While we continue to invest in capabilities to support customer self-service in the iSpecimen Marketplace, including $3 million of the proceeds of this offering, we do not know when we will have the resources to fully develop these capabilities. Additionally, we do not know if researchers will utilize the iSpecimen Marketplace to transact without the intervention of iSpecimen personnel which could limit our scalability. We may continue to invest in software which may never provide a return on its investment and diverts resources from the development of software that drives other parts of our procurement workflow.

Our business may be materially and adversely impacted by the reduction, delay or cancellation of orders from our customers.

Our contracts with our customers generally allow them to reduce, delay, or cancel the unfulfilled portion of their specimen order with a two-week notice. Customers may reduce, delay, or cancel their unfulfilled orders due to a variety of reasons including: they make changes to project requirements and the open request no longer meets their needs; their budgets change or projects get cancelled; they place orders with multiple specimen providers and cancel open orders when they have procured sufficient quantity of samples across all their sources; or we are unable to fulfill the entire order before the project deadline. For orders received and closed (either fully fulfilled, reduced, or cancelled) between January 1, 2016 and March 31, 2021, we fulfilled approximately 60% of the total value of these orders. Our business, financial condition, results of operations and cash flows may be materially and adversely impacted by the reduction, delay or cancellation of orders.

We have entered into contracts with U.S. government agencies which subjects us to federal contract and audit risks.

We have entered into contracts with U.S. government agencies, representing less than 10% of our total revenue from January 1, 2018 through March 31, 2021, that may contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which subjects us to additional risks. These risks include the ability of the U.S. government to unilaterally:

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suspend or prevent us for a set period of time from receiving new contracts or extending existing contracts;

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terminate our existing contracts;

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reduce the scope and value of our existing contracts;

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audit and object to our contract-related costs and fees, including allocated indirect costs;

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change certain terms and conditions in our contracts.

The U.S. government may terminate any of its contracts with us either for its convenience or if we default by failing to perform in accordance with the contract schedule and terms. Termination for convenience provisions may enable us to recover only our costs incurred or committed, and settlement expenses and profit on the work completed prior to termination. Termination for default provisions may not permit these recoveries and make us liable for excess costs incurred by the U.S. government in procuring undelivered items from another source.

As a U.S. government contractor, we may become subject to periodic audits and reviews. Based on the results of these audits, the U.S. government may adjust our contract-related costs and fees, including allocated indirect costs. As part of any such audit or review, the U.S. government may review the adequacy of, and

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our compliance with, our internal control systems and policies, including those relating to our purchasing, property, compensation, and/or management information systems. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government.

We could also suffer serious harm to our reputation if allegations of impropriety were made against us. Although we have not had any government audits and reviews to date, future audits and reviews could cause adverse effects.

Sustainable future revenue growth is dependent on growth in the capabilities of our supply network which we may not be able to achieve.

Our business is fundamentally a match-making business between healthcare providers who have access to subjects, samples, and data and life science researchers who need them. Currently, we receive more requests for our products and services than we have access to in our supply network and we are therefore supply constrained. Although we plan to use $1 million of the proceeds of this offering in supply development and commensurately grow our supply network capabilities to keep pace with demand, this supply-demand imbalance could increase in the future if we do not continue or increase our investment in this area. Additionally, demand for specimens we receive is becoming more specific, requiring access to a greater population of subjects, samples, and data to find those that meet a researcher’s inclusion and exclusion criteria. For example, whereas a few years ago, a researcher may have requested access to formalin fixed paraffin embedded (“FFPE”) tumor blocks from subjects with lung cancer, now researchers may need access to FFPE blocks that are less than two years old, from subjects with non-small cell lung cancer with a known genetic mutation, who took a specific medication, and whose cancer did not respond to the medication. It takes a larger network of subjects, samples, and data to access a wide enough population of subjects to meet a growing number of requests with more stringent criteria. Delays, difficulties, or unanticipated costs in developing our supply network capabilities necessary to successfully procure products and services could adversely affect revenue and profitability.

Sustainable future revenue growth is dependent upon gaining access to more healthcare data from our supply network and a failure to obtain this data may adversely affect our growth.

Key to our growth strategy is the accessibility and availability of deep medical record data from our healthcare provider supply sites. This data is used to automate the process of matching researchers to subjects, samples, and data, and also used to automate the procurement workflow. Currently, we have gained access to laboratory data to support the distribution of clinical lab specimens as well as biorepository data to support the distribution of banked specimens. However, we have not gained access to deeper medical record data sets from a broad set of healthcare providers to support custom specimen collections, clinical trial recruitment, or data licensing. Should we fail in our ability to access deeper healthcare data, we may not be able to effectively compete in our served markets or grow as anticipated and our business may suffer.

The adoption cycle of our supply network tends to be very lengthy, which may adversely affect our ability to scale rapidly and increase revenues.

The business development cycle for the adoption of our technology solution at healthcare provider supply partners can take up to 18 months or more from initial contact with the prospect through execution of a contract. We may spend significant resources to attempt to secure a new supply partner without successfully engaging the supply partner. Even if we are successful in securing a new supply partner, once a contract is executed, implementation of our technology in the supply partner’s environment can take another several months to a year or more. Because of the lengthy adoption cycle, we may fail to expand our supply network quickly enough to reach our revenue growth targets.

Potential adverse effect from changes in the healthcare industry, including consolidations and regulatory changes, could affect access to subjects, samples, and data and affect our growth.

Changing healthcare-related legislation and regulation may impact the fiscal stability and sustainability of our supply partners. Additionally, many healthcare providers are consolidating to create larger healthcare

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systems and/or integrated healthcare delivery systems. These changes can divert resources at our healthcare provider supply sites away from the evaluation or implementation of the iSpecimen solution to the adoption of new infrastructure, policies, and procedures to support the changes, thereby extending their timeline to adopt the iSpecimen solution. We cannot predict whether or when future healthcare reform initiatives at the international, federal, or state level, consolidations, or other initiatives affecting healthcare providers’ businesses will be proposed, enacted, or implemented or what impact those initiatives may have on our business, results of operations, and financial condition.

Our supply chain may not provide adequate resources to quickly respond to requests for specimens and delays in the procurement process can affect our reputation, revenue, and profitability.

Many of the healthcare providers in our supply network are not-for-profit organizations whose primary business is to provide clinical care to patients. Supporting biospecimen research may be an adjunct activity for them. These organizations may lack adequate resources to quickly respond to our requests for specimens now and into the future. Should we and our customers experience slow turnaround times on specimen requests, our reputation may be damaged and there may be an adverse impact on our revenue and profitability.

We do not control the end-to-end quality of specimens and data collected in our supply chain and quality issues can affect our reputation, revenue, and profitability.

We rely upon our supply sites and their quality control processes to provide us with products and services that meet order specifications. 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. Instead, we rely upon our customers to perform quality checks themselves and offer refunds or replacements for products that do not meet specification. We receive products from supply sites and ship them to our customers. In 2019, approximately 99% of clinical remnant specimens delivered to our customers met specifications, 92% of banked research specimens delivered to our customers met specifications, and 97% of custom research collections delivered to our customers met specifications. Refunds and replacements for our products that did not meet specifications in 2019 were nominal. In 2020, the percent of specimens that met specifications increased to 100% for clinical remnant specimens, 97% for banked research specimens and 97% for custom research collections. During the first three months of 2021, the percent of specimens that met specifications was 99% for clinical remnant specimens, 99% for banked research specimens and 94% for custom research collections. Refunds and replacements for our products that did not meet specifications for 2020 were nominal. Any issues with quality from our supply sites can adversely affect our reputation, revenue, and profitability.

Reliance on relatively few supply partners for significant supplies and services could affect our ability to operate and grow.

We have derived, and believe that we may continue to derive, a significant portion of our revenues from products we procure from a limited number of supply sites. There were two suppliers that accounted for 20% and 16% of our total cost of revenue during the three months ended March 31, 2021. There was one supplier that accounted for 21% of our total cost of revenue during the year ended December 31, 2020. There were three suppliers that accounted for 22%, 10%, and 10% of our total cost of revenue during the year ended December 31, 2019. No other single supplier accounted for over 10% of our total cost of revenue for the years ended December 31, 2020 and 2019. Any change in the ability of a major supply site to provide us with products and services (such as financial health of the supply site, key leadership, research focus, information technology, competitive demand for specimens from third-parties, pricing structures, contract status and changes in the general economy) may adversely affect our financial performance.

Our supply partners’ inventories may become obsolete, which could have a material adverse effect upon our ability to generate revenue.

Approximately 50% of our revenue is derived from specimens that are procured from our supply partners’ existing sample inventories in their biobanks. These inventories may become obsolete due to changes in regulatory requirements such as a requirement for new consent form disclosures; changes in researcher

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requirements for the types of specimens, subjects, and data they need for their studies; and/or general degradation in the quality of stored specimens. Any change in regulations, researcher needs, or specimen quality could render our supply partners’ inventories obsolete and may adversely affect our financial performance.

Specimen collection from human subjects, including the possible occurrence of adverse events during or after tissue collection, could provide exposure to claims and litigation.

There are inherent risks associated with collecting specimens from human subjects. Although specimen collections are completed by certified staff according to established industry standards, specimen donors vary in their ability to tolerate specimen collection protocols and such donors may potentially have an adverse health reaction either during or following a specimen collection. Research subjects or their legally authorized representative may file claims related to a specimen collection and these claims could result in litigation that could be expensive, and time consuming to defend or result in judgements that exceed the resources of the Company and its insurance coverage.

We procure specimens and data from organizations outside of the U.S. and as such, we rely upon these organizations to collect and distribute specimens and data in accordance with their local regulations as well as our contractual requirements. A failure by our sites to comply with both applicable regulations and our contractual requirements could introduce us to compliance risk.

Some of the organizations from which we procure specimens and data reside outside of the U.S. in jurisdictions that may have data protection rules, human research protection rules, and other pertinent rules that relate to the collection and distribution of specimens and data that vary from U.S. regulations. We, as an organization are not knowledgeable about all the pertinent rules and regulations of all of the jurisdictions in which these sites operate, and therefore we rely upon our contractual relationships with supply sites to ensure that they have legal responsibility for compliance with their own jurisdiction-specific regulations. Should any site fail to comply with the applicable regulations, we may suffer reputational risks if we have distributed specimens and data from that site. Additionally, any compliance failure on the part of our supply sites that impacts our research customers’ ability to utilize specimens and data they previously obtained from us, as well as utilize any research results, they derived from these specimens and data, may subject us to claims by these customers. These claims could result in litigation that could be expensive to defend or result in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition, and results of operations.

We may experience delays or interruption in the shipments of our specimens due to factors outside of our control, and such disruption could lead to lost revenue and customer satisfaction issues.

We distribute biological specimens to customers around the world. These specimens need to be delivered over a range of temperatures from ambient to cryogenic and delivery timeframes that can be as quick as hours. We rely on third-party shipping materials (such as thermal containers) as well as shipping services (such as FedEx) to transport specimens to our customers. Shipping materials may be defective and third-party shipping services, including international shipping services, could become disrupted by adverse weather conditions, natural disasters, flight cancellations, ground logistics issues, customs delays, and other service interruptions. Any defect in our shipping materials or delays in shipping service times could cause damage to these specimens and render them unusable by our customers. If we are unable to deliver our specimens in a timely matter and without damage, our revenue could be negatively impacted and our reputation with our customers could suffer, resulting in material harm to our business.

Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.

Our future success will depend upon our ability to retain our key management and other personnel and will also depend in large part on our ability to attract and retain additional qualified software developers, bioinformaticists, operations personnel, sales and marketing personnel, and business development personnel. Competition for these types of employees is intense due to the limited number of qualified professionals

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and the high demand for them, particularly in the Boston, Massachusetts area where our headquarters are located. We have in the past experienced difficulty in recruiting qualified personnel, especially in the area of sales. Failure to attract, assimilate, and retain personnel would have a material adverse effect on our business and potential growth.

