Form S-1
We note that each unit being offered includes two warrants that are immediately exercisable. Please note that the shares underlying these warrants must be registered on this registration statement. Please amend the cover page caption to clarify the number of shares that you are registering that underlie the warrants. Please see Securities Act CDI 139.01.
No reply letter found.
We note your disclosure that you "may" be a controlled company under Nasdaq listing standards and that your CEO, Tim Pickett, beneficially owns 73% of your common stock. Please revise your cover page and the related risk factor to disclose that you are a controlled company, identify Mr.Rest of the question
Pickett as your controlling shareholder and the amount of voting power the controlling stockholder will own following the completion of the offering.
No reply letter found.
Please revise your cover page to clarify that the Non-tradeable warrant will not be listed on the Nasdaq Capital Market.
No reply letter found.
We note that your summary appears to only discuss the positive aspects of the Company. The prospectus summary should provide a brief, but balanced, description of the key aspects of the Company as of the latest practicable date. Please revise the summary to also discuss any negative aspects of the Company`s experience, strategy, and prospects.Rest of the question
For example only and without limitation, please revise the prospectus summary to provide: • a brief description of the regulatory approvals that are required for your products; • the uncertainty related to laws and regulations affecting the medical marijuana industry; and • the substantial doubt related to your ability to continue as a going concern, and your history of net losses and accumulated deficit.
No reply letter found.
We note your statement on page 6 that you intend to expand into five additional markets in 2023 through expansion of clinic locations and additional acquisitions. We also note your statement on page 34 that you "hope to be able to enter four new markets in the twelve calendar months following the closing of the Offering." Please clarify and provide more detail regarding your plans related to your expansion goals,Rest of the question
including a brief description of the types of opportunities you intend to explore, the markets that you intend to expand into in 2023/2024, whether you have taken any steps to expand into these markets, and whether you have identified any additional clinic locations or acquisitions or entered into any agreements or commitments for any material acquisitions or investments. If you do not have definitive plans at this time, revise to include balancing disclosure to clarify that your plans are in the early stages of development and that you do not currently have agreements in place for expansions or acquisitions.
No reply letter found.
Please provide your basis to support the following statements: • On page 5, your statement that you anticipate the expansion into the Murray office space would increase your revenue opportunity by up to $270,000 per month in the summer of 2023.Rest of the question
• On pages 6, 35 and 42 "KindlyMD is one of the largest providers of medical evaluation and management services related to treatment recommendations within the medical cannabis program in Utah." • On page 34, "Creating standard workflows based on provider/patient interaction can be both art and science and may yield new processes that could improve patient outcomes in relation to the opioid epidemic in the United States."
No reply letter found.
Several of the risk factors in this section are duplicative. Please revise to eliminate redundancy.
No reply letter found.
We note that several risk factors refer to "Subordinate Voting Shares," but you neither appear to be offering any such shares, nor do you appear to discuss these shares elsewhere in the prospectus. Please clarify or modify your disclosure accordingly. The market price for the Common Shares may be volatile, which may affect the price at which you could sell the Subordinate Voting Shares., page 20
No reply letter found.
We note recent instances of extreme stock price run-ups followed by rapid price declines and stock price volatility seemingly unrelated to company performance following a number of recent initial public offerings, particularly among companies with relatively smaller public floats.Rest of the question
Revise to disclose such and state that such volatility, including any stock-run up, may be unrelated to your actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of your stock.
No reply letter found.
We note your statements on pages 22 and 23 that investors "should not place undue reliance" on forward-looking statements. We also note your statement cautioning investors not to give undue weight to estimates and projections and your statement that you have not independently verified the statistical and other industry data generated by independent parties.Rest of the question
These statements imply that investors are not entitled to rely on the information included in the registration statement and imply a disclaimer of responsibility for this information in the registration statement. Please either revise this section to remove such implication or specifically state that you are liable for all information in the registration statement.
No reply letter found.
We note your references to forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please be advised that the safe harbor for forward-looking statements is inapplicable in this context, because you are not currently a reporting company. See Section 27A(a)(1) of the Securities Act.Rest of the question
Therefore, please either delete all references to the Private Securities Litigation Reform Act or make it clear that the safe harbor does not apply to this offering.
No reply letter found.
We note your disclosure that you intend to use the net proceeds from this offering for general corporate purposes, including capital expenditures and real estate. Please revise to provide more meaningful and specific disclosure of the intended use of proceeds, with respect to any particular capital expenditures that you expect to make.Rest of the question
For example, we note that you hope to acquire five to ten clinics in 2023/2024 and your plan to enter four new markets in the twelve calendar months following the closing of the Offering "[a]s funding is secured or made available." If any of the proceeds of this offering will be used, either directly or indirectly, to finance these acquisitions, expand your disclosure in this section to identify such businesses, if known, or, if not known, identify the nature of the businesses to be sought, the status of any negotiations with respect to the acquisition, and provide a brief description of such business. Refer to Instruction 6 to Item 504 of Regulation S-K for guidance.
No reply letter found.
