Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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

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

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance, or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the "Risk Factors" section of the Company's Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on April 14, 2025. The Company's securities filings can be accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We were incorporated in 2009 under the laws of the state of Delaware. Our mission is to accelerate life science research and development via a single global marketplace platform, the iSpecimen Marketplace, which connects researchers to subjects, specimens, and associated data. We are headquartered in Woburn, 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 fulfillment. Specimen providers can 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. As capital is made available to do so, 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 our medical research customers using our proprietary software to identify and locate the required specimens. Costs paid to acquire specimens from hospitals and laboratories generally vary 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.

Private Placement Offering

On December 1, 2021, we closed on a private placement offering ("PIPE") for gross proceeds of approximately $21 million, before deducting approximately $1.4 million for underwriting discounts and commissions and estimated offering expenses, for (i) an aggregate of 87,500 shares of common stock and (ii) warrants, which are exercisable for an aggregate of up to 65,625 shares of common stock, all of which were repurchased by us on February 13, 2024, and are no longer outstanding.

At the Market Offering

On March 5, 2024, we entered into an At the Market Offering Agreement (the "ATM Agreement") with Rodman & Renshaw LLC as agent (the "Sales Agent") pursuant to which we may issue and sell shares of our common stock, having an aggregate offering price of up to $1,500,000 (the "ATM Shares"), from time to time through the Sales Agent. The ATM Shares when issued will be registered pursuant to our shelf registration statement on Form S-3 (File No 333- 265976), which became effective on July 12, 2022. We sold the ATM Shares, from time to time, pursuant to the ATM Agreement, in transactions that are "at the market offerings" as defined in Rule 415(a)(4) promulgated under the Securities Act. During the year ended December 31, 2024, we issued 199,004 shares of common stock for gross proceeds of approximately $1,494,000 under the ATM Agreement. In connection with the ATM Offering, we incurred offering costs of approximately $255,000, resulting in net proceeds of approximately $1,239,000.

Reverse Stock Split

On October 9, 2023, we received a notification from Nasdaq that our Common Stock failed to maintain a minimum bid price of $1.00 over the previous 30 consecutive business days as required by the Listing Rules of The Nasdaq Stock Market.

On July 19, 2024, our stockholders approved a proposal to amend our Fourth Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, as well as any shares of common stock held by the Company in treasury, at a ratio in the range from 1-for-10 to 1-for-20.

On August 19, 2024, the Board approved a one-for-twenty (1:20) reverse stock split of our issued and outstanding shares of common stock. On September 13, 2024, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment to our Certificate of Incorporation to effect the Reverse Stock Split. The Reverse Stock Split became effective on September 13, 2024, and our common stock began trading on a split-adjusted basis on Nasdaq on September 16, 2024.

On October 1, 2024, we received a notification from Nasdaq that the Staff has determined that for the last 11 consecutive business days, from September 16, 2024 to September 30, 2024, the closing bid price of our Common Stock was $1.00 per share or greater. Accordingly, we regained compliance with Listing Rule 5559(a)(2).

Except as otherwise indicated, all references to our common stock, share data, per share data and related information have been adjusted for the Reverse Stock Split ratio of 1-for-20 as if they had occurred at the beginning of the earliest period presented. The Reverse Stock Split combined each 20 shares of our outstanding common stock and treasury shares into one share of common stock without any change in the par value per share, and the Reverse Stock Split correspondingly adjusted, among other things, the exercise rate of our warrants and options into our common stock. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share.

Debt Financing

On September 19, 2024, we entered into the Purchase Agreement with the Lender. Pursuant to the provisions of the Purchase Agreement, the Lender agreed to provide a loan to us in the amount of $1,000,000 and we agreed to issue to the Lender a promissory note in the principal amount of $1,000,000 payable within 12 months after the date of issuance, with interest accruing and payable at a rate of 18% per annum. The Purchase Agreement contains customary representations and warranties and obligates the Lender to provide an additional loan to us, in the form of a revolving line of credit of up to $1,000,000, upon our initial filing of a Registration Statement for an underwritten or best-efforts public offering for gross proceeds of at least $5,000,000. On September 25, 2024, we and the Lender closed the transactions described in the Purchase Agreement, the Lender provided funds to the Company in the net amount of $959,980 and we issued the Note to the Lender in the principal amount of $1,000,000. WestPark Capital, Inc. ("WestPark") served as the placement agent in connection with the Loan and was paid a placement agent fee in the amount of $40,020 for its services.

