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LogicMark, Inc. (LGMK) CEO Chia Lin Simmons on This autumn 2021 Outcome – Earnings Call Transcript


LogicMark, Inc. (NASDAQ:LGMK) This autumn 2022 Earnings Conference Call April 19, 2022 2:00 PM ET

CompanyParticipants

Jules Abraham – Investor Relations

Chia Lin Simmons – President & Chief Executive Officer

Mark Archer – Chief Financial Officer

Conference Call Participants

Operator

Good day, girls and gents. Thank you for standing by and welcome to the LogicMark Fourth Quarter and Full Year-End 2021 Financial and Corporate Update Conference Call. At this time, all members are in a listen-only mode. After the audio system presentation, there will probably be a question-and-answer session. [Operator Instructions]

I’d now like to show the convention over to your speaker host as we speak, Jules Abraham from CORE IR. Please go forward.

Jules Abraham

Thank you very a lot, operator. Good day, everybody and thanks for taking part in as we speak’s convention name. Joining me from LogicMark’s management staff are Chia Lin Simmons, Chief Executive Officer; and Mark Archer, Chief Financial Officer.

During this name, administration will probably be making forward-looking statements, together with statements that tackle LogicMark’s expectations for future efficiency or operational outcomes. Forward-looking statements contain dangers and different components that will trigger precise outcomes to vary materially from these statements. For extra details about these dangers, please discuss with the danger components described in LogicMark’s most lately filed annual report on Form 10-Okay and subsequent periodic studies filed with the SEC and LogicMark’s press launch that accompanies this name, notably the cautionary statements inside.

The content material of this name incorporates time-sensitive data that’s correct solely as of as we speak, April 19, 2022. And besides as required by legislation, LogicMark disclaims any obligation to publicly replace or revise any data to replicate occasions or circumstances that happen after this name.

It’s now my pleasure to show the decision over to the corporate’s CEO, Chia Lin Simmons. Chia Lin?

Chia Lin Simmons

Thank you, Jules. This is our first earnings name below our new identify, LogicMark. So welcome, everybody and thanks for becoming a member of us.

Today, I wish to take the chance to shut the books on 2021 and open a brand new chapter for our firm. As from our submitting with the SEC, we did need to postpone this name beforehand as our auditors had not accomplished their evaluate of the monetary statements and 10-Okay. It is a privilege to have been appointed LogicMark’s CEO and a member of the Board final yr. My mandate was to wash home, rebuilt our firm and reposition it with new merchandise to enter new markets to serve the care financial system. After only a few weeks in a row, it grew to become obvious that sure gadgets wanted our quick consideration.

First, on condition that we’re a publicly traded firm, there are governance and itemizing requirements that we’re required to observe. One pertains to the minimal share worth that should be maintained on Nasdaq the place we’re listed. After our share worth fell under the required stage, our Board requested shareholders to approve reverse inventory splits of our frequent and Series C most well-liked courses. Your shareholders permitted these splits. The outreach program that we performed to acquire approval was time-consuming however properly well worth the time. It was necessary for LogicMark to have enough entry to the capital markets to assist assist future progress which I’ll converse to in a second.

Second, we assessed our necessities for elevating new capital in gentle of our future plans and noticed that the demand was there. So we issued new fairness to assist present runway for our future progress. We additionally concentrate on making certain that current money owed have been paid in full. Mark will discuss extra concerning the numbers in a second. Operationally, we noticed the company infrastructure was not in place to assist our future plans. As a outcome, we started outlining what expertise have been wanted by LogicMark to rebuild our staff and the hiring course of started. We may even proceed to evaluate our insurance policies and procedures in addition to consider our provide chain to make sure that we’re properly positioned going ahead.

On the brand new enterprise entrance, we recognized a chance to increase our core authorities enterprise by making use of for a U.S. General Services Administration or GSA contract. The GSA is the federal authorities’s buying agent and it’s a lengthy and tough course of to acquire these contracts and we think about it an accomplishment in and of itself. While our merchandise have been accessible to veterans — to the Veterans Health Administration, this new contract extends our attain to extra authorities consumers which permits us to produce our services to extra federal companies, states and state municipalities in order that we will serve extra individuals. We anticipate it will enhance authorities revenues.

We worth our report of robust service. With anticipated phaseout of the 3G community by carriers throughout 2022, we started making ready our clients for the transition through the fourth quarter final yr. The shutdown of the 3G community has been known as the 3G sunsetting. We partnered with the Department of Veterans Affairs to create an outreach plan to place veterans first, notifying those who had an affected system. Specifically, our program concerned various actions, together with junk mail, this included mailing letters and postcards to veterans who could also be affected to assist them perceive 3G sunsetting and what to do to exchange their items.

Customer assist; we created a devoted telephone line and a devoted staff of buyer assist representatives assist our veterans with alternative and setup of — new 4G items.