So that investors may better understand the data collection part of your business, describe your data acquisition and analysis processes. For example, please disclose your informed consent procedures, the method by which you obtain the data, the nature of the data, and how data collection is used to improve your products and marketing efforts, providing examples where useful to investors.Rest of the question
Please also provide more information regarding your artificial intelligence technology, including its development, the nature of the predictions and inferences it generates. To the extent you have agreements with third party vendors or software developers, please provide a discussion of those agreements and their material terms, and file them as exhibits. Last, clarify whether you generate revenues from data collection and research. We note your disclose on page F-6.
No reply letter found.
Please expand your disclosure to state whether any specific government funding programs have materially impacted your operating results or liquidity in any of the periods presented. If so, disclose the status of those programs and whether you expect a similar material impact in future periods.
No reply letter found.
Regarding your acquisition growth strategy, please disclose whether you have identified any specific acquisition targets and the status of those negotiations, if material. Operating Expenses, page 36
No reply letter found.
Please expand your disclosure to quantify the specific costs increases that caused your G&A expenses to increase from 34% of sales in 2021 to 57% of sales in 2022. Clarify why your "additional investments in infrastructure and technology" were not capitalized. Similarly, please expand your personnel expense disclosure to explain why these costs increased from 60% of sales in 2021 to 110% of sales in 2022.Rest of the question
Explain why these costs increased by a substantially greater rate than sales and whether you expect this trend to continue. Specifically discuss the circumstances surrounding the $1.6 million equity based compensation expense referenced on page F-5 and its impact on your operating results. See Item 303(a) of Regulation S-K.
No reply letter found.
Please expand your disclosure to specifically describe the factors that materially impacted your 51% revenue variance. For example, if the variance was materially impacted by an increase in non-opiod treatment appointments then please quantify the increase in appointments. Disclose whether there was a material change in pricing between 2021 and 2022.Rest of the question
Quantify the portion of total revenue comprised by your controlled substance medication services. Describe any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues. See Item 303(b)(2) of Regulation S-K.
No reply letter found.
We note your reference to your medical advisory committee on page 38. Please provide a brief description of this committee, including its role in the company, responsibilities and composition.
No reply letter found.
Please revise the graphic on page 39 to ensure that it is of high enough resolution and type size that all information is legible.
No reply letter found.
Please revise your disclosure to discuss the material terms of your Business Associate Agreements with local healthcare clinics, manufacturers and vendors, including the vendors that review the predictions and inferences made by your AI. Ensure you include the rights and obligations of the parties, any payment terms, duration, and termination provisions.Rest of the question
Please also file these agreements as exhibits to your registration statement.
No reply letter found.
Please expand your disclosure with regard to your retail sales to describe each of your three gummy products, including how you supply and manufacture these products, and the government regulations or approvals that affect your ability to offer these products.Rest of the question
Further, please revise the description of your products to avoid referring to any CBD products as supplements, which implies that these products supplement diet or nutrition. For guidance, please refer to Question 9 of the FDA's Regulation of Cannabis and Cannabis-Derived Products: Questions and Answers (available at https://www.fda.gov/news-events/public-health-focus/fda-regulationcannabis-andcannabis-derived-products-including-cannabidiol-cbd).
No reply letter found.
We note that KindlyMD offers telehealth online to patients in select markets. Please identify those markets and discuss the effect of telehealth regulations on your business. In your Government Regulation section and the related risk factor section, please revise to discuss briefly state regulation of telehealth in those jurisdictions and their effect on your business.
No reply letter found.
Please revise this section to provide a more detailed discussion regarding the effect of existing or probable governmental regulations on the business. Discussions should include, but are not limited to, regulation related to telehealth and telepsychology provider licensing, medical practice, psychology, certification and related laws and guidelines, corporate practice of medicine laws, fee splitting, cyberRest of the question
security, patient confidentiality, insurance regulation (if any), and any other relevant regulations you believe are applicable to your line of business.
No reply letter found.
We note your intention to expand your operations into four other states. Please expand your government regulation section to discuss the cannabis regulations, including the licensure and registration requirements, you must satisfy to operate in those states, including the steps you have taken to satisfy those requirements and the steps that remain.Rest of the question
Please also consider inserting risk factor disclosure related to these regulations and the consequences of failing to comply. Also expand on your risk factors related to the medical marijuana industry on page 12. If you do not believe that these regulations apply to your products and services, provide us an analysis with support to explain your conclusions. Management, page 45
No reply letter found.
Please revise Messrs. Cox and Barrera's biographies to discuss their principal occupation and employment for the past five years, including the name, and principal business of any corporation or other organization. Please also indicate any other directorships held during the last five years for each director. See Item 401(e) of Regulation S-K. Executive Compensation, page 50
No reply letter found.
Please update your executive compensation table for the fiscal year ended December 31, 2022. Please also include the executive compensation of the company's two most highly compensated executive officers other than the chief executive officer who were serving as executive officers at the end of December 31, 2022, and an outstanding equity awards table. Refer to Item 402(m) and (p) of Regulation S-K.
No reply letter found.
