Inspire Veterinary Partners(US:IVP)2025-05-15 20:01Company Overview - Inspire Veterinary Partners, Inc. operates thirteen clinics across nine states, focusing on small animal general practice hospitals and expanding into equine care with the acquisition of The Pony Express Veterinary Hospital [141]. Acquisition Strategy - The company has acquired multiple veterinary practices, with transaction values ranging from $500,000 to $3,108,652, totaling significant investments in growth [153]. - The acquisition of Kauai Veterinary Clinic was completed for $1,505,000, with an additional $1,300,000 for the underlying real estate, financed by loans totaling $2,383,400 [157]. - The company plans to continue due diligence for acquisitions of general practice and specialty hospitals, aiming to expand services to include emergency care and complex surgeries [150]. - The company intends to maintain a focus on individual clinic acquisitions while also pursuing clusters of 2 to 6 hospitals to accelerate growth [151]. - The Company acquired Dietz Family Pet Hospital for $500,000, financed by a loan of $382,500 from WealthSouth [165]. - The acquisition of Aberdeen Veterinary Clinic was completed for $574,683, with financing of $445,981 from WealthSouth [166]. - All Breed Pet Care Veterinary Clinic was acquired for $952,000, alongside real estate for $1,200,000, financed by loans totaling $1,945,450 [167]. - The Pony Express Veterinary Hospital acquisition cost $2,608,652, with an additional $500,000 for real estate, financed by loans totaling $2,853,314 [168]. - Williamsburg Animal Clinic was acquired for $850,000, financed by a loan of $637,500 from WealthSouth [169]. - The Old 41 Animal Hospital acquisition totaled $1,465,000, financed by loans of $1,208,000 [170]. - Valley Veterinary Service was acquired for $800,000 in cash, with a holdback of $200,000 and $400,000 in restricted shares, alongside real estate for $590,000 [171]. Financial Performance - For the three months ended March 31, 2025, total revenue decreased by 25% to $3,639,209 compared to $4,831,567 in 2024 [172]. - Service revenue dropped by 23% to $2,741,029, while product revenue fell by 30% to $898,180 [174]. - The Company aims for service revenue to constitute 70% to 80% of gross revenue, currently at 75% for the reported period [177]. - Service revenue decreased by $804,571, or 23%, to $2,741,029 for the three months ended March 31, 2025, compared to $3,545,599 for the same period in 2024 [181]. - Product revenue decreased by $387,787, or 30%, to $898,180 for the three months ended March 31, 2025, compared to $1,285,968 for the same period in 2024 [182]. - Cost of service revenue decreased by $569,869, or 21%, to $2,139,278 for the three months ended March 31, 2025, compared to $2,709,147 for the same period in 2024 [183]. - Cost of product revenue decreased by $230,698, or 23%, to $785,409 for the three months ended March 31, 2025, compared to $1,016,107 for the same period in 2024 [184]. - General and administrative expenses decreased by $426,905, or 15%, to $2,446,438 for the three months ended March 31, 2025, compared to $2,873,343 for the same period in 2024 [185]. - Net loss decreased by $1,006,756, or 29%, to $2,415,036 for the three months ended March 31, 2025, compared to $3,421,792 for the same period in 2024 [188]. - The company had a total accumulated deficit of $38,765,317 as of March 31, 2025 [189]. - Cash used in operations was $1,374,297 for the three months ended March 31, 2025 [189]. Funding and Capital Structure - The company expects to incur additional costs and require additional capital as it continues to acquire additional veterinary hospitals, clinics, and practices [190]. - The company is seeking to raise additional funding through debt or equity financing during the next twelve months [192]. - As of March 31, 2025, total notes payable amounted to $11,523,821, a decrease from $11,983,137 as of December 31, 2024, reflecting a reduction of approximately 3.85% [212]. - The company entered into a commercial loan with FSB for $375,000 on November 8, 2023, with a fixed interest rate of 8.5% [210]. - The company issued a total of $2,102,500 in Convertible Debentures with a 6.00% interest rate between March 18 and December 28, 2021 [213]. - The total principal amount of FSB notes payable as of March 31, 2025, was $3,097,263, down from $3,361,618 as of December 31, 2024 [212]. - The company has a long-term portion of notes payable amounting to $8,283,910 as of March 31, 2025 [212]. - The company has incurred issuance costs of $40,000 for the Convertible Debenture, amortized over its life [213]. - The company entered into a Merchant Cash Advance Agreement for gross proceeds of $1,050,000 with an effective interest rate of 49% [215]. - The financing arrangement was amended on August 10, 2023, to borrow an additional $507,460, increasing weekly repayments to $76,071 over 28 weeks and decreasing the effective interest rate to 41% [216]. - As of March 31, 2025, the outstanding balance of the loan payable was $1,737,846, down from $2,340,020 as of December 31, 2024 [222]. - For the three months ended March 31, 2025, the Company reported net cash used in operating activities of $1,374,297, an improvement from $3,169,029 in the same period of 2024 [229]. - The cash provided by financing activities for the three months ended March 31, 2025, was $2,528,915, compared to $3,216,090 in the same period of 2024 [229]. Goodwill and Intangible Assets - The Company has entered into acquisitions primarily with existing veterinary hospitals throughout the United States, allocating purchase consideration based on estimated fair values [237]. - Goodwill is tested for impairment annually or when circumstances change, with the Company assessing qualitative factors to determine if an impairment test is necessary [239]. - As of March 31, 2025, the company's intangible assets totaled $1,481,352, with accumulated amortization of $1,927,020 [243]. - The client list is valued at $1,916,444, with a retention rate of 74% based on the Veterinary Services industry [243]. - An increase in the retention rate to 80% would increase the client list value by approximately $1.2 million and decrease goodwill by the same amount [243]. Risk Factors - Staffing shortages and rising talent acquisition costs pose risks to the company's ability to swiftly acquire and integrate new hospitals [148]. - The company has no off-balance sheet arrangements [246]. - As of March 31, 2025, the company's net borrowings under the Master Lending and Credit Facility were $11,523,820, exposing it to minimal interest rate fluctuations [248]. - The company has not used any financial instruments to hedge against interest rate fluctuations [248]. - Inflation has not materially affected the company's financial condition or results of operations [250]. Valuation and Financial Assumptions - The company selected a discount rate of 19.6% to calculate the present value of prospective after-tax cash flows associated with the customer base [245]. - Stock-based compensation is measured using the Black-Scholes Model, with assumptions that can significantly impact recorded expenses [244]. - The annual sales retention rate for the customer base is maintained at 74% [245].