Inspire Veterinary Partners(IVP) - 2023 Q4 - Annual Report

Forward-Looking Statements This section outlines forward-looking statements in the Annual Report on Form 10-K, reflecting management's views on future events and financial performance, cautioning that actual results may differ due to various risks and uncertainties - The report contains forward-looking statements that are not guarantees of future performance and involve risks and uncertainties[13] - Key risks include limited operating history, unprofitability, need for additional capital, increased expenses as a public company, challenges in managing acquisitions, difficulties in recruiting veterinarians, negative publicity, and fluctuations in quarterly results[14] - Additional risks are related to government regulations and potential adverse effects on common shares and securities, such as delisting notices and stock price volatility[16][17][20] PART I ITEM 1. Business Inspire Veterinary Partners operates veterinary hospitals, expanding through acquisitions while managing IPO-related growth and recent financial and regulatory challenges Company Overview Inspire Veterinary Partners owns and operates fourteen veterinary hospitals, specializing in small animal general practice and expanding through acquisitions, having recently completed its IPO - Inspire Veterinary Partners, Inc. owns and operates fourteen veterinary hospitals in ten states, specializing in small animal general practice, with plans to expand into mixed animal facilities and critical/emergency care through acquisitions[22][23] - The company completed its initial public offering on August 31, 2023, and its Class A Common Stock is traded on The Nasdaq Capital Market under the symbol 'IVP'[23] - Services include preventive care, various surgical procedures (soft tissue, orthopedic), and alternative treatments like acupuncture and chiropractic care[24] Recent Developments Recent developments include new senior notes, a Nasdaq delisting notice, a common stock purchase agreement, a key acquisition, preferred stock conversions, and an amended registration statement for a 'Best-Efforts' Offering - On March 26, Inspire Veterinary entered into a securities purchase agreement to issue two Increasing OID Senior Notes for $250,000 each, with maturity by December 26, 2024, or upon a capital raise[27][29][30][31] - On March 8, 2024, Nasdaq issued a delisting determination due to the company's stock closing below $0.10 for ten consecutive trading days[35][36][37] - The company entered into a common stock purchase agreement with Tumim Stone Capital LLC on November 30, 2023, for up to $30.0 million in Class A Common Stock, with the purchase price at 95% of the lowest daily volume-weighted average price during a three-day period[43][44][46] - On November 8, 2023, Inspire acquired Valley Veterinary Services for $1,400,000 cash plus 408,163 restricted shares of Class A common stock, and assumed certain liabilities[64][65] - Between November 14, 2023, and January 29, 2024, existing Series A preferred stock holders converted 416,641 shares into 16,616,942 shares of Class A Common Stock[68] - On January 26, 2024, the Company filed an amended registration statement for a 'Best-Efforts' Offering of up to 26,581,605 shares of Class A Common Stock, aiming for $5,000,000 gross proceeds, with Spartan Capital Securities, LLC as the placement agent[69] Industry Overview and Market Opportunity Inspire Veterinary aims for significant growth by acquiring existing veterinary hospitals and expanding into mixed animal and specialty care, capitalizing on a largely unconsolidated market - Inspire Veterinary aims to acquire ten units per year, targeting 50 locations within five years, focusing on existing veterinary hospitals[75] - Future growth plans include expanding beyond small companion animal hospitals to mixed animal and specialty care, and acquiring multi-unit practices for faster growth and internal benefits[75][76][77] Our Strategy The company's strategy involves acquiring general practice and specialty hospitals, expanding existing locations with advanced care, and seeking multi-unit practices for accelerated growth and internal benefits - The company's strategy involves acquiring existing general practice and specialty hospitals, and expanding current locations to include emergency care, complex surgeries, holistic care, and comprehensive diagnostics[76] - In its third calendar year, Inspire plans to seek multi-unit practices with regional presence to accelerate growth and provide internal benefits like case referrals and career pathing[77] Selling and Marketing Inspire Veterinary leverages established brokerage contacts and an internal team for acquisitions, with plans to expand for deeper industry integration and organic lead generation - Inspire Veterinary has established contacts with major veterinary brokerages and has a pipeline of deals, extending letters of intent on approximately 10% of analyzed hospitals[79] - The company's acquisition and valuation team is sufficient for current activity and plans to expand for deeper industry integration, organic lead generation, and leveraging supplier relationships[79] Competition The veterinary industry is highly competitive, with Inspire differentiating itself through broad employee equity, personalized integration, customized clinician development, and disciplined acquisition of profitable locations - The veterinary industry is highly competitive, with approximately 13 national and 30 regional consolidators owning around 6,000 of nearly 30,000 U.S. hospitals[82] - Larger competitors like Mars and NVA have advantages in brand awareness, financial, and infrastructure resources[83][85] - Inspire differentiates itself through a broad equity offering to employees, a personalized approach to purchasing and integrating hospitals, a customized coaching and development workflow for clinicians, and a disciplined approach to acquiring profitable locations[87] Government Regulation Inspire Veterinary complies with varying state-specific veterinary care and ownership regulations, including those for non-licensed ownership and controlled substance dispensing - Inspire Veterinary has processes to comply with state-by-state veterinary care and ownership regulations, which vary significantly[86] - Specific regulations include prohibitions on non-licensed persons