Please provide a footnote explanation to include identification to the extent material for any item included under “All Other Compensation” . See Item 402(o)(7) of Regulation S- K.
No reply letter found.
We note your consulting agreement with Wade Rivers, LLC, which is owned and managed by Tim Pickett, and your footnote (b), which states that Mr. Pickett's compensation includes the amounts paid to a related entity. Please revise your footnote disclosure to clarify the amount of compensation paid to Mr. Pickett and the amount paid to Wade River, LLC.
No reply letter found.
Please disclose the nature and the amount of consideration paid for the shares issued in your disclosed private placement transactions. See Item 701(c) of Regulation S-K. General
No reply letter found.
Please ensure each exhibit is in the proper text-searchable format. See Rules 301 and 304 of Regulation S-T. For example, we note Exhibits 3.4, 10.1, 10.4 and 10.5.
No reply letter found.
We note that your exclusive forum provision in Section 11.01 of your corporate bylaws identifies the state and federal courts located within Salt Lake County, Utah as the exclusive forum for certain litigation, including any “derivative action.” Please disclose whether this provision applies to actions arising under the Securities Act or Exchange Act.Rest of the question
In that regard, we note that Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. If the provision applies to Securities Act claims, please also revise your prospectus to state that there is uncertainty as to whether a court would enforce such provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. If this provision does not apply to actions arising under the Securities Act or Exchange Act, please also ensure that the exclusive forum provision in the governing documents states this clearly, or tell us how you will inform investors in future filings that the provision does not apply to any actions arising under the Securities Act or Exchange Act.
No reply letter found.
Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications.
No reply letter found.
We note your revisions in response to our prior comment 2 and reissue in part. Please revise your cover page to identify Mr. Pickett as your controlling shareholder and the amount of voting power the controlling stockholder will own following the completion of the offering.
No reply letter found.
We note your response to prior comment 4. Please further revise to balance your disclosure by clarifying that there is no assurance that your services and products will be "ending the opioid crisis."
No reply letter found.
We note your revisions in response to our prior comment 4 and reissue in part. Please revise your summary to disclose your accumulated deficit.
No reply letter found.
We note your revisions in response to our prior comment 7 and reissue in part. We note that there are still duplicates of the risk factors titled "We have broad discretion in the use of our cash, cash equivalents, and investments, including the net proceeds from this offering, and may not use them effectively" on pages 18 and 21 and "There could be unidentified risks involved with an investment in our securities" onRest of the question
pages 19 and 22. Please revise to remove the duplicative risk factors.
No reply letter found.
The descriptions of the risks associated with your industries in this sub-section is general in nature and could relate to any company. Please revise to fully describe the risks associated with your industries with more specificity.
No reply letter found.
We note your revisions in response to our prior comment 10 and reissue in part. We note your statement that investors "should not place undue reliance on these forward-looking statements." Please revise this statement to eliminate any implication that investors are not entitled to rely on the information included in the registration statement. Use of Proceeds, page 24
No reply letter found.
We note your revisions in response to our prior comment 12 and reissue in part. We note that your estimate an acquisition price of approximately $1 million to acquire two existing clinics. Please clarify whether this estimate is for each clinic, or whether the $1 million purchase price is meant to be allocated between the two clinics.Rest of the question
Please also disclose how you determined the purchase price estimate when you have not yet identified any specific acquisitions.
No reply letter found.
Please disclose on page 35 why your 2023 personnel expenses increased by 63% compared to the March 31, 2022 period whereas revenue only increased by 30%. Clearly disclose whether this expense category is entirely comprised of compensation for employees that directly provide healthcare services to patients.Rest of the question
Explain why you were not able to increase the pricing of your services commensurate with the substantial increase in your personnel costs. See Item 303(c) of Regulation S-K.
No reply letter found.
We note your graphic on page 37. Please revise to provide narrative disclosure that clearly explains the context for the graphic. To the extent that this reflects actual data collected from your patients, please provide appropriate context for the data, including how it was was collected.
No reply letter found.
We note your revisions in response to our prior comment 21. We note that you partner with local healthcare clinics and product manufacturers in geographic markets to maximize your ability to increase service and product offerings to more individuals.Rest of the question
Please revise this section to provide more detailed descriptions of your arrangements in these service affiliate agreements, including the nature of the agreements and the material terms. Please file any material agreements related to such engagement as an exhibit.
No reply letter found.
We note your revisions in response to our prior comment 21 and reissue in part. Please expand your disclosure to describe each of your three gummy products, and to provide further detail regarding the approval and registration process with the Department of Agriculture, including what steps are required, any dosage limits, or ongoing approval or registration requirements.Rest of the question
With regard to the supply and manufacture of your gummy products, please also disclose the material terms of your arrangement with the licensed manufacturer, including whether you have entered into any material agreements, and information regarding the license held by the manufacturer. Further, please revise your Government Regulation section to discuss the regulations governing the manufacture and distribution of your gummy products, and please consider inserting risk factor disclosure regarding any risks or uncertainties related to these regulations or your ability to satisfy them.
