| Debt | 7. Debt Master Lending and Credit
Facility On June 25, 2021, the Company entered
into a master line of credit loan agreement (“MLOCA”) with Wealth South a division of Farmers National Bank of Danville,
Kentucky (“FNBD”). The MLOCA provides for a $2,000,000 revolving secured credit facility (“Revolving Line”) to
be drawn for the initial purchase of veterinary clinical practices (“Practices”) and a $8,000,000 closed end line of credit
(“Closed End Line”) to be disbursed as individual loans (Term Loans) to paydown draws on the Revolving Line and to provide
longer term financing of the purchase of Practices. Each draw on the Revolving Line shall be repaid with a Term Loan out of the Closed
End Line within one hundred and twenty (120) days of the draw on the Revolving Line. Each draw on the Revolving Line and the Closed End
Line shall not exceed eighty-five (85%) percent of the purchase price of the Practice. The Company shall contribute and maintain equity
of a minimum of fifteen (15%) percent of the initial purchase price of a Practice as long as any draw on the Revolving Line or a Term
Loan remains unpaid with FNBD. The Revolving Line has an interest rate equal to the New York Prime Rate plus 0.50% that shall never be
less than 3.57%. Each Term Loan issued under the Closed End Line shall have a fixed interest rate of 3.98% for the first five years of
the loan. Immediately following the fixed rate period, the rate of interest rate will equal to the New York Prime Rate plus 0.65% that
shall never be less than 3.57%. Each Practice to be acquired must have a minimum projected debt-service coverage ratio (“DSCR”)
of 1.0x, defined as earnings before interest depreciation and amortization (“EBIDA”)/Annual Debt Service Requirement. The
MLOCA terminates and the Revolving Line matures on June 25, 2023. Under the MLOCA the Term Loans to acquire
a Practice shall not exceed 10 years. The first twelve months of the Term Loan may be interest only. Thereafter, the Loan will convert
to an amortizing loan with monthly principal and interest payments. For Practice only Term Loans (“Practice Term Loans”),
after the initial twelve-month interest only period, the balance will amortize over 9 years. For Loans made to purchase real property
(“RE Term Loans”), after the initial twelve-month interest only period, the balance will amortize over a 19-year period. There is no prepayment penalty on payments
on the Revolving Line. The Term Loans are subject to a refinance fee of 2% of the then outstanding principal balance of the Term Loan
if paid within two years of entering into the Term Loan and 1% of the then outstanding principal balance of the Term Loan if paid within
three to five years of entering into the Term Loan. The refinance fee is due only if the Term Loan is paid off by refinancing. Borrowing
under the MLOCA are guaranteed by Kimball Carr, CEO & President of the Company. On August 18, 2022 the MLOCA was amended
and restated to terminate the revolving feature on the Revolving Line and convert the line of credit to a closed end draw note (“Closed
End Draw Note”) that mature on August 18, 2024. Each draw on the Closed End Draw Note shall not exceed eighty-five (85%) percent
of the purchase price of the Practice. The Company shall contribute and maintain equity of a minimum of fifteen (15%) percent of the
initial purchase price of a Practice as long as any draw on the Closed End Draw Note or a Term Loan remains unpaid with FNBD. The interest
rate charge on all sums advance under the amended and restated MLOCA shall be 5.25% for the first five years of the loan. Immediately
