Ladies and gentlemen, thank you for standing by and welcome to the Nxt-ID IR Update Webcast and Conference Call. At this time all participants’ lines are in a listen only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded.

[Operator instructions] I would now like to hand the conference over to your speaker today, Mr. Vin Miceli, CEO. Thank you. Please go ahead, sir..

I will provide a brief update on the third quarter financials; I'll then turn the call over to Kevin, who will provide an update on the status of the LogicMark business; I'll take the call back and describe briefly the sale of Fit Pay and our initiatives on a post Fit Pay basis where we see the business going, what initiatives have we put in place et cetera, et cetera.

So, with that I’d like to get started on the third quarter highlights and review those with you. Revenue from our continuing operations for the nine and three months ended September 30th came in at approximately $13.1 million and $4.4 million, respectively, up slight in both periods as compared to 2018.

The gross profit from our continuing operations for the nine and three months ended September 30, was approximately $9.9 million and $3.3 million, respectively, compared to $9.5 million and $3.2 million for the same 2018 periods. The gross profit margins continue to be well in excess of 70%, right around 75%, which is just very, very strong.

Operating expenses from continuing operations for the nine and three months ended September 30, were approximately $8.1 million and $2.6 million, down versus the prior period from $8.6 million and $3.0 million for the comparable 2018 periods.

Operating income from continuing operations for the nine and three months ended September 30, was $1.8 million and $0.7 million, respectively, compared to operating income of $0.9 million and $0.2 million for the same 2018 periods.

And so, on a sequential basis, what we’ve seen is that quarter-to-quarter, the Company has made strides in terms of generating additional operating income. Now, it was a little bit flat in Q2, mainly because of the expenses related to the Fit Pay -- the attempted Fit Pay spinoff. But nonetheless, sequentially, we are making progress.

And it confirms in our minds that a lot of our efforts are starting to show results through the financial statements, which is obviously very important.

From a non-GAAP -- on a non-GAAP operating income basis, which really in essence is adjusted EBITDA, our continuing operations generated $2.9 million and $1.1 million of non-GAAP operating income, which was up substantially from $2.3 million and $0.6 million for the comparable 2018 periods. So, I think really, really showing some strength there.

And it’s interesting to note on -- this is an interesting statistic or metric, if you will, at least one that I use quite a bit. And I think, if you look at our overall loss per share, the expenses that we incurred that are really non cash related, comprised like $0.04 of the $0.11 that we had in a loss per share. So, I think it’s very important.

This is an interesting metric that I think is very important to take note of. And lastly, as it relates to our income statement, I just like to explain briefly, I know in the third quarter, our interest expense versus the prior year three months was up considerably and just like to explain so everybody understands what the drivers there were.

Three things mainly, one is that the term loan debt that we currently have is about 1.2, 1.5 basis points higher than what it was under the previous term loan facility. Secondly, we had prepaid a big chunk of term loan facility in the third quarter with the proceeds that we received from the Fit Pay sale.

And so, under GAAP we were required to accelerate the amortization on the non-cash interest expense components. And that was roughly about $280,000 in the quarter. And then, lastly, when we made the prepayment in the third quarter, we incurred a 7% prepayment penalty by the lender. So, that was also part of interest expense in Q3.

So, that will sort of bridge the large increase there in Q3 this year versus Q3 last year. Moving over to our balance sheet. Just a couple of key things that I want to make mention of and draw your attention to. One, obviously, the cash came in at about $1.35 million. Very pleased with that number.

It shows strength in the business and strength in our cash flow management. Also, inventories were up at September 30th, we had received some large inventory shipments right at month end or quarter end, I should say. And that was really the main driver there behind the increase in inventory.

Interestingly enough, we had a very solid October -- month of October, revenues were well in excess of $1.5 million. And so, the inventory levels are interestingly enough, right back to down to where we would expect them, so interesting how that goes. And cash by the way, at the end of October was right around $1.5 million as well.

So, just continuing our strength and confirming in our minds that we're making progress here. In terms of accounts payable, really up mainly because of the inventory that we received at the end of the month, at September 30th. And the other big item certainly is the delevering of the debt, which is near and dear to my heart here.