owning clinics in Texas (where Inspire operates two clinics) and requirements for at least one veterinarian member in Indiana LLC-owned clinics (where Inspire operates one clinic)[89][90] - The company also adheres to Drug Enforcement Agency (DEA) regulations for controlled and scheduled drugs, maintaining utilization logs and security procedures[92] Employees As of April 1, 2024, the company had 156 employees, none of whom are represented by labor unions or collective bargaining agreements - As of April 1, 2024, the company had 156 employees, none of whom are represented by labor unions or covered by collective bargaining agreements[94] Properties Inspire Veterinary operates with a decentralized leadership team and owns real estate for most of its clinics, with some properties leased and most owned ones financed by banks - Inspire Veterinary operates with a decentralized leadership team working from home offices across several states, without a physical headquarters[95] - The company owns the real estate for Kauai Veterinary Clinic, Chiefland Animal Hospital, Pets & Friends Animal Hospital, Lytle Veterinary Clinic, Southern Kern Veterinary Clinic, Bartow Animal Hospital, All Breed Pet Care, The Pony Express Veterinary Hospital, The Old 41 Animal Hospital, and Valley Veterinary Services[96][97][98][100][101][102][105][106][107][108] - Leased properties include Advanced Veterinary Care of Pasco, Dietz Family Pet Hospital, and Aberdeen Veterinary Clinic[99][103][104] - Most owned properties are financed by WealthSouth (a division of Farmers National Bank) with variable interest rates (New York Prime Rate + 0.50%, never less than 3.57% per annum), or First Southern National Bank[97][98][100][101][102][105][106][107][108][109] Legal Proceedings As of the report date, Inspire Veterinary and its subsidiaries are not party to any pending or threatened legal or administrative proceedings - As of the report date, Inspire Veterinary and its subsidiaries are not party to any pending legal or administrative proceedings, nor are they aware of any threatened against them[110] ITEM 1A. Risk Factors This section details numerous risks that could materially affect Inspire Veterinary's operations, financial condition, or business, covering business, government regulation, and common shares/securities factors Risks Related to our Business The company faces business risks including limited operating history, unprofitability, going concern doubts, management challenges, acquisition integration issues, and reputational harm from negative publicity - The company has a limited operating history, is not profitable, and may never become profitable, with a net loss of $14,792,886 for the year ended December 31, 2023, and an accumulated deficit of $21,215,257[112] - There is substantial doubt about the company's ability to continue as a going concern, dependent on generating sufficient cash flow and securing additional capital, which may not be available on acceptable terms[113][114][116][117][118] - Failure to attract and retain senior management, effectively integrate acquisitions, manage rapid growth, or protect intellectual property rights could materially adversely affect the business[115][121][122][160][161] - The company faces significant increased expenses and administrative burdens as a public company, and its management lacks prior senior public company experience, potentially diverting attention from day-to-day operations[119][120][133] - The company may incur successor liabilities from acquired businesses, and purchasing real estate with acquisitions adds complexity and cost[136][137] - Recruiting and retaining skilled veterinarians is challenging due to shortages, which could disrupt business and increase labor costs[141] - Negative publicity from animal care claims or security breaches of computer networks could harm reputation, reduce sales, and adversely affect operating results[143][149][150][156][158] Risks Related to Government Regulation The company is subject to increasing compliance costs and risks of fines or service restrictions due to complex federal and state regulations governing veterinary care, ownership, and prescription medications - The company is subject to various federal, state, and local laws and regulations governing business practices, veterinary care, ownership, and environmental/health/safety matters, with compliance costs expected to increase[164] - Failure to comply with these regulations could result in fines, litigation, sanctions, and an inability to offer services in certain states, particularly those with restrictions on non-veterinarian ownership or para-professional duties[165][167][168][170][171][172] - Dispensing prescription pet medications, including controlled substances, is subject to extensive and evolving federal and state regulations, with potential for reprimands, sanctions, or fines for non-compliance[173] Risks Related to our Common Shares and Securities Risks include a Nasdaq delisting notice, potential stock dilution from capital raises, no anticipated cash dividends, and high stock price volatility, exacerbated by reduced disclosure as an emerging growth company - The company received a Nasdaq delisting notice on March 8, 2024, due to its Class A Common Stock bid price falling below $0.10 for ten consecutive trading days, following a previous notice for falling below $1.00[175][176] - The company plans to appeal the delisting determination and implement a reverse stock split to regain compliance, but there's no assurance of success, which could lead to trading on the OTC market, reduced liquidity, and a 'penny stock' designation[177][178][180] - Sales of Class A Common Stock to Tumim Stone Capital LLC under the Purchase Agreement are subject to market conditions and other factors, making the actual number of shares sold and gross proceeds unpredictable, potentially causing substantial dilution to existing stockholders[181][183][184] - The company does not intend to pay cash dividends in the foreseeable future, meaning investor returns will depend on stock price appreciation[188] - The trading price of Class A common stock is volatile due to various factors, including potential delisting, variations in financial results, and negative publicity, which could result in substantial losses for investors[195][197][198][200][201] - The company is an 'emerging growth