No reply letter found.
We reissue comment 23. We note brief summaries regarding the government regulations affecting your business added to page 42. Please revise to provide a more detailed description of the regulations you are subject to so that investors can understand the regulatory framework you must navigate to conduct your business.Rest of the question
In doing so, please disclose the applicable regulations and regulatory agencies by name, and please discuss how you comply with those regulations.
No reply letter found.
We note your revisions in response to our prior comment 24 and reissue in part. We note that you have not currently targeted or planned specific expansion into other states. However, we also note your intent to evaluate and explore North Carolina, Texas, Florida and Pennsylvania, with the hope to enter four new markets in the twelve calendar months following the closing of the Offering.Rest of the question
In light of the intended timeframe, please expand your government regulation section to discuss the cannabis regulations, including the licensure and registration requirements, you must satisfy to operate in those states, including the steps you have taken to satisfy those requirements and the steps that remain.
No reply letter found.
We note disclosure on page 33 where you state that you anticipate slower growth in 2023 due to "limiting legislation." Revise this section to describe the limiting legislation you refer to, and, as appropriate, include a related risk factor to disclose the attendant risks of such legislation to your business and plan of operation.
No reply letter found.
We note your revisions in response to our prior comment 25 and reissue in part. Please revise to clarify Mr. Cox's position and role for IS Acquisitions and Analytics and when he joined KindlyMD.
No reply letter found.
We note your revisions in response to our prior comment 26 and reissue in part. We note that Messrs. Cox and Barrera both joined KindlyMD partway through your fiscal year 2022. Please advise us how your disclosure complies with Item 402(m)(2)(iii) of Regulation S-K.
No reply letter found.
We note your response to previous comment 13 and re-issue the comment in part. In your description of your 2023 operational plan, you note that "[a]t present, [y]our operations are solely based in Utah and [you] have not currently targeted or planned specific expansion into other states." However, your disclosure also states that you "hope to be able to enter four new markets in the twelve calendar months followingRest of the question
the closing of the Offering." We also note that your Growth Strategy section on page 5 of the Prospectus states that "[t]he markets that [you] intend to explore and evaluate include North Carolina, Texas, Florida, Pennsylvania, among further expansion in Utah." Please reconcile your disclosure regarding your twelve calendar month timeline and intended exploration of those specific markets with your statement that you have not currently targeted or planned specific expansion into other states.
We have updated the Registration Statement universally to disclose that the Company has no expansion plans outside the state of Utah currently. Please see pages 12, 35 and 45. Read in the reply ↗
We note your response to previous comment 13 and we refer you to our comment above. We note your current growth plans and your disclosure that you hope to be able to enter four new markets in the twelve calendar months following the closing of the Offering.Rest of the question
Please revise to clarify your disclosures and include the appropriate regulatory disclosures in this section if you elect to include disclosures regarding your entry into the new four markets. As appropriate, revise to include risk factor disclosures regarding the uncertainty of entering into these markers.
We have updated the Registration Statement universally to disclose that the Company has no expansion plans outside the state of Utah currently. Please see pages 12, 35 and 45. Because there are no expansion plans, we have not included any new risk factors regarding expansion.
Please note that we have filed this Registration publicly on Form S-1 instead of as a Draft Registration Statement. We appreciate your time and attention in your review. Read in the reply ↗
For each of your director nominees, please briefly discuss the specific experience, qualifications, attributes or skills that led to the conclusion that such person should serve as a director of the Company. Please refer to Item 401(e) of Regulation S-K. General
All director nominees have extensive experiences and qualifications that make them suitable for a directorial position in KindlyMD. The following director nominees are poised to offer substantial expertise and leadership to navigate the complexities and opportunities the company faces. The incorporation of the additional information from KindlyMD reveals a rich context wherein the individual experiences, qualifications, and skills of each director nominee can be mapped to cater to the company’s diverse needs.
Amy
Powell, MD - Director Nominee
●
Clinical and Research Acumen: Dr.Read in the reply ↗Rest of the answer
Powell brings vital clinical and research acumen which is crucial to enhancing and validating KindlyMD’s pain management approaches, specifically given the blend of multimodal pain management methods the company uses.
Medical
Expertise: Her 20 years of experience in caring for athletes and active individuals aligns with the company’s mission to reduce opioid usage while successfully treating patients, utilizing both her practical and theoretical insights in pain management.
Educational
Contribution: Her role in medical education can further bolster KindlyMD’s research, clinical protocols, and patient education strategies in creating evidence-based guidelines and therapies.
Christian
Robinson, CPA - Director Nominee
Financial
Oversight: Given KindlyMD’s diversified services and data management, Christian’s vast experience in managing finances, ensuring compliance (such as with SOX), and overseeing SEC reporting is pivotal for financial stability and regulatory adherence.
Strategic
Planning: His experience with startups, particularly in the medical cannabis industry, resonates with KindlyMD’s approach to alternative treatments and may offer valuable insights into both strategic financial planning and industry-specific nuances.