We, since the beginning of the year, were able to take debt down by about $3.3 million and just a real testament to everybody's effort hear. and mainly a large part of debt delevering came with proceeds received from the sale of Fit Pay, we are able to delever about $2.5 million of our debt.

The rest of it was paid with cash flow generated from operations. So, again, I think, a good indicator, and certainly I'm focused and encouraged by the performance there. And lastly, on the balance sheet, stockholders’ equity obviously dipped significantly down.

And as I’ll talk about a little bit later in the call, we obviously sold Fit Pay and we recognized a fairly significant loss, non-cash loss, I should add. So, that is really the primary driver behind the reduction in stockholders’ equities. Moving over to our cash flow statement.

I just want to highlight two key areas that I think are of real significance and the first being net cash provided by operating activities from the continuing business.

This year, we generated about -- sorry, for the first nine months, I should say, we generated about a $1.5 million in operating cash flow, whereas last year for the same timeframe we actually used $800,000. So, that's a flip of about $2.3 million, which is really, really significant.

And so, I think it's again a confirmation that things are getting a little bit brighter for us.

And then, lastly, to what I've already alluded to, the cash from financing activities, clearly reflects the pay down in debt, which I think is critical to building shareholder value on a go-forward basis and really helping to minimize our interest expense going forward.

So, with that, I'd like to now turn it over to Kevin, who will provide us with an update on the LogicMark business.

Kevin?.

Yes. Thanks Vin. So, I'll give kind of a brief overview of the business. I'm not going to go into the financials, obviously, as Vin really touched on them, with LogicMark really being the bulk of the financials within the business. So, overall, the LogicMark core business continues to perform really well.

There are strong fundamentals, the business, really the entire time that we've been part of Nxt-ID, has performed well, and we've got a strong position that we can build from. So, volume remains strong, strong gross profits that Vin touch on, and profitability continues to be very good.

One of the things that we've always been pretty focused on and even more so now is the operational efficiency is excellent. And as Vin took over as CEO, Ken, who runs our global operations and I've been working with Vin to really take a look at all expenses across the business.

So, even though we think we operate it really efficiently, one of the things we're really focused on is to literally go line item by line item and look at the fact that everything we're spending that we're putting into the right areas and that we're looking to get a return on that.

So, we're going through that process now and are optimistic that we can allocate the resources into the right areas to give us the best return, manage our costs while at the same time we want to be focused on maintaining a high level of customer support, because that's really important.

We’ve got a strong reputation with the customers that we serve of taking good care of them. So, we want to make sure that as we're looking at cost reductions that we're not cutting too far or cutting in the wrong areas where it's going to impact the level of service of the customers. We want to make sure we can continue to build on that.

One thing I'm pretty excited about is, as we've gone through these changes recently is we now are at a point where I believe that we're going to be able to invest in LogicMark in the right areas.

We've got a strong core business, we think that there is good future opportunities, and it's really a matter of being able to invest in the right areas to build on that, and I think we're in a position right now where we can strategically drive the right initiatives and put the resources into the right areas.

So, a big part of that has been and I have been working really closely with our engineering and product development team to focus on the NPI to make sure that number one, we're developing the right solutions for the right markets and that we don't have so many projects going.

We've had a lot of things that have in many cases been distracting in the past. We’re able to really focus on the things that need to be developed and get them delivered because with so many projects in the pipeline, it was difficult to get them out in a timely manner.

So, working with engineering product development, we’re looking to streamline that whole process.

And overall, our focus is really just continue to build on the strong business, and target the NPI investment, get the product designed and released, to take care of the core business that we have but then also look at broader markets, so we can expand our core.

When we think the overall space that we serve today as far as personal emergency response, there are opportunities and we want to make sure that we got the right solutions being developed and delivered into the market.

And everybody is working on the same direction to make sure that again we're putting the resources in the right areas to deliver on that. So, with that, Vin, I’ll hand it back over to you, and you can go through the additional details you talked about..

One, how do we rightsize the remaining business? What additional expenses can we take out of the business without harming the business. And really the basic underlying premise that we used was if we cannot correlate the expense to incremental revenue or to enhance profitability, chances are we probably shouldn't be doing it.

