Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended March 31, 2024, covering Kindly MD, Inc., not Nakamoto Inc. The filing identifies Kindly MD as a Utah-based holistic pain-management clinic and healthcare data company offering medical evaluation, behavioral health, chronic-pain management, recovery support, weight-loss and related services. Its common stock and tradeable warrants trade on Nasdaq under KDLY and KDLYW.
The financial statements are unaudited and prepared under U.S. GAAP. Kindly MD is a smaller reporting company and emerging growth company.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $829,029 | $1,160,345 | Down 28.6% |
| Operating expenses | $1,066,156 | $1,365,550 | Down 21.9% |
| Loss from operations | $(237,127) | $(205,205) | Loss increased |
| Net loss | $(282,326) | $(180,979) | Loss increased 56.0% |
| Basic and diluted loss per share | $(0.06) | $(0.04) | More unfavorable |
| Net cash used in operating activities | $(213,439) | $167,100 provided | Decreased materially |
| Cash and cash equivalents, period-end | $287,383 | $331,323 | Down from $525,500 at Dec. 31, 2023 |
- Patient care services generated $785,843, or approximately 94.8% of revenue; product retail sales generated $43,186.
- Operating expenses equaled 128.6% of revenue, producing an operating margin of approximately negative 28.6%.
- Net loss represented approximately negative 34.1% of revenue, compared with negative 15.6% in the prior-year quarter.
- Salaries and wages were $707,966, or 85.4% of revenue. General and administrative expense was $325,545, or 39.3% of revenue.
- Total assets were $799,315 and total liabilities were $1,182,437 at March 31, 2024. Stockholders’ deficit was $383,122.
- Current liabilities were $861,438 versus current assets of $356,019, resulting in a reported working-capital deficit of $505,419.
- Notes payable totaled $373,250 on the balance sheet, excluding the $276,000 derivative liability and operating lease liabilities totaling $232,415.
- Investing cash use was $11,182, primarily for property and equipment. Financing cash use was $13,496, including $45,000 of new note proceeds and $58,496 of note repayments.
Material Changes Versus the Prior Comparable Period
- Revenue declined $331,316, primarily because the Company shifted from cash-pay services toward billing commercial and governmental insurance payers. Management stated that this transition reduced cash-pay patient-care revenue during the quarter.
- Operating expenses declined $299,394. Salaries and wages decreased $225,335, general and administrative expense decreased $32,638, and cost of revenues decreased $40,880.
- Despite lower operating expenses, the operating loss increased by $31,922 because the revenue decline exceeded the expense reduction.
- Interest expense increased from zero to $57,239, consisting primarily of $9,881 of accrued interest and $47,358 of debt-discount amortization.
- Operating cash flow changed from $167,100 of cash provided in Q1 2023 to $213,439 of cash used in Q1 2024.
- Accumulated deficit increased from $4.16 million at December 31, 2023 to $4.44 million at March 31, 2024.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management reported a significant liquidity risk at quarter-end, including $287,383 of cash, a $505,419 working-capital deficit, an operating loss, and negative operating cash flow.
- After quarter-end, the Company completed an IPO on June 3, 2024, issuing 1,240,910 units and receiving approximately $6.0 million of net proceeds. The units included common stock and warrants. The underwriters also received additional warrants and partially exercised the over-allotment option.
- Management stated that the IPO proceeds provided adequate liquidity for at least the 12-month period following the filing date and were intended to support operations, debt service and strategic plans. This is management’s outlook, not a guarantee of future cash generation.
- On June 3, 2024, the Company repaid outstanding 10% OID promissory notes totaling $463,534, including principal and accrued interest, and issued 80,808 restricted shares to note holders. The related derivative liability was extinguished.
- The Company had a $276,000 derivative liability at March 31, 2024 related to embedded redemption features in its notes. The filing states that a substantial portion of the remaining $336,721 debt discount balance would be recognized as interest expense in the following quarter as a result of the IPO.
- Management cited risks relating to additional capital needs, regulatory approvals, reimbursement and commercialization, competition, third-party suppliers, intellectual-property protection, personnel retention, patient-care operations and expansion.
- Disclosure controls and procedures were determined to be ineffective as of March 31, 2024. Management reported no material changes in internal control over financial reporting during the quarter.
- The filing reports no known pending legal proceedings and no off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for Kindly MD, Inc. and ticker KDLY, whereas the request metadata names Nakamoto Inc.
- Verify the post-quarter-end IPO proceeds, share and warrant issuances, over-allotment exercise and use of proceeds.
- Assess whether the shift to insurance billing improves revenue collection, reimbursement timing, patient volume and margins.
- Reconcile the post-IPO treatment of the notes payable, derivative liability and remaining debt-discount amortization.
- Monitor cash burn, working-capital requirements, debt service and whether operations become cash-flow positive.
- Review remediation of the ineffective disclosure controls and any subsequent internal-control developments.
- Evaluate dilution from IPO shares, bridge-financing shares, warrants, stock options and potential warrant exercises.