On October 31, 2024, we paid off the outstanding principal balance of $1,000,000 and accrued interest of $18,000 on the Note.

Securities Offering on Form S-1

On October 29, 2024, we entered into a placement agency agreement (the "Placement Agency Agreement") with WestPark. (the "Placement Agent"), and a securities purchase agreement (the "Securities Purchase Agreement") with investors pursuant to which we agreed to issue and sell, in a "reasonable best efforts" public offering (the "Offering") (i) 132,814 shares (the "Shares") of our common stock, par value $0.0001 per share (the "Common Stock") at an offering price of $2.999 per share, and (ii) pre-funded warrants to purchase up to 1,533,852 shares of Common Stock (the "Pre-Funded Warrants") at an offering price of $3.00 per Share, less $0.0001 per Pre-Funded Warrant, for aggregate gross proceeds of $4,998,464 (or $4,999,998 assuming the full exercise of the Pre-Funded Warrants), before deducting placement agent fees and other offering expenses. As part of its compensation for acting as Placement Agent for the Offering, we paid the Placement Agent a cash fee of 4.0% of the aggregate gross proceeds plus reimbursement of certain expenses and legal fees. We intend to use the net proceeds of the offering for repayment of outstanding debt, potential acquisitions of assets or investments in businesses, products and technologies, and for marketing and advertising services. The remainder of the net proceeds will be used for working capital purposes.

The Offering closed on October 31, 2024. The securities sold in the Offering were offered and sold pursuant to a registration statement on Form S-1 (File No. 333-282736), which was filed with the Securities and Exchange Commission (the "Commission") on October 18, 2024, and subsequently declared effective by the Commission on October 29, 2024.

Impact of the Current Economy

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

Changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy and inflation, as are being currently experienced, may result in a reduction in researchers' demand for specimens due to the research organization's inability to obtain funding.

To further address the current market conditions, we have taken steps, which include but are not limited to, reevaluating our pricing in order to be more competitive, creating campaigns to highlight and fast-track high demand items, enhancing internal team communications to accelerate the sales cycle, moving to a new line of business structure organized by our internal categorization of biospecimen suppliers capabilities to increase efficiency in operations, implementation of next day quotes to increase conversion ratios of quotes to purchase orders, and initiation of efforts to decrease expenditures through reductions in our workforce.

We believe that our business will continue to be resilient through a continued industry-wide economic slowdown in life science research, and that we will continue to work on improving our liquidity to address our financial obligations and alleviate possible adverse effects on our business, financial condition, results of operations or prospects.

Impact of the Russian-Ukrainian War on Our Operations

Our business was negatively impacted during the first half of 2022 by the ongoing war between Russia and Ukraine. At the start of the war, we had approximately $1 million of purchase orders that were slated to be fulfilled by our supply network in Ukraine and Russia. This supply network was shut down at the start of the war. Ukrainian suppliers were disabled due to war conditions and evacuations and some of our Russian suppliers were disabled by sanctions. While we mobilized to shift these purchase orders to other suppliers in the network, the process of specimen collections from other supply sites took time, which caused a delay in the fulfillment of such purchase orders. Alternate suppliers do not have the same favorable unit economics or specimen collection rates, and this also impacted our margins. Additionally, key resources were diverted from operations to resolving the re-fulfillment issues caused by the conflict.

As of June 30, 2025, our supply sites in Russia that had not been under sanctions were accessible and our supply sites in Ukraine were mostly reopened. However, logistics and transportation of specimens out of the country of Ukraine remains challenging and not as economically feasible as they were prior to the beginning of the war. Due to the uncertainty caused by the ongoing war, Ukrainian and Russian suppliers may again become inaccessible to us. Therefore, as long as the uncertainty continues, our policy is to ensure at a purchase order level that an order is not solely sourced from the two countries. The short and long-term implications of the war are difficult to predict as of the date of this Form 10-Q. The imposition of more sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the businesses of our supply partners, especially those in Ukraine and Russia. Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the war on our business and the companies from which we obtain supplies and distribute specimens.

Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business

Chief Executive Officer Initiatives

The Company's mission remains to accelerate life sciences research and development, pursuant to a single global marketplace platform. Executive management of the Company continues to review the Company's structure, processes, and resources to evaluate and identify areas for improvement, and has been focused on creating and ensuring a runway for growth and scale for the business.