Our competitors may have greater resources than us and may outspend us to grow more quickly.

Our competitors are highly fragmented and comprise thousands of biobanks, healthcare providers, and commercial biospecimen organizations. We expect to continue to experience significant and increasing levels of competition in the future, especially from several larger biospecimen providers who have consolidated via mergers and acquisitions and who are well-capitalized by private equity. These organizations are currently acquiring smaller biospecimen businesses and have larger customer bases, their own collection centers, biospecimen inventories, larger marketing and sales budgets, and an international presence. They may also be developing their own technology solution that could be better or less costly to develop than our own iSpecimen Marketplace, thereby eliminating one of our key competitive advantages. They may continue to outspend us to grow more quickly and we may not be able to successfully compete with a competitor that has greater resources; hence such competition may adversely affect our business.

We may lose business to competitors which have or develop their own biorepositories and/or collection centers that can meet customers’ needs.

Many of our competitors have their own biorepository of specimens that they have collected or procured over time. These inventories, when they meet a customer’s needs for product, almost always provide our competitors with a time-to-delivery advantage because they can directly fulfill requests from their own inventories, whereas we must procure products through our supply network after an order has been received from our customers. Additionally, some competitors have their own collection facilities and direct access to eligible research subjects which also provides a time-to-delivery advantage. We have lost and will continue to lose business to competitors when they can provide samples more quickly than we can from our supply network.

We may face pricing pressure from competitors who may lower prices to reduce biorepository inventories or because they have more favorable specimen acquisition costs.

Many competitors invest in biorepositories of specimens and data. These competitors may be incented to drop prices in order to more quickly recoup their inventory carrying costs, especially when they have held inventory for longer periods of time. This may cause downward pricing pressure on us. Additionally, some competitors may have cost advantages on some types of collections either because of more favorable supply relationships or because they have their own collection centers, and they can likewise exert pricing pressure in the market. Lower prices will adversely impact our revenue and gross margins.

Our overall business results may suffer from an economic downturn.

We rely upon researchers from biopharma companies as the primary source of our revenue. During an economic downturn, the biopharma industry typically experiences a drop in the annual growth rate of research and development spending and allocates fewer resources towards it. An economic downturn could adversely affect the demand for our products and services and have a corresponding impact on our revenue and profitability. A prolonged economic downturn may cause us to reduce investment in the longer-term growth of our Company in order to reduce short term costs.

We may have difficulty managing growth in our business, which could adversely affect our financial condition and results of operations.

Significant growth in the size and scope of our operations could place a strain on our financial, technical, operational, and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems, or the occurrences of unexpected expansion difficulties, could have a material adverse effect on our financial condition and our ability to timely execute our business plans.

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Our revenue may be adversely affected if we are required to charge sales tax or other transaction taxes on all or a portion of our past and future sales.

States and other jurisdictions have varying policies regarding when a company has a taxable presence in their locale. There are many factors to consider when determining if a locale nexus exists and if yes, whether products and services offered by the Company are subject to sales tax. To date, we have not paid any sales tax in any state on the provision of services to distribute biospecimens. However, it is possible that we could owe sales tax on past sales or in the future if laws and policies, court decisions, Federal law, or our decisions about where and when sales tax is owed changes.

Our ability to utilize net operating loss carryforwards may be limited, resulting in income taxes sooner than currently anticipated.

As of March 31, 2021, we had federal net operating loss carryforwards (“NOLs”) of approximately $25.9 million for federal income tax purposes of which approximately $13 million expires at various periods through 2037 and approximately $11.6 million can be carried forward indefinitely. These NOLs may be used to offset future taxable income, to the extent we generate any taxable income, and thereby reduce or eliminate our future federal income taxes otherwise payable. Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, imposes limitations on a corporation’s ability to utilize NOLs if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. In the event that an ownership change has occurred, or were to occur, utilization of our NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock at the time of the ownership change by the applicable long-term tax-exempt rate as defined in the Code. Any unused annual limitation may be carried over to later years. We may be found to have experienced an ownership change under Section 382 as a result of events in the past or the issuance of shares of common stock in the future. If so, the use of our NOLs, or a portion thereof, against our future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of our NOLs before utilization.

A pandemic, epidemic, or outbreak of an infectious disease in the United States or worldwide could adversely affect our business.

Outbreaks of pandemic, epidemic, or infectious diseases, such as the current COVID-19 pandemic, Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, or the H1N1 virus, could disrupt the operations of our business, much as with the current COVID-19 pandemic. Our supply chain’s ability to collect specimens from subjects may be disrupted if medical resources are re-allocated to focus on the treatment of disease, medical personnel work remotely, or patient appointments are cancelled or move to virtual appointments. Our customers’ demand for specimens may be reduced if research projects are cancelled, paused, or temporarily slowed due to an economic downturn caused by a widespread health crisis or our customers move to remote work environments where they cannot use our products and services. Limitations on travel may disrupt our supply development and customer development initiatives. Our ability to fulfill requests for products and services, develop our technology, and market and sell our solutions may be impacted if there is a closure of our facilities.

We may acquire other businesses, products, or technologies that could disrupt our business, reduce our financial resources, or cause dilution to our stockholders.

Although we have not identified such an opportunity, as part of our business strategy, we may, in the future, pursue acquisitions of businesses and assets or pursue strategic alliances and joint ventures that leverage our core technology and industry experience to expand our offerings, increase our customer base, or increase our supply base. We have no experience with acquiring other companies and limited experience with forming strategic alliances and joint ventures. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in significant

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write-offs or the incurrence of debt and contingent liabilities, any of which could have a material adverse effect on our financial condition, results of operations, and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that would otherwise focus on developing our existing business. We may experience losses related to acquisitions of other companies, which could have a material adverse effect on our results of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, or joint venture.

To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

We have outstanding indebtedness secured by security interests in all of our assets and our failure to comply with the terms and covenants of such indebtedness could result in our loss of all of our assets.

Upon the consummation of this offering, we will have approximately $3.0 million principal amount of the Bridge Notes outstanding, the holders of which have been granted a security interest in substantially all of our assets. In January 2021, we also entered into a security agreement in connection with a non-recourse factoring agreement (“Factoring Agreement”) with Versant Funding LLC (“Versant”), pursuant to which we have granted Versant a security interest in substantially all of our assets. If we fail to comply with the covenants contained in such agreements or if we fail to make certain payments when due, the creditors could declare us in default, in which event the creditors have the right to seize our assets that secure the indebtedness, which may force us to suspend all operations.

Risks Related to Regulatory Environment

Failure to comply with federal and state data protection regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.

Because we may gain access to protected healthcare or personal data, we must comply with various data protection regulations worldwide, including the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, and their implementing regulations at 45 CFR Parts 160-164 (collectively, “HIPAA”). As part of the operation of our business, we act in the capacity of a HIPAA business associate with respect to protected health information (“PHI’’), we receive from our healthcare provider partners. As a HIPAA business associate, we are required to protect the privacy and confidentiality of PHI, and we are required to comply with HIPAA security regulations requiring certain administrative, physical, and technical safeguards to ensure the confidentiality, integrity, and availability of electronic PHI (“ePHI’’). To comply with our regulatory and contractual obligations, which may change over time, we may have to reorganize processes and invest in new technologies. We also are required to train personnel regarding data protection requirements. If we, or any of our employees or agents, are unable to maintain the privacy, confidentiality, and security of the PHI that is entrusted to us, we could be subject to civil and criminal fines and sanctions imposed by the Department of Health and Human Services (“HHS”) or state regulatory authorities, and we could be found to have breached our HIPAA business associate agreements with our healthcare provider suppliers. In addition to the HIPAA requirements that we are subject to, we may be subject to similar state laws and regulations, which regulate the collection, handling, processing, and storage of sensitive personal information. While we have never had a data breach, we cannot guarantee that it will not happen in the future nor can we guarantee that we will always be in compliance with these regulations. Failure to comply with federal, state and local laws and regulations could subject the Company to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which would have a material adverse effect on its business. In addition, compliance with future legislation could impose additional requirements on the Company which may be costly.

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Failure to comply with international laws related to data protection, such as the GDPR could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business.

We may be required to comply with international laws, such as the European Union (“EU”) General Data Protection Regulation (“GDPR”). The GDPR took effect in May 2018 and regulates the collection, storage, use, disclosure, transfer, and/or other processing of personal data of identified or identifiable individuals located in the European Economic Area (“EEA”), including the EU. This data specifically includes personal health data that generally is provided as part of biospecimen collection studies. The GDPR imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates for processing (with some exceptions), allowing individuals to revoke consents granted, enabling individuals the right to have their data erased (with some exceptions), amended, or transferred to another data controller (known as “data portability”), providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, limiting the transfer of data to countries outside of the EU, providing notification of data breaches, and taking certain measures when engaging third-parties who may also use or process the data. In addition, EU member states may make their own further laws and regulations limiting the processing of personal data, including biometric, genetic or health data.

The GDPR covers areas where we may not have expertise and the GDPR and the regulatory guidance enforcing GDPR may be actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance with the GDPR or may incur significant costs in obtaining or maintaining regulatory compliance. Any action brought against us for violations of this law, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on the Company which may be costly.

Failure to comply with federal and state laws around environmental, health and safety, biohazards and dangerous goods, and imports/exports could result in fines, penalties, and litigation, and have a material adverse effect upon our business.

Because we receive, store, and ship specimens, we are subject to regulation under federal, state, and local laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation, and disposal of specimens and infectious and hazardous waste materials, as well as regulations relating to the safety and health of laboratory employees. Our laboratory is subject to applicable federal and state laws and regulations relating to biohazard disposal of all laboratory specimens, and we utilize outside vendors for disposal of such specimens. In addition, the federal Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV, COVID-19, and the hepatitis B virus. These requirements, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations, and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens. There are also federal laws related to import and export of biospecimens and related data.

Failure to comply with federal, state and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which would have a material adverse effect on our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.

Failure to comply with other international laws around environmental, health and safety, biohazards and dangerous goods, imports/exports, and other regulations could result in fines, penalties, and litigation, and have a material adverse effect upon our business.

Because we procure specimens from and distribute specimens to countries outside of the United States, we are subject to international and foreign rules similar to any of the aforementioned U.S. rules, including those

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related to environmental, health and safety, biohazards, and imports/exports. We may be unaware of those international and foreign rules.

These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory compliance. Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.

Failure to comply with laws and regulations related to the protection of research subjects could result in fines, penalties, and litigation, and have a material adverse effect upon our business.

We are subject to regulation under international, federal, state, and local laws and regulations relating to the protection of research subjects. Federally-funded human-subject research in the United States, including the collection of identifiable human biospecimens, is governed by 45 CFR Part 46, also known as the Health and Human Services Policy for Protection of Human Research Subjects or the “Common Rule.” Use of biospecimens in certain other research is subject to Food and Drug Administration (“FDA”) regulations for the Protection of Human Subjects and Institutional Review Boards at 21 CFR Parts 50 and 56. Research funded by the National Institutes of Health (“NIH”) may be subject to grant or contract requirements, as well as NIH Certificates of Confidentiality. When collecting specimens for research in the United States, iSpecimen and its collection sites are responsible for ensuring that specimens are collected in accordance with these regulations. In addition, other countries have their own regulations around the ethical collection of human specimens for research. While we believe that we are in compliance with these laws, we may not be aware of all such laws or may fail to properly audit and identify gaps in compliance. Similarly, we may find errors in our technology and processes and may fail to properly match the compliance requirements of our researchers to the compliance requirements of our suppliers. Failure of our Company or our suppliers to comply with international, federal, state, and local laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties, and/or other enforcement actions which could have a material adverse effect on our business.