following the fixed rate period, the rate of interest will be equal to the New York Prime Rate plus 0.65% that shall never be less than
4.75%. Each Practice to be acquired must have a minimum projected DSCR of 1.0x, defined as EBIDA/Annual Debt Service Requirement. The
MLOCA terminates and the Closed End Draw Note matures on August 18, 2024. Notes payable to FNBD as of June 30,
2024 and December 31, 2023 consisted of the following: Original Acquisition Entered Maturity Interest June 30, December 31, Issuance $ 237,272 CAH 12/27/21 12/27/41 3.98 % $ 224,425 $ 228,785 $ 6,108 231,987 CAH 12/27/21 12/27/31 3.98 % 198,925 210,161 6,108 216,750 P&F 12/27/21 12/27/41 3.98 % 205,014 208,997 5,370 318,750 P&F 12/27/21 12/27/31 3.98 % 273,324 288,761 5,370 817,135 Pasco 1/14/22 1/14/32 3.98 % 707,294 746,733 3,085 478,098 Lytle 3/15/22 3/15/32 3.98 % 421,668 444,593 1,898 663,000 Lytle 3/15/22 3/15/42 3.98 % 633,329 645,392 11,875 425,000 Kern 3/22/22 3/22/42 3.98 % 405,980 413,713 7,855 1,275,000 Kern 3/22/22 3/22/32 3.98 % 1,124,511 1,185,648 4,688 246,500 Bartow 5/18/22 5/18/42 3.98 % 236,974 241,429 5,072 722,500 Bartow 5/18/22 5/18/32 3.98 % 648,851 683,262 2,754 382,500 Dietz 6/15/22 6/15/32 3.98 % 346,552 364,708 1,564 445,981 Aberdeen 7/19/22 7/29/32 3.98 % 407,649 428,747 1,786 1,020,000 All Breed 8/12/22 8/12/42 3.98 % 989,792 1,008,039 8,702 519,527 All Breed 8/12/22 8/12/32 3.98 % 478,978 503,471 3,159 225,923 All Breed 8/12/22 8/12/32 5.25 % 209,262 219,347 3,159 637,500 Williamsburg 12/8/22 12/8/32 5.25 % 609,544 637,500 2,556 850,000 Valley Vet 11/8/23 11/8/33 5.25 % 850,000 850,000 3,315 $ 9,713,423 $ 8,972,072 $ 9,309,286 $ 84,424 The Company amortized $1,543 and $2,069
of issuance cost in the aggregate during the three months ending June 30, 2024 and 2023, respectively. The Company amortized $3,086 and
$4,151 of issuance cost in the aggregate during the six months ending June 30, 2024 and 2023, respectively, for the FNBD notes payable. FSB Commercial Loans The Company entered into three separate
commercial loans with First Southern National Bank (“FSB”) as part of the acquisition. The first commercial loan in the amount
of $1,105,000 has a fixed interest rate of 4.35% and a maturity date of January 25, 2024. The fixed rate loan has monthly payments of
$6,903 and a full payoff of the remaining principal balance at maturity. The commercial loan had issuance costs of $13,264 that was capitalized
and is being amortized straight line over the life of the loan. The Company entered into a Forbearance Agreement that extended the maturity
date to August 31, 2024 and required the lender to make monthly payments of $9,016 and increased the interest rate to 8.15% per annum. The second commercial loan with FSB
entered into on January 11, 2021 in the amount of $1,278,400 has a fixed interest rate of 4.35% and a maturity date of January 25, 2024.
The fixed rate loan has monthly payments of $13,157 and a full payoff of the remaining principal balance at maturity. The commercial
loan had issuance costs of $10,085 that was capitalized and is being amortized straight line over the life of the loan. The Company entered
into a Forbearance Agreement that extended the maturity date to August 31, 2024 and required the lender to make monthly payments of $14,898
and increased the interest rate to 8.15% per annum. The third commercial loan with FSB
entered into on January 11, 2021 in the amount of $450,000 has a fixed interest rate of 5.05% and a maturity date of September 11, 2021.