company' and 'smaller reporting company', allowing for reduced disclosure requirements, which may make its stock less attractive to some investors[202][205][206] ITEM 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments from the SEC regarding the company's filings - There are no unresolved staff comments[210] ITEM 1C. Cybersecurity Inspire Veterinary Partners uses a third-party for cybersecurity monitoring and is establishing a comprehensive policy to manage escalating threats, with no material incidents reported to date - The company uses a third-party provider for cybersecurity monitoring, including firewall, network, system security, and backups, with management participating in risk assessments[211][212] - To date, no cybersecurity incidents have materially affected the company's business strategy, results of operations, or financial condition[214] - A comprehensive cybersecurity policy is being established to evaluate and address significant risks, including those from AI technologies, with measures integrated into broader operational risk management[215][216][217] - The Chief Financial Officer oversees information security programs, and the Audit Committee oversees cybersecurity risk management activities[218] ITEM 4. Mine Safety Disclosures. This section states that disclosures related to mine safety are not applicable to the company - Mine safety disclosures are not applicable to Inspire Veterinary Partners, Inc.[236] PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides information on Inspire Veterinary's Nasdaq listing, shareholder count, dividend policy, ongoing Nasdaq delisting notice, equity compensation plans, and executive compensation recovery policy Market Information Inspire Veterinary Partners' Class A Common Stock is listed on Nasdaq under the symbol 'IVP' - Inspire Veterinary Partners' Class A Common Stock is listed on Nasdaq under the symbol 'IVP'[239] Holders As of the Annual Report date, there were 100 stockholders of record for Class A common stock, 5 for Class B common stock, and 2 for Series A preferred stock - As of the Annual Report date, there were 100 stockholders of record for Class A common stock, 5 for Class B common stock, and 2 for Series A preferred stock[240] Dividend Policy The company does not anticipate declaring or paying any cash dividends in the foreseeable future, intending to retain all available funds for business development and expansion - The company does not anticipate declaring or paying any cash dividends on its capital stock in the foreseeable future, intending to retain all available funds and future earnings for business development and expansion[241] Nasdaq Deficiency Notice Nasdaq issued a delisting notice on March 8, 2024, due to the company's stock price falling below $0.10, following a previous notice for falling below $1.00 - On March 8, 2024, Nasdaq issued a staff determination to delist the company's securities because the Class A Common Stock's closing bid price was $0.10 or less for at least ten consecutive trading days[242] - Previously, on November 27, 2023, the company received a deficiency letter for its common stock closing below the minimum $1.00 per share for 30 consecutive business days[243] - The company plans to appeal the delisting determination and implement a reverse stock split to regain compliance with both the Low Priced Stocks Rule and the Bid Price Rule[244] Securities Authorized for Issuance under Equity Compensation Plans Shareholders approved the 2022 Equity Incentive Plan, authorizing various equity awards with a share limit of 10% of total issued and outstanding common stock plus issuable shares - Shareholders approved the 2022 Equity Incentive Plan on October 18, 2022, authorizing awards of stock options, stock awards, and stock appreciation rights to officers, directors, employees, and consultants[245] - The number of shares available for issuance under the Plan cannot exceed 10% of the total issued and outstanding common stock plus shares issuable upon conversion/exercise of outstanding securities[246] Outstanding Equity Awards No equity awards to named executive officers were outstanding as of December 31, 2023, or the date of the Annual Report - No equity awards to named executive officers were outstanding as of December 31, 2023, or the date of the Annual Report[248] Executive Incentive Compensation Recovery Policy The company adopted an Executive Incentive Compensation Recovery Policy to recover erroneously awarded incentive-based compensation in the event of an accounting restatement due to material noncompliance - The company adopted an Executive Incentive Compensation Recovery Policy to recover erroneously awarded incentive-based compensation in the event of an accounting restatement due to material noncompliance with financial reporting requirements[249] - The policy is administered by the Compensation Committee, which can determine if recovery is impracticable under certain conditions[250][251] Recent Sales of Unregistered Securities Sales of equity securities during the reporting period that were not registered under the Securities Act were exempt as transactions not involving any public offering - Sales of equity securities during the reporting period that were not registered under the Securities Act were exempt under Section 4(a)(2) as transactions not involving any public offering[254] Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the period - There were no issuer purchases of equity securities during the period[255] ITEM 6. [Reserved] This section is intentionally left blank, indicating no information is required or provided for this item - This item is reserved and contains no information[256] ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Inspire Veterinary's financial condition and results, covering its business model, acquisition strategy, revenue and expense trends, liquidity, capital resources, market risks, and critical accounting policies Overview Inspire Veterinary, incorporated in Delaware in 2020 and converted to a Nevada C-corporation in 2022, completed its IPO in 2023 and operates 14 veterinary hospitals across 11 states - Inspire Veterinary, incorporated in Delaware in 2020 and converted to a Nevada C-corporation in June 2022, completed its IPO on August 31, 2023, and trades on Nasdaq under 'IVP'[258] - The company owns and operates 14 veterinary hospitals in 11 states, specializing in small animal general practice, with plans to expand into equine care, emergency, and specialty services[258][259] - Inspire operates as one operating and one reportable segment, leveraging a distributed leadership and support structure for acquisitions across the U.S.