Our lack of knowledge of all the laws and regulations related to our business operations may result in our failure to abide by these rules.

In addition to the above-described laws and regulations, there are many other federal, state and international laws and regulations applicable to iSpecimen. The following list contains some of the other laws and regulations that could directly or indirectly affect our ability to operate the business:

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Occupational Safety and Health regulations and requirements;

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Centers for Disease Control Import Permit Program rules related to biological agents;

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Shipping rules such as IATA Dangerous Goods regulations;

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State and local laws and regulations for the disposal and handling of medical waste and biohazardous material;

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Export laws such as the U.S. Department of Commerce’s Bureau of Industry and Security Export Administration Regulations, U.S. State Department’s Directorate of Defense Trade Controls, and the U.S. Department of the Treasury’s Office of Foreign Assets Control in export licensing;

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Import laws such as the Customs and Border Protection Trade Act of 2002 and the Customs Modernization Act;

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The federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs;

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Federal, state, and local tax and tariff rules;

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Other laws and regulations administered by the FDA;

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Other laws and regulations administered by HHS; and

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State and local laws and regulations governing human subject research and clinical trials.

These laws cover areas where we may not have expertise and, in many areas, these laws are actively evolving. We, or our other third-party customers, suppliers and/or distribution partners, may not be able to maintain regulatory compliance or may incur significant costs in obtaining or maintaining regulatory compliance. Any action brought against us for violations of these laws or regulations, even if successfully defended, could cause us to incur significant legal expenses, reputational risks, and divert our management’s attention from the operation of our business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.

Failure to comply with governmental export and import regulations could result in fines, penalties, and litigation, and have a material adverse effect upon the Company’s business.

Our products and services are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and services must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in our products and services or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and services to international markets, prevent our customers from procuring our products and services or, in some cases, prevent the export or import of our products and services to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our products and services, or in our decreased ability to export or sell our products and services to existing or potential customers. Any decreased use of our products and services or limitation on our ability to export or sell our products and services could adversely affect our business, financial condition and results of operations.

Product safety and product liability, including bio-hazard risks, could provide exposure to claims and litigation.

Specimens may have hazardous properties and may carry transmissible infectious agents. There are inherent risks in connection with the handling, storage, disposal, distribution, and/or use of the specimens. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local regulation and regulations of foreign jurisdictions, the risk of accidental contamination or injury from these materials cannot be completely eliminated. Individuals who use or come in contact with the specimens may file claims related to their use and these claims could result in litigation that could be expensive to defend or result in judgements that exceed our resources and our insurance coverage. Any such litigations and judgement could adversely affect our business, financial condition and results of operations.

Risks Related to the Offering and our Securities

There has been no prior public market for our common stock and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following completion of this offering or, if developed, may not be sustained. The price for our

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common stock in this offering will be determined by negotiations between us and the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at or above the initial offering price or at all at the time you wish to sell them. An inactive trading market may also impair our ability to both raise capital by selling shares of common stock and acquire other complementary diagnostic tests, technologies or businesses by using our shares of common stock as consideration and attract and motivate employees through equity and incentive awards.

Upon closing of this offering, we expect that our common stock will be listed on the NASDAQ. If we fail to satisfy the continued listing standards of the NASDAQ, however, we could be delisted, which would adversely impact the price of our common stock and Company reputation.

The sale of substantial shares of our common stock may depress our stock price.

As of March 31, 2021, we have 936,213 shares of common stock outstanding; outstanding stock options to purchase 265,102 shares of common stock at an average price of $1.00 per share; outstanding warrants to purchase 23,309 shares of common stock at an average price of $0.06 per share, an aggregate of 1,291,012 shares of Series A, Series A-1 and Series B preferred stock that will convert into 1,291,012 shares of common stock in connection with this offering, and $6.7 million of Convertible Notes and approximately $4.6 million of the outstanding principal and accrued interest of the Bridge Notes that will convert into 1,060,496 and 730,408 shares of our common stock, respectively, in connection with this offering. Additionally, we have reserved 608,000 shares to issue stock options, restricted stock or other awards under our 2021 Plan. Upon the closing of this offering, we will issue warrants to purchase 88,889 shares of our common stock to the representative of the underwriters. Sales of a substantial number of shares of our common stock could cause the price of our common stock to fall and could impair our ability to raise capital by selling additional securities.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing common stock in this offering will incur immediate dilution of $6.59 per share, based on an assumed initial public offering price of $9.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share of $2.41. For more information on the dilution you may suffer as a result of investing in this offering, see the section of this prospectus entitled “Dilution.”

This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering as well as the conversion of our preferred stock and convertible debt into shares of our common stock upon the completion of this offering and the exercise of stock options granted to our employees as the conversion and exercise prices of such securities and options are substantially below the price offered to the public in this offering.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell their shares, could result in a decrease in the market price of our common stock. Immediately after this offering, we will have 6,240,351 outstanding shares of common stock based on the number of shares outstanding as of March 31, 2021. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares, 4,259,642 shares are currently restricted as a result of securities laws or lock-up agreements

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but will be able to be sold after the offering as described in the section of this prospectus entitled “Shares Eligible For Future Sale.”

Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

After this offering, our officers, directors and principal stockholders each holding more than 5% of our common stock will collectively control approximately 49.8% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to control the management and affairs of our Company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change of control, impeding a merger, consolidation or other business combination transaction involving us and discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.

We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section titled “Use of Proceeds.” Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment, and the failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which could cause our stock price to decline.

Certain provisions of our certificate of incorporation, as amended, and our bylaws, as amended, may make it more difficult for a third party to affect a change-of-control.

Our certificate of incorporation, as amended, authorizes the Board of Directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of the Board of Directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock. In addition, our certificate of incorporation, as amended, provides for a staggered board of directors. As a consequence, only a minority of the board of directors will be considered for election at every annual meeting of stockholders, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. Additional provisions that may discourage unsolicited takeover proposals include (i) board vacancies may be filled by a majority of the remaining board members, (ii) the board may adopt, repeal, rescind, alter or amend our bylaws without stockholder approval, (iii) stockholders holding more than 15% of the outstanding shares may call a special meeting, (iv) a director may be removed from office only by the affirmative vote of the a majority of the issued and outstanding stock entitled to vote; and (v) no cumulative voting in the election of directors, which would allow holders of less than a majority of the stock to elect some directors.

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Our bylaws, as amended, designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our bylaws, as amended, provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of ours to us or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the certificate of incorporation, or the bylaws; and (iv) any action asserting a claim governed by the internal affairs doctrine (the “Delaware Forum Provision”). Our bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”). In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision.

Section 27 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the Delaware Forum Provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

We recognize that the Delaware Forum Provision and the Federal Forum Provision in our bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision and the Federal Forum Provision may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court were “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce the Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the United States District Court may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Limitations on director and officer liability and indemnification of our officers and directors by us may discourage stockholders from bringing suit against an officer or director.

Our certificate of incorporation, as amended, and bylaws, as amended, provide that, to the fullest extent permitted by Delaware law, as it presently exists or may be amended from time to time, a director shall not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director. Under Delaware law, this limitation of liability does not extend to, among other things, acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or unlawful payments of dividends. These provisions may discourage stockholders from bringing suit against a director or officer for breach of fiduciary duty and may reduce the likelihood of derivative litigation brought by stockholders on our behalf against a director or officer.

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We are responsible for the indemnification of our officers and directors.

Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our certificate of incorporation, as amended, and bylaws, as amended, also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of our company. This indemnification policy could result in substantial expenditures, which we may be unable to recoup. If these expenditures are significant or involve issues which result in significant liability for our key personnel, we may be unable to continue operating as a going concern.

We do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment will only occur if our stock price appreciates.

We may need additional capital, and the sale of additional shares of common stock or other equity securities could result in additional dilution to our stockholders.

While we believe that the net proceeds from this offering will be sufficient to fund our current operating plans for the 24 months following this offering, we have based these estimates on assumptions that may prove to be wrong. Until such time, if ever, as we can generate substantial revenue, we may finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, or other sources. We do not currently have any committed external source of funds. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies or future revenue streams or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate technology development or future commercialization efforts.

Our quarterly revenue tends to fluctuate, making it harder to forecast and meet investor expectations.

Quarterly revenue has been difficult to predict, has historically fluctuated, and may vary from quarter to quarter due to a variety of factors, many of which are beyond our control. Accordingly, comparing our operating results on a period-to-period basis may not be meaningful. Factors that may affect our quarterly revenue and operating results may include: any material changes in demand for our products and services; changes in our supply sites’ ability to collect and ship specimens or our ability to retain them; changes in the number, availability, and quality of competing products; our ability to maintain a timely delivery of high quality products and services; the timing and amount of sales and marketing expenses incurred by us to attract new customers; changes in the economic or business prospects of our customers or the economy generally; changes in the pricing policies of our competitors; unforeseen defects in our technology; changes in the regulatory environment; and unforeseen costs necessary to improve and maintain our technology. These factors affecting our future earnings are difficult to forecast and could harm our quarterly and/or

36

annual operating results. The change in our earnings or general economic conditions may cause the market price of our common stock to fluctuate.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various risk factors, including the following:

➢

changes in our industry;

➢

ability to enhance our platform or to add new functionality;

➢

regulatory changes;

➢

competitive pricing or other pressures;

➢

failures of our suppliers to deliver product on time;

➢

loss of supply partners;

➢

additions or departures of key personnel;

➢

sales of our common stock;

➢

our ability to execute our business plan;

➢

operating results that fall below expectations;

➢

loss of any strategic relationship including customers, suppliers and channel partners; and/or

➢

economic and other external factors.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Our status as an “emerging growth company” under the Jumpstart Our Business Startups (“JOBS”) Act of 2013 may make it more difficult to raise capital when we need to do it or make our common stock less attractive to investors.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company,” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

We have limited insurance which may not cover claims by third parties against us or our officers and directors.

We have limited directors’ and officers’ liability insurance and commercial liability insurance policies. Claims by third parties against us may exceed policy amounts and we may not have amounts to cover these claims. Also, due to high self-insured retention costs and deductibles, we may incur significant costs from any claim made against us before insurance policies provide coverage. Any significant claims would have a material adverse effect on our business, financial condition, and results of operations. In addition, our limited directors’ and officers’ liability insurance may affect our ability to attract and retain directors and officers.

In connection with our 2020 and 2019 audits, we identified material weaknesses in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.

Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and

37

other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal controls over financial reporting pursuant to Section 404 until the later of (i) the year following our first annual report required to be filed with the SEC or (ii) the date we are no longer an emerging growth company. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the Securities and Exchange Commission, or SEC, following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the JOBS Act. We could be an emerging growth company for up to five years.

In connection with the audits of our financial statements for the years ended December 31, 2020 and 2019, we identified material weaknesses in our internal control over financial reporting and the material weaknesses identified in connection with the audits of our financial statements for the years ended December 31, 2020 and 2019 were remediated.

In connection with the audits of our financial statements for the year ended December 31, 2020 and 2019, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.

In connection with the audit of our financial statements for the year ended December 31, 2020, we identified a material weakness in our internal control over financial reporting related to a lack of accurate and detailed business operations information within the finance function that impacted the understanding and documentation of the policies and procedures associated with revenue recognition.

During the audit of our financial statements for the year ended December 31, 2020 it came to management’s attention that business operations information within the documentation of our policies and procedures associated with revenue recognition were not as detailed and accurate as they should have been, which impacted the finance function’s understanding of our business operations. This resulted a short pause in the 2020 audit, while management initiated a review of the information and updated and expanded the Company’s documentation related to revenue recognition. Management concluded during their review that, although the documentation was not as detailed or accurate as it should have been, the Company’s revenue recognition policy remained appropriate.