The commercial loan was modified on August 25, 2021 to extend the maturity date to February 25, 2023 and increase the principal amount
to $469,914. The fixed rate loan had monthly payments of $27,164 and was fully paid off on the maturity date. The commercial loan had
issuance costs of $753 that was capitalized and is being amortized straight line over the life of the loan. On October 31, 2022 the Company entered
into three separate commercial loans with FSB as part of the Pony Express Practice acquisition. The first loan with FSB that was entered
into on October 31, 2022, was in the amount of $2,086,921. The loan has a fixed interest rate of 5.97% and a maturity date of October
31, 2025. The fixed rate loan has monthly payments of $23,138 except for a final monthly payment of $1,608,530. The commercial loan had
issuance costs of $25,575 that was capitalized and is being amortized straight line over the life of the loan. The second loan with FSB that was entered
into on October 31, 2022, was in the amount of $400,000. The loan has a fixed interest rate of 5.97% and a maturity date of October 31,
2042. The fixed rate loan has monthly payments of $2,859. The commercial loan had issuance costs of $3,277 that was capitalized and is
being amortized straight line over the life of the loan. The third loan with FSB that was entered
into on October 31, 2022, was in the amount of $700,000. The loan has a fixed interest rate of 6.75% and a maturity date of April 1,
2023. The fixed rate loan has monthly payments of $6,903 except for a final monthly payment of $423,278. The commercial loan did not
have any issuance costs that were capitalized. On December 16, 2022, the Company entered
into two separate commercial loans with FSB as part of the Old 41 Practice acquisition. The first loan with FSB that was entered into
on December 16, 2022, was in the amount of $568,000. The loan has a fixed interest rate of 6.50% and a maturity date of December 16,
2025. The fixed rate loan has monthly payments of $4,772 and a full payoff of the remaining principal balance at maturity. The loan had
issuance costs of $4,531 for the year ended December 31, 2022, that was capitalized and is being amortized straight line over the life
of the loan. The second loan with FSB that was entered
into December 16, 2022, was in the amount of $640,000. The loan has a fixed interest rate of 6.50% and a maturity date of December 16,
2025. The fixed rate loan has twelve monthly payments of approximately $2,830, followed by monthly payments of $7,443. and the interest
rate is 6.50%. The loan had issuance costs of $5,077 that was capitalized and is being amortized straight line over the life of the loan. The FSB commercial loans are guaranteed
by Kimball Carr, Chief Executive Officer and President and Charles Stith Keiser, our Vice Chairman and Chief Operating Officer. Notes payable to FSB as of June 30,
2024 and December 31, 2023 consisted of the following: Original Acquisition Entered Maturity Interest June 30, December 31, Issuance $ 1,105,000 KVC 1/25/21 8/31/24 4.35 % $ 993,791 $ 997,010 $ 13,264 1,278,400 KVC 1/25/21 8/31/24 4.35 % 951,242 960,849 10,085 469,914 KVC 1/25/21 2/25/23 5.05 % - - 753 2,086,921 Pony Express 10/31/22 10/31/25 5.97 % 1,819,385 1,902,452 25,575 400,000 Pony Express 10/31/22 10/31/42 5.97 % 381,774 387,433 3,277 568,000 Old 41 12/16/22 12/16/25 6.5 % 495,871 520,697 4,531 640,000 Old 41 12/16/22 12/16/25 6.5 % 615,390 623,861 5,077 375,000 Valley Vet 11/8/2023 11/8/2024 8.5 % 375,000 375,000 6,877 $ 7,623,235 $ 5,632,774 $ 5,767,302 $ 69,439 The Company amortized $5,090 and $3,380
of issuance cost in the aggregate during the three months ending June 30, 2024 and 2023, respectively. The Company amortized $10,180
and $6,781 of issuance cost in the aggregate during the six months ending June 30, 2024 and 2023, respectively, for the FSB notes payable. Notes payable as of June 30, 2024 and
December 31, 2023 consisted of the following:
June 30, December 31,
2024 2023
FNBD Notes Payable $ 8,972,072 $ 9,309,286
FSB Notes Payable 5,632,453 5,767,302
Total notes payable 14,604,525 15,076,588
Unamortized debt issuance costs (110,403 ) (124,170 )
Notes payable, net of issuance cost 14,494,122 14,952,418
Less current portion (3,316,147 ) (1,469,043 )
Long-term portion $ 11,177,975 $ 13,483,375 Notes payable repayment requirements
as of June 30, 2024, in the succeeding years are summarized as follows:
Remainder of 2024 $ 2,796,379
2025 3,610,465
2026 835,031
2027 872,072
2028 909,759
Thereafter $ 5,580,819
Total $ 14,604,525 Bridge Note In December 2021, the Company entered
into two bridge loans in the aggregate amount of $2,500,000 with Target Capital 1, LLC and Dragon Dynamic Catalytic Bridge SAC Fund as
short term secured convertible notes (“Bridge Note”). The Bridge Note is convertible into the Company’s common stock,
at the time of a successful initial public offering (“IPO”) at the noteholder’s option, at a 35% discount to the IPO