[259] Our Business Model The company's business model focuses on acquiring existing veterinary hospitals for growth, offering preventive care, surgeries, and alternative treatments, with plans to expand into emergency and mixed animal services - Services include preventive care (exams, parasite control, dental, nutrition), various surgeries (soft tissue, orthopedic), and alternative procedures (acupuncture, chiropractic)[262] - Growth is driven by acquisitions of existing hospitals in markets with large pet populations, with recent expansion into equine care[263] - Future plans include entering emergency care and mixed animal services, with acquisition targets evaluated based on staffing, ownership transition, demographics, medical quality, and financial performance[264] - Risks to acquisition and integration include national staffing shortages, costs/time for due diligence, and challenges in achieving post-purchase growth and profitability due to rising talent acquisition costs[265][266] Results of Operations The company's acquisition strategy evolved, leading to a 70% revenue increase to $16.68 million in 2023, but total operating expenses rose 79%, resulting in a 201% increase in net loss to $(14.79) million - The company's acquisition strategy evolved from general practice hospitals to mixed animal hospitals (late 2022) and plans to include specialty and emergency care, and multi-unit practices for accelerated growth[267][268] Summary of Acquisitions (Inception through Dec 31, 2023) | Name | Closing Date | Transaction Value | | :-------------------------------- | :----------- | :------------------ | | Kauai Veterinary Clinic | January 2021 | $1,505,000 | | Chiefland Animal Hospital | August 2021 | $564,500 | | Pets & Friends Animal Hospital | October 2021 | $630,000 | | Advanced Veterinary Care of Pasco | January 2022 | $1,014,000 | | Lytle Veterinary Clinic | March 2022 | $1,442,469 | | Southern Kern Veterinary Clinic | March 2022 | $2,000,000 | | Bartow Animal Clinic | May 2022 | $1,405,000 | | Dietz Family Pet Hospital | June 2022 | $500,000 | | Aberdeen Veterinary Clinic | July 2022 | $574,683 | | All Breed Pet Care Veterinary Clinic | August 2022 | $2,152,000 | | Pony Express Veterinary Hospital, Inc. | October 2022 | $3,108,652 | | Williamsburg Animal Clinic | December 2022 | $850,000 | | The Old 41 Animal Hospital | December 2022 | $1,465,000 | | Valley Veterinary Services | November 2023 | $1,790,000 | Consolidated Results of Operations (Years Ended Dec 31, 2023 vs 2022) | Metric | 2023 | 2022 | $ Change | % Change | | :-------------------------------------------------------------------------------- | :----------- | :----------- | :----------- | :------- | | Service revenue | $11,879,934 | $7,032,800 | $4,847,134 | 69% | | Product revenue | $4,795,459 | $2,801,978 | $1,993,481 | 71% | | Total revenue | $16,675,393 | $9,834,778 | $6,840,615 | 70% | | Cost of service revenue | $9,700,963 | $5,308,104 | $4,392,859 | 83% | | Cost of product revenue | $3,420,515 | $1,981,046 | $1,439,469 | 73% | | General and administrative expenses | $9,476,287 | $5,467,642 | $4,008,645 | 73% | | Depreciation and amortization | $1,252,539 | $596,124 | $656,415 | 110% | | Loss from operations | $(7,191,016) | $(3,518,138) | $(3,672,878) | 104% | | Interest expense | $(2,538,710) | $(1,425,260) | $(1,113,450) | 78% | | Loss on debt modification | $(927,054) | $- | $(927,054) | 100% | | Beneficial conversion feature | $(4,137,261) | $- | $(4,137,261) | 100% | | Net loss | $(14,792,886) | $(4,911,926) | $(9,880,960) | 201% | | Net loss attributable to Class A and B common stockholders | $(15,064,131) | $(4,911,926) | $(10,152,205) | 207% | | Basic and diluted net loss per share | $(2.25) | $(0.95) | | | - Total revenue increased by 70% to $16.68 million in 2023, driven by acquisitions and price increases[287][289][293][294] - Total operating expenses increased by 79% to $23.87 million in 2023, leading to a 104% increase in loss from operations to $(7.19) million[287][295][299][300][301][302] Liquidity and Capital Resources Operations have been financed through various debt and equity issuances, but recurring losses and an accumulated deficit of $21.22 million raise substantial doubt about the company's ability to continue as a going concern - Since inception, operations have been financed through senior convertible notes, convertible debentures, bank borrowings (Farmers National Bank of Danville, First Southern National Bank), merchant cash advances, equity issuances, and cash from operations[303][304] - The company has incurred recurring operating losses, with an accumulated deficit of $21,215,257 as of December 31, 2023, and a net loss of $15,064,131 for the year, raising substantial doubt about its ability to continue as a going concern[305][308] - Primary short-term cash requirements are for working capital, lease obligations, and short-term debt, while medium-to-long-term needs include debt servicing, acquisitions, and facility investments[306] Notes Payable (Dec 31, 2023 vs 2022) | Metric | 2023 | 2022 | | :-------------------------- | :----------- | :----------- | | FNBD Notes Payable | $9,309,286 | $8,863,423 | | FSB Notes Payable | $5,767,302 | $6,531,377 | | Car loan | $- | $6,653 | | Total notes payable | $15,076,588 | $15,401,453 | | Unamortized debt issuance costs | $(124,170) | $(135,240) | | Notes payable, net | $14,952,418 | $15,266,213 | | Less current portion | $(1,469,043) | $(1,549,861) | | Long-term portion | $13,483,375 | $13,716,353 | Notes Payable Repayment Requirements (as of Dec 31, 2023) | Fiscal Year | Amount | | :---------- | :----------- | | 2024 | $1,469,043 | | 2025 | $3,776,189 | | 2026 | $1,008,110 | | 2027 | $1,052,832 | | 2028 | $1,098,387 | | Thereafter | $6,672,027 | - The company entered into a Merchant Cash Advance Agreement on May 30, 2023, for $1,050,000, with an effective interest rate of 49%[330][331][332] Cash Flows (Years Ended Dec 31, 2023 vs 2022) | Cash Flow Activity | 2023 | 2022 | | :-------------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(3,820,772) | $(2,658,309) | | Net