LGMK - NASDAQ

Good day and thank you for standing by. Welcome to LogicMark's Second Quarter 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Pierre Dubois, with Investor Relations. Please go ahead.

Well, thank you, Norma, and good afternoon to everyone, and thank you also for participating in today's conference call. Joining me from LogicMark today are Chia-Lin Simmons, Chief Executive Officer; and Mark Archer, Chief Financial Officer. During this call, management will be making forward-looking statements including statements that address LogicMark's expectations for future performance or operational results and anticipated product launches. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in LogicMark's most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC, as well as LogicMark's press release that accompanies this call, particularly for the cautionary statements in it. The content of this call contains time-sensitive information that is accurate only as of today, August 10, 2023. Except as required by law, LogicMark disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. With that, it's my pleasure to now turn the call over to Chia-Lin.

Thank you, Pierre, and welcome to everyone joining us today. I would like to start by thanking our employees for their tireless efforts as we continue to build LogicMark into a leading solutions provider for the care economy. Our team is relatively new, but we have much to be proud of us. You'll see from our second quarter results that we were, again, able to sustain a 60%-plus gross margin level for another consecutive quarter. In fact, our second quarter gross margin, of 69%, is the highest level reported in the last 10 quarters. This is partly due to improvements in our supply chain logistics. And we're also looking for other operating efficiencies. But keep in mind, we are still very focused on building, testing, and releasing new products which will grow our top line. Speaking to product releases, I am very excited to announce that we are expecting to launch a new product called Freedom Alert Plus, the first since most of the new team was hired last year, and for the legacy company the first new product in eight years. The new Freedom Alert Plus is a wearable device that introduces fall detection, instant connection to caregivers, and a touchscreen design which is unique to the PERS industry. By incorporating a more sophisticated device in our Care Village Software Platform, we can offer valuable additional features, helping to transform us from a mere reactive technology into a predictive technology and a more comprehensive health communications product. With this new LogicMark product we can now capture the needed data to monitor our customers' wellbeing in real time, using artificial intelligence and machine learning to optimize the best care. These systems utilize various sensors, algorithms, and machine learning techniques to analyze movement patterns, usage, and other relevant data to accurately predict the likelihood of a fall occurring. Accurate assessment of fall detection has been lacking in the PERS market for some time, and our team is tackling it head on with our R&D efforts and innovative solutions through our proprietary Caring Platform as a Service or CPaaS ecosystem. CPaaS utilizes the LogicMark Care Village Software Platform, our new suite of connected services. The platform includes a proprietary device operating system, cloud-based services, and Care Village app which can be accessed on both iOS and Android devices. The new LogicMark devices will offer automatic updates. This permits us to continuously optimize our fall detection for our customers. It also allows us to add new features, ensuring sustainability by providing customers with our most innovative features at all times. For example, we'll be incorporating a medicine reminder in one of our upcoming product releases. The user can program alerts for the various prescription medicines they are taking. Our aim is to make the feature accessible on all the new LogicMark hardware products as the features become available. Our previously announced partnership with US Monitoring also supports our ability to respond to our customers' needs, and we've been working with them to support our LifeSentry subscription-based product. Freedom Alert will be available through all government, business-to-business, and direct-to-consumer channels. This includes the LogicMark Amazon store, which we launched in late March to help increase our direct-to-consumer distribution. We're continuously working on making our direct-to-consumer channels operate more efficiently so that we can capture additional market share. We're excited about our role in providing additional products in the marketplace to serve the ageing population. A recent article U.S. News & World Report summarizes their survey, and indicates a strong desire for the 55-and-older population to live in their homes as long as possible. A few of the highlights include, for the first time ever, there will more older adults in the United States than children in the upcoming decades. By 2034, the U.S. Census Bureau projects that there will be 77 million people aged 65 and older, compared to 67.5 million under the age of 18. While the decision to adopt a medical alert system can be a difficult one for some seniors, nearly all, 96% who use it, says it brings them comfort according to their Senior Safety and Connectedness Survey. The survey similarly found that 97% of users' children say that medical device systems, like their parents utilize, provides reassurance compared to having a no-frills device. When using assisted or house-related technologies, people 55 and older say that things that matter the most and that it's easy to use, easy to set up, accessible using a mobile app, and wireless. Separately, in a recent report published by CB Insights on State of Digital Health, care delivery and navigation tech as well as health data and analytics are on the top five categories that are attracting private company investments so far in 2023. So, just as a few more proof points that we are on the right path with our target market and the work that we're doing [technical difficulty] product development is on target. At this point, I'd like to hand over the call to Mark for some comments on the financials.

Yes, thank you, Chia-Lin. Our second quarter results include a gross margin of 68.7% on revenues of $2.3 million. This compares to a gross margin of 59.5% on revenues of $3.4 million for the same period last year. We are always looking for ways to improve margins through productivity, better supply chain management, efficiency improvements, and cost reduction programs. As an example, we've been able to return to transpacific shipping as opposed to using air freight from our Asia-based contract manufacturers. And the air freight can be four to five times as expensive as shipping over the ocean, so the savings is substantial. The decrease in year-over-year over revenues was due to one-time sales [technical difficulty] 911 Plus 4G units last year that replaced 3G units, which the national cellular networks announced, in 2022, they would no longer support. In the case of our 3G units less than two years old, [but we hope to place] (ph) those units at our cost, which the Veterans Administration Healthcare System greatly appreciated. As you are aware, the VA has been our most significant and enduring customer. As Chia-Lin mentioned, we're still focused on building out the new product pipeline and ramping up our sales. During the quarter, operating expenses rose $748,000 or 24%, compared to the same period last year. Specifically, the increased operating expenses relate to the start of online advertising to support our direct-to-consumer sales effort, additional personnel in the sales department, and one-time expenses relating to the Special Shareholders Meeting, held in April, and the reincorporation into Nevada that was done in June. Net loss attributable to common shareholders for the second quarter was $2.3 million compared with a net loss of $1.2 million in the same period last year. On a fully diluted basis our net loss per share was $1.83, compared to a net loss of $2.50 a share last year. The net loss per share improved over prior year because of the weighted number of shares outstanding. On April 21, we successfully completed a 1-for-20 reverse stock split on both our common and preferred shares, which was required to maintain compliance with our continued listing on the Nasdaq stock exchange. On May 8, we were notified by Nasdaq that we were in full compliance with their listing requirements. From a liquidity standpoint, we ended the second quarter with a cash balance of $7.6 million, compared to $7 million at the end of calendar 2022. I also would just like to mention that we finished bringing our accounting function in-house this quarter, while we had been outsourcing with a third party. And we believe this move will strengthen our internal controls, improve our financial reporting process, and help us manage our expected future growth. [Technical difficulty]

Well, I think, Norma, we can go ahead and kickoff Q&A. Mark, did you have any comments before you want to hand the call over to her?

Yes, I'm sorry. Did you not hear any of that?

Sure, yes, we heard it all. I think you had a closing statement before you wanted to hand it over. So, just didn’t know if wanted to.

I guess I would just say today I am pleased with the progress so far. And with the product pipeline filling up, I think we'll see a lift in our revenues beginning later this year.

And at this time, I'd like to hand the conference back to Chia-Lin Simmons for closing remarks.

Thanks to all of you for taking the time to listen today. We appreciate your support and we look forward to keeping you updated on our progress.