price. The Bridge Note has a face value of $2,500,000 with an original issue discount (“OID”) of 12% and has a maturity date
of January 24, 2023. The OID of $300,000 is being amortized over the life of the loan. If the Company has not issued the Company’s
common stock in an initial public offering pursuant to a registration statement filed with and declared effective by the Securities and
Exchange Commission (“SEC”) and the listing of the common stock on a “national securities exchange” as defined
in Section 6 of the Securities Exchange Act of 1934, as amended (“Qualified financing”) by January 24, 2023 the conversion
price will be set at a 40% discount to the IPO price. The Bridge Note was funded in two installments of net proceeds of $1,100,000 in
December 2021 and the second installment January 2022. The bridge loans had issuance costs of $70,500 for the first installment and $54,000
for the second installment that is amortized straight line over the life of the loan. The Company amortized $0 and $62,758 of issuance
cost during the three months ended June 30, 2024 and 2023, respectively. The Company amortized $0 and $62,758 of issuance cost during
the six months ended June 30, 2024 and 2023. In conjunction with the Bridge Note
the Company issued warrants on January 24, 2022 to Target Capital 1, LLC and Dragon Dynamic Catalytic Bridge SAC Fund (collectively the
“Bridge Lenders”). The warrants entitled the Bridge Lenders to purchase the Company’s Class A common stock, at a purchase
price equal to the per share price in an IPO. The quantity of the Company’s common stock of subject to purchase upon exercise of
the warrants is equal to 50% of the face value of the Bridge Note, divided by the per-share price in the Qualified Financing, unless
a Qualified Financing has not been completed by January 24, 2023 in which case the quantity of Class A common stock subject to purchase
upon exercise of the warrants will be an amount equal to 75% of the face value of the Bridge Note divided by the per-share price in the
Qualified Financing. If a Qualified Financing has not consummated or the Bridge Note has not been repaid in full on or before January
24, 2027, then the quantity of common stock subject to purchase upon exercise of the warrants will be an amount equal to 100% of the
face value divided by the per-share price equal to the fair market value of one share of Class A common stock as mutually agreed by the
Holder and the Company. The warrants are exercisable through the fifth anniversary of the issuance date. The warrants may be redeemed
at the option of the Company at any time following a Qualified Financing if the Company’s common stock trade on a national securities
exchange at a price equal to the purchase price of the Company’s common stock in the Qualified Financing multiplied by 2 for a
period of ten consecutive trading days. On November 18, 2022, the Company entered
into an Original Issue Discount Secured Convertible Note loan with Target Capital 1, LLC for $1,136,364. The note is issued at an original
issue discount of 12% with an maturity date on the earlier of March 31, 2023 (“Initial Maturity Date”) or the Company’s
sale of its common stock in an initial public offering pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission and the listing of the common stock on a “national securities exchange” as defined in
Section 6 of the Securities Exchange Act of 1934, as amended (“Qualified Financing” or the “Maturity Date”).
If the Company has filed its Form S-1 Registration Statement with the SEC on or prior to the Initial Maturity Date but the Qualified
Financing has not closed by such date (“Automatic Extension”) then all principal and accrued interest under this Note shall
become due and payable in cash on September 30, 2023 (the “Final Maturity Date”) or such earlier date as this note is required
be repaid. The note bears an interest rate of 12% per annum by means of the original issue discount. Upon the occurrence of an Automatic
Extension, this note shall commence to accrue interest at an interest rate of 12% percent per annum on the date of the commencement of
the Automatic Extension until the note is converted or is paid in full. The Company may pay the full principal amount of this note, and
all accrued but unpaid interest at any time prior to the Maturity Date without the prior written consent of the holder in the principal
amount of $1,136,364, plus all accrued but unpaid interest, multiplied by 120%. In addition, and to the extent the Company is required
to pay this note in cash at the on or after the Initial Maturity Date due to, upon the closing date of a Qualified Financing, the Company
shall pay to the holder $1,136,364, plus all accrued unpaid interest, multiplied by 120%. Upon the occurrence and during the continuation
of an Event of Default (as defined in the note), until the Event of Default is cured, or the note is repaid in full, Company will pay
