ISPC 10-K & 10-Q changes, risk factors and insider trading

Our iSpecimen Marketplace technology consists of four major functional areas: data ingestion and harmonization, search, workflow management, and administration, compliance and reporting. Each of these functional areas need continual development to both enable our current business to scale and to enable us to enter new markets. As financial resources become available, our intention is to focus most of our engineering resources on the development of the iSpecimen Marketplace platform for the foreseeable future. In fiscal year 2024,2025, we incurred $2,159,815 $3,530,291 in technology expenses, and capitalized $653,288$1,000,000 for internallysoftware developedunder software.development. While we have spent 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 and 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 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 in 20242025 and 2023,2024, we fulfilled approximately 69%77% and 77%,69%, , respectively, of the total value of these orders. These percentages do not take into consideration long term or open- ended projects that are not intended to be completely fulfilled at year end. Our business, financial condition, results of operations and cash flows may be materially and adversely impacted by the reduction, delay or cancellation of orders.

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 2024,2025, the percent of specimens that met specifications was 99% for clinical remnant specimens, 92% for banked research specimens and 99% for custom research collections. In 2024, the percent of specimens that met specifications was 99% for clinical remnant specimens, 89% for banked research specimens and 99% for custom research collections. In 2023, the percent Percentage of specimens that met specifications was 99% for clinical remnant specimens, 97% for banked research specimens and 99% for custom research collections. Percentage of specimens that met specifications decreasedincreased year over year from 2022 and then again during the year ended December 31, 2024. 2025. Following feedback from our customers, we implemented a robust return and exchange program to better meet customer needs. iSpecimen is also terminating contracts with suppliers with lower quality specimens. Any issues with quality from our supply sites can adversely affect our reputation, revenue, and profitability.

If we We are not able toin complycompliance with theNasdaq’s applicableminimum continuedbid listingprice requirementsrequirement, or standards of The Nasdaq Stock Market LLC,and our common stock couldmay be delisted from Nasdaq.if we fail to regain compliance.

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 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. AsThe Offering partclosed ofon itsOctober compensation31, 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.2024.

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 which was filed with the Securities and Exchange Commission (the “Commission”) on October 18, 2024, and subsequently declared effective effective by the Commission on October 29, 2024.

Throughout During the yearsyear ended December 31, 20242025, andthe Company continued its efforts, which had begun in 2023, we have initiated efforts to decrease ourits capital and operational expenditures by cutting costs and right sizing the Company through reductionsa reduction 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 reductionsreduction in workforce since January 1, 20232024 through the end of December 31, 20242025, has cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146% 67% and technology costs of approximately 64%25% during the year ended December 31, 20242025 when compared to the year ended December 31, 2023.2024.

We completed the implementation of a next day quote system in the third quarter of 2023 and we continue to see positive results in 2024,2024 and 2025, as evidenced by increased conversion ratios of quotes to purchase orders of 41%.44%. 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 20242025 when compared to 20232024 and prior years, while we focus on growing our revenues through key market opportunities and assessing our capital raise prospects. During the years ended December 31, 2024 2025 and 2023,2024, we capitalized approximately $653,000$Nil and $3,767,000,$653,000, respectively, of internally developed software costs and $1,000,000 and $Nil, respectively, of software costs.under development. 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. In the yearsyear 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 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.

Financial Operations Overview and Analysis for the Years Ended December 31, 20242025 and 2023 Comparison of the Years Ended December 31, 2024 and 2023

Cost of revenue increaseddecreased by approximately $482,000,$3,398,000, or 10%,64%, from approximately $4,820,000$5,303,000 for the year ended December 31, 20232024 to approximately $5,303,000 $1,905,000 for the year ended December 31, 2024.2025 Although therewhich was aattributable 0.7%to an approximately 64% decrease in the number of specimens delivered during for the current year endedas Decembercompared 31, 2024, overto the sameaccessioned specimens in the prior yearyear, period,offset by an approximately $47, or 21%, increase in the average cost per specimen increased by 11% from $196 for the year ended December 31, 2023 to $217 for the year ended December 31, 2024.specimen.