cash used in investing activities | $(1,869,529) | $(14,666,796) | | Net cash provided by financing activities | $5,625,008 | $15,710,940 | | Net increase (decrease) in cash and cash equivalents | $(19,879) | $(1,614,165) | - Net cash used in operating activities increased to $(3.82) million in 2023, driven by a higher net loss and IPO-related costs[336] - Net cash used in investing activities decreased significantly to $(1.87) million, while net cash provided by financing activities decreased to $5.63 million[337][338] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from interest rate fluctuations, regulatory changes, and inflation, though interest rate risk is considered minimal due to floating rates on credit facilities - The company is exposed to market risks primarily from fluctuations in interest rates, regulatory changes, and inflation[339] - Interest rate risk is considered minimal, as credit facilities bear floating rates (New York Prime Rate + 0.50%), and term loans have fixed rates for the initial five years[340][341] - Inflation has not had a material effect, but significant inflationary pressures could prevent the company from offsetting higher costs through price increases, harming business and operating results[342] Critical Accounting Policies and Significant Judgments and Estimates The company allocates purchase consideration for acquisitions to assets and liabilities at fair value, recognizing goodwill and amortizing intangible assets over 2-5 years, with annual impairment tests - The company allocates purchase consideration for acquired businesses to assets and liabilities based on estimated fair values, with any excess recorded as goodwill[344] - Goodwill is not amortized but tested for impairment annually or when circumstances indicate fair value may be below carrying amount[345][346] - Intangible assets (client lists, trademarks, non-compete agreements) are amortized over 2-5 years and evaluated for impairment annually[347][348] Intangible Assets and Goodwill Balances (as of Dec 31, 2023) | Asset Category | Amount | | :---------------------- | :----------- | | Client List | $2,071,000 | | Noncompete Agreement | $398,300 | | Trademark | $1,117,200 | | Other Intangible Assets | $45,835 | | Goodwill | $8,147,590 | | Total | $11,779,925 | Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[352] ITEM 8. Financial Statements and Supplementary Data This section indicates that detailed financial statements and supplementary data are provided in a separate section of the Annual Report, starting on page F-1 - Financial statements and supplementary data are included following the 'Index to Financial Statements' on page F-1 of this Annual Report[354] ITEM 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure This section states that there have been no changes in or disagreements with accountants on accounting and financial disclosure matters - There have been no changes in or disagreements with accountants on accounting and financial disclosure[355] ITEM 9A. Controls and Procedures This section details the company's disclosure controls and procedures and management's assessment of internal control over financial reporting, both deemed effective as of December 31, 2023 Evaluation of Disclosure Controls and Procedures As of December 31, 2023, the company's CEO and CFO concluded that its disclosure controls and procedures were effective - As of December 31, 2023, the company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective[356] Management's Annual Report on Internal Control over Financial Reporting Management, under CEO and CFO supervision, concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework - Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting[358][360] - Based on their assessment using the COSO framework (2013), management concluded that internal control over financial reporting was effective as of December 31, 2023[361] Attestation Report of the Registered Public Accounting Firm This Annual Report does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting, as the company is exempt as a smaller reporting company - This Annual Report does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting, as the company is exempt as a smaller reporting company[362] Changes in Internal Control over Financial Reporting There have been no material changes in internal control over financial reporting during the fourth quarter that have affected, or are reasonably likely to affect, internal control over financial reporting - There have been no changes in internal control over financial reporting during the fourth quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[363] ITEM 9B. Other Information There is no other information to report for this item - There is no other information to report for this item[364] ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Disclosures regarding foreign jurisdictions that prevent inspections are not applicable to the company - Disclosures regarding foreign jurisdictions that prevent inspections are not applicable[365] PART III ITEM 10. Directors, Executive Officers and Corporate Governance This section provides information on Inspire Veterinary's directors, executive officers, and corporate governance practices, detailing key personnel, Board committee structures, risk oversight, and adherence to a Code of Business Conduct and Ethics Executive Officers Key executive officers include Kimball Carr (Chair, President, and CEO) and Richard Paul Frank (Chief Financial Officer), both bringing extensive business and financial experience - Key executive officers include Kimball Carr (Chair, President, and CEO) and Richard Paul Frank (Chief Financial Officer)[367] - Kimball Carr has over 30 years of varied business experience, including leadership roles at Starbucks and Mars, and over a decade in veterinary medicine services[368][369] Directors The Board of Directors comprises diverse members bringing expertise in business operations, veterinary medicine, investment banking, technology leadership, and M&A transactions - The Board of Directors includes Larry Alexander, Charles Stith Keiser, Peter Lau, Anne Murphy, John Suprock, Erinn Thomas-Mackey, DVM, and Timothy Watters[367] - Directors bring diverse expertise, including business operations, veterinary medicine, investment banking, technology leadership, and