20% of its total gross revenues (including that of all its subsidiaries) monthly, which shall be applied to payment of principal and
interest under this this note. The conversion price (the “Conversion Price”) shall be equal to the price paid by the public
in the Company’s Qualified Financing multiplied by 0.65 (or 0.60, from and after any Automatic Extension). In conjunction with the Original Issue
Discount Secured Convertible Note with Target Capital 1, LLC the company issued the holder 412 shares of Class A common stock and equity
classified warrants that entitle the holder to purchase the Company’s common stock at a purchase price equal to the per share price
in an IPO. The quantity of the Company’s common stock of subject to purchase upon exercise of the warrants is equal to 50% of the
face value of the Bridge Note, divided by the per-share price in the Qualified Financing, unless a Qualified Financing has not been completed
by March 31, 2023 in which case the quantity of Class A common stock subject to purchase upon exercise of the warrants will be an amount
equal to 75% of the face value of the Bridge Note divided by the per-share price in the Qualified Financing. On November 18, 2022, the Company entered
into an Original Issue Discount Secured Convertible Note with 622 Capital LLC for $568,182. The note is issued at an original issue discount
of 12% with an maturity date on the earlier of January 24, 2023 (the “622 Initial Maturity Date”) or the Company’s
sale of its common stock in an initial public offering pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission and the listing of the common stock on a “national securities exchange” as defined in
Section 6 of the Securities Exchange Act of 1934, as amended (“Qualified Financing” or the “622 Maturity Date”).
If the Company has filed its Form S-1 Registration Statement with the SEC on or prior to the 622 Initial Maturity Date but the Qualified
Financing has not closed by such date (“Automatic Extension”) then all principal and accrued interest under this note shall
become due and payable in cash on July 24, 2023 (the “622 Final Maturity Date”) or such earlier date as this note is required
be repaid. The note bears an interest rate of 12% per annum by means of the original issue discount. Upon the occurrence of an Automatic
Extension, this note shall commence to accrue interest at an interest rate of 12% percent per annum on the date of the commencement of
the Automatic Extension until the note is converted or is paid in full. The Company may pay the full principal amount of this note and
all accrued but unpaid interest at any time prior to the 622 Maturity Date without the prior written consent of the holder in the principal
amount of $568,182, plus all accrued but unpaid interest, multiplied by 120%. In addition, and to the extent the Company is required
to pay this note in cash at the on or after the 622 Initial Maturity Date due to, upon the closing date of Qualified Financing, the Company
shall pay to the holder $568,182, plus all accrued unpaid interest, multiplied by 120%. Upon the occurrence and during the continuation
of an Event of Default (as defined in the note), until the Event of Default is cured or the note is repaid in full, Company will pay
20% of its total gross revenues (including that of all its subsidiaries) monthly, which shall be applied to payment of principal and
interest under this this note. The conversion price (the “Conversion Price”) shall be equal to the price paid by the public
in the Company’s Qualified Financing multiplied by 0.65 (or 0.60, from and after any Automatic Extension). In conjunction with the Original Issue
Discount Secured Convertible Note with 662 Capital LLC the company issued the holder equity classified warrants that entitle the holder
to purchase the Company’s common stock at a purchase price equal to the per share price in an IPO. The quantity of the Company’s
common stock of subject to purchase upon exercise of the warrants is equal to 50% of the face value of the Bridge Note, divided by the
per-share price in the Qualified Financing, unless a Qualified Financing has not been completed by March 31, 2023 in which case the quantity
of Class A common stock subject to purchase upon exercise of the warrants will be an amount equal to 75% of the face value of the Bridge
Note divided by the per-share price in the Qualified Financing. The warrants were deemed legally detachable
from the Bridge Note and were fair valued using the Black Scholes Method to determine the relative fair values of the Bridge Note and
the detachable warrants. The significant inputs for the Black Scholes calculation included the exercise price and common share price
of $0.44, volatility rate of 27% and risk-free rate of 1.53% with a 5 year term. The proceeds received for the Bridge Note were allocated