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

During the year ended December 31, 2023, we performed operational process improvement activities to increase collaboration within and between departments. We moved to a line of business structure organized by our internal categorization of biospecimen suppliers' capabilities, which has increased efficiency in our operations and throughout the Company. We continue to see benefits from this move.

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

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

We have shifted our focus from high volume to high value suppliers that meet our newly defined costs, quality and speed requirements. We established business criteria that focus on supplier capabilities and revenue growth strategies as well as technology criteria for integrating onto our iSpecimen Marketplace platform and participating with us. During the year ended December 31, 2024, we terminated 180 supplier agreements and are in the final stages of what we call our "supplier network refresh project". This has resulted in fewer key suppliers, supported by our lean workforce and processes more effectively. We have been reengaging our suppliers in a more meaningful manner which assisted us in the implementation of our next day quote system. We now have a key supplier program whereby we proactively engage with the suppliers to promote our business through marketing campaigns and supplier organizations' offerings.

Going forward, we will leverage the hard work detailed above to support a sales overhaul. As we wrap up several operationally focused projects, we will now be re-organizing the commercial end of the business. This starts with a new account-based sales approach and the introduction of an outbound sales team to ensure we are meeting our customers and prospects where they are. We are also bringing marketing and sales closer to enable the same efficiencies within the commercial organization, the same way that our line of business realignment brought to the operational side of the business this past year. This refined approach and tighter internal integration will continue to accelerate our next day quote program and deepen customer relationships for increased predictability.

Our strategic business intelligence initiatives have enabled us to understand our market and business better than ever before. We now have the capabilities to use data to know how and where to grow. We will continue adjusting the shape of the business toward our core competencies and the market. We can better use key insights from our sales data to understand market needs to assess areas where we lose deals today, through multiple lenses, in order to adjust our supplier network and marketing efforts accordingly. Conversely, this strategy will also allow us to assess areas where we win with an eye toward expanding deeper into those market niches or disease states.

Following the completion of our supplier network refresh efforts, we will have a better than ever understanding of our key supplier capabilities, specifically focused on their pricing, quality, and speed. Using this information and the outputs of our strategic business intelligence capabilities, we will continue to be able to increase the speed of an opportunity through our sales funnel and our conversion ratios, which we believe will continue to grow our revenue.

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 agree 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 to 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.

During 2024, the Company recognized its revenue when the related specimens are delivered.

Cost of Revenue

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

Technology

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

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

Sales and Marketing

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

Supply Development

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

Fulfillment

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

General and Administrative

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

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

Comparison of the Three Months Ended June 30, 2025 and 2024

		Three Months Ended June 30,								Change
		2025				2024				Dollars				Percentage
Revenue		$	713,135			$	2,863,679			$	(2,150,544	)			(75	)%
Operating expenses:
Cost of revenue			444,177				1,424,392				(980,215	)			(69	)%
Technology			536,311				911,927				(375,616	)			(41	)%
Sales and marketing			258,382				1,082,949				(824,567	)			(76	)%
Supply development			99,090				137,511				(38,421	)			(28	)%
Fulfillment			248,225				433,189				(184,964	)			(43	)%
General and administrative			948,376				1,055,376				(107,000	)			(10	)%
Total operating expenses			2,534,561				5,045,344				(2,468,063	)			(50	)%
Loss from operations			(1,821,426	)			(2,181,665	)			(317,519	)			(17	)%
Other income, net
Interest expense			-				(4,474	)			4,474				100	%
Interest income			398				9,163				(8,765	)			(96	)%
Interest and penalties on sales tax liability			9,620				-				9,620				(100	)%
Other income (expense), net			764,165				67,952				696,213				1,025	%
Total other income, net			774,183				72,641				701,542				966	%
Net loss		$	(1,047,243	)		$	(2,109,024	)			(1,019,061	)			(50	)%

Revenue

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

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

Cost of Revenue

Cost of revenue decreased by approximately $980,000, or 69%, from approximately $1,424,000 for the three months ended June 30, 2024 to approximately $444,000 for the three months ended June 30, 2025, which was attributable to an approximately 57% decrease in the number of specimens delivered for the current period as compared to the accessioned specimens in the same period in the prior year, and an approximately $65, or 27%, decrease in the average cost per specimen.