M&A transactions[370][371][372][373][374][375] Committees of the Board of Directors The Board has independent Audit, Compensation, and Governance and Nominating Committees, responsible for financial integrity, executive compensation, and corporate governance respectively - The Board has an Audit Committee, Compensation Committee, and Governance and Nominating Committee, all composed of independent directors[376][380][386] - The Audit Committee monitors financial statement integrity, auditor qualifications, and compliance, with Timothy Watters serving as the Audit Committee Financial Expert[377][379] - The Compensation Committee reviews and approves executive compensation, administers equity incentive plans, and sets performance targets, with Anne Murphy as Chair[380][381][382][383] - The Governance and Nominating Committee identifies qualified director candidates, recommends nominees, develops corporate governance guidelines, and oversees board and management evaluations, with Larry Alexander as Chair[387][388][389][392] Board Diversity While lacking a formal diversity policy, the Board considers skill set, background, reputation, business experience, and contributions, seeking individuals with experience in operating and growing businesses - While there is no formal diversity policy, the Board considers skill set, background, reputation, business experience, and contributions to the mix, seeking individuals with experience in operating and growing businesses[394] Board Diversity Matrix (as of report date) | | Female | Male | Non Binary | Did Not Disclose Gender | | :------------------------------ | :----- | :--- | :--------- | :---------------------- | | Total Number of Directors: | | | | 8 | | Part 1: Gender Identity | | | | | | Directors | 2 | 5 | 0 | 1 | | Part II: Demographic Background | | | | | | African American or Black | 1 | 0 | 0 | 0 | | Alaskan Native or Native American | 0 | 0 | 0 | 0 | | Asian | 0 | 1 | 0 | 0 | | Hispanic or Latino/Latina | 0 | 0 | 0 | 0 | | Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | | White | 1 | 4 | 0 | 0 | | Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | | LGBTQ+ | | 0 | | | | Did Not Disclose Demographic Background | | 1 | | | Board Leadership Structure Kimball Carr serves as the Chair of the Board, and Charles Stith Keiser serves as Vice-Chair - Kimball Carr serves as the Chair of the Board, and Charles Stith Keiser serves as Vice-Chair[397] Board Risk Oversight The Board oversees the company's risk management, with management apprising the Board of material risks, primarily liquidity and lack of material revenue - The Board oversees the company's risk management function, with management keeping the Board apprised of material risks and providing access to information for evaluation[398] - Kimball Carr, Chair, President, and CEO, collaborates with other Board members on addressing identified material risks, with independent directors conducting assessments if conflicts with management arise[398] - The primary risks currently affecting the company are liquidity and lack of material revenue[398] Family Relationships None of the company's directors or officers have any known family relationships with other directors or officers - None of the company's directors or officers have any known family relationships with other directors or officers[399] Involvement in Legal Proceedings The company is unaware of any directors or officers being involved in legal proceedings (bankruptcy, insolvency, criminal, or other Item 401(f) matters) in the past ten years - The company is unaware of any directors or officers being involved in legal proceedings (bankruptcy, insolvency, criminal, or other Item 401(f) matters) in the past ten years[400] Code of Ethics The Board adopted a Code of Business Conduct and Ethics applicable to all employees and directors, promoting ethical conduct, conflict of interest handling, accurate disclosure, and legal compliance - The Board adopted a Code of Business Conduct and Ethics applicable to all employees, including the CEO and CFO, and also to directors[401] - The Code promotes honest and ethical conduct, ethical handling of conflicts of interest, accurate disclosure, compliance with laws, and prompt reporting of unethical behavior[401] ITEM 11. Executive Compensation This section details executive compensation for Named Executive Officers and directors for 2023 and 2022, including salaries, bonuses, and other compensation, and outlines the CEO's employment agreement 2023 and 2022 Summary Named Executive Officer Compensation Table This table summarizes the compensation for Named Executive Officers, including Kimball Carr, Richard Frank, and Alexandra Quatri, for 2023 and 2022, detailing salaries, bonuses, and other compensation Named Executive Officer Compensation (2023 vs 2022) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :---------------- | :----------------------------------------- | :------------------------- | :-------- | | Kimball Carr, Chair, President and Chief Executive Officer | 2023 | 233,630 | - | | - | 8,857 | 242,487 | | | 2022 | 224,589 | - | - | - | 6,692 | 231,281 | | Richard Frank, Chief Financial Officer | 2023 | 191,781 | - | - | - | 1,308 | 193,088 | | | 2022 | - | - | - | - | - | - | | Alexandra Quatri, DVM, Vice President of Medical Operations | 2023 | 199,250 | - | - | - | 2,148 | 201,398 | | | 2022 | 97,500 | - | - | - | 642 | 98,142 | - Kimball Carr received a warrant for 50,000 shares of Class A common stock on January 1, 2023, in recognition of his guaranty of company loans[405] - 'All Other Compensation' consists of company contributions to medical benefit premiums[406] Employment Agreements Kimball Carr's employment agreement, effective July 8, 2021, provides for a renewable three-year term with duties focused on company business, base salary tiers, and annual bonuses tied to revenue and profit targets - Kimball Carr's employment agreement, effective July 8, 2021, provides for a three-year term, renewable annually, with duties focused on company business and interests[407][408] Kimball Carr's Base Salary Tiers | Annual Revenue | Base Salary | | :------------- | :---------- | | Up to $7,500,000 | $175,000 | | $7,500,000 | $225,000 | | $15,000,000 | $250,000 | | $20,000,000 | $300,000 | | $25,000,000 | To be negotiated by the parties | Kimball Carr's Annual Revenue Bonus Structure | Actual