Technology expenses decreased by approximately $37,000,$1,370,000, or 1%,39%, from approximately $3,567,000$3,530,000 for the year ended December 31, 20232024 to approximately $3,530,000 $2,160,000 for the year ended December 31, 2024.2025. The decrease was related to professional fees of approximately $2,040,000. which were partially offset by an increasesdecrease in amortization expense of internally developed software of approximately $89,000 and$491,000, payroll and related expenses of approximately $887,000 and general operating expenses related to $1,918,000.technology expenses of approximately $1,000, which was partially offset by the increase in professional fees of approximately $9,000.

Sales and marketing expenses increased decreased by approximately $989,000,$2,650,000, or 25%,54%, from approximately $3,956,000$4,945,000 for the year ended December 31, 2023 2024 to approximately $4,945,000 $2,296,000 for the year ended December 31, 2024.2025. The increasedecrease was primarily attributable to increases in external marketing expense of approximately $1,618,000 and advertising and promotions expense of approximately $201,000, which were partially offset by a decrease in payroll and related expenses of approximately $773,000$1,713,000, advertising and promotions expense of approximately $296,000 and external marketing expense of approximately $649,000, which was partially offset by the increase in general operating expenses related to sales and marketing of approximately $57,000.$3,000.

Supply development expenses decreased by approximately $492,000,$291,000, or 48%,54%, from approximately $1,030,000$538,000 for the year ended December 31, 20232024 to approximately $538,000$247,000 for the year ended December 31, 2024.2025. The decrease was primarily attributable to a decrease in professional fees of approximately $278,000,$119,000 and payroll and related expenses of approximately $189,000 and general supply development expenses of approximately $25,000.$172,000.

Fulfillment costs decreased by approximately $153,000,$808,000, or 9%,49%, from approximately $1,789,000$1,636,000 for the year ended December 31, 20232024 to approximately $1,636,000 $828,000 for the year ended December 31, 2024.2025. The decrease was primarily attributable to a decrease in professional fees of approximately $183,000 $19,000 and general operating expenses related to fulfillment of approximately $39,000, which was partially offset by increases in payroll and related expenses of approximately $69,000$821,000 for personnel engaged in pre-sales feasibility assessments and order fulfillment, fulfillment.which was partially offset by the general operating expenses related to fulfillment of approximately $32,000.

OtherGeneral and income,administrative net,expenses increased decreased by approximately $160,000,$2,595,000, or 230%,43%, from approximately $70,000$6,067,000 for the year ended December 31, 2024 to approximately $3,472,000 for the year ended December 31, 2023 to approximately $230,000, for the year ended December 31, 2024.2025. The increase in other income (expense), net,decrease was attributable to ana increasedecrease in compensation costs of otherapproximately income$647,000, professional fees of approximately $133,000 and utilities and facilities expenses of approximately $93,000, doubtful account expense of approximately $646,000, taxes and insurance of approximately $388,000 and franchise tax of approximately $445,000$310,000, andwhich decrease in interest and penalties on sales tax liability of approximately $168,000,was partially offset by the increase in interest expensegeneral operating expenses of approximately $157,000,$120,000, amortization of approximately $3,000, and awrite-off decreaseof in interest incomeIDS of approximately $296,000.$274,000.