Technology

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

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

Sales and Marketing Expenses

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

Supply Development

Supply development expenses decreased by approximately $38,000, or 28%, from approximately $138,000 for the three months ended June 30, 2024 to approximately $99,000 for the three months ended June 30, 2025. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $48,000, offset by the increase in professional fees of approximately $10,000.

Fulfillment

Fulfillment costs decreased by approximately $185,000, or 43%, from approximately $433,000 for the three months ended June 30, 2024 to approximately $248,000 for the three months ended June 30, 2025. The decrease was primarily attributable to a decrease in professional fees of approximately $4,000, payroll and related expenses of approximately $179,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment and general operating expenses related to fulfillment of approximately $2,000.

General and Administrative Expenses

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

Other Income, net

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

Comparison of the Six Months Ended June 30, 2025 and 2024

		Six Months Ended June 30,								Change
		2025				2024				Dollars				Percentage
Revenue		$	1,770,645			$	5,153,672			$	(3,383,027	)			(66	)%
Operating expenses:
Cost of revenue			1,101,456				2,424,398				(1,322,942	)			(55	)%
Technology			1,081,678				1,823,894				(742,216	)			(41	)%
Sales and marketing			605,522				1,748,890				(1,143,368	)			(65	)%
Supply development			192,771				335,350				(142,579	)			(43	)%
Fulfillment			541,991				844,043				(302,052	)			(36	)%
General and administrative			1,707,042				3,159,282				(1,452,240	)			(46	)%
Total operating expenses			5,230,460				10,335,857				(5,105,397	)			(49	)%
Loss from operations			(3,459,815	)			(5,182,185	)			(1,722,370	)			(33	)%
Other income, net
Interest expense			(1,946	)			(8,939	)			6,993				78	%
Interest income			3,186				39,661				(36,475	)			(92	)%
Interest and penalties on sales tax liability			(8,920	)			-				(8,920	)			100	%
Other income (expense), net			761,856				140,322				621,534				443	%
Total other income, net			754,176				171,044				583,132				341	%
Net loss		$	(2,705,639	)		$	(5,011,141	)			(2,305,502	)			(46	)%

Revenue

Revenue decreased by approximately $3,383,000, or 66%, from approximately $5,154,000 for the six months ended June 30, 2024 to approximately $1,771,000 for the six months ended June 30, 2025. This was primarily due to the decrease of 6,317, or approximately 57%, in specimen count from 11,159 specimens in the six months ended June 30, 2024 to 4,842 specimens in the six months ended June 30, 2025. The significant decrease in specimen count was mainly due to the change in revenue recognition during the fourth quarter of 2024. The specimen counts during the second quarter of 2024 consists of accessioned specimens that were both delivered and not yet delivered specimens to customers, while the specimen counts during the second quarter of 2025 consists only of delivered specimens.

The effect of the decrease in specimen count have also caused a decrease to the average selling price by approximately $96, or 21%, from approximately $462 in the six months ended June 30, 2024 to approximately $366 in the six months ended June 30, 2025.

Cost of Revenue

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

Technology

Technology expenses decreased by approximately $742,000, or 41%, from approximately $1,824,000 for the six months ended June 30, 2024 to approximately $1,082,000 for the six months ended June 30, 2025. The decrease was related to professional fees of approximately $17,000, amortization expense of internally developed software of approximately $340,000 and payroll and related expenses of approximately $384,000 and general operating expenses related to technology expenses of approximately $1,000.

Technology expenditures capitalized as internally developed software costs decreased by approximately $448,000, or 100%, from approximately $448,000 for the six months ended June 30, 2024 to $0 for the six months ended June 30, 2025 due to reductions in workforce stemming from our decision to invest in the software at a significantly lower level in 2025 when compared to 2024 and prior years.

Sales and Marketing Expenses

Sales and marketing expenses decreased by approximately $1,143,000, or 65%, from approximately $1,749,000 for the six months ended June 30, 2024 to approximately $606,000 for the six months ended June 30, 2025. The decrease was primarily attributable to decrease in payroll and related expenses of approximately $937,000, advertising and promotions expense of approximately $176,000 and external marketing expense of approximately $34,000, which was partially offset by the general operating expenses related to sales and marketing of approximately $4,000.