Our remediation efforts have included extensive accounting and finance staff education in the details of the operations of the Company, and management education regarding the impact of operations on accounting policies. The Company retained subject matter experts to assist us in the confirmation of our compliance with generally accepted accounting principles, as well as enhancing our documentation in a more detailed and accurate manner as it relates to our revenue recognition policy and procedures. We consider this matter to be remediated. However, the Company does have future plans to enhance and expand the resources within the finance function to address the needs of being a public company.

In connection with our audit of our financial statements for the year ended December 31, 2019, we identified a material weakness in our internal control over financial reporting related to the reports used in our revenue recognition process.

For the year ended December 31, 2019, in connection with our adoption of Topic 606 Revenue from Contracts with Customers (“ASC 606”), we began recognizing revenue when specimens are accessioned rather than upon shipment. We generated reports from the iSpecimen Marketplace to determine what specimens had been accessioned but not yet shipped as of December 31, 2019 in order to accrue for unbilled

38

specimen revenue. The underlying conclusions of these reports were not verified by management prior to completion of the financial statements and, these reports were determined to be inaccurate. As a result, audit adjustments were made to unbilled revenue upon adoption of ASC 606 on January 1, 2019 and as of December 31, 2019. Therefore, we have noted a material weakness in internal controls over unbilled specimen revenue.

While our efforts to address this matter should have taken place prior to the 2019 audit process, we believe it has now been addressed and that we have a process and report that provides accurate information for our unbilled specimen revenue. We consider this matter to be remediated.

We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley 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. We cannot assure that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition and results of operations.

The requirements of being a U.S. public company may strain our resources and divert management’s attention.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and NASDAQ rules. Following this offering, the requirements of these rules and regulations will significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue strain on our personnel, systems and resources and divert management’s attention.

The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain disclosure controls and procedures and internal control over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place, as well as maintaining these controls and procedures, is a costly and time-consuming effort that needs to be re-evaluated frequently.

Additionally, various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or higher deductibles or incur substantially higher costs to maintain coverage.

Evaluation of internal control and remediation of potential problems will be costly and time consuming and could expose weaknesses in financial reporting.

Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires that we evaluate our internal control over financial reporting to enable management to report on the effectiveness of those controls annually. In connection with the Section 404 requirements, we could, as part of that documentation, identify material weaknesses, significant deficiencies, or other areas for further attention or improvement.

Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers, and employees, require the hiring of additional finance, accounting and other personnel, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, adequate internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.

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Our senior management team has limited experience managing a public company.

Our senior management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business. Our management team may not successfully or efficiently manage our continued transition to a public company that will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, we are expected to follow Sarbanes-Oxley Act regulations and other public company rules, and these rules and regulations will increase our compliance costs and make certain activities more time consuming and costly. As a result, these rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult and costly for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this prospectus may constitute “forward-looking statements” for purposes of federal and state securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, used in either the singular or plural form, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:

➢

our ability to enter into contracts with healthcare providers to gain access to specimens, subjects, and data on favorable terms;

➢

our ability to obtain new customers and keep existing customers;

➢

development of our technology to adequately keep pace to support expansion of our existing line of business or our entry into new lines of businesses;

➢

market adoption rate of our marketplace technology;

➢

our ability to continue to expand outside of the United States in compliance with local laws and regulations;

➢

our business model generally and our utilization of the proceeds from this offering;

➢

the viability of our current intellectual property;

➢

acceptance of the products and services that we market;

➢

government regulation;

➢

our ability to retain key employees;

➢

adverse changes in general market conditions for medical devices;

➢

our ability to continue as a going concern;

➢

our future financing plans; and

➢

our ability to adapt to changes in market conditions (including as a result of the COVID-19 pandemic) which could impair our operations and financial performance.

The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

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USE OF PROCEEDS

We estimate, based upon an assumed initial public offering price of $9.00 per share (which is the midpoint of the price range set forth on the cover page of this prospectus), that we will receive net proceeds from this offering of approximately $17.9 million (or $20.7 million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We currently estimate that we will use the net proceeds from this offering, together with our existing cash as follows:

➢

approximately $3.0 million to continue development and expansion of the iSpecimen Marketplace platform to support more diverse and complex data sets, improve search functionality (including patient/subject search), enhance user workflows, and optimize administrative and reporting functionality;

➢

approximately $2.0 million to grow our sales and marketing efforts;

➢

approximately $1.0 million to expand our supplier development and management capabilities, including gaining access to more diverse and emerging healthcare data sets;

➢

approximately $1.0 million for our operations and fulfillment function to support our expected growth in specimen orders;

➢

the remainder for working capital, business development opportunities, general corporate purposes, including expanding our legal, finance, and compliance capabilities to support operating as a public company.

➢

approximately $2.5 million to repay the accrued and unpaid interest of the Bridge Notes (as of March 31, 2021).

Our expected use of proceeds from this offering represents our current intentions based on our present plans and business condition as well as the market environment. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the proceeds to be received upon the completion of this offering or any of the actual amounts that we will spend on the uses set forth above. We may also use a portion of the proceeds to license, acquire, or invest in additional businesses, technologies, products, services, or assets, although currently we have no specific agreements, commitments, or understandings in this regard.

The amount and timing of our actual expenditures will depend on numerous factors, including the progress of our technology development efforts, our ability to expand our supply network to access more diverse and complex healthcare  offer, changing customer demands, any collaborations that we may enter into with third parties, and any unforeseen cash needs. As a result, the executive management team will retain broad discretion over the allocation of the net proceeds from this offering.

Pending the use of the proceeds from this offering, we may invest the proceeds in interest-bearing, investment-grade securities, certificates of deposit, or government securities.

Each $1.00 increase (decrease) in the assumed initial public offering price of $9.00 per share (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $2.1 million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each 1,000,000 share increase (decrease) in the number of shares offered in this offering would increase (decrease) the net proceeds to us from this offering by approximately $8.3 million, assuming that the price per share for the offering remains at $9.00 (which is the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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DIVIDEND POLICY

We currently intend to retain all available funds and any future earnings to fund the development, commercialization, and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on any class of our common stock in the foreseeable future. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors, subject to compliance with contractual restrictions and covenants in the agreements governing our current and future indebtedness. Any such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability, and other factors that our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth cash, as well as our capitalization, as of March 31, 2021 as follows:

➢

on an actual basis;

➢

on a pro forma basis to give effect to the issuance of 3,081,916 shares of common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended, 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021 and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and (ii) reflecting an approximate $0.3 million loss on conversion of the Bridge Notes in connection with the unamortized discount on the Bridge Notes and an approximate $0.2 million loss in connection with the loss on conversion of the Bridge Notes issued subsequent to March 31, 2021.

➢

on a pro forma, as adjusted, basis, giving effect to the pro forma adjustments set forth above and (i) the sale and issuance by us of 2,222,222 shares of our common stock in this offering, based upon the assumed initial public offering price of $9.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us totaling approximately $17.9 million of net proceeds; and (ii) the repayment of approximately $2.5 million of accrued and unpaid interest on the Bridge Notes from the proceeds of this offering.

You should read this table together with our financial statements and related notes, and the sections titled “Selected Financial and Other Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and financial statements and related notes that are included elsewhere in this prospectus.

​	As of March 31, 2021
​	Actual			Pro Forma			Pro Forma As Adjusted(1)
​	(Unaudited)
Cash	​	$	355,126	​	$	855,126	​	$	16,286,861
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs	​	$	5,491,899	​	$	—	​	$	—
Bridge notes payable, net of debt discount	​	​	4,185,172	​	​	2,480,077	​	​	2,480,077
Bridge notes payable, related parties, net of debt discount	​	​	1,735,094	​	​	246,582	​	​	246,582
Accrued interest	​	​	4,253,987	​	​	2,468,263	​	​	—
Derivative liability for embedded conversion features on convertible notes payable	​	​	2,527,000	​	​	—	​	​	—
Derivative liability for embedded conversion feature on bridge notes payable and bridge notes, related parties	​	​	3,662,000	​	​	—	​	​	—
Total debt	​	​	21,855,152	​	​	5,194,922	​	​	2,726,659
Series B convertible preferred stock, $0.0001 par value, 3,200,000 shares authorized, 572,465 shares issued and outstanding, actual; no shares outstanding pro forma; and no shares outstanding pro forma as adjusted	​	​	7,999,997	​	​	—	​	​	—

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​	As of March 31, 2021
​	Actual			Pro Forma			Pro Forma As Adjusted(1)
​	(Unaudited)
Series A-1 convertible preferred stock, $0.0001 par value, 556,550 shares authorized, 100,365 issued and outstanding, actual; no shares outstanding pro forma; and no shares outstanding pro forma as adjusted	​	​	561,041	​	​	—	​	​	—
Series A convertible preferred stock, $0.0001 par value, 3,427,871 shares authorized, 618,182 issued and outstanding, actual; no shares outstanding pro forma; and no shares outstanding pro forma as adjusted	​	​	2,612,038	​	​	—	​	​	—
Total convertible preferred stock	​	​	11,173,076	​	​	—	​	​	—
Stockholders’ Deficit:	​	​	​	​	​	​	​	​	​
Common stock, $0.0001 par value, 16,000,000 shares authorized; 967,213 issued and 936,213 shares outstanding, actual; 4,018,129 shares outstanding pro forma; and 6,240,351 shares outstanding pro forma as adjusted	​	​	94	​	​	402	​	​	624
Additional paid-in capital	​	​	1,801,734	​	​	30,591,146	​	​	48,490,922
Treasury stock, at cost, 31,000 shares	​	​	(172)	​	​	(172)	​	​	(172)
Accumulated deficit	​	​	(33,021,078)	​	​	(33,477,492)	​	​	(33,477,492)
Total stockholders’ (deficit) equity:	​	​	(31,219,422)	​	​	(2,886,116)	​	​	15,013,882
Total Capitalization:	​	$	1,808,806	​	$	2,308,806	​	$	17,740,541

1)

On March 15, 2021, the Company entered into the Amendment to convert, effective with this offering, approximately $4.1 million of the outstanding principal of and accrued interest on the Bridge Notes. We will use a portion of the proceeds from this offering to repay the approximately $2.5 million of the remaining accrued and unpaid interest of the Bridge Notes as of March 31, 2021. The remaining approximately $3.0 million principal amount of Bridge Notes outstanding as of March 31, 2021, shall, pursuant to the terms of the Amendment, automatically be amended to adjust (i) the interest rates to 15% per annum and (ii) the maturity date to a date that is 18 months from the closing date of this offering. On April 16, 2021 and May 20, 2021, the Company issued additional Related Party Bridge Notes to related parties in the aggregate amount of $500,000 in order to finance the Company’s working capital needs. The note holders have agreed to convert the outstanding principal and accrued and unpaid interest of the notes into shares of common stock upon the consummation of this offering. See Certain Relationships and Related Party Transactions section.

Each $1.00 increase or decrease in the assumed initial public offering price of $9.00 per share (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (or decrease) each of cash, additional paid in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $2.1 million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each 1,000,000 share increase or decrease in the number of shares offered in this offering would increase (or decrease) each of cash, additional paid in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $8.3 million, assuming that the price per share for the offering remains at $9.00 (which is the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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The information in the table above gives effect to the 1-for-5.545 reverse stock split and excludes:

➢

an aggregate of 265,102 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and the 2013 Stock Incentive Plan (the “2013 Plan”), at a weighted average exercise price of $1.00 per share as of March 31, 2021;

➢

98,334 shares of common stock available for future issuance under the 2013 Plan as of March 31, 2021;

➢

608,000 shares of common stock available for future issuance under our 2021 Plan;

➢

the issuance of 88,889 warrants to purchase shares of common stock to be issued to the representative of the underwriters upon the consummation of this offering; and

➢

23,309 shares of our common stock issuable upon the exercise of warrants outstanding as of March 31, 2021, at a weighted-average exercise price of $0.06 per share.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our historical net tangible book value (deficit) as of March 31, 2021 was $(31.2) million, or $(33.35) per share of our common stock. Our historical net tangible book value (deficit) represents the amount of our total tangible assets less our total liabilities and our Series A, Series A-1, and Series B preferred stock. Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the 936,213 shares of our common stock outstanding as of March 31, 2021.