to the detached warrants based on the relative fair values. Pursuant to ASC 470 the relative fair value of the warrants attributable
to a discount on debt is $429,284; this is amortized to interest expense on a straight-line basis over the term of the loan. A roll forward of the bridge note for
the six months ended June 30, 2023 is below:
Bridge notes, December 31, 2022 3,899,156
Amortization of original issue discount 116,656
Amortization of warrant discount 125,975
Amortization of debt issuance costs 62,758
Bridge notes, March 31, 2023 4,204,545
Extinguishment of bridge notes in exchange for Series A Preferred Stock (4,204,545 )
Bridge notes, June 30, 2023 - On June 30, 2023, the Company entered
into exchange agreements (the “Exchange Agreements”) with each of the Company’s Bridge Note lenders, pursuant to which
the lenders exchanged their existing Bridge Notes for 29,896 shares, 352,771 shares, and 59,792 shares, respectively, of Convertible
Series A preferred stock (442,458 shares of Convertible Series A Preferred stock in total) (the “Exchange”). The Exchange
Agreements would have been rescinded, and the former Bridge Notes reinstated if the Company didn’t complete the initial public
offering by September 1, 2023. Upon the IPO completing on August 31, 2023, the Company recognized the extinguishment of the Bridge Notes
pursuant to ASC 470 and recognized a debt extinguishment loss of $16,105. The Company recognized a beneficial conversion feature of $2,567,866
for the issuance of the Series A preferred stock on the date of the IPO due to the $4 (Pre-Reverse Split) offering price related to the
IPO being known as of that date. Convertible Debenture Between March 18 and December 28, 2021,
the Company issued $2,102,500 in aggregate principal amount of 6.00% subordinated convertible promissory note (“Convertible Debenture”).
During the year ending December 31, 2022 the Company issued $1,612,000 in aggregated principal amount of the 6.00% Convertible Debenture.
In March 2023 the Company issued an additional $650,000 in aggregate principal amount of 6.00% Convertible Debenture to five (5) separate
holders. The Convertible Debenture is convertible into the Company’s Class A common stock upon the Company’s offering for
sale its shares in a public offering (“IPO”). At the holder’s election, the accrued interest and principal may be paid
in cash or Class A common stock (such number of shares reflecting a twenty-five percent (25%) discount of the opening price per share
of Class A common stock). The Convertible Debenture mature 5 years from the date of issuance to each holder. Prior to the maturity date,
the holder is entitled to convert the Convertible Debenture into Class A common stock upon the Company’s IPO. Upon an IPO the accrued
and unpaid interest is due and payable in cash on the first business day of the following month of March for any balance not elected
to be converted into the Class A common stock. The Convertible Debenture incurred issuance cost of $40,000 that was amortized straight
line over the life of the Convertible Debenture. The Company amortized $1,993 and $1,993 of issuance cost during the three months ended
June 30, 2024 and 2023, respectively. The Company amortized $3,987 and $3,965 for the six months ending June 30, 2024 and 2023, respectively. Upon the Company’s IPO closing
on August 31, 2023, the majority of Convertible Debenture holders elected to convert an aggregate of $4,014,500 of principal and $399,818
of accrued interest into 14,953 shares of Class A common stock at a conversion price of $30.00 per share. The Company recorded a beneficial
conversion feature as of the date of the conversion of $1,569,395 based on the IPO price of $40 per share minus the principal and accrued
interest of the Convertible Debenture balance converted into common stock. Four holders of the Convertible Debenture with an aggregate
principal balance of $250,000 elected to be paid back in cash and one investor with a principal balance of $100,000 elected to be paid
on February 28, 2024 including accrued interest through the date of payment at 6%. Loans Payable On May 30, 2023, the Company entered
into a Merchant Cash Advance Agreement for gross proceeds of $1,050,000 with an unrelated third-party financial institution. Under the
terms of the agreement, the Company must pay $57,346 each week for 26 weeks with the first payment being due June 6, 2023. The financing
arrangement has an effective interest rate of 49%. The financing arrangement includes an original issuance discount (“OID”)
of $441,000 and issuance costs of $50,000. The OID and issuance cost associated with the financing arrangement are presented in the balance
sheets as a direct deduction from the carrying amount of the financing arrangement and is amortized using the effective interest method. On August 10, 2023, the Company amended
the financing arrangement to borrow an additional $507,460 resulting in the weekly repayments increasing to $76,071 to be paid over 28