We have recurring losses since inception. As of December 31, 2024,2025, our available cash and available-for-sale securities totaled approximately $1,878,000,$6,881,000, which represented aan decreaseincrease of approximately $465,000$5,002,000 from approximately $2,344,000,$1,878,000, as of December 31, 2023.2024. We had working capital deficit of approximately $2,182,000,$723,000, an accumulated deficit of approximately $71,863,000,$82,350,000, cash and cash equivalents of approximately $1,878,000$6,881,000 and accounts payable and accrued expenses of approximately $5,366,000.$5,982,000. Our continued viability is dependent on the ability to successfully obtain additional working capital and/or ultimately attain profitable operations. During the year ended December 31, 2025, the Company continued its efforts, which had begun in 2023, weto began initiating efforts to decrease ourits capital and operational expenditures by cutting costs and right sizing the Company through reductionsa reduction in workforce while streamlining operations and rationalizing resources to focus on key market opportunities. The reduction in workforce since January 1, 2023 2024 through December 31, 2024,2025, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 146%67% and technology costs of approximately 64%25% during the year ended December 31, 20242025 when compared to year ended December 31, 2023.2024. 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. In the year ended December 31, 2024,2025, we engaged in raising capital through debtequity financing as discussed in Note 7 and through public equity as discussed in Note 10.

Cash Flows Operating

Operating Activities

For the year ended December 31, 2024, 2025, net cash used in operating activities was approximately $8,264,000,$4,241,000, which consisted of a net loss of approximately $12,498,000 $10,488,000 offset by non-cash charges of approximately $3,549,000,$4,133,000, which included approximately $2,037,000$1,471,000 related to amortization of internally developed software, approximately $250,000$21,000 in stock-based compensation, approximately $706,000$60,000 in bad debt expense, approximately $66,000$68,000 related to depreciation of property and equipment, approximately $700 for loss from sales of available-for-sale securities, approximately $60 for loss on disposal of property and equipment, approximately $327,000 of write-off of internally developed software, an approximately $1,188,000 increase in write-off of accounts receivable-unbilled and approximately $192,000 related to amortization of other intangible assets, assets,approximately $1,871,000 related to write-off of internally developed software, approximately $525,000 related to write-off of other intangible assets which were offset by approximately $29,000$75,000 of accretion write-off of discountaccounts on available-for-sale securities.payable.

DuringNet cash theused yearin endedinvesting December 31,activities 2024, we investedwas approximately $653,000$1,000,000 in further developing our iSpecimen Marketplace technology with plans to invest at a much lower level in 2025, in comparison to the cash invested duringfor the year ended December 31, 20232025, which consisted of approximately $1,000,000 $3,767,000.of capitalization of intangible assets under development and $454 purchase of property and equipment. We intend to continue to use our existing cash to grow our supply network, increase our marketing and sales presence, scale our operations, and for working capital and general corporate purposes.

Net cash provided by investing activities was approximately $1,980,000 and net cash used in investing activities was approximately $7,228,000 for the years ended December 31, 2024 and 2023, respectively. Net cash provided by investing activities$1,980,000 for the year ended December 31, 2024 consisted of approximately $3,150,000 $3,150,000 of proceeds from sale and maturities of available-for-sale securities, which were offset by approximately $461,000 of purchases of available-for-sale securities, approximately $653,000 of capitalization of internally developed software, approximately $25,000 of purchases of leasehold improvements and approximately $32,000 of purchases of property and equipment.

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 year ended December 31, 2024. However, there had been an increase in our shipping costs period over period during the year ended December 31, 2024.

We capitalize certain internal and external costs incurred during the application development stage of internal use software projects until the software is ready for its intended use. Amortization of the asset commences when the software is complete and placed into service and is recorded in operating expenses. We amortize completed internal-use software over its estimated useful life of five years on a straight-line basis. Costs incurred during the planning, training and post-implementation stages of the software development life cycle are classified as technology and expensed to operations as incurred. Costs that do not meet the capitalization criteria are expensed as incurred. We performed an impairment analysis of our internally developed software as of the measurement date of December 31, 2024 and concluded that a small portion the net book value of the asset is not recoverable. During the year ended December 31, 2024,2025, such portion were written off and reduced the net book value estimates by $327,000.$1,871,000 (2024 - $327,000).