Our pro forma net tangible book value (deficit) as of March 31, 2021 was $(2.9) million, or $(0.72) per share. Pro forma net tangible book value per share is our total tangible assets less our total liabilities and dividing the difference by the number of common stock deemed to be outstanding, after giving effect to the issuance of 3,081,916 shares of common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended, and 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021 and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and (ii) reflecting an approximate $0.3 million loss on conversion of the Bridge Notes in connection with the unamortized discount on the Bridge Notes and an approximate $0.2 million loss in connection with the loss on conversion of the Bridge Notes issued subsequent to March 31, 2021.

After giving further effect to our (i) issuance and sale of 2,222,222 shares of our common stock in this offering, based upon the assumed initial public offering price of $9.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us totaling approximately $17.9 million of net proceeds; and (ii) the repayment of approximately $2.5 million of accrued and unpaid interest on the Bridge Notes from the proceeds of this offering, our pro forma as adjusted net tangible book value as of March 31, 2021, would have been $15.0 million, or $2.41 per share of common stock. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $35.76 per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of $6.59 per share to new investors purchasing shares of common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution:

Assumed initial public offering price per share of common stock				$	9.00
Historical net tangible book value (deficit) per share as of March 31, 2021	​	$	(33.35)	​	​
Increase per share attributed to the conversion of outstanding preferred stock, Convertible Notes, and Bridge Notes	​	​	32.63	​	​
Pro forma net tangible book value per share as of March 31, 2021 before this offering	​	​	(0.72)	​	​
Increase in pro forma as adjusted net tangible book value per share attributable to investors in this offering	​	​	3.13	​	​
Pro forma as adjusted net tangible book value per share after this offering	​	​	​	​	2.41
Dilution per share to new common stock investors in this offering	​	​	​	$	6.59

A $1.00 increase (decrease) in the assumed initial public offering price of $9.00 per share (which is the midpoint of the price range listed on the cover page of this prospectus) would increase (decrease) the

47

pro forma as adjusted net tangible book value per share after this offering by approximately $0.33, and dilution in pro forma as adjusted net tangible book value per share to new investors by approximately $6.26, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares of our common stock in full, the pro forma as adjusted net tangible book value after the offering would be $2.71 per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $36.06 per share and the dilution in pro forma as adjusted net tangible book value to new investors would be $6.29 per share, in each case assuming an initial public offering price of $9.00 per share, which is the midpoint of the price range listed on the cover page of this prospectus.

The following table summarizes, as of March 31, 2021, after giving effect to this offering, the number of shares of our common stock purchased from us, the total consideration paid, or to be paid, to us and the average price per share paid, or to be paid, by existing stockholders and by the new investors. The calculation below is based on an assumed initial public offering price of $9.00 per share (which is the midpoint of the price range listed on the cover page of this prospectus) before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

​

Shares purchased

Total consideration

Average price per share

​

Number

Percentage

Amount

Percentage

Existing Shareholders

​

4,018,129

​

64%

​

$

511,186

​

2%

​

$

0.13

New Investors

​

2,222,222

​

36

​

​

19,999,998

​

98

​

​

9.00

Total

​

6,240,351

​

100%

​

$

20,511,184

​

100%

​

$

3.29

Each $1.00 increase (decrease) in the assumed initial public offering price of $9.00 per share would increase (decrease) the total consideration paid by new investors and the total consideration paid by all stockholders by $2.1 million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions but before estimated offering expenses.

Except as otherwise indicated, the discussion and the tables above give effect to the 1-for-5.545 reverse stock split, assume no exercise of the underwriters’ option to purchase additional shares of our common stock and excludes:

➢

an aggregate of 265,102 shares of common stock issuable upon exercise of outstanding stock options granted under the 2010 Plan and the 2013 Plan, at a weighted average exercise price of $1.00 per share as of March 31, 2021;

➢

98,334 shares of common stock available for future issuance under the 2013 Plan as of March 31, 2021;

➢

608,000 shares of common stock available for future issuance under our 2021 Plan;

➢

the issuance of warrants to purchase 88,889 shares of common stock to be issued to the representative of the underwriters upon the consummation of this offering; and

➢

23,309 shares of our common stock issuable upon the exercise of warrants outstanding as of March 31, 2021, at a weighted-average exercise price of $0.06 per share.

48

SELECTED FINANCIAL DATA

You should read the following selected financial data together with our financial statements and the related notes thereto included elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. We have derived the statements of operations data for the years ended December 31, 2020 and 2019 and the balance sheet data as of December 31, 2020 and 2019 from our audited financial statements included elsewhere in this prospectus.

The statement of operations data for the three months ended March 31, 2021 and 2020 and the balance sheet data as of March 31, 2021 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited financial statements.

The selected financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the financial statements, related notes and other financial information included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of our future results.

​

Three Months Ended March 31,

Years Ended December 31,

​

2021

2020

2020

2019

​

(Unaudited)

​

Statement of Operations Data:

​

​

​

​

​

​

​

​

​

​

​

​

Revenue

​

$

2,963,807

​

$

1,711,660

​

$

8,184,106

​

$

4,298,350

Operating expenses:

​

​

​

​

​

​

​

​

​

​

​

​

Cost of revenue

​

​

1,623,651

​

​

654,268

​

​

3,585,477

​

​

2,127,900

Technology

​

​

409,951

​

​

426,712

​

​

1,426,473

​

​

993,329

Sales and marketing

​

​

529,387

​

​

431,640

​

​

1,775,347

​

​

1,413,059

Supply development

​

​

111,576

​

​

114,605

​

​

495,967

​

​

792,778

Fulfillment

​

​

269,096

​

​

215,171

​

​

853,450

​

​

914,633

General and administrative

​

​

962,790

​

​

314,797

​

​

2,453,772

​

​

1,936,740

Total operating expenses

​

​

3,906,451

​

​

2,157,193

​

​

10,590,486

​

​

8,178,439

Loss from operations

​

​

(942,644)

​

​

(445,533)

​

​

(2,406,380)

​

​

(3,880,089)

Other income (expense), net

​

​

​

​

​

​

​

​

​

​

​

​

Interest expense

​

​

(853,147)

​

​

(587,669)

​

​

(2,096,795)

​

​

(1,724,450)

Change in fair value of derivative liability on convertible notes

​

​

(154,000)

​

​

(605,000)

​

​

(159,000)

​

​

551,000

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

​

​

(48,000)

​

​

—

​

​

—

​

​

—

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

​

​

(2,750,171)

​

​

—

​

​

—

​

​

—

Gain on extinguishment of note payable

​

​

788,156

​

​

—

​

​

—

​

​

—

Other income

​

​

(3,732)

​

​

—

​

​

9,654

​

​

168,859

Interest income

​

​

47

​

​

223

​

​

437

​

​

630

Other expense, net

​

​

(3,020,847)

​

​

(1,192,446)

​

​

(2,245,704)

​

​

(1,003,961)

Net loss before benefit from income taxes

​

​

(3,963,491)

​

​

(1,637,979)

​

​

(4,652,084)

​

​

(4,884,050)

Benefit from income taxes

​

​

—

​

​

—

​

​

—

​

​

157,000

Net loss

​

$

(3,963,491)

​

$

(1,637,979)

​

$

(4,652,084)

​

$

(4,727,050)

Net loss per common share – basic and diluted(1)

​

$

(4.23)

​

$

(1.75)

​

$

(4.97)

​

$

(5.05)

49

​	Three Months Ended March 31,					Years Ended December 31,
​	2021			2020		2020		2019
​	(Unaudited)					​
Weighted average common shares outstanding – basic and diluted(1)	​	​	936,213	​	936,213	​	936,213	​	936,096
Pro forma net loss (unaudited)(2)	​	$	(4,419,905)	​	​	​	​	​	​
Pro forma net loss per common share – basic and diluted (unaudited)(2)	​	$	(1.10)	​	​	​	​	​	​
Pro forma weighted average common shares outstanding – basic and diluted (unaudited)(2)	​	$	(4,018,129)	​	​	​	​	​	​

1)

See Note 2 to our audited financial statements appearing at the end of this prospectus for further details on the calculation of basic and diluted net loss per common share.

2)

To give effect to the issuance of 3,081,916 shares of common stock (i) consisting of: (a) 1,060,496 shares of common stock upon conversion of Convertible Notes, as amended and accrued interest thereon, issued to Andrew L. Ross, Anna-Maria & Stephen Kellen Foundation, and OBF Investments, LLC in 2017 and 2018; 651,065 shares of common stock upon conversion of approximately $4.1 million of the outstanding principal of, and accrued interest on, the Bridge Notes as amended, and 79,343 shares of common stock upon conversion of approximately $0.5 million of the outstanding principal of the Bridge Notes as amended, issued subsequent to March 31, 2021, and (b) the automatic conversion of all outstanding shares of our Series A, Series A-1, and Series B preferred stock into an aggregate of 1,291,012 shares of our common stock, all of which will occur immediately prior to the closing of this offering, and (ii) reflecting an approximate $0.3 million loss on conversion of the Bridge Notes in connection with the unamortized discount on the Bridge Notes and an approximate $0.2 million loss in connection with the loss on conversion of the Bridge Notes issued subsequent to March 31, 2021.

​	As of March 31, 2021			As of December 31,
​				2020			2019
​	(Unaudited)			​			​
Balance Sheet Data:	​	​	​	​	​	​	​	​	​
Cash	​	$	355,126	​	$	695,909	​	$	53,893
Working capital(1)	​	​	(22,751,850)	​	​	(18,663,321)	​	​	(14,179,599)
Total assets	​	​	5,823,755	​	​	6,209,696	​	​	4,214,588
Accrued interest	​	​	4,253,987	​	​	3,696,944	​	​	1,745,515
Convertible notes payable, related parties, net of unamortized debt discount and debt issuance costs	​	​	5,491,899	​	​	5,490,811	​	​	5,350,278
Derivative liability for embedded conversion features on convertible notes	​	​	2,527,000	​	​	2,373,000	​	​	2,214,000
Bridge notes payable, net of debt discount and debt issuance costs	​	​	4,185,172	​	​	4,589,228	​	​	3,586,326
Bridge notes payable, related parties, net of debt discount	​	​	1,735,094	​	​	1,905,000	​	​	1,655,000
Derivative liability for embedded conversion feature on bridge notes payable and bridge notes, related parties	​	​	3,662,000	​	​	—	​	​	—
Note payable, current portion	​	​	—	​	​	604,109	​	​	—
Note payable, net of current portion	​	​	—	​	​	178,899	​	​	—
Convertible preferred stock	​	​	11,173,076	​	​	11,173,076	​	​	11,173,076

50

​	As of March 31, 2021		As of December 31,
​			2020		2019
​	(Unaudited)		​		​
Total stockholders’ deficit	​	(31,219,422)	​	(27,277,967)	​	(22,718,749)

1)

We define working capital as current assets less current liabilities.

51

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and plan of operations together with our selected financial data, financial statements and the related notes, and other financial information appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.

Overview

We were incorporated in 2009 under the laws of the state of Delaware. Our mission is to accelerate life science research and development via a single global marketplace platform that connects researchers to subjects, specimens, and associated data. We are headquartered in Lexington, Massachusetts. We operate as one operating and reporting segment.

In addition to creating a single global platform where both specimen providers and researchers can connect, the platform automates the process of searching for and selecting specimens for research. The platform taps into healthcare provider data to gain insights into the available samples in biobanks or laboratories, or to gain insights into the patient populations to support specimen collections directly from research subjects. The platform receives de-identified data from electronic medical records, laboratory information systems, and other healthcare data sources of available specimens and research subjects and harmonizes the data across all participating organizations.