Media outreach; our staff spoke with quite a few information media organizations to safe instructional 3G sunsetting protection. You could have seen my quote within the Senior Planet article printed by the AARP the place our academic characteristic article that ran in over 750 media shops and direct to veteran teaching programs which included a 3G sunsetting useful resource middle, FAQs and an tutorial video on the right way to test present LogicMark gadgets. We started the arduous course of to refocus the corporate final yr in order that we will begin 2022 with as a lot of a clear state as potential. We started to place collectively the staff, merchandise and capital construction for the corporate to allow us to get on the precise path for progress in 2022. The LogicMark administration staff and our Board of Directors are dedicated to rebuilding our enterprise.

That leads me to what we have now deliberate for 2022. This yr is all about growing new merchandise and coming into new markets to serve the dynamic and rising care financial system. Our new Caring Platform as a Service or CPaaS enterprise mannequin will drive our technique. We plan to increase product choices for each on-the-go and at-home options, proceed to construct out our established line of PERS gadgets, will develop a brand new software program that may lengthen our buyer attain, observe extra patents and additional lengthen our know-how stack in addition to develop and combine synthetic intelligence and machine studying and increase our distribution by way of authorities, well being care and direct-to-consumer channels.

While we have been capable of accomplish an excellent deal final yr with a small staff, our new technique additionally requires us to convey on new expertise. We’ve introduced various necessary key hires within the first quarter to assist us execute our plans. First, I’m thrilled that we have added two key executives and two new Board members, all had a really numerous set of non-public {and professional} expertise. Mark Archer has joined full time as our CFO after serving in an advisory capability final yr. He brings vital expertise serving to small corporations remodel into greater ones. He’ll be specializing in strengthening our monetary and reporting controls, assessing monetary choices and serving to us consider merger and acquisition alternatives.

Rafael Saavedra has additionally joined us as VP of Engineering to steer the cost on new product improvement. He is known as as inventor on varied patents in geospatial, cell, analytics, blockchain and linked automotive applied sciences. His data of cloud-based linked IoT programs, AI and machine studying is a pure match for the trail reenvisioned for LogicMark. Sherice Torres, our new Board member, brings robust skills in change administration, client advertising and technique. She at the moment serves because the Chief Marketing Officer of Circle, a worldwide monetary know-how agency. Companies she has labored for embrace Google, Nickelodeon, Meta and Deloitte Consulting. She can also be an impartial member of the Board at Advance Auto Parts, a publicly traded firm with a market capitalization of over $12 billion. Sherice additionally serves on advisory board of a number of nonprofit organizations.

John Pettitt has additionally joined the LogicMark Board. He at the moment works at Google as a know-how chief for a multiproduct staff. He brings with him practically 40 years of expertise in e-commerce and content material distribution and safety, together with a number of foundational know-how patents. He has a profitable know-how commonplace with 4 exits below his belt; two IPOs on the Nasdaq as Co-Founder and CTO of software program.internet and CyberSource; and two exits to main corporations, the latest of which was to Google. Sherice and John brings contemporary entrepreneurial prospectus to LogicMark, given their start-up expertise and the general public firm expertise can also be invaluable as they perceive the wants of our varied stakeholders.

Having the precise expertise positions us for the long run as we glance to alter the trajectory of our place within the care financial system. Talent is vital and I’m thrilled that we have now been capable of entice executives of this caliber. As , LogicMark has been doing enterprise with the VA for 11 years. And with our approval final yr as GSA vendor, we consider that our current authorities enterprise is the perfect place to start out with the redoubling of efforts to extend gross sales. This consists of federal, state and native companies. Our stellar popularity with the VA ought to enable us to develop our authorities enterprise as we introduce new merchandise and additional increase our staff. In truth, elevated gross sales efforts are already underway.

LogicMark affords inexpensive well being communication gadgets that maintain over 0.5 million individuals protected each day. So {our capability} to produce the VA system and the broader authorities offers us confidence that we will enter bigger markets. In this respect, we additionally plan to promote by way of well being care and direct-to-consumer channels. By the tip of the primary half of 2022, we anticipate launching an e-commerce platform. The varieties of merchandise we’re growing embrace each at-home and on-the-go options, together with our first software program software. Older generations have change into extra comfy with digital age, with 61% proudly owning a smartphone in accordance with a 2021 Pew Research research. This creates a pathway for our R&D group to introduce options powered by state-of-the-art synthetic intelligence, machine studying and IoT capabilities.

I’ve talked about an expanded staff at LogicMark to assist lead our efforts. External partnerships are additionally necessary. In truth, we’re in discussions with different like-minded companions to assist us increase our product choices and buyer attain. We plan on including monitor providers to our choices as we diversify our product portfolio and look to supply a richer client expertise. Today, subscriptions have change into extra commonplace which provides us the chance to supply extra knowledge and linked providers to maintain shoppers protected. We count on to share extra data quickly relating to partnership settlement.