On May 8, 2026, the Company entered into the securities Purchasepurchase Agreementagreement with certain Investors,accredited investors, pursuant to which the Company agreed to issue and sell 488,281 Shares, at a purchase price of $5.12 per Share. In lieu of Shares that would otherwise resultsell, in a purchaser’sprivate beneficialplacement, an ownership exceeding 4.99%aggregate of the number488,281 securities, comprised of (i) 85,202 shares of Common Stock outstandingat immediatelya afterpurchase givingprice effectof $5.12 per Share, and (ii) 403,088 pre-funded warrants to thepurchase issuanceup to 403,088 shares of suchCommon Shares, certain purchasers may elect to receive Pre-Funded WarrantsStock at a purchase price of $5.1199 per Pre-Funded Warrant (equal to the per Share purchase price less $0.0001)., for aggregate gross proceeds of $2,500,000, before deducting placement agent fees and other offering expenses. Each Pre-Funded Warrant is exercisable immediately upon issuance for one share of Common Stock at an exercise price of $0.0001 per share and will remain exercisable until exercised in full. The offering closed on May 11, 2026.

The Company’s Company’s financial performance is subject to global economic conditions and their impact on levels of spending by our customer research 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 increaseddecreased our allowance for doubtful accounts in accounts receivablesreceivable by $369$11,275 as of MarchJune 31,30, 2026 due to certain certain customers that either lack liquidity or have filed for bankruptcy. We have enhanced procedures related to our credit check process for new and existing customers in the firstsecond quarter of 2026 to mitigate the risk to future collectability of receivables.

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 MarchJune 31,30, 2026, 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.

During the threesix months ended MarchJune 31,30, 2026, the Company continued its efforts, which had begun in 2023, to decrease its capital and operational expenditures by cutting costs and right sizingright-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, 2024 through December 31, 2025, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 67% and technology costs of approximately 39% during during the year ended December 31, 2025 when compared to the year ended December 31, 2024. During the firstsecond quarter of 2026, the reductions reductions in workforce resulted in an estimated reduction in monthly compensation costs of approximately 70% and technology costs of approximately 36% during the three months ended March 31, 2026,17% when compared to the three six months ended MarchJune 31,30, 2025. Technology costs increased approximately 455% during the six months ended June 30, 2026 when compared to the six months ended June 30, 2025 as a result of the development and improvement of the Company’s internally developed software.

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 firstsecond quarter of 2026, as evidenced by increased conversion ratios of quotes to purchase orders of 44%.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 threesix months ended MarchJune 31,30, 2026 and 2025, we we capitalized approximately $1,700,000 and $0, respectively, of internally developed software costs, of which $1,000,000 was reclassified from software under development. These investments have resulted in multiple process improvements, streamlining workflows and providing deeper insights into orders for all users of our marketplace.

Financial Operations Overview and Analysis for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025 (Unaudited)

Comparison of the Three Months Ended March 31,June 30, 2026 and 2025

Revenue decreased by approximately $902,000,$561,000, or 85%, 79%, from approximately $1,058,000$713,000 for the three months ended MarchJune 31,30, 2025 to approximately $156,000 $152,000 for the three months ended MarchJune 31, 30, 2026. This was primarily due to the decrease of 1,419,2,198, or approximately 61%,87%, in specimen count from 2,3092,533 specimens in the three months ended June 30, 2025 to 335 specimens in the three months ended MarchJune 31, 2025 to 890 specimens in the three months ended March 31,30, 2026.

The effect of the decrease in specimen count also caused the average selling price per specimen to decreaseincrease by $283,$172, or 62%,61%, from approximately $458 $282 during the three months ended March 31,June 30, 2025 to $175$454 during the three months ended MarchJune 31,30, 2026. The significant decline in revenue was mainly due to decrease in customers’ orders and procurement during the three months ended MarchJune 31,30, 2026.