Researchers can search this data using our intuitive, web-based user interface to obtain specimens more efficiently. They can instantly find the specific specimens they need for their studies, request quotes for these specimens or for custom collections directly from research subjects, place orders, and track and manage their specimens and associated data across projects.

Biospecimen providers also gain efficiencies using the iSpecimen Marketplace, not only because the platform provides instant access to a large researcher base, but because the technology orchestrates the bioprocurement workflow from specimen request to fulfilment. Specimen providers access intuitive dashboards to view requests, create proposals, and track and manage their orders.

Finally, the platform helps with administrative and reporting functions for researchers, suppliers, and our internal personnel, including user and compliance management.

The iSpecimen Marketplace is composed of four major functional areas: search; workflow; data; and administration and reporting. We continue to invest in the evolution of these areas to improve engagement with the platform and liquidity across it. Our core business objective is to retain and grow both researcher and supplier usage of our platform to support biospecimen procurement, as well as to position our Company to explore other adjacent business opportunities that can benefit from the use of the iSpecimen Marketplace.

The iSpecimen Marketplace currently supports the supply chain management and bioprocurement process for specimens and associated data. We generate revenue by procuring various specimens from hospitals, laboratories, and other supply sites comprising our network, and delivering them to its medical research customers using its proprietary software to identify and locate the required specimens. Costs paid to acquire specimens from hospitals and laboratories generally varies depending upon the sample type, collection requirements, and data provided. We generally operate in a “just in time” fashion, meaning we procure specimens from our suppliers and distribute specimens to our customers after we obtain an order for specimens from a research client. Generally, we do not speculatively purchase and bank samples in anticipation of future, unspecified needs. We believe our approach offers many advantages over a more traditional inventory-based supplier business model where biorepositories take inventory risks, and where inventory turnover and cash conversion cycles can be lengthy.

52

Impact of the COVID-19 Pandemic on Our Operations

We are subject to the risks arising from the SARS-Cov2 (“COVID-19”) outbreak’s social and economic impacts on the healthcare services industry. Our management believes that the social and economic impacts, which include but are not limited to the following, could have a significant impact on future financial condition, liquidity, and results of operations: (i) restrictions on in-person activities arising from shelter-in-place, or similar isolation orders, that limit our ability to procure specimens through our supply chain; (ii) decline in researcher demand for specimens; and (iii) deteriorating economic conditions, such as increased unemployment rates and recessionary conditions.

Beginning in March 2020, COVID-19 affected our supply chain’s ability to fulfill specimen requests. As healthcare providers dealt with the COVID-19 pandemic, many temporarily shuttered their research operations, including biospecimen collection capabilities, as they deployed resources to more critical parts of their organization or their employees stayed home to support social distancing measures. As a result, by April 2020, more than 40% of our worldwide supply was fully disabled, more than 40% was partially disabled, and less than 15% was fully operational. Consequently, during the three months beginning April 2020, while our purchase order value increased by more than 300% compared to same period in 2019, our ability to fulfill these orders was negatively impacted by COVID-19 and resulted in our revenue only increasing year-over-year by less than 30% compared to the same period in 2019.

In response to the COVID-19 outbreak, we implemented measures to help stabilize revenue, improve our cash position, and reduce costs. In May 2020, we applied for and received a loan in the amount of $783,008 from the Paycheck Protection Program under the CARES Act. Cost saving measures included the elimination of non-essential travel and in-person training activities, deferral of certain planned expenditures, and the furlough of 7% of our employees in August 2020.

To stabilize revenue, we added COVID-19 samples to our product line to support growing research in this area and also contracted with mobile phlebotomy service providers to more easily collect specimens from research subjects who may be practicing social distancing. We received our first request for samples from patients with a prior or current COVID-19 infection on March 18, 2020, and through March 31, 2021, we fulfilled additional COVID-19 specimen requests. Because of our large, geographically diverse network with many sites around the country and the world, we were able to respond quickly to this new demand and match requests for COVID-19 specimens to sites in areas of outbreak. As a result, more than 35% of our total purchase orders in 2020 and more than 40% of our purchase orders in the first three months of 2021 related to COVID-19 specimens.

While our supply sites are mostly operational as of March 31, 2021, we expect that while the pandemic lasts, we will continue to experience a slowdown in non-COVID-19 specimen collections due to social distancing on the part of research subjects, supply partner site employees, and customer research organizations. There is considerable uncertainty around the duration of this COVID-19 outbreak and its future impact. While we implemented measures to help stabilize revenue as well as measures to reduce costs in response to the COVID-19 outbreak, given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we expect this matter to have an impact on our results of operations, financial condition, or liquidity, which cannot be reasonably estimated at this time.

Components of Our Results of Operations

Revenue

We generate revenue by procuring various specimens from hospitals, laboratories, and other supply sites, for our medical research customers using our proprietary software, the iSpecimen Marketplace, to identify, locate, and ultimately validate the required specimens to our customers' requested specifications. The Company's performance obligation is to procure a specimen meeting the customer specification(s) from a supplier, on a “best efforts” basis, for our customer at the agreed price per specimen as indicated in the customer contract with the Company. We do not currently charge suppliers or customers for the use of our proprietary software. Each customer will execute a material and data use agreement with the Company or

53

agrees to online purchase terms, each of which includes terms such as specimen and data use, shipment terms, payment and cancellation terms. These are then supplemented by purchase orders that specify specimen requirements including detailed inclusion/exclusion criteria, quantities to be collected, and pricing. Collectively, these customer agreements represent the Company’s contracts with its customer. Generally, contracts have fixed unit pricing. For certain specimen orders, a refundable customer deposit may be required prior to order fulfillment depending on project set-up requirements, presented as deferred revenue. The Company expects to recognize the deferred revenue within the next twelve months.

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

Customers are typically invoiced upon shipment. Depending on the quantity of specimens ordered, it may take several accounting periods to completely fulfill a purchase order. In other words, there can be multiple invoices issued for a single purchase order, reflecting the specimens being accessioned over time. However, specimens are generally shipped as soon as possible after they have been accessioned.

Cost of Revenue

Cost of revenue primarily consists of the purchase price to acquire specimens from hospitals and laboratories; inbound and outbound shipping costs; supply costs related to samples; payment processing and related transaction costs; and costs paid to the supply sites to support sample collections. Shipping costs upon receipt of products from suppliers are recognized in cost of revenue.

Additionally, we believe that loss from operations is a more meaningful measure of profitability than gross profit due to the nature of specimens accessioned and the diversity of our pricing.

Technology

Technology costs include payroll and related expenses for employees involved in the development and implementation of our technology; software license and system maintenance fees; outsourced data center costs; data management costs; depreciation and amortization; and other expenses necessary to support technology initiatives. Collectively, these costs reflect the efforts we make to offer a wide variety of products and services to our customers. Technology and data costs are generally expensed as incurred.

A portion of technology costs are related to research and development. Costs incurred for research and development are expensed as incurred, except for software development costs that are eligible for capitalization. Research and development costs primarily include salaries and related expenses, in addition to the cost of external service providers.

Sales and Marketing

Sales and marketing costs primarily consist of payroll and related expenses for personnel engaged in marketing and selling activities, including salaries and sales commissions; travel expenses; public relations and social media costs; ispecimen.com website development and maintenance costs; search engine optimization fees; advertising costs; direct marketing costs; trade shows and events fees; marketing and customer relationship management software; and other marketing-related costs.

Supply Development

We have agreements with supply partners that allow us to procure specimens from them and distribute these samples to customers. Supply development costs primarily include payroll and related expenses for personnel engaged in the development and management of this supply network; related travel expenses; regulatory compliance costs to support the network; and other supply development and management costs.

54

Fulfillment

Fulfillment costs primarily consist of those costs incurred in operating and staffing operations and customer service teams, including costs attributable to assess the feasibility of specimen requests; creating and managing orders; picking, packaging, and preparing customer orders for shipment; responding to inquiries from customers; and laboratory equipment and supplies.

General and Administrative

General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses for human resources, legal, finance, and executive teams; associated software licenses; facilities and equipment expenses, such as depreciation and amortization expense and rent, outside legal expenses, insurance costs, and other general and administrative costs.

Financial Operations Overview and Analysis for the Three Months Ended March 31, 2021 and 2020 (unaudited) and the Years Ended December 31, 2020 and 2019

Comparison of the Three Months Ended March 31, 2021 and 2020

​	Three Months Ended March 31,						Change
​	2021			2020			Dollars			Percentage
​	(unaudited)						​	​	​	​	​
Revenue	​	$	2,963,807	​	$	1,711,660	​	$	1,252,147	​	73%
Operating expenses:	​	​	​	​	​	​	​	​	​	​	​
Cost of Revenue	​	​	1,623,651	​	​	654,268	​	​	969,383	​	148%
Technology	​	​	409,951	​	​	426,712	​	​	(16,761)	​	(4)%
Sales and marketing	​	​	529,387	​	​	431,640	​	​	97,747	​	23%
Supply development	​	​	111,576	​	​	114,605	​	​	(3,029)	​	(3)%
Fulfillment	​	​	269,096	​	​	215,171	​	​	53,925	​	25%
General and administrative	​	​	962,790	​	​	314,797	​	​	647,993	​	206%
Total operating expenses	​	​	3,906,451	​	​	2,157,193	​	​	1,749,258	​	81%
Loss from operations	​	​	(942,644)	​	​	(445,533)	​	​	(497,111)	​	(112)%
Other income (expense), net	​	​	​	​	​	​	​	​	​	​	​
Interest expense	​	​	(853,147)	​	​	(587,669)	​	​	(265,478)	​	(45)%
Change in fair value of derivative liability on convertible notes	​	​	(154,000)	​	​	(605,000)	​	​	451,000	​	75%
Change in fair value of derivative liability on bridge notes and bridge notes, related parties	​	​	(48,000)	​	​	—	​	​	(48,000)	​	(100)%
Loss on extinguishment of bridge notes and bridge notes, related parties	​	​	(2,750,171)	​	​	—	​	​	(2,750,171)	​	(100)%
Gain on extinguishment of note payable	​	​	788,156	​	​	—	​	​	788,156	​	100%
Other income	​	​	(3,732)	​	​	—	​	​	(3,732)	​	(100)%
Interest income	​	​	47	​	​	223	​	​	(176)	​	(79)%
Other expense, net	​	​	(3,020,847)	​	​	(1,192,446)	​	​	(1,828,401)	​	(153)%
Benefit from income taxes	​	​	—	​	​	—	​	​	—	​	100%
Net loss	​	$	(3,963,491)	​	$	(1,637,979)	​	$	(2,325,512)	​	(142)%

Revenue

Revenue increased by approximately $1,252,000 or 73%, from approximately $1,712,000 for the three months ended March 31, 2020 to approximately $2,964,000 for the three months ended March 31, 2021 primarily due to a more seasoned sales team, continued demand for specimens from patients with known COVID-19 test results, and an increasing demand for specimens in non-COVID-19 research areas. For the three months

55

ended March 31, 2021, our revenue derived from specimens related to COVID-19 accounted for more than 20% of our total revenue. There was no COVID-19 related revenue for the first quarter of the prior year. Sales efforts resulted in specimens accessioned during the first quarter of the current year increasing by approximately 831 or 16% to approximately 6,191, compared to approximately 5,360 specimens accessioned during the first quarter of 2020, contributing to the increase in sales period-over-period. This increase was also impacted by the specimen mix with an increase of approximately $160 or 50% in the average selling price per specimen period-over-period.

Cost of Revenue

Cost of revenue increased by approximately $969,000, or 148%, from approximately $654,000 for the three months ended March 31, 2020 to approximately $1,624,000 for the three months ended March 31, 2021 which was attributable to a 16% increase in specimens accessioned as well as a 115% increase in the average cost per specimen impacted by the specimen mix during the current period over the prior period.