weeks. This amendment decreased the effective interest rate to 41%. The refinancing resulted in a loss on debt modification of $441,618. On November 28, 2023, the Company amended
the financing arrangement to borrow an additional $531,071 resulting in the weekly payments to decrease to $56,800 to be paid over 40
weeks. This amendment increased the effective rate to 49%. The refinancing resulted in a loss on debt modification of $485,436. On January 18, 2024, the Company amended
the financing arrangement to borrow an additional $549,185 resulting in the weekly payments to increase to $86,214 to be paid over 43
weeks. This amendment increased the effective interest rate to 52%. The refinancing resulted in a loss on debt modification of $728,278. On May 7, 2024, the Company amended
the financing arrangement to borrow an additional $518,750 resulting in the weekly payments to increase to $90,229 to be paid over 48
weeks. This amendment decreased the effective interest rate to 49%. The refinancing resulted in a loss on debt modification of $859,584. On April 4, 2024, the Company entered
into a new financing agreement for gross proceeds of $420,000 with a different unrelated third-party financial institution. Under the
terms of the agreement, the Company must pay $21,600 each week for 28 weeks with the first payment being due April 8, 2024. The financing
arrangement has an effective interest rate of 51%. The financing arrangement includes an original issuance discount (“OID”)
of $184,800 and issuance costs of $20,000. The OID and issuance cost associated with the financing arrangement are presented in the balance
sheets as a direct deduction from the carrying amount of the financing arrangement and is amortized using the effective interest method. During the three and six months ended
June 30, 2024, the Company amortized $605,611 and $984,924 of OID and issuance cost, respectively. The amounts are included in interest
expense on the statement of operations. During the three and six months ended June 30, 2024, the Company made $1,148,887 and $2,181,427
in payments on the loan payable. The outstanding balance of the loan payable as of June 30, 2024 and December 31, 2023, were $3,313,925
and $2,809,820. The financing arrangement is secured by an interest in virtually all assets of the Company with a first security interest
in accounts receivable. The financing arrangements are guaranteed by the Company’s CEO. Convertible Notes Payable On March 26, 2024, Inspire entered
into a securities purchase agreement (the “Purchase Agreement”) with a certain investor. Pursuant to the Purchase Agreement,
Inspire issued to investors Increasing OID Senior Note (“Convertible Note Payable”) for $500,000. The Convertible Note Payable
has a maturity date of the earlier of December 26, 2024 or the consummation of a capital raise (the “Maturity Date”). On June 11, 2024, Inspire entered into
a securities purchase agreement (the “Purchase Agreement”) with two investors. Pursuant to the Purchase Agreement, Inspire
issued to investors Increasing OID Senior Note (“Convertible Note Payable”) for $250,000 each. The Convertible Note Payable
has a maturity date of the earlier of February 11, 2025 or the consummation of a capital raise (the “Maturity Date”). The Convertible Notes Payable contain
an original issued discount (“OID”) which shall be: (i) fifteen percent (15%) if the Convertible Notes Payable is satisfied
and paid in full on or before the forty-fifth (45th) day after the Original Issue Date (as such term is defined in the Notes), (ii) twenty
percent (20%) if the Convertible Notes Payable is satisfied and paid in full after such 45th day but on or before the ninetieth (90th)
day after the Original Issue Date, and (iii) thirty percent (30%) after such 90th day. The Convertible Notes Payable can be prepaid at
any time prior to the Maturity Date without any penalties. The Convertible Notes Payable must
be repaid in full from any future capital raises (debt, equity or any other form of capital raise) of Inspire. All of the funds raised
must be used to repay the Convertible Notes Payable until the Convertible Notes Payable are repaid in full The Convertible Notes Payable are convertible
into shares of common stock of Inspire, in full or in part, at any time after issuance at the discretion of the noteholder at a fixed
conversion price of $0.03 per share (the “Fixed Conversion Price”). If the Convertible Notes Payable is
not repaid by the Maturity Date the default provisions are as follow: (i) The Face Value (as such term is defined in the Convertible
Notes Payable) of the Convertible Notes Payable will increase by 20% (to a 50% OID -- $1,000,000 Face Value); (ii) the
conversion price of the Convertible Notes Payable will become convertible at the lower of (a) the Fixed Conversion Price or (b) 20%
discount to a 3-Day volume-weighted average price (the “Default Conversion Price”). |