Compliance and Reporting: Ensuring that KindlyMD adheres to financial regulations and maintains transparent communication with investors and stakeholders will be crucial, especially in light of the company’s collection and management of sensitive patient data and its varied revenue streams (subscription, fee-for-service, etc).
Gary
Seelhorst, MS, MBA - Director Nominee
Pharmaceutical
Insight: Given that KindlyMD is tackling challenges with prescription medication use, Gary’s 25-year background in Pharmaceuticals and Healthcare is invaluable for navigating the pharmaceutical landscape, especially regarding non-opioid alternatives.
Business Development: His business development role during the growth phase at Imprimis/Harrow Health, and his MBA with a focus on finance, could be crucial in aiding KindlyMD to strategically navigate its expansion strategies and potentially increase its service portfolio or market share.
Development & Corporate Strategies: His varied roles in both clinical and corporate development offer a balanced perspective that is particularly useful in ensuring that KindlyMD’s clinical and corporate strategies are aligned, sustainable, and optimized for both patient outcomes and business growth.
summary, the integration of these professionals into KindlyMD’s leadership aligns well with the company’s multifaceted approach to tackling the opioid crisis through direct healthcare provision, alternative treatment methodologies, and comprehensive data management.
Each nominee brings a specific skill set - clinical expertise (Dr. Powell), financial and compliance management (Mr. Robinson), and a blend of pharmaceutical insight and strategic development (Mr. Seelhorst) - that can holistically contribute to navigating the regulatory, clinical, financial, and strategic challenges and opportunities within the healthcare and data sectors in which KindlyMD operates.
We have updated the Registration Statement on page 47 to include this reasoning.
We note that Section 11.01 of your ByLaws provide that "to the fullest extent permitted by law, and unless the Corporation, pursuant to a resolution adopted by a majority of the Board of Directors, consents in writing to the selection of an alternative forum, the appropriate state and federal courts located within Salt Lake County, Utah, shall be the sole and exclusive forum for (a) any derivative action orRest of the question
proceeding brought in the name or right of the Corporation or on its behalf, (b) any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action arising or asserting a claim arising pursuant to any provision of the Utah or any provision of the Articles of Incorporation or these Bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to such court having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 11.01." Please disclose whether this provision applies to actions arising under the Securities Act or Exchange Act. If so, please also state that there is uncertainty as to whether a court would enforce such provision. If the provision applies to Securities Act claims, please also state that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. In that regard, we note that Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules. If this provision does not apply to actions arising under the Securities Act or Exchange Act, please also ensure that the exclusive forum provision in the governing documents states this clearly, or tell us how you will inform investors in future filings that the provision does not apply to any actions arising under the Securities Act or Exchange Act.
We amended our corporate bylaws in June 2023 to eliminate this conflict and filed the Restated Bylaws as Exhibit 3.6 to the Draft Registration
Statement filed on June 20, 2023. Read in the reply ↗
Please revise here and on page 27 to explain what the Pro Forma As Adjusted column represents and how the amounts presented were determined.
We have revised the tables included in the Summary of Financial Information and Capitalization sections of the Registration Statement to retitle the columns to include a “Post-Offering Pro Forma without Over-Allotment Option” and a “Post Offering Pro
Forma with Over-Allotment Option.” These amounts were determined based on the purchase price of the Units, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We have also updated the description in the footnotes to the tables. Read in the reply ↗
Please tell us why you present the Use of Proceeds based on percentage raised or revise the table to reflect the firm underwritten offering.
We have updated the Use of Proceeds table to reflect the firm underwritten offering. Read in the reply ↗
We note that you included a resale prospectus for shares to be sold by the selling shareholders. Revise to disclose the reasons why you have included the resale prospectus when you disclose that "The selling stockholders have expressed an intent not to sell stock concurrently with the initial public offering."
We have removed the references to our selling shareholders’ intent or representations not to sell the stock concurrently with the initial public offering. Read in the reply ↗
We note your disclosure at page II-2. Please confirm that you have included all information as to all securities sold within the past three years which were not registered under the Securities Act. We note you were incorporated in 2019 and we were unable to locate disclosure related to the issuances to Sally Alicia LLC, Gus Doodle LLC and Frank Stevens LLC. Please advise.
All of the information regarding securities issued or sold by the Company in the past three years is included in the Registration Statement.
The shareholders listed above (Sally Alicia LLC, Gus Doodle LLC and Frank Stevens LLC) either (i) received their shares from individual shareholders in private transactions, or (ii) retitled their shareholdings from an individual shareholder to an entity for personal or estate planning purposes. Read in the reply ↗
You disclose here that you "expect net sales to increase as the opioid and prescription medication management side of the business have a favorable impact on net sales through the remainder of 2023 and into 2024" but other disclosures appear to indicate that revenue from opioid and medication management treatments have been immaterial.Rest of the question
Please clarify your disclosure by quantifying the amount of revenue in each period recognized from each of the revenue streams disclosed on pages 30-32.
We have revised our disclosure in the Revenue section of the Registration Statement so it is consistent with the rest of the document and because the fiscal year is almost complete. Read in the reply ↗
Please disclose the maturity date, stated interest rate, collateral and/or security provisions, and any other material terms of the loan payable to Wade Rivers.