Cost of revenue decreased by approximately $573,000, $361,000, or 87%,81%, from approximately $657,000$444,000 for the three months ended MarchJune 31,30, 2025 to approximately $84,000 $83,000 for the three months ended March 31,June 30, 2026, which was attributable to an approximately 62%87% 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, andoffset by an approximately $190, $73, or 67%,42%, decreaseincrease in the average cost per specimen.

Technology expenses decreased by approximately $298,000, $246,000, or 55%,46%, from approximately $545,000$536,000 for the three months ended MarchJune 31,30, 2025 to approximately $248,000 $290,000 for the three months ended MarchJune 31,30, 2026. The decrease was related to decrease in amortization expense of internally developed software of approximately $234,000 and $168,000, payroll and related expenses of approximately $81,000,$23,000, which was partially offset by the increase inand professional fees of approximately $17,000.$55,000.

Sales and marketing expenses increased by approximately $1,195,000, $286,000, or 344%,111%, from approximately $347,000$258,000 for the three months ended MarchJune 31, 30, 2025 to approximately $1,542,000$544,000 for the three months ended MarchJune 31,30, 2026. The increase was primarily attributable to increasesincrease in external marketingadvertising and promotions expense of approximately $1,501,000, $468,000, which was partially offset by the decrease in payroll and related expenses of approximately $259,000 and$166,000, advertisingexternal and promotionsmarketing expense of approximately $13,000 $45,000.and general operating expenses related to sales and marketing of approximately $3,000.

Supply development expenses decreased by approximately $60,000,$62,000, or 64%,62%, from approximately $94,000$99,000 for the three months ended MarchJune 31,30, 2025 to approximately $34,000 $37,000 for the three months ended MarchJune 31,30, 2026. The decrease was primarily attributable to a decrease in payroll and related expenses of approximately $10,000 $60,000.and professional fees of approximately $52,000.

Fulfillment costs decreased by approximately $188,000, $131,000, or 64%,53%, from approximately $294,000$248,000 for the three months ended MarchJune 31,30, 2025 to approximately $106,000 $117,000 for the three months ended March 31,June 30, 2026. The decrease was primarily attributable to a decrease in professional fees of approximately $1,000 and payroll and related expenses of approximately $185,000$131,000 for personnel engaged in pre-sales feasibility assessments and order fulfillmentfulfillment, andwhich was partially offset by the general operating expenses related to fulfillment of approximately $3,000. $1,000.

General and administrative expenses decreased by approximately $78,000,$506,000, or 10%,53%, from approximately $759,000$948,000 for the three months ended March 31,June 30, 2025 to approximately $680,000$442,000 for the three months ended MarchJune 31,30, 2026. The decrease was attributable to a decrease in compensation costs of approximately $349,000, professional fees of approximately $91,000,$138,000, utilities and facilities expenses of approximately $2,000,$1,000, taxes and insurance of approximately $47,000, depreciation and amortization of approximately $15,000 and franchise tax of approximately $63,000, which was partially offset by the increase in doubtful account expense of approximately $111,000, amortization and depreciation of approximately $15,000, taxes and insurance of approximately $95,000, and franchise tax of $20,000, which were partially offset by the increase in compensation costs of approximately $253,000$90,000 and general operating expenses of approximately $3,000. $17,000.

Other income, net, increaseddecreased by approximately $283,000, $774,000, or 1,415%,100%, from an income of approximately $20,000$774,000 for the three months ended March 31,June 30, 2025 to approximately $263,000$175 for the three months ended MarchJune 31,30, 2026. The decrease in other income, net, was attributable to the increasedecrease of other income of approximately $266,000, decrease in interest income of approximately $2,000, decrease in recovery of$764,000, interest and penalties on sales tax liability of approximately $17,000$10,000 and increasedecrease in interest expenseincome of approximately $2,000.$0.

