iSpecimen (ISPC) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The financial statements for the period ended September 30, 2022, show a decrease in total assets to $27.9 million from $35.7 million, primarily due to a reduction in cash, and a net loss of $8.1 million, an increase from the prior year period Condensed Balance Sheets As of September 30, 2022, total assets decreased to $27.9 million from $35.7 million, driven by a drop in cash, while total stockholders' equity fell to $22.4 million due to accumulated deficits Condensed Balance Sheet Highlights (as of September 30, 2022 vs. December 31, 2021) | Balance Sheet Item | September 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $20,657,719 | $27,738,979 | | Total current assets | $24,236,174 | $32,948,349 | | Total assets | $27,939,939 | $35,719,598 | | Liabilities & Equity | | | | Total current liabilities | $2,833,338 | $2,505,394 | | Total liabilities | $5,516,479 | $5,928,010 | | Accumulated deficit | $(46,105,643) | $(38,019,402) | | Total stockholders' equity | $22,423,460 | $29,791,588 | Condensed Statements of Operations For Q3 2022, revenue decreased 5% to $2.6 million, while operating expenses increased 36% to $5.7 million, resulting in a net loss of $3.1 million, nearly double the prior year Three Months Ended September 30, 2022 vs 2021 | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Revenue | $2,583,412 | $2,718,534 | | Total operating expenses | $5,684,471 | $4,177,607 | | Loss from operations | $(3,101,059) | $(1,459,073) | | Net loss | $(3,095,690) | $(1,553,023) | | Net loss per share | $(0.35) | $(0.22) | Nine Months Ended September 30, 2022 vs 2021 | Metric | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Revenue | $7,440,760 | $8,586,217 | | Total operating expenses | $15,485,214 | $12,516,465 | | Loss from operations | $(8,044,454) | $(3,930,248) | | Net loss | $(8,086,241) | $(6,911,428) | | Net loss per share | $(0.92) | $(2.17) | Condensed Statements of Cash Flows For the nine months ended September 30, 2022, net cash used in operating activities was $5.6 million, with investing activities using $1.5 million, resulting in a net decrease in cash of $7.1 million Cash Flow Summary (Nine Months Ended September 30) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,610,366) | $(9,348,701) | | Net cash used in investing activities | $(1,549,281) | $(733,722) | | Net cash provided by financing activities | $78,387 | $19,177,246 | | Net change in cash | $(7,081,260) | $9,094,823 | | Cash at end of period | $20,657,719 | $9,790,732 | Notes to Unaudited Condensed Financial Statements The notes detail the company's biospecimen marketplace business, significant events like CEO departure and term loan payoff, and impacts from the Russia-Ukraine war and COVID-19 - The company's business was negatively impacted in the first half of 2022 by the Russia-Ukraine war, which disrupted approximately $1 million in purchase orders from its supply network in that region[30] - The company recognized a severance expense of $376,400 for the departing CEO, Dr. Christopher Ianelli, effective October 24, 2022[76] - On August 13, 2021, the company entered into a $3.5 million term loan with Western Alliance Bank, which was subsequently paid off on November 3, 2022[82][120] - Management believes existing cash will be sufficient for operations for at least the next 12 months, alleviating substantial doubt about going concern raised in prior periods[24] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% revenue decrease for Q3 2022, driven by a significant drop in COVID-19 related specimen demand, offset by non-COVID growth, and a sharp rise in operating expenses due to increased spending and a severance charge Overview and Known Trends The company operates the iSpecimen Marketplace, connecting researchers with human biospecimens, and faces trends including a 62% decline in COVID-19 related revenue and disruptions from the Russia-Ukraine war - The company's core business is the iSpecimen Marketplace, a platform that automates the process of searching for and procuring human biospecimens for research[124][125] Revenue Trend: COVID-19 vs. Non-COVID-19 (Nine Months Ended Sep 30) | Revenue Type | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | COVID-19 | $971,000 | $2,523,000 | $(1,552,000) | (62)% | | Non-COVID-19 | $6,470,000 | $6,063,000 | $407,000 | 6% | - Following management changes, the interim CEO is focused on improving execution, reviewing company structure, and green-lighting projects to accelerate technology development[142][144] Results of Operations For Q3 2022, revenue decreased 5% to $2.6 million due to lower COVID-19 demand, while operating expenses surged 36% from higher spending and a severance charge, leading to a doubled loss from operations - Q3 2022 revenue decreased by 5% YoY, primarily due to a reduction in demand for COVID-19 specimens, with COVID-related revenue at $322,000 (12% of total), down from $923,000 (34% of total) in Q3 2021[162] - Q3 2022 General and Administrative expenses increased by 37% YoY, largely due to a $376,000 severance charge for the former CEO and a $166,000 increase in taxes and insurance[169] - For the nine months ended Sep 30, 2022, revenue decreased 13% YoY, impacted by lower COVID-19 demand, supply network shutdowns in Ukraine/Russia, and smaller purchase order sizes due to recessionary effects[173] Liquidity and Capital Resources As of September 30, 2022, cash decreased by $7.1 million to $20.7 million, driven by operating and investing activities, though management believes current cash is sufficient for the next 12 months Key Liquidity Metrics | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash | $20,657,719 | $27,738,979 | | Working Capital | $21,402,836 | $30,442,955 | - For the nine months ended Sep 30, 2022, net cash used in operating activities was $5.6 million, net cash used in investing activities was $1.5 million, and net cash from financing was $0.08 million[183][187][189][190] - Management believes its current cash and anticipated cash flow will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[185] Non-GAAP Financial Measure The company uses Adjusted EBITDA to evaluate core operating performance, reporting losses of $2.2 million and $6.1 million for the three and nine months ended September 30, 2022, respectively, significantly wider than prior year periods Reconciliation of Net Loss to Adjusted EBITDA | Period | Net Loss | Adjusted EBITDA | | :--- | :--- | :--- | | Three Months Ended Sep 30, 2022 | $(3,095,690) | $(2,173,243) | | Three Months Ended Sep 30, 2021 | $(1,553,023) | $(823,290) | | Nine Months Ended Sep 30, 2022 | $(8,086,241) | $(6,124,463) | | Nine Months Ended Sep 30, 2021 | $(6,911,428) | $(2,750,061) | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - Not applicable for smaller reporting companies[223] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[226] - No changes in internal control over financial reporting occurred during the nine months ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[227] PART II – OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None[230] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2021 - No material changes from the risk factors disclosed in the Form 10-K filed on March 22, 2022[231] Unregistered Sales of Equity Securities and Use of Proceeds During the nine months ended September 30, 2022, the company granted an aggregate of 175,261 restricted stock units (RSUs) to employees under its 2021 Stock Incentive Plan - In the nine months ended September 30, 2022, the company granted 175,261 restricted stock units (RSUs) to employees under the 2021 Stock Incentive Plan[232] Other Part II Items The company reported no defaults upon senior securities, no mine safety disclosures, and no other information requiring disclosure under Item 5 for the period - Item 3. Defaults Upon Senior Securities: None[234] - Item 4. Mine Safety Disclosures: Not Applicable[235] - Item 5. Other Information: None[236]