We have revised Note 8 to the financial statements to include the material terms of the Wade Rivers loan payable. Read in the reply ↗
We note the disclosure that from December 2023 to January 2024, you issued convertible promissory notes in the aggregate principal amount of $444,444 to certain investors. Please revise to disclose the investors and the material terms of the related Securities Purchase Agreements, including the convertible feature and pricing terms.
The disclosure on page 6 has been updated to include the investors and the material terms of the related Securities Purchase Agreements, Read in the reply ↗
Please provide us with a detailed analysis as to why the proposed secondary offering is not an indirect primary offering on your behalf and thus appropriate to characterize the transaction as a valid secondary offering under Securities Act Rule 415(a)(1)(i). For example, we note your new disclosure regarding the issuance of convertible promissory notes from December 2023 to January 2024.Rest of the question
Elsewhere, you note that these convertible notes will convert into shares of common stock at the assumed initial public offering price of $5.50 per share. Given that the investment in the promissory notes appeared to be made with a view towards the resale of the underlying common stock following the Company’s initial public offering, it appears the resale of these shares of common stock could be deemed an indirect primary offering being conducted by or on behalf of the Issuer. Explain why the selling shareholders should not be deemed to be underwriters, or revise your prospects to include a statement that the selling shareholders are deemed underwriters and fix a price at which the resale shares will sell for the duration of the offering. For guidance, please refer to Securities Act Rules Compliance and Disclosure Interpretations Question 612.09. Last, please tell us whether the sales by the selling shareholders are needed to meet Nasdaq listing requirements.
The Company acknowledges the Staff’s comment and respectfully submits that the proposed resale of the shares of the Company’s common stock by the bridge lenders/selling securityholders (the “Selling Securityholders”) as contemplated in the Registration Statement is not an indirect primary offering and is appropriately characterized as a secondary offering under Rule
415(a)(1)(i) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
In further consideration of this comment, we have reviewed Compliance and Disclosure Interpretation Question 612.09 (“C&DI 612.09”),Read in the reply ↗Rest of the answer
which provides guidance regarding Rule 415:
“It is important to identify whether a purported secondary offering is really a primary offering, i.e., the selling securityholders are actually underwriters selling on behalf of an issuer. Underwriter status may involve additional disclosure, including an acknowledgment of the seller’s prospectus delivery requirements…
The question of whether an offering styled a secondary one is really on behalf of the issuer is a difficult factual one, not merely a question of who receives the proceeds. Consideration should be given to how long the selling securityholders have held the shares, the circumstances under which the received them, their relationship to the issuer, the amount of shares involved, whether the sellers are in the business of underwriting securities, and finally, whether under all the circumstances it appears that the seller is acting as a conduit for the issuer.” have reviewed the guidance in C&DI 612.09, including the six enumerated factors contained therein, and offer the following discussion for the Staff’s consideration.
Background
Between
December 28, 2023 and January 24, 2024, through bona fide private placements with five separate individual accredited investors (collectively, the “Selling Securityholders”), the Company issued five separate Original Issuance Discount Promissory Notes (the
“Notes”) with principal aggregate amounts totaling $444,444 to the Selling Securityholders (the “Private Placement”).
In connection with the issuance of the Notes, the Company entered separate securities purchase agreements with each of the Selling
Securityholders (the “Securities Purchase Agreements”), which includes the registration rights for a total of 80,808 shares of common stock to be issued to the Selling Securityholders on the date of the pricing of the Company’s IPO. The
Private Placement was effected in reliance upon the exemption from the registration requirements of the Securities Act by virtue of Section
4(a)(2) thereof and Rule 506 of Regulation D thereunder.
Private Placement was conducted pursuant to the Securities Purchase Agreement in which, among other things, each Selling Securityholder made customary investment and private placement representations to the Company, including that it (i) was an “accredited investor” as defined in Rule 501 under the Securities Act, (ii) had such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Note, and (iii) was able to bear the economic risks of the investment.
Factor
1: How Long the Selling Stockholders Have Held the Securities
While the presumption is that the longer securities are held, the less likely it is that a selling securityholder is acting as a conduit for a primary offering, such a factor is not determinative, and the Commission has in fact specifically recognized that a short holding period does not by itself negate valid investment intent. The Staff regularly permits issuers to register privately issued shares for resale promptly following, or even prior to, the closing of a private placement transaction.
