iSpecimen raised $400,000 in a private placement of convertible preferred stock, giving investors a security that can be converted into common shares and pays an 8% cumulative dividend. The financing also gives the company a later option to redeem the preferred shares for cash at a premium.
The proceeds are earmarked for working capital and general corporate purposes. The terms set limits on how many common shares can be issued without stockholder approval and give preferred holders certain protections over changes that could affect their shares.
Key details
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Size and price: iSpecimen sold 500 shares of Series D preferred stock for $800 each, for $400,000 in gross proceeds. Each preferred share has a stated value of $1,000, making the aggregate stated value $500,000.
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Conversion terms: Holders can convert their preferred shares into common stock at any time. The conversion price is the greater of 85% of the common stock’s closing price on the trading day before conversion or a floor of $0.1616 per share, subject to adjustment for stock splits and similar events. The number of common shares received is based on the preferred shares’ stated value plus any accrued, unpaid dividends.
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Dividends and ownership limits: The preferred stock accrues dividends at 8% a year, payable quarterly in cash or, if specified equity conditions are met, in common shares. A holder generally may not convert if doing so would take its beneficial ownership above 4.99%; that limit can be raised to as much as 9.99% with 61 days’ notice.
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Limit on common-share issuance: Until stockholders approve the issuance under Nasdaq rules, the transaction is capped at 1,157,223 common shares, including shares issued upon conversion and as dividends. That equals 19.99% of the 5,789,013 common shares outstanding before the financing.
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Redemption option: Starting six months after issuance, iSpecimen may redeem some or all of the preferred stock for cash, subject to the stated conditions. The redemption price is 110% of stated value through the first anniversary of issuance, then 105%, plus accrued and unpaid dividends.
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Preferred-holder protections: A majority of the outstanding Series D shares must approve changes that would adversely affect the class, authorization of a senior class of stock, or an increase in the authorized number of Series D shares. The company established a Series D class of up to 2,000 shares and sold 500 in this offering.
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Placement costs: E.F. Hutton acted as exclusive placement agent on a best-efforts basis. Its compensation includes a cash fee of 4% of gross proceeds and a 1% expense allowance, plus reimbursement of certain expenses and legal fees capped at $80,000. The stated gross proceeds therefore do not reflect these costs.
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Resale registration and lock-ups: iSpecimen agreed to file a registration statement covering common shares issuable upon conversion and as dividends within 30 days of closing, and to use commercially reasonable efforts to have it become effective within 75 days, or 120 days if it receives a full review. Directors and executive officers agreed not to sell or otherwise dispose of company securities for 90 days after closing, subject to customary exceptions.
What changes for investors: The financing provides cash to the company while creating a potential source of future common-share dilution through conversion and share-paid dividends. The 19.99% cap limits issuance before stockholder approval; the preferred shares also carry an 8% cumulative dividend and specified protections for holders.