And so, as he alluded to, we went line-by-line, P&L line-by-line item and really scoured the P&L. And I think we've been very, very successful in that regard. And then, secondly, we have a size -- as our financials would indicate, we have a sizable investment in our R&D efforts.

And so, one of the things that we view as critical to our future growth here is, really getting engaged and really gaining an understanding of what these new product initiatives are really doing and what benefits will they bring to us in the future. And so, we're still -- that's still a work in process.

And I hope by the time we get to the annual meeting in mid-December that I can certainly provide you with a more robust description and provide more clarity on where that's all going and where I see it going in the future. And then, lastly and certainly not least, making sure that we have a vehicle in place to continue delevering the debt.

Being a finance guy by trained, I feel like that's the probably one of the most important things to do, and so especially with 13% debt, it's quite pricey. And so, it’s obviously very important to all of us as we go forward. So, that's the approach that we took. And we're working through that so far in the roughly two months.

I think, we've been very successful -- doing a bunch of modeling and pro forma calculations and I absolutely positively -- I mean, I can't go into too much of the detail, but I can tell you that essentially the financial statements are in a complete -- in my estimation in a complete transformation.

So, I think, as we get to -- head into 2020, we’ll be quite pleased with the overall results.

And so, what I'd like to really convey here is that -- and I just want to make sure that everybody's on board with this, I just want to convey that LogicMark in my estimation is a very solid company that as everybody knows has a very unique, very niche market space that it sells its products into.

And as Kevin pointed out and he is obviously very correct, and if you look at our financials, it comes across loud and clear, it's one of the key highlights in what we've presented in the recently filed SEC filings is the margins at the gross profit level and at the operating income level are just, in my estimation, great.

And I think that coupled with the fact that we've made considerable reductions in the overhead, the SG&A overhead, I think those items coupled with the delevering that we've done in the future interest savings, I think it really positions us well for future growth.

And so, I feel very compelled to tell you that I'm very encouraged by the results that we have made. I think, we have a long way to go. I certainly don't want to give anybody any false expectations.

That's not the intention, but the intention is to convey that I believe we're on the right path, I believe we're doing the right things and hopefully on our way back to gaining some shareholder value.

From a financial perspective, I've kind of laid out what I think our top four or five top financial priorities will be, as we head into next year and beyond. And again, I can't stress it enough; I want to continue micromanaging cash.

I think it's probably the single most important thing we can do for this size of a company, and critical to our future growth. And again, as Kevin pointed out, we're really looking at all of the P&L line items. I really want to be disciplined.

And we’re trying to instill that throughout the organization, be very disciplined when it comes to spending, make sure that we're going to get some return for whatever it is we're spending the money on. One other thing I’d like to really focus on as we head into 2020 is what can we do to -- right now we got a working capital deficit.

And the way I kind look of at that working capital deficit is a big chunk of that is attributable to the schedule term debt, which is so long as we're making our payments, I really kind of carve that out of the equation. So, whatever that residual amount it, I’d like to really make strides in reducing that as much as we possibly can.

Also, we have a fairly large reduction in Q3 to stockholders’ equity, I'd really like to begin to, as we go forward here, begin rebuilding the stockholders’ equity with positive earnings. And last but not least, as I mentioned earlier, continue to delever the debt.

And so, with that I'd like to just mention, at the upcoming meeting, annual meeting, again, I'd like to -- I look forward to meeting many of the shareholders.

I would really like to meet with you and provide you with an update on our efforts thus far and also to, as I mentioned earlier, provide more clarity on where I see the new product initiatives going -- where Kevin and I see the new product initiatives going and where we think the Company’s growth will come over --starting in 2020 and beyond.

And so, with that, I’d like to open it up for questions, if I may..

[Operator Instructions] Our first question comes from Michael Diana with Maxim Group. Your line is now open..

Okay. Hi, Vin..

Hi..

Well, first of all, congratulations on becoming CEO. This you are -- the presentation you just gave certainly hit the ground running, I’d say. Let me ask you one thing just to confirm really, because I think I know the answer.