Four of the Selling Securityholders initially purchased the Notes on December 28, 2023, with one investor purchasing a note on January 24,
2024 pursuant to the Securities Purchase Agreements. Therefore, as of the date of this letter, most of the Selling Securityholders will have held the Notes and the shares issuable upon the IPO related to the Note (the “Shares”) for over three months, with one holding a Note for more than two months. The issuances were made in a bona fide private placement exempt from registration under Section
4(2) of the Securities Act, and the Selling Securityholders acquired the securities for their own investment purposes. The Selling
Securityholders have been subject to the full economic and market risks of their entire investment since the date of the acquisition of the shares. In addition, The Selling Securityholders acquired the shares with no assurance that the Company would ever go public or that the shares could be ever be sold in a liquid market. This holding period for the Notes and the Shares demonstrates that the Selling Securityholders acquired the securities for investment, do not have intent to distribute the Shares on behalf of the
Company and are not acting as an underwriter. Additionally, the Selling Shareholders have agreed to lock up their shares for an additional ninety days following the pricing of the IPO.
the Securities Purchase Agreement, the Company has covenanted to file a registration statement covering the resale of the shares of common stock underlying the Note. The Company has added the Shares to its Registration Statement to perform such obligation under the Securities
Purchase Agreement. The Company respectfully submits to the Staff that the registration of the shares of common stock for resale as contemplated in the Registration Statement is consistent with other financing transactions, such as a typical “PIPE” transaction, where an issuer is required to file a resale registration statement shortly after closing. As discussed above, the Selling Securityholders have held the Notes for more than three or two months as of the date of this letter. Like other investors in a typical PIPE or IPO transaction, the Selling Securityholders were immediately at market risk once the Notes and the Shares underlying the Note were acquired on
December 28, 2023 and January 24, 2024, respectively.
2: Circumstances under which the Selling Securityholders Acquired the Shares
As described above, the Selling Securityholders acquired the shares of common stock in the Private Placement, which was a bona fide private placement transaction conducted pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act.
Securities Purchase Agreement contained, among other things, customary investment and private placement representations of the Selling
Securityholders to the Company. In addition, the Selling Securityholders have not entered into any underwriting relationships or arrangements with the Company, have not received any commission or other payment from the Company in connection with the resale of any of its securities, and the Company will receive no proceeds from the resale of the shares of common stock, if any, by the Selling Securityholders.
These circumstances are quite distinct from those involving a primary offering by or on behalf of the Company.
Furthermore,
Rule 100 of Regulation M defines a “distribution” as “an offering of securities, whether or not subject to registration under the Securities Act, that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods” (emphasis added). The Company is not aware of any evidence that would suggest that any such special selling efforts or selling methods (such as investor presentations or road shows) by or on behalf of the Selling Securityholders that have or are currently intended to take place if the Registration Statement is declared effective.
Company further notes that registration is not equivalent to a current intent to distribute. If registration did equate with such a distribution intent, then no private placement transaction could ever occur because the mere fact of subsequent registration would presumably negate an investor’s prior representation of investment intent, which would in turn destroy any private placement exemption. In addition, the Securities Purchase Agreement with each investor provided that the investor agreed that, without the prior written consent of the
Company, the investor shall not, during the period ending 90 days after the pricing of the initial public offering: (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of such securities or
(2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership or such securities.
Please substantially expand your disclosure to fully explain the specific facts and circumstances that caused the fluctuations in salaries and wages and general and administrative expenses. Specifically address the significant change in stock compensation expense reflected on page F-6.Rest of the question
Also, please clarify how your "focus on improvement of operational efficiency and standardization of operational processes" impacted your reported revenue. Further, regarding the change in other income, please provide a disclosure that fully describes the Uplift charity program and how the program's income and expenses are accounted for and classified in your financial statements. See Item 303 of Regulation S-K.
The Selling Securityholders’ Relationship to the Company
Based upon information supplied to the Company by the Selling Securityholders, the Selling Securityholders are private individual accredited investors that purchased the securities for their own accounts and not with a view to resale or distribution.Read in the reply ↗Rest of the answer
The Company does not have an underwriting relationship with the Selling Securityholders or any contractual, legal or other relationship that would control the timing, nature or amount of resales of the shares of common stock following the effectiveness of the Registration Statement or even whether, or if, any shares of common stock may be resold under the Registration Statement. To the Company’s knowledge, at no time have the Selling Securityholders been affiliated with or acted as securities broker-dealers or representatives thereof. Further, as noted above, the Selling Securityholders each represented to the Company that they were acquiring the securities for their own accounts and not with a view to resale or distribution.
registration rights granted to the Selling Securityholders under the Securities Purchase Agreement entered into in connection with the
Private Placement are customary and are not indicative of any desire of the Selling Securityholders to sell or distribute the shares of common stock on behalf of the Company, or at all. The Selling Securityholders negotiated for such customary registration rights for a variety of business reasons and the registration rights were not granted by the Company for the purpose of conducting an indirect primary offering. In addition, the Selling Securityholders would be responsible for paying any broker-dealer fees or underwriting discounts or commissions directly to any broker-dealers they engage to assist in selling any shares of common stock.
To the extent the Selling Securityholders sell the shares of common stock, the Selling Securityholders will retain all proceeds from such sales and the Company will not receive any of the proceeds from any resale of the Shares.
Please disclose the amount of stock compensation expense that you expect to recognize in 2024 based on the awards that are currently outstanding.
