Kindly MD Begins U.S. Micro-IPO Effort (Pending:KDLY)

A Quick Take On Kindly MD, Inc.

Kindly MD, Inc. (KDLY) has filed to raise $7 million in an IPO of its common stock and one warrant per share, according to an SEC S-1 registration statement.

The firm provides specialty outpatient chronic pain treatment services to patients in the state of Utah.

KDLY’s revenue growth is already slowing on a small revenue base, and management has no track record in growing a medical clinic practice to a multi-state operation.

When we learn more details about the IPO, I’ll provide a final opinion.

Kindly MD Overview

Salt Lake City, Utah-based Kindly MD, Inc. was founded to provide a variety of chronic pain management and treatment services to augment traditional healthcare options.

Management seeks to expand its footprint ‘to build a multi-state network of in-person clinics, telemedicine resources and wholly owned subsidiaries in the outpatient medical space.’

Management is headed by founder and CEO Timothy Pickett, who has been with the firm since its inception in 2019 and was previously a physician assistant at the Steward Medical Group’s Physician Group of Utah from 2014 to 2020.

The company’s primary offerings include the following:

• Medical evaluation and treatment

• Subscription outpatient medicine

• Data collection and research

• Education partnerships

• Online and email campaign marketing revenue

• Service affiliate agreements

• Retail sale of dietary products.

As of June 30, 2023, Kindly MD has booked fair market value investment of $3.3 million in equity from investors, including Wade Rivers LLC, Sally Alicia LLC, Suzy St Jeor and Frank Stevens LLC.

Kindly MD Customer Acquisition

The firm operates two clinic facilities in Utah, one each in Murray and Millcreek and markets its services online and offline.

Management says the company is among the largest providers of medical evaluation and related services “within the medical cannabis program of Utah.”

General & Administrative expenses as a percentage of total revenue have varied as revenues have increased, as the figures below indicate:

Click to enlarge

(Source – SEC.)

The General & Administrative efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of General & Administrative expense, has fallen to 0.4x in the most recent reporting period, as shown in the table below:

Click to enlarge

(Source – SEC.)

Kindly MD’s Market & Competition

According to a 2023 market research report by Mordor Intelligence, the global market for pain management is an estimated $75.4 billion in 2023 and is forecasted to reach $90 billion by 2028.

This represents a forecast CAGR of 3.59 from 2018 to 2028.

The main drivers for this expected growth are an increasingly aged global population experiencing higher chronic pain and expanded treatment options for patients from improved drugs and medical devices.

Also, the chart below shows the expected growth rate of pain treatments by region:

Major competitive or other industry participants include the following:

• Goforward.com

• Medalus

• evolvedMD

• Other local pain clinics.

Kindly MD, Inc. Financial Performance

The company’s recent financial results can be summarized as follows:

• Growing topline revenue from a small base

• Increasing gross profit but reduced gross margin

• Reduced operating losses

• Increasing cash used in operations.

Below are relevant financial results derived from the firm’s registration statement:

Click to enlarge

(Source – SEC.)

As of June 30, 2023, Kindly MD had $110,625 in cash and $878,384 in total liabilities.

Free cash flow during the twelve months ending June 30, 2023, was negative ($651,356).

Kindly MD IPO Details

Kindly MD intends to raise $7 million in gross proceeds from an IPO of its common stock and warrants, although the final figure may differ.

No existing shareholders have indicated an interest in purchasing shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

Capital Expenditures will include a total of $2,140,000, including money spent on expansion of at least two new clinic locations in Utah and Weber Counties at an estimated capital infusion of $570,000 per clinic. It also includes funds used to acquire existing clinic operations, with an acquisition budget of approximately $1,000,000. No specific clinics have been targeted for acquisition as of the date of this filing. If no clinics are found within this budget range, new expansion capital will be estimated at $2,140,000 in total.

Real Estate will include potentially acquiring clinic locations, although no specific markets or targeted real estate have been identified or are currently known as of the date of this filing.

Technology Development will include our plans to enhance our data and artificial intelligence (“AI”) capabilities significantly. We aim to allocate $300,000 towards bolstering our data collection systems and processes, ensuring richer and more accurate insights from patient interactions. An additional $200,000 will be directed towards refining our data analysis, aiding us in better understanding the complex patterns and trends in our data. The bulk of the use of proceeds, approximately $400,000, will expand our AI capabilities, strengthening our problem-solving and decision-making processes. Finally, the remaining $100,000 will be dedicated to system implementation, staff training, and contingency needs within our core businesses. This strategic investment is designed to deliver more personalized patient experiences, make informed business decisions, and ultimately enhance our organization’s operational efficiency and profitability.

We believe that our existing cash and cash equivalents, along with the net proceeds from this offering and any proceeds from the exercise of Warrants, together with interest on cash balances, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months.

(Source – SEC.)

Management’s presentation of the company roadshow is not available yet.

The company has elected to take advantage of reduced public company reporting requirements by its “smaller reporting company” and “emerging growth company” status.

This means that management may choose to provide less information to public shareholders during the IPO process and as a public company.

Regarding outstanding legal proceedings, management is not aware of any legal proceedings against it or the firm.

The sole listed bookrunner of the IPO is WallachBeth Capital.

Commentary About Kindly MD’s IPO

KDLY is seeking U.S. public capital market investment to fund its expansion plans and for working capital purposes.

The company’s financials have shown increasing topline revenue from a small base, growing gross profit but reduced gross margin, lowered operating losses and higher cash used in operations.

Free cash flow for the twelve months ending June 30, 2023, was negative ($651,356).

General & Administrative expenses as a percentage of total revenue have fluctuated as revenue has grown; its General & Administrative efficiency multiple fell to 0.4x in the most recent reporting period.

The firm currently plans to pay no dividends and has no plans to pay any in the foreseeable future.

The company’s recent capital spending history indicates it has continued to spend on capital expenditures despite negative operating cash flow.

The market opportunity for providing pain management treatment is large and expected to grow at a moderate rate of growth in the coming years as global populations age and experience greater chronic pain.

Business risks to Kindly MD, Inc.’s outlook as a public company include its tiny size and lack of management experience and demonstrated ability in growing a small business through expansion.

The firm’s revenue growth rate on a small base is slowing markedly.

I’ll provide a final opinion when we learn more about the IPO.

Expected IPO Pricing Date: To be announced.