Technology

Technology expenses decreased by approximately $17,000 or 4% from approximately $427,000 for the three months ended March 31, 2020 to approximately $410,000 for the three months ended March 31, 2021. The decrease was primarily related to a decrease in project expenses for development of the Company’s technology that were not capitalizable of approximately $76,000, partially offset by an increase in operating and maintenance expenses of approximately $33,000 and an increase in depreciation and amortization of approximately $28,000.

Sales and Marketing Expenses

Sales and marketing expenses increased approximately $98,000, or 23%, from approximately $432,000 for the three months ended March 31, 2020 to approximately $529,000 for the three months ended March 31, 2021. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during 2020 and the first quarter of 2021, which amounted to approximately $73,000, an increase in general operating expenses related to sales and marketing of approximately $34,000, and an increase in external marketing efforts of approximately $7,000, partially offset by reductions to general expenses related to sales and marketing of approximately $15,000.

Supply Development

Supply development expenses decreased approximately $3,000, or 3%, from approximately $115,000 for the three months ended March 31, 2020 to approximately $112,000 for the three months ended March 31, 2021. The decrease was primarily attributable to a decrease in general expenses related to supply development of approximately $6,000 and a decrease in payroll and related expenses of approximately $3,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak, partially offset by an increase in operating and maintenance expenses of approximately $6,000.

Fulfillment

Fulfillment costs increased approximately $54,000, or 25%, from approximately $215,000 for the three months ended March 31, 2020 to approximately $269,000 for the three months ended March 31, 2021. The increase was primarily attributable to an increase in payroll and related expenses of approximately $74,000 for personnel engaged in pre-sales feasibility assessments, partially offset by a decrease in post-sales activities such as order processing and management, shipping and receiving, and customer service of approximately $20,000.

General and Administrative Expenses

General and administrative expenses increased approximately $648,000 or 206%, from approximately $315,000 for the three months ended March 31, 2020 to approximately $963,000 for the three months ended

56

March 31, 2021. The increase was primarily attributable to an increase in legal and accounting expenses of approximately $467,000, the loss on the sale of accounts receivable of approximately $152,000, an increase of approximately $20,000 in bad debt expense, an increase in insurance of approximately $12,000, an increase in payroll and related expenses of approximately $10,000, and an increase in utilities and facilities of approximately $7,000, partially offset by a decrease in other general and administrative expenses of approximately $17,000, and a decrease in depreciation and amortization expenses of approximately $2,000.

Other Expense, net

Other expense, net increased approximately $1,828,000, or (153)%, from approximately $1,192,000 for the three months ended March 31, 2020 to approximately $3,021,000 for the three months ended March 31, 2021. The increase in other expense, net was primarily the result of the loss recognized on the extinguishment of the Bridge Notes and Related Party Bridge Notes of approximately $2,750,000, an increase in interest expense of approximately $265,000 related to accrued interest on the Bridge Notes and Convertible Notes, and a difference in the change in fair value of derivative liabilities related to the Bridge Notes and Related Party Bridge Notes of approximately $403,000, offset by a gain on the extinguishment of note payable of approximately $788,000 due to the forgiveness of the total outstanding balance of the Paycheck Protection Program Loan.

Benefit from Income Taxes

The Company did not record an income tax benefit for the three months ended March 31, 2021 and 2020 due to not qualifying for a refundable R&D tax credit.

Comparison of the Years Ended December 31, 2020 and 2019

​	Years Ended December 31,						Change
​	2020			2019			Dollars			Percentage
Revenue	​	$	8,184,106	​	$	4,298,350	​	$	3,885,756	​	90%
Operating expenses:	​	​	​	​	​	​	​	​	​	​	​
Cost of revenue	​	​	3,585,477	​	​	2,127,900	​	​	1,457,577	​	68%
Technology	​	​	1,426,473	​	​	993,329	​	​	433,144	​	44%
Sales and marketing	​	​	1,775,347	​	​	1,413,059	​	​	362,288	​	26%
Supply development	​	​	495,967	​	​	792,778	​	​	(296,811)	​	(37)%
Fulfillment	​	​	853,450	​	​	914,633	​	​	(61,183)	​	(7)%
General and administrative	​	​	2,453,772	​	​	1,936,740	​	​	517,032	​	27%
Total operating expenses	​	​	10,590,486	​	​	8,178,439	​	​	2,412,047	​	29%
Loss from operations	​	​	(2,406,380)	​	​	(3,880,089)	​	​	1,473,709	​	38%
Other income (expense), net	​	​	​	​	​	​	​	​	​	​	​
Interest expense	​	​	(2,096,795)	​	​	(1,724,450)	​	​	(372,345)	​	(22)%
Change in fair value of derivative liability	​	​	(159,000)	​	​	551,000	​	​	(710,000)	​	(129)%
Other income	​	​	9,654	​	​	168,859	​	​	(159,205)	​	(94)%
Interest income	​	​	437	​	​	630	​	​	(193)	​	(31)%
Other expense, net	​	​	(2,245,704)	​	​	(1,003,961)	​	​	(1,241,743)	​	(124)%
Benefit from income taxes	​	​	—	​	​	157,000	​	​	(157,000)	​	(100)%
Net loss	​	$	(4,652,084)	​	$	(4,727,050)	​	$	74,966	​	2%

Revenue

Revenue increased by approximately $3,886,000 or 90%, from approximately $4,298,000 for the year ended December 31, 2019 to approximately $8,184,000 for the year ended December 31, 2020 primarily due to an

57

expansion of our sales team and new demand for specimens from patients with known COVID-19 test results. For the year ended December 31, 2020, our revenue derived from specimens related to COVID-19 accounted for more than 40% of our total revenue. In addition to an expansion of the sales team from three to seven employees, we also had a more seasoned sales team in 2020 compared to 2019. Sales efforts resulted in specimens accessioned during the current year increasing by approximately 9,000 or 68% to approximately 22,100, compared to approximately 13,150 specimens accessioned during the prior year, contributing to the increase in sales year-over-year. This increase was also impacted by the specimen mix with an increase of $43.53 or 13% in the average selling price per specimen year-over-year.

Cost of Revenue

Cost of revenue increased by approximately $1,458,000, or 68%, from approximately $2,128,000 for the year ended December 31, 2019 to approximately $3,585,000 for the year ended December 31, 2020 which was attributable to a 68% increase in specimens accessioned during the current year over the prior year.

Technology

Technology expenses increased by approximately $433,000 or 44% from approximately $993,000 for the year ended December 31, 2019 to approximately $1,426,000 for the year ended December 31, 2020. The increase was primarily related to an increase in depreciation and amortization of approximately $195,000, project expenses for development of the Company’s technology that were not capitalizable of approximately $164,000, and an increase in operating and maintenance expenses of approximately $78,000, partially offset by a decrease in other expenses of approximately $4,000.

Sales and Marketing Expenses

Sales and marketing expenses increased approximately $362,000, or 26%, from approximately $1,413,000 for the year ended December 31, 2019 to approximately $1,775,000 for the year ended December 31, 2020. The increase was primarily attributable to an increase in payroll and related expenses associated with the hiring of additional staff during the fourth quarter of 2019, which amounted to approximately $546,000, partially offset by reductions to external marketing efforts of approximately $87,000 in 2020 due to the COVID-19 outbreak, a reduction in general operating expenses related to sales and marketing of approximately $79,000, and other reductions in marketing efforts.

Supply Development

Supply development expenses decreased approximately $297,000, or 37%, from approximately $793,000 for the year ended December 31, 2019 to approximately $496,000 for the year ended December 31, 2020. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $295,000 for personnel engaged in supply development activities and travel-related expenses due to the COVID-19 outbreak, and other expenses of approximately $49,000, partially offset by an increase in operating and maintenance expenses of approximately $50,000.

Fulfillment

Fulfillment costs decreased approximately $61,000, or 7%, from approximately $915,000 for the year ended December 31, 2019 to approximately $853,000 for the year ended December 31, 2020. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $33,000 for personnel engaged in pre-sales feasibility assessments, and approximately $37,000 in post-sales activities such as order processing and management, shipping and receiving, and customer service, partially offset by an increase in other fulfillment expenses of approximately $10,000.

General and Administrative Expenses

General and administrative expenses increased approximately $517,000 or 27%, from approximately $1,937,000 for the year ended December 31, 2019 to approximately $2,454,000 for the year ended

58

December 31, 2020. The increase was primarily attributable to an increase in legal and accounting expenses of approximately $638,000, an increase of approximately $108,000 in bad debt expense, and an increase in utilities and facilities of approximately $67,000, offset by a decrease in payroll and related expenses of approximately $161,000, a decrease in other general and administrative expenses of approximately $112,000, a decrease in depreciation and amortization expenses of approximately $10,000, a decrease in marketing and advertising expenses of approximately $6,000, and a decrease in insurance of approximately $6,000.

Other Expense, net

Other expense, net increased approximately $1,242,000, or 124%, from approximately $1,004,000 for the year ended December 31, 2019 to approximately $2,246,000 for the year ended December 31, 2020. The increase in other expense, net was primarily the result of a difference in the change in fair value of the derivative liability related to the Convertible Notes of approximately $710,000, and an increase in interest expense of approximately $372,000 related to accrued interest on the issuance of additional Bridge Notes.

Benefit from Income Taxes

The Company did not record an income tax benefit for the year ended December 31, 2020. Income tax benefit for the year ended December 31, 2019 was approximately $157,000 representing a year-over-year decrease of $157,000 or 100% due to not qualifying for a refundable R&D tax credit in 2020.

Liquidity and Capital Resources

Capital Resources

As of March 31, 2021, our available cash totaled approximately $355,000 which represented an decrease of approximately $341,000 compared to December 31, 2020. As of March 31, 2021, we had a working capital deficit of approximately $22,752,000 which represents an increase of approximately $4,089,000 compared to the year ended December 31, 2020. Since inception, we have relied upon raising capital to finance our operations and at March 31, 2021, we did not have sufficient capital to fund our operations through the next twelve months.

We recognized a net loss on extinguishment of our Bridge Notes and Related Party Bridge Notes of approximately $2,750,000 in connection with the issuance of the Fifth Amendment to the Note Subscription Agreements and Secured Promissory Notes (the “Fifth Amendment”) which was executed on March 15, 2021. The Fifth Amendment added elective and mandatory conversion options, and was considered a substantive change to the Bridge Notes and Related Party Bridge Notes based on the likelihood of the option being exercised in the near future in connection with a qualified IPO event. Accordingly, we accounted for the Fifth Amendment as an extinguishment of the original Bridge Notes and Related Party Bridge Notes. The Amended Bridge Notes and Related Party Bridge Notes shall bear interest, on a non-compounding basis, (at a rate of twenty four percent per annum prior to October 1, 2020 and) at a rate of thirty percent per annum from and after October 1, 2020, due on maturity on the earlier of (i) the closing of an initial public offering yielding gross proceeds in excess of $18,000,000, exclusive of any existing Convertible Notes, (ii) the sale of the Company, (iii) prepayment by the Company, or (iv) April 30, 2021. On April 28, 2021, the maturity date of the Bridge Notes and Related Party Bridge Notes was further extended to May 31, 2021. On May 12, 2021, the maturity date was further extended to June 30, 2021.