On the sale of Fit Pay to Garmin, was that a clean break, meaning there are no contingent liabilities, expenses or anything else?.

Yes. That's correct. It was -- to use your phraseology, a clean break, and there were no future applications on the part of Nxt-ID..

And Michael Orlando's claims have all been taken care of in that sale, is that right?.

Yes. As I mentioned, we completely repaid the seller note at the time of the Fit Pay sale to Garmin. I believe, if my mind serves me correctly, we paid about 400 -- I want to say, was either 480 or slightly below that.

And we basically repaid the entire seller note and we took $2 million of the proceeds, Mike, or thereabouts and delevered the term loan facility..

Okay. And then, obviously, one of the problems before is you are burning a lot of cash -- or Fit Pay was. So, do you have any assessment of like how much per month you are saving by not having....

I think it’s -- you could derive it. You can pretty much derive it derive it, Mike, by look at the financial statements and looking at the loss from discontinued operations. But, on average, I think, it’s safe to say that the cash burn at Fit Pay was anywhere between $250,000 and $300,000 per month.

And as we were getting closer to the sale date, that number was significantly higher..

Okay.

And in your press release, you mentioned savings of $380,000 from interest expense, that's cash savings, right?.

That's all cash savings, absolutely. And if -- again, we have very -- for lack of a better way to put it to you, our team loan facility, Mike, is quite pricy, and we paid upwards of 13% on the money.

And so, when you take the $3.3 million of delevering that we had through the first nine months, and you basically wait the seller know which had a lower interest rate than the 13%, but when you blend that all together, the annual savings approximates $380,000.

Now, also keep in mind that we will take down the term loan facility by roughly another $600,000 in Q4. So, as we head into 2020, we’ll have a much reduced cash pay interest on a prospective basis..

Right..

Which is obviously very important to us..

Sure.

And you mentioned in prepaid, how much was that approximately?.

So, yes, included in the current term loan facility any prepayments that we make in year one, we have to pay a prepayment penalty of I believe it’s 7%. So, when we paid down $2 million, we ended up paying about $140,000 of prepayment penalty, which as I alluded to before, pointed out as part of our interest expense in Q3..

Sure.

And won’t be there in Q4, right?.

Correct..

Okay. And I know you had an office in Florida.

Do you intend to keep that office?.

So, we're just in the final stages of terminating the lease agreement. That was one of the first things that I attempted to do. It won't be huge savings, but nonetheless, we weren't getting a lot of use out of the property. And so, again, nothing worse in my mind than wasting money. So, I think that closing that will go a long way for us.

And essentially we’ll save roughly all in -- we’ll Save about 15 -- I believe it’s 15 or 18 months of rent. And so, not a huge deal, but still significant in my mind and very important that we're not wasting dollars that we could put to a better use..

Sure, okay. And last one for me. You say in the press release you’re very optimistic about the remainder of 2019. Certainly, you discussed the expenses at length. And I guess, you also -- but as to revenues, you also mentioned October was a good revenue month. So you....

Yes. I certainly can't -- I can't speak what the quarter will look like, Mike. But having October in hand, I think if October is any indication, we had a very strong October, I think, if my mind serves me correctly, revenues came in at about $1.540 million or $1.550 million, somewhere around there, but very strong and very encouraging in my mind.

So, if that's any indication we should have a good fourth quarter. But, I certainly can't -- it's basically a book and earn business, there is not a lot of backlog in the pipeline. So, it's very difficult to predict where revenues in the quarter will shake out. But, we certainly have a good start to Q4, and I'm pretty happy about that..

[Operator instructions] And I am not showing any further questions at this time. I'd now like to turn the call back over to Vin Miceli for any further remarks..

Thank you, Dan. Thank you, everyone. I again thank you very much for being patient with us and giving us a couple of months here to get on the webcast with you and give you an update. I'm positively encouraged by our efforts thus far.

And we basically are trying very hard to make improvements here and get back on the right track and build shareholder value.

Again, I look forward to seeing some of you at the upcoming annual meeting really, look forward to meeting some of you in bringing and providing an update on where we currently are and where we will be with -- as we head into 2020. So again, thank you, and have a very good afternoon. Thanks..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..