Revenue Compared to Revenue Target | Revenue Bonus | | :---------------------------------------- | :------------ | | 110% or greater | 125% of Revenue Bonus Target | | 100-109% | 100% of Revenue Bonus Target | | 95-99% | 95% of Revenue Bonus Target | | 90-94% | 90% of Revenue Bonus Target | | Below 90% | No Revenue Bonus | Kimball Carr's Profit Bonus Structure | Actual Profit Compared to Profit Target | Profit Bonus | | :-------------------------------------- | :----------- | | 110% or greater | 125% of Profit Bonus Target | | 100-109% | 100% of Profit Bonus Target | | 95-99% | 95% of Profit Bonus Target | | 90-94% | 90% of Profit Bonus Target | | Below 90% | No Profit Bonus | - Mr. Carr is eligible for annual bonuses tied to revenue and profit targets, and discretionary stock bonuses (10-14% of base salary) based on company performance[409][410][411] - The agreement includes non-disclosure, confidentiality, and non-solicitation covenants (employees and clients for two years post-termination)[413] - Termination provisions allow for immediate termination for cause (e.g., disloyalty, gross neglect) or by Mr. Carr for good reason (e.g., material breach by company, significant reduction in duties, relocation), with severance payments in certain circumstances[414][415] ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of common stock by executive officers, directors, and significant shareholders as of March 29, 2024, highlighting voting power distribution and the absence of change-in-control agreements Security Ownership of Certain Beneficial Owners and Management As of March 29, 2024, the company had 80.3 million Class A and 3.9 million Class B common shares outstanding, with Class B shares carrying 25 votes each, significantly impacting voting power distribution - As of March 29, 2024, the company had 80,306,073 Class A Common Stock, 3,891,500 Class B common stock, and 53,793 Series A preferred stock outstanding[417] - Each Class B common stock share entitles the holder to 25 votes, significantly impacting voting power distribution[417] Beneficial Ownership of Common Stock (as of March 29, 2024) | Name and Address of Beneficial Owner | Title | Number of Shares Beneficially Owned | % Voting Power | | :----------------------------------- | :---------------- | :---------------------------------- | :------------- | | NAMED EXECUTIVE OFFICERS | | | | | Kimball Carr | Class A common | 77,728 | * | | | Class B common | 333,250 | 4.3% | | Richard Frank | Class A common | - | * | | | Class B common | - | * | | Alexandra Quatri | Class A common | - | * | | | Class B common | - | * | | DIRECTORS | | | | | Lawrence Alexander | Class A common | 1,000 | * | | Charles Stith Keiser | Class A common | 24,528 | * | | | Class B common | 2,150,000 | 27.3% | | Peter Lau | Class A common | - | * | | | Class B common | 537,500 | 6.8% | | Dr. Thomas-Mackey | Class A common | 5,600 | * | | John Suprock | Class A common | - | * | | Timothy Watters | Class A common | - | * | | 5% OWNERS | | | | | Best Future Investment, LLC | Class B common | 537,500 | 6.8% | | Richard Martin | Class B common | 333,250 | 4.2% | | 622 Capital LLC | Class A common | 112,110 | * | | Dragon Dynamic Catalytic Bridge SAC Fund | Class A common | 56,055 | * | | | Series A preferred | 20,994 | 3.8% | | Target Capital 1 LLC | Class A common | 661,447 | *% | | | Series A preferred | 32,799 | 6.3% | | Wilderness Trace Veterinary Partners, LLC | Class B common | 2,150,000 | 27.3% | | * Represents ownership of less than 1%. | | | | - Non-independent directors, officers, and their affiliates control approximately 38.4% of the voting power of outstanding common stock[190][194] - Charles Stith Keiser, director and Vice-Chair, controls approximately 27.3% of the voting power through Class B common stock[193][422] Change-in-Control Agreements The company does not have change-in-control agreements with executive officers, except for a provision in CEO Kimball Carr's employment agreement allowing termination within six months of a change in control - The company does not have any change-in-control agreements with executive officers, except for a provision in CEO Kimball Carr's employment agreement allowing him to terminate employment within six months of a change in control[424] ITEM 13. Certain Relationships and Related Transactions, and Director Independence This section discloses transactions and relationships between Inspire Veterinary and its related parties, including loans from directors, intercompany operating leases, and consulting agreements with director-controlled entities Keiser Loans In August 2022, Charles Stith Keiser and Charles Hurst Keiser, DVM, advanced $300,000 total to the company for working capital, which were interest-free and repaid before the IPO on August 31, 2023 - In August 2022, Charles Stith Keiser (director, Vice-Chair) and Charles Hurst Keiser, DVM (former director) advanced $150,000 each ($300,000 total) to the company for working capital, which were interest-free and repaid before the IPO on August 31, 2023[425] Operating Leases with Related Parties The company has intercompany leases between its subsidiaries, with transactions and balances eliminated in the consolidated financial statements - The company has intercompany leases between its subsidiaries, with transactions and balances eliminated in the consolidated financial statements[426] Consulting Agreements The company received acquisition, business, and financial advisory services from Blue Heron Consulting and Star Circle Advisory Group, both related parties, with agreements terminated in Q3 2023 - The company received acquisition, business, and financial advisory services from Blue Heron Consulting (BHC), where Charles Stith Keiser is COO and Dr. Charles 'Chuck' Keiser is Chief Visionary Officer, paying $1,090,788.16 before the agreement was terminated in Q3 2023[427] - Financial consulting services were also received from Star Circle Advisory Group, LLC, controlled by current and former directors, with $866,900 paid before its termination on September 18, 2023[428] ITEM 14. Principal Accounting Fees and Services This section outlines fees paid to Kreit & Chiu CPA LLP for audit, tax, and other services in 2023 and 2022, and describes the Audit Committee's practice of pre-approving all audit and permissible non-audit services Audit Fees This table details fees billed