The future success of the Company is dependent on its ability to successfully obtain additional working capital and to ultimately attain profitable operations. To attain profitable operations, we expect to achieve economies of scale through further advancements in the iSpecimen Marketplace platform that increase operational efficiencies, while devoting additional resources to customer and supplier acquisition and management. Together, these actions are expected to help to increase revenue and manage expenditures to improve our financial position and fund operations. We may seek to fund our operations through public equity, private equity, or debt financings, as well as other sources. We may obtain and renegotiate debt financing to support operations. However, we may be unable to raise additional capital, or if we are able to raise additional capital, we may be unable to do so on commercially favorable terms. Our failure to raise

59

capital or enter into such other arrangements, if and when needed, would have a negative impact on our business, results of operations, and financial condition and our ability to continue. However, as certain elements of our operating plan are outside of our control, they cannot be considered probable. If we do not receive additional capital from future anticipated capital raises, our business plan will need to be scaled down.

These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements are issued. Our plan to mitigate the conditions that raise substantial doubt include delaying certain projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern.

Additionally, we might need or choose to raise additional capital through debt or equity financings, which might not be available on favorable terms or at all and could hinder our business and dilute our existing shareholders. Our future capital requirements depend on many factors, including our level of investment in technology and our rate of growth into new markets. Our capital requirements might also be affected by factors which we cannot control such as changes in the healthcare industry, interest rates, and other monetary and fiscal policy changes to the manner in which we currently operate. Additionally, as the impact of the COVID-19 outbreak on the economy and operations evolves, we will continuously assess our liquidity needs. In the event of a sustained market deterioration, we may need or seek advantageously to obtain additional funding through equity or debt financing.

We expect that the net proceeds from this offering will be sufficient to support our operations through the next twelve months.

Factoring Agreement

On January 1, 2021, we entered into a Factoring Agreement with Versant Funding, LLC (“Versant”), pursuant to which we have agreed to sell a minimum of $1.2 million of our accounts receivable without recourse. Through March 31, 2021, we have factored, without recourse approximately $2.3 million of our accounts receivable to Versant. Without recourse indicates that we assign and transfer our rights, title, and interest in and to the accounts receivable to Versant, meaning that we will not be liable to repay all or any portion of the advance amount if any portion of the accounts receivable is not paid by our customer(s). Information on accounts receivable identified for factoring are provided and verified by Versant prior to being accepted for factoring. Pursuant to the Factoring Agreement, we will receive an advance of 75% of the value of the purchased accounts receivable upfront. Upon receipt of the payment from the customer, Versant will calculate the applicable factoring fee from invoice date through the actual collection date, and will remit the remaining 25% holdback of the value of the factored accounts receivable, less their factoring fees, to us. The factoring fees range from 2.5% to 15% of the purchase price of the accounts receivable based on the age of the accounts receivable when collected. We are also charged for certain reimbursable administrative fees incurred on our behalf for the management of the program. In connection with the Factoring Agreement, we entered into a Security Agreement, granting to Versant a security interest in substantially all of our assets to secure our obligations under the Factoring Agreement.

Note Payable Loan Forgiveness

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

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Cash Flows

Three Months Ended March 31, 2021 and 2020

​	Three Months Ended March 31,						Change
​	2021			2020			Dollars			Percentage
​	(unaudited)						​	​	​	​	​
Net cash flows used in operating activities	​	$	(126,249)	​	$	(426,011)	​	$	299,762	​	70%
Net cash flows used in investing activities	​	​	(214,534)	​	​	(260,204)	​	​	45,670	​	18%
Net cash flows provided by financing activities	​	​	—	​	​	1,000,000	​	​	(1,000,000)	​	(100)%
Net (decrease) increase in cash and cash equivalents	​	$	(340,783)	​	$	313,785	​	$	(654,568)	​	​

Operating Activities

For the three months ended March 31, 2021, net cash used in operating activities was $126,249, which consisted of a net loss of $3,963,491 offset by non-cash charges of approximately $2,744,000, which primarily includes a $2,750,171 loss on extinguishment of bridge notes, $289,867 of amortization of discount on Amended Bridge Notes, $235,229 related to amortization of internally developed software, a $202,000 loss on derivative liabilities, $22,036 in stock based compensation, $20,652 in bad debt expense, $11,130 related to depreciation and amortization of property and equipment, and $1,088 of amortization of discount and debt issuance costs on Convertible Notes, offset by a $788,156 gain on the extinguishment of the note payable. Total changes in assets and liabilities of approximately $1,093,000 were primarily driven by a $925,544 decrease in accounts receivable, a $562,193 increase in accrued interest, an increase in accrued expenses of $308,410, an increase of $299,130 in accounts payable, offset by $495,735 of due from factor, an increase in accounts-receivable unbilled of $426,973, a decrease of $69,189 in deferred revenue, and a $10,155 increase in prepaid expenses and other current assets.

For the three months ended March 31, 2020 net cash used in operating activities was $426,011 which consisted of a net loss of $1,637,979, offset by non-cash charges of approximately $986,000, which primarily includes a $605,000 loss on derivative liabilities, $206,508 related to amortization of internally developed software, $137,998 of amortization of discount and debt issuance costs on Convertible Notes, $22,045 of share-based compensation, and $14,340 of depreciation and amortization of property and equipment. Total changes in working capital assets and liabilities of approximately $226,000 were primarily driven by an increase in accrued interest of $449,671, a $436,551 increase in deferred revenue, an increase in accrued expenses of $163,843, an increase in accounts payable of $110,414, offset by a $566,465 increase in accounts receivable, an increase in accounts receivable-unbilled of $305,197, and a $62,740 increase in prepaid expenses and other current assets.

Investing Activities

Net cash used in investing activities was $214,534 and $260,204 for the three months ended March 31, 2021 and 2020, respectively. Net cash used in investing activities for the three months ended March 31, 2021 consisted of $214,534 of capitalization of internally developed software. Net cash used in investing activities for the three months ended March 31, 2020 consisted of $259,304 of capitalization of internally developed software, and $900 for purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was $0 and $1,000,000 for the three months ended March 31, 2021 and 2020, respectively. Net cash provided by financing activities for the three months ended March 31, 2020 consisted of proceeds received from the issuance of Bridge Notes payable totaling $1,000,000.

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Years Ended December 31, 2020 and 2019

​	Years Ended December 31,						Change
​	2020			2019			Dollars			Percentage
Net cash flows used in operating activities	​	$	(288,380)	​	$	(2,679,900)	​	$	2,391,520	​	89%
Net cash flows used in investing activities	​	​	(1,102,612)	​	​	(1,475,245)	​	​	372,633	​	25%
Net cash flows provided by financing activities	​	​	2,033,008	​	​	3,078,674	​	​	(1,045,666)	​	(34)%
Net increase (decrease) in cash and cash equivalents	​	$	642,016	​	$	(1,076,471)	​	$	1,718,487	​	​

Operating Activities

For the years ended December 31, 2020, net cash used in operating activities was $288,380, which consisted of a net loss of $4,652,084 offset by non-cash charges of approximately $1,323,000 which primarily includes $774,929 related to amortization of internally developed software, a $159,000 loss on derivative liability, $143,435 of amortization of discount and debt issuance costs on Convertible Notes, $108,096 in bad debt expense, $92,866 in stock based compensation, and $44,758 related to depreciation and amortization of property and equipment. Total changes in assets and liabilities of approximately $3,041,000 were primarily driven by a $1,951,429 increase in accrued interest, an increase of $1,054,638 in accounts payable, an increase of $873,254 in deferred revenue, an increase in accrued expenses of $282,142, and a decrease in tax credit receivable of $104,624, offset by a $800,908 increase in accounts receivable, a $226,374 increase in prepaid expenses and other current assets, and an increase in accounts receivable-unbilled of $198,185.

For the year ended December 31, 2019 net cash used in operating activities was $2,679,900 which consisted of a net loss of $4,727,050, offset by non-cash charges of approximately $996,000, which primarily includes $577,605 related to amortization of internally developed software, $551,993 of amortization of discount and debt issuance costs on Convertible Notes, $360,379 of share-based compensation, and $57,360 of depreciation and amortization of property and equipment, offset by a $551,000 gain on derivative liability. Total changes in working capital assets and liabilities of approximately $1,051,000 were primarily driven by an increase in accrued interest of $1,172,359, a $192,253 decrease in accounts receivable, an increase in accrued expenses of $94,725, an increase in accounts payable of $40,882, and a $13,170 decrease in prepaid expenses and other current assets, offset by an increase in accounts receivable-unbilled of $305,576, and an increase in tax credit receivable of $157,000.

Investing Activities

Net cash used in investing activities was $1,102,612 and $1,475,245 for the years ended December 31, 2020 and 2019, respectively. Net cash used in investing activities for the year ended December 31, 2020 consisted of $1,102,186 of capitalization of internally developed software, and purchases of property and equipment of $426. Net cash used in investing activities for the year ended December 31, 2019 consisted of $1,447,062 of capitalization of internally developed software, and purchases of property and equipment of $28,183.

Financing Activities

Net cash provided by financing activities was $2,033,008 and $3,078,674 for the years ended December 31, 2020 and 2019, respectively. Net cash provided by financing activities for the year ended December 31, 2020 consisted of proceeds received from the issuance of Bridge Notes payable totaling $1,250,000 and proceeds received from the Paycheck Protection Program of $783,008. Net cash provided by financing activities for the year ended December 31, 2019 primarily consisted of proceeds received from the issuance of Bridge Notes totaling $3,075,000, and proceeds received from the exercise of stock options of $3,674.

Non-GAAP Financial Measure

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we use adjusted earnings before interest,

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taxes, depreciation, and amortization (“Adjusted EBITDA”), a non-GAAP financial measure, to understand and evaluate our core operating performance. This non-GAAP financial measure, which may be different than similarly titled measures used by other companies, is presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We define our non-GAAP financial measure of Adjusted EBITDA as net loss, excluding income tax benefit, change in fair value of derivative liabilities, loss on extinguishment of Bridge Notes and Related Party Bridge Notes, gain on extinguishment of note payable, interest expense, depreciation and amortization, and share-based compensation expense.

We believe that Adjusted EBITDA provides useful information about our financial performance, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to a key metric used by our management for financial and operational decision-making. We believe that Adjusted EBITDA helps identify underlying trends in our business that otherwise could be masked by the effect of the expenses that we exclude in Adjusted EBITDA. In particular, we believe the exclusion of share-based compensation expense provides a useful supplemental measure in evaluating the performance of our operations and provides better transparency into our results of operations.

We are presenting the non-GAAP measure of Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe this measure provides an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to net loss, the closest comparable GAAP measure. Some of these limitations are that:

➢

Adjusted EBITDA excludes the change in fair value of the derivative liability, which represents a non-cash charge related to the change in fair value for the embedded features on the Convertible Notes, Bridge Notes, and Related Party Bridge Notes;

➢

Adjusted EBITDA excludes the loss on the extinguishment of Bridge Notes and Relates Party Bridge Notes;

➢

Adjusted EBITDA excludes the gain on the extinguishment of note payable;

➢

Adjusted EBITDA excludes amortization of debt issuance costs and discounts on Convertible Notes which are components to interest expense;

➢

Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of leasehold improvements, property and equipment and amortization of internally developed software and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; and

➢

Adjusted EBITDA excludes share-based compensation expense which has been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy.

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented:

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​

Three Months Ended March 31,

Years Ended December 31,

​

2021

2020

2020

2019

​

(unaudited)

​

​

​

​

​

​

Net loss

​

$

(3,963,491)

​

$

(1,637,979)

​

$

(4,652,084)

​

$

(4,727,050)

Income tax benefit

​

​

—

​

​

—

​

​

—

​

​

(157,000)

Change in fair value of derivative liability on convertible notes

​

​

154,000

​

​

605,000

​

​

159,000

​

​

(551,000)

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

​

​

48,000

​

​

—

​

​

—

​

​

—

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

​

​

2,750,171

​

​

—

​

​

—

​

​

—

Gain on extinguishment of note payable

​

​

(788,156)

​

​

—

​

​

—

​

​

—

Interest expense

​

​

853,147

​

​

587,669

​

​

2,096,795

​

​

1,724,450

Depreciation & amortization

​

​

246,359

​

​