The Amount of Shares Involved
Selling Stockholders are registering for resale 80,808 shares of Common stock they have the right to acquire pursuant to the Notes, out of the 1,712,057 total shares being registered in the Secondary Offering. Such shares represent only 4.71% of the total shares being registered in the Company’s Secondary Offering and 1.35% of the Company’s common shares after the Offering on a fully-diluted basis.Read in the reply ↗Rest of the answer
We note that the Staff has permitted offerings to be characterized as secondary offerings in cases where a significantly larger percentage of a company’s outstanding securities was registered for resale.
Please tell us why the discount rate used in your lease accounting appears to be materially different from the borrowing rates disclosed in Note 8. See ASC 842-20-30-3.
Whether the Selling Securityholders are in the Business of Underwriting Securities noted above, based upon information supplied to the Company by the Selling Securityholders, the Selling Securityholders are each individual accredited investors. To the Company’s knowledge, the Selling Securityholders are not, nor have they ever been, in the business of underwriting securities.Read in the reply ↗Rest of the answer
Additionally, the issuance of shares of common stock covered by the Registration Statement to be issued to the Selling Securityholders related to the issuance of the Note was neither conditioned on the prior effectiveness of the Registration
Statement nor otherwise conditioned on the Selling Securityholders’ ability to resell the shares of common stock.
prior no-action letters, the Staff has noted that determination of “underwriter” status depends on all of the facts and circumstances surrounding a particular transaction. The Staff also has stated that institutional investors generally should not be deemed to be underwriters with regard to the acquisition of large amounts of securities, provided such securities are acquired in the ordinary course of the investor’s business and that the investor has no arrangement with any person to participate in the distribution of such securities. See, e.g.,
Staff Letter dated May 10, 1983 re: American Council of Life Insurance. Pursuant to the Securities Purchase Agreements, the Selling
Securityholders represented and warranted that they were acquiring the securities without a view towards the sale or distribution thereof within the meaning of the Securities Act. There is no evidence to suggest that any of those representations were false.
Please ask your auditors to provide us with a fully updated consent. Stock-based Compensation, page 34
The auditors have updated their consent to reflect the date of filing. Thank you for bringing this to our attention. Read in the reply ↗
Please reconcile your disclosure about there being no outstanding stock awards with the disclosure on page F-16 about the 2024 issuance of stock options.
We have revised the S-1 based on this comment. Please see pages 34 and F-16 to included the following language in both sections.
On
January 5, 2024 the Company issued Incentive Stock Options to various employees of the Company, resulting in the award of 5,805 Incentive
Stock Options with and exercise price of $5.50, an effective grant date of January 2, 2024 and a vesting date of July 1, 2024. The Company has no stock awards currently outstanding; all outstanding awards have been fully expensed and there are no outstanding award expenses for 2024.
Note
6, page F-123. Read in the reply ↗
It is not clear how you calculated the impact of the accounting error. Please provide us with your calculations and the underlying assumptions. Also, please clarify for us how you estimated your incremental borrowing rate to be 10% given that the borrowing arrangement disclosed on page F-14 includes features that substantially increased your effective borrowing rate.Rest of the question
Please cite the specific authoritative guidance that supports your analysis. We note that the lease asset exceeds 20% of your reported total assets.
We have restated the 2023 and 2022 FS to correctly reflect the weighted average discount rate in Note 6 to 15% based on this comment.
In response to the SEC Staff’s comment regarding the impact of the accounting discrepancy noted in the Company’s previous response, and the calculations and underlying assumptions, we acknowledge the Staff’s comment and reaffirm our adherence to the guidance provided in ASC 842-20-30-3.Read in the reply ↗Rest of the answer
As per our accounting policies, in instances where our leases do not specify an implicit rate, we determine the present value of future lease payments using an estimated incremental borrowing rate (“IBR”) at the commencement date of each lease. The IBR is calculated by estimating the cost for the Company to borrow, on a collateralized basis, an amount equal to the total lease payments for the term of the lease.
The
Company currently has six leases, which were originally executed between May 2020 and August 2021. The Company renewed two of the leases in July and September of 2023. In April 2023, the Company entered into a long-term unsecured not payable with Wade Rivers, LLC, with an interest rate of 14.9% per annum. In December of 2023, subsequent to the execution of the lease renewals, the Company entered into several loans for the purpose of financing the Company operations through the completion of the Company’s IPO in 2024 (the effective interest rates of these loans ranged between approximately 11% to 20%).
recognize that the IBR used to account for its operating leases and lease renewals was previously lower than the interest rates on lease loans. Upon evaluating the difference between the IBR used to present value future lease payments and the actual borrowing rates of the Company’s loans and current offers for funding today, we concluded that the IBR used should have been higher approximately
15% under the criteria outlined in ASC 842-20-35-5 and the SEC’s comment. As a result, the 2023 and 2022 financials have been restated to as follows:
1. The total
2023 balance of operating right-of-use assets has decreased from $268,399 to $235,706
(representing a $32,693 change from the reported balance).
2. The
2023 balance of operating lease liabilities has decreased from $291,684 to $258,991
3. The total 2022 balance of operating right-of-use assets has decreased from $350,688 to $296,417
(representing a $54,271 change from the reported balance).