As , all corporations are dealing with provide chain challenges from the most recent spike in COVID circumstances to the battle in Ukraine, our suppliers and producers are coping with steady disruptions. Luckily, we consider that LogicMark is nimble sufficient to cope with a lot of the stresses on our provide chain and course right with little disruption. However, we count on these components to have an effect on the worth of our merchandise in our market in addition to the price of doing enterprise. We will at all times endeavor to supply options at various worth level to satisfy the wants of our clients.

I’ll now pause and ask Mark Archer to debate our fourth quarter and year-end monetary outcomes. And then I’ll return to supply some closing remarks.

Mark Archer

Thank you, Chia Lin. Let me start by discussing outcomes for the fourth quarter ended December 31, 2021. Revenue was $2.4 million, a lower of 6% from the fourth quarter of final yr however up 1% from this yr’s third quarter. We skilled 5% to six% year-over-year progress in gross sales in October and November of 2021 however gross sales have been mushy in December 2021 as COVID-19 started to peak once more. Gross revenue for the quarter was $1 million, a lower of $100,000 in contrast with the identical quarter final yr. Gross margin was 43% in comparison with 46% in the identical quarter final yr. The discount in gross margin was resulting from a mixture shift towards our costlier Guardian Alert 911 Plus 4G unit.

Operating bills have been $7.1 million in comparison with $2.2 million in the identical quarter final yr. Expenses within the fourth quarter of 2021 included a $4.5 million noncash goodwill impairment cost. Adjusting for this expense, working bills would have been $2.6 million, a rise of $400,000 or 18% over the fourth quarter of final yr. In addition, let me observe that noncash inventory compensation expense in final yr’s fourth quarter was $500,000 increased than within the fourth quarter of 2020. Operating loss was $6.1 million versus an working loss within the prior yr’s fourth quarter of $1 million. Adjusting for the goodwill impairment cost, working loss would have been $1.6 million or $600,000 increased than the prior yr’s fourth quarter. And internet loss for the quarter was $6.3 million in comparison with a internet lack of $1.6 million in the identical quarter final yr. Once extra, adjusting for the goodwill impairment cost, internet loss for the quarter would have been $1.8 million or $300,000 increased than the identical quarter final yr. At quarter finish, the corporate had $12 million in unrestricted money.

Now, let me discuss concerning the full yr 2021 outcomes. Revenue for the yr was $10 million, a lower of $1.4 million or 12% from the prior yr. Gross revenue was $5.7 million, a lower of $2 million or 26% from the prior yr. Gross margin declined from 67% to 57% resulting from a rise in stock reserves and the improve of our 3G Guardian Alert 911 Plus to a 4G product. Of the $2 million decline in gross revenue, half was resulting from decrease gross sales and the opposite half was resulting from increased 4G manufacturing prices.

Operating bills have been $13.2 million, up $5 million or 60% from the prior yr. Adjusting for the goodwill impairment cost, working bills would have been up $400,000 or 5%. Operating loss was $7.5 million in comparison with an working lack of $600,000 final yr. And internet loss for the yr was $11.7 million or $2.23 per share, in comparison with a internet lack of $3.7 million or $1.14 per share for the prior yr. These per share numbers have been adjusted for the corporate’s October 2021 reverse inventory cut up. In the web lack of $11.7 million for 2021, there are $10 million of noncash expenses, together with the goodwill impairment, warrant modification expense, inventory compensation expense and depreciation and amortization. This is up from $1.6 million in comparable noncash expenses in 2020.

Let me make a few remaining factors earlier than I flip the decision again over to Chia Lin. On March 31, the choose presiding over the litigation regarding the sale of Fit Pay, our former fintech subsidiary, dominated favorably on our movement for abstract judgment and dismissed the case. This was the corporate’s remaining open piece of litigation.

And lastly, the final 9 months that I’ve been with the corporate have been difficult to say the least as we cleaned up the executive facet of the enterprise and put the suitable infrastructure in place to assist fast progress. I’m blissful to have that section behind us and look ahead to talking with you on future calls concerning the issues we’re doing to develop gross sales and profitability.

Chia Lin?

Chia Lin Simmons

Thanks, Mark. As we wrap up the decision, I wish to depart you with a few key ideas. Our plans are bold however with the precise staff and proper merchandise, we count on to determine LogicMark as a number one model within the well being communications market and care financial system. Research signifies that there is definitely sufficient demand for progressive merchandise and options which can be supported with stellar customer support. We consider that LogicMark has the power to seize extra of the care financial system market from the grandmother who needs to age in place in our dwelling to our beloved army veteran, who may have some additional assist or the coed who wants and seeks extra safety.

At this time, I’ll open the decision to questions. Operator?

Question-and-Answer Session

Operator

Chia Lin Simmons

I wish to thank all of you who dialed in to hearken to our name as we speak. We’ll be reporting on the primary quarter ends in only a few weeks. So I look ahead to offering one other replace on our progress at the moment.

Operator

Ladies and gents, that does conclude the convention for as we speak and thanks in your participation. You could now disconnect.



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