Supply Development

Supply development expenses decreased by approximately $143,000, or 43%, from approximately $335,000 for the six months ended June 30, 2024 to approximately $193,000 for the six months ended June 30, 2025. The decrease was primarily attributable to a decrease in professional fees of approximately $76,000 and payroll and related expenses of approximately $67,000.

Fulfillment

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

General and Administrative Expenses

General and administrative expenses decreased by approximately $1,452,000, or 46%, from approximately $3,159,000 for the six months ended June 30, 2024 to approximately $1,707,000 for the six months ended June 30, 2025. The decrease was attributable to a decrease in compensation costs of approximately $503,000, general operating expenses of approximately $73,000, professional fees of approximately $145,000, utilities and facilities expenses of approximately $65,000, doubtful account expense of approximately $187,000, taxes and insurance of approximately $259,000 and franchise tax of approximately $222,000, which was partially offset by the increase in depreciation and amortization of approximately $2,000.

Other Income, net

Other income, net, increased by approximately $583,000, or 341%, from an income of approximately $171,000 for the six months ended June 30, 2024 to approximately $754,000 for the six months ended June 30, 2025. The increase in other income, net, was attributable to an increase of other income of approximately $622,000, partially offset by increase in interest and penalties on sales tax liability of approximately $9,000, a decrease in interest income of approximately $36,000, and decrease in interest expense of approximately $7,000.

Liquidity and Capital Resources

		June 30,				December 31,				Change
		2025				2024				Dollars				Percentage
		(unaudited)
Balance Sheet Data:
Cash and cash equivalents		$	588,775			$	1,878,408			$	(1,289,633	)			(69	)%
Working capital			(4,005,455	)			(2,182,488	)			(1,822,967	)			84	%
Total assets			6,034,501				9,350,230				(3,315,729	)			(35	)%
Total stockholders' equity			621,973				3,311,008				(2,689,035	)			(81	)%

		Six Months Ended June 30,								Change
		2025				2024				Dollars				Percentage
		(unaudited)				(unaudited)
Statement of Cash Flow Data:
Net cash flows used in operating activities		$	(1,288,079	)		$	(3,611,614	)		$	2,323,535				(64	)%
Net cash flows provided by (used in) investing activities			(454	)			2,232,565				(2,233,019	)			(100	)%
Net cash flows provided by (used in) financing activities			(1,100	)			(1,186,626	)			1,187,726				(100	)%
Net decrease in cash and cash equivalents		$	(1,289,633	)		$	(192,423	)		$	(1,097,210	)

Capital Resources

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

We may be unsuccessful in increasing our revenues or contain our operating expenses, or we may be unable to raise additional capital on commercially favorable terms. Our failure to generate additional revenues or contain operating costs would have a negative impact on our business, results of operations and financial condition and our ability to continue as a going concern. If we do not generate enough revenue to provide an adequate level of working capital, our business plan will be scaled down further.

These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date of this Quarterly Report. Management's plan to mitigate the conditions that raise substantial doubt includes generating additional revenues, deferring certain projects and capital expenditures and eliminating certain future operating expenses for us to continue as a going concern. However, there can be no assurance that we will be successful in completing any of these options. As a result, management's plans cannot be considered probable and thus do not alleviate substantial doubt about our ability to continue as a going concern.

Cash Flows

Operating Activities

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

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

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

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

Investing Activities

Net cash used in investing activities was less than $1,000 for the six months ended June 30, 2025, which consisted of approximately $400 of purchase of property and equipment.

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

Financing Activities

Net cash used in financing activities was approximately $1,000 for the six months ended June 30, 2025, which consisted of approximately $1,000 for the payment of offering costs in connection with the on-going Public Offering.

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

Effects of Inflation and Supply Chain Shortages

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

We have experienced negative effects of inflation in certain areas of our business due to the high rates of inflation in the world's current economy. This inflation is affecting employee salaries, which account for a significant portion of our operating costs. Additionally, the costs of supplies have been affected by inflation; however, these costs are not significant to the Company's results.

Inflation has not had a significant impact on the cost of specimens due to our long-term contracts maintained with vendors, which include revenue sharing plans.

Critical Accounting Policies and Estimates

We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with GAAP. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note 2, "Summary of Significant Accounting Policies," in our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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

JOBS Act Transition Period

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected not to "opt out" of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) December 31, 2026; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.