We have recurring losses since inception. As of MarchJune 31,30, 2026, our available cash and cash equivalents totaled approximately $2,818,989, $4,414,000, which represented a decrease of approximately $4,062,000$2,466,000 from approximately $6,881,000,$6,881,000 as of December 31, 2025. We had a working capital deficit of approximately $2,116,000, $993,000, an accumulated deficit of approximately $84,625,000,$85,988,000, cash and cash equivalents of approximately $2,819,000 $4,414,000, and accounts payable and accrued expenses of approximately $5,351,000.$5,291,000. Our continued viability is dependent on the ability to successfully obtain additional working capital and/or ultimately attain profitable operations. During the threesix months ended March 31,June 30, 2026, the Company continued its efforts, which had begun in 2023, to decrease its capital and operational expenditures by cutting costs and right sizing 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, 2024 through December 31, 2025, cumulatively resulted in an estimated reduction in monthly compensation costs of approximately 67% and technology costs of approximately 39% during the year yearended December 31, 2025 when compared to the year ended December 31, 2024. During the firstsecond quarter of 2026, the reductions in workforce workforce resulted in an estimated reduction in monthly compensation costs of approximately 70% and technology costs of approximately 36%17% during the threesix months ended MarchJune 31, 2026,30, 2026 when compared to the threesix months ended MarchJune 31,30, 2025. Technology costs increased approximately 450% during the six months ended June 30, 2026 when compared to the six months ended June 30, 2025 as a result of the development and improvement of the Company’s internally developed software. While the Company plans to improve its sales and revenues, the Company is taking steps to significantly reduce and manage expenditures to improve its financial position and ensure continued funding of operations. However, as certain elements of the Company’s operating plan are not within the Company’s control, the Company is unable to assess their probability of success. During the year ended December 31, 2025, the Company engaged in raising capital through equity financing as discussed in Note 10.8.

We may be unsuccessful in increasing our revenues or containcontaining 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.

For the threesix months ended MarchJune 31,30, 2025,2026, net cash used in operating activities was approximately $1,096,000,$4,051,000, which consisted of a net loss of approximately $1,584,000$3,638,000 offset by non-cash charges of approximately $486,000,$73,000, which included approximately of $368,000$333,000 related to amortization of internally developed software, approximately $16,000 $1,000 in stock-based compensation, approximately $37,000$4,000 in bad debt expense, recovery, approximately $17,000$5,000 related to depreciation of property and equipment, and approximately $48,000$262,000 related to amortizationgain ofon otherdebt intangible assets.settlement.

Total changes in assets and liabilities of approximately $3,000 $487,000 were attributable to an approximately $752,000$31,000 decrease in accounts receivable, an approximately $101,000$31,000 decrease in operating lease right-of-use asset and an approximately $429,000 decrease in accounts payable, offset by an approximately $23,000 increase in prepaid expenses, an approximately $28 increase in accrued expenses, an approximately $14,000$28,000 decrease in operating lease right-of-use asset,liability and an approximately $90,000 $68,000 decrease in deferred revenue, offset by an approximately $411,000 decrease in accounts payable, an approximately $351,000 decrease in accrued expenses and an approximately $12,000 decrease in operating lease liability.revenue.

Net cash used in investing activities was approximately $700,000 for the threesix months ended MarchJune 31,30, 2026, which consisted of approximately $700,000 of capitalization of intangibleinternally assetsdeveloped under development. software. We intend to continue to use our existing cash to grow our supply network, increase our marketing and sales presence, scale our operations, and for working capital and general corporate purposes.

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, 2025. There have been no material changes in our critical accounting policies and procedures during the threesix months ended MarchJune 31,30, 2026.

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 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. Based on the foregoing, the Company expects to cease to qualify as an emerging growth company on December 31, 2026, and should prepare for compliance with all applicable requirements for non-emerging growth companies beginning with its Annual Report on Form 10-K for the year ending December 31, 2026.