by Kreit & Chiu CPA LLP for audit and tax services in 2023 and 2022, including professional services for annual financial statements and the initial public offering Fees Billed by Kreit & Chiu CPA LLP (2023 vs 2022) | Services | 2023 | 2022 | | :--------------- | :----------- | :----------- | | Audit fees (1) | $292,400 | $175,100 | | Audit related fees (2) | - | - | | Tax fees (3) | $28,130 | $26,000 | | All other fees (4) | - | - | | Total fees | $320,530 | $201,100 | (1) Audit fees include professional services for the audit of annual financial statements and initial public offering. (3) Tax fees cover professional services for tax compliance, planning, and advice. Audit Committee's Pre-Approval Practice The board of directors pre-approved the engagement of the independent auditor and all audit-related, tax, and other fees incurred, with pre-approval generally for up to one year - The board of directors pre-approved the engagement of the independent auditor and all audit-related, tax, and other fees incurred[431] - Pre-approval is generally for up to one year, detailed by service category and budget, with auditors and management reporting quarterly on services provided[431] Pre-Approval of Audit and Permissible Non-Audit Services The Audit Committee approves all audit and non-audit services, requiring auditors to provide and uphold cost estimates, with 0% of audit hours attributed to non-principal accountant employees - The Audit Committee approves all audit and non-audit services, requiring auditors to provide and uphold cost estimates[433] - 0% of hours expended on the audit of financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees[433] PART IV ITEM 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the Annual Report on Form 10-K, including articles of incorporation, warrants, agreements, and certifications - The report includes various exhibits such as amended and restated articles of incorporation, bylaws, certificates of designation, warrants, registration rights agreements, common stock purchase agreements, and employment agreements[435] - Financial statement schedules and certifications (e.g., Sarbanes-Oxley Act certifications) are also listed[435][436] ITEM 16. Form 10-K Summary This section indicates that no summary for Form 10-K is provided - No Form 10-K summary is provided[437] SIGNATURES This section contains the required signatures of the registrant's principal executive officer, principal financial officer, and directors, certifying the filing of the Annual Report on Form 10-K - The report is signed by Kimball Carr (Chair, President, and CEO) and Richard Frank (Chief Financial Officer) on April 8, 2024[442] - All directors, including Larry Alexander, Charles Stith Keiser, Peter Lau, Anne Murphy, John Suprock, Erinn Thomas-Mackey, DVM, and Timothy Watters, also signed the report[443] INDEX TO THE INSPIRE VETERINARY PARTNERS, INC AND SUBSIDIARIES FINANCIAL STATEMENTS This section provides an index to the consolidated financial statements of Inspire Veterinary Partners, Inc. and its subsidiaries, including the independent auditor's report, balance sheets, statements of operations, changes in shareholders' deficit, cash flows, and accompanying notes - The index lists the Report of the Independent Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Shareholders' Deficit, Consolidated Statements of Cash Flows, and Notes to the Consolidated Financial Statements[444] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Kreit & Chiu CPA LLP issued an unqualified opinion on Inspire Veterinary Partners' consolidated financial statements for 2023 and 2022, but noted substantial doubt about the company's ability to continue as a going concern - Kreit & Chiu CPA LLP issued an unqualified opinion, stating the consolidated financial statements for December 31, 2023 and 2022, present fairly, in all material respects, the company's financial position and results of operations[446] - An explanatory paragraph highlights substantial doubt about the company's ability to continue as a going concern due to recurring losses, an accumulated deficit of $21,215,257, and a net loss of $14,792,886 in 2023[447] - The auditors did not perform an audit of internal control over financial reporting, as the company is not required to have one[449] Consolidated Financial Statements Consolidated Balance Sheets The consolidated balance sheets present the financial position of Inspire Veterinary Partners, Inc. and its subsidiaries as of December 31, 2023, and 2022, detailing assets, liabilities, and stockholders' equity (deficit) Consolidated Balance Sheet Summary (as of Dec 31, 2023 vs 2022) | Metric | 2023 | 2022 | | :------------------------------------ | :----------- | :----------- | | Total assets | $21,790,975 | $20,185,695 | | Current assets | $1,352,120 | $1,742,089 | | Property and equipment, net | $7,949,144 | $7,323,050 | | Goodwill | $8,147,590 | $7,614,553 | | Total liabilities | $22,579,234 | $25,321,176 | | Current liabilities | $7,581,815 | $7,249,840 | | Notes payable - noncurrent | $13,483,375 | $13,716,352 | | Total stockholder's equity (deficit) | $(788,259) | $(5,135,481) | | Accumulated deficit | $(21,215,257) | $(6,243,448) | - Total assets increased to $21.79 million in 2023 from $20.19 million in 2022, driven by increases in property and equipment and goodwill[453] - Total liabilities decreased to $22.58 million in 2023 from $25.32 million in 2022, primarily due to changes in convertible debentures and bridge notes[453] - Stockholders' deficit improved significantly from $(5.14) million in 2022 to $(0.79) million in 2023, despite an increase in accumulated deficit to $(21.22) million, due to increases in additional paid-in capital from equity issuances[453] Consolidated Statements of Operations The consolidated statements of operations present Inspire Veterinary's financial performance for the years ended December 31, 2023, and 2022, showing significant increases in revenue and operating expenses, leading to a substantial net loss Consolidated Statements of Operations (Years Ended Dec 31, 2023 vs 2022) | Metric | 2023 | 2022 | | :-------------------------------------------------------------------------------- | :----------- | :----------- | | Service revenue | $11,879,934 | $7,032,800 | | Product revenue | $4,795,459 | $2,801,978 | | Total revenue | $16,675,393 | $9,834,778 | | Cost