Ladies and gentlemen, thank you for standing by and welcome to the Nxt-ID Investor Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Mr. Vin Miceli.

Sir, you may begin..

Thank you, Valerie. Good afternoon, all. And thank you for joining our call today to discuss Nxt-ID’s unaudited financial and operating results for the 3 months ended March 31, 2020 and to provide a general update on the business.

During this afternoon’s call, we’ll be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections and future performance and the assumptions underlying such statements.

Please note that there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including factors identified and discussed in our SEC filings.

Please recognize that except as required by applicable law, we undertake no duty to update any forward-looking statements, and you should not place any undue reliance on such statements. So, again, thank you for joining. Again, Vin Miceli. I am here today with Kevin O’Connor. We will use the format that we have used in the past.

I will provide an update on the financial results for the first quarter of 2020, and then I’ll turn the call over to Kevin, who will provide a current update on the business over at LogicMark. Kevin will turn it back over to me for some closing remarks. And then, we’ll open the call up for some Q&A.

So, with that, I’ll start with the financial results for the first quarter. And as we included in our press release, revenues for Q1 came in at about $3.7 million compared to $4.2 million for the three months ended March 31, 2019.

If you’ll recall from the call that we had back in the early part of April, Kevin and I had given our investors some preliminary -- a preliminary indication that we started to see some softening in our revenues around the middle point of March.

And so, in estimating that number, I believe the number was somewhere around -- the miss was about $400,000 in revenue that we did not get because of the COVID pandemic. Now, obviously, that’s just an estimate. I think it’s a fairly conservative estimate. But, I think it puts it a little bit more in perspective.

And more importantly, the contribution margin that was missed from the missing revenue was probably somewhere in the neighborhood of $300,000, based on our gross profit margin. So, hopefully, that gives you a little bit more insight. The gross profit for the quarter this year came in at $2.8 million versus $3.2 million for the 2019 comparable period.

The gross profit margin percentage, very strong, continues to be very, very strong at approximately 75%, which is like a staple for the business, just very strong margins. And so, we missed out on roughly $300,000 of additional profit, which basically translated into about a penny of additional EPS.

Operating expenses for the three months ended March 31, 2020 were approximately $1.8 million, compared to approximately $2.7 million for the same 2019 period. No surprise here. We talked extensively about the progress that we made in reducing our overhead, reducing our operating expenses and trying to get the business positioned for future growth.

So, no surprises there. Again, on an annual basis, I expect the SG&A expenses or operating expenses to be down somewhere in the neighborhood of $4 million, on an annual basis. Operating income for the three months ended March 31, 2020 was approximately $1.1 million, compared to $0.5 million for the comparable 2019 period.

And again, I firmly believe, without factoring in the COVID impact, our operating income would have been somewhere in the neighborhood of $1.3 million. Non-GAAP op income for the three months this year came in at about $1.3 million, compared to about $0.9 million for the comparable period.

Net cash provided by operating activities for the three months ended March 31, 2020 was $0.5 million, compared to about $0.8 million for the same 2019 period.

If everyone will recall, one of the key financial objectives that I had when I started to take over as CEO, was to minimize or reduce, if you will, the working capital deficiency that the Company had. And so, although we still have a deficiency, we were able to reduce it by $300,000 in the quarter, which was a big undertaking for us.

In terms of the debt. The term facility, we paid down about $700,000 of term debt in the first quarter. Near and dear to my heart, we need to delever the business or the debt, I should say. We did a great job in Q1. We paid down about $700,000. Included in that number was a prepayment of about $150,000.

I could have done another quarter of $1 million, but thought better that with the COVID pandemic going on, better to preserve some of the cash position, but easily had enough cash flow to pay down the debt even further. The Company’s current cash -- well, let me just go back a second.

The cash balance at the end of March came in at about just above $1.4 million. Our cash position currently is right around $1.4 million. And our equity has actually grown, which is a great thing for us that came in at about $7.3 million. So, we’re quite pleased with that. Again, favorable earnings per share of about $0.013.

I firmly believe that without COVID, we would have been somewhere in the $0.025 range in EPS. But again, that’s just our perspective, based on what we estimated the miss to be in revenue. And in terms of the government loan -- I would just like to say I’m sure many of you picked up on the disclosure we had in our recently filed 10-Q.

We were fortunate enough to receive about $350,000 in loan proceeds under the CARES Act. We actually were fortunate to make it on the second round, got some funding, which will obviously help us tremendously going forward. And more importantly, we’ll look to get at those loan proceeds waived. However, we have to wait a 60-day period.

So, we’ll start that process in July of this year. And that will hopefully offset some of the impact that we will incur in Q2. So, with that, I’ll turn it over to Kevin. And Kevin will provide an update on the business over at LogicMark.

Kevin?.

Great. Thanks, Vin. So, I’ll spend a little time touching on Q1 and the performance. But, as Vin went through the financials, I won’t spend any time on the numbers, just kind of review what we did for the first quarter operationally and some of the things that we’ll continue to do in terms of product and business development.

So, first of all, to touch on employee safety and customer support. As we went through Q1, as everybody saw, COVID was going to have a significant impact.

So, we focused on what we needed to do to make sure that the employee safety was first and foremost, so that we could continue our operation, taking care of the employees and continuing to support the business. The way we’re structured at LogicMark is that we have for about eight years now had employees around the country.

So, we’ve got our headquarters, our facility in Louisville, Kentucky where we do all of our fulfillment. We’ve got staff there, both in the fulfillment center as well as customer service and sales.

And so, we were positioned between them and the people that work from home that we could be flexible if we needed to adapt and close down that we could do that. The number one goal was to make sure that we kept the fulfillment portion of the business up and operational. We were able to do that.

We kept the staff in Louisville working with the precautions to make sure that everybody was safe and make sure that we could continue to support the customers, as they call them. And then again, we had people working from home already so that we were able to make sure to support that if things changed in Louisville.

We were considered and are considered an essential business within Kentucky, because Kentucky did put some strong restrictions in place. Because we are in the emergency alert/medical alert business, providing products to seniors and to the VA, we were considered essential and were allowed to continue to stay open in Louisville.

The operations in Louisville are being managed consistently with health and safety guidelines to follow the state guidelines, making sure that we’re providing the proper PPE for the people that are there. We have not had any issues with employee infection.

And again, we monitor that closely as employees come to work every day to make sure that we’re not putting anyone at risk. We also early on restricted all travel and business events, again, to minimize exposure and also to manage the cost as we went through that.

The business continuity through these challenging times, we’ve been working closely with our suppliers, minimizing any supply chain disruption.

That’s both on the side of managing the component availability, so that we can continue production, looking at transportation and shipping lead times, it’s been really challenging because as everything is kind of contrasted, the availability of shipping and a lot of it comes in by air has been very restricted.

Costs have gone up and flight availability was limited because they were really trying to make sure that PPE took priority as far as anything that got shipped into the U.S.

So, our operations team headed up by Ken in Louisville did a phenomenal job there making sure that we were staying in product without swimming in inventory, because we did anticipate a little bit of a pullback at the end of the quarter as well as going into Q2.

We’ve been, as Vin mentioned, kind of focused, going back to last fall, on right sizing the business and taking out non-essential costs. And we really feel like that helped us get through this.

We had the proper headcount to continue to support our employees, and has been mentioned, the Payroll Protection Program that we were able to take part in second phase. We have kept everybody on staff, we did not eliminate any employees.

And so, we feel like we’re in a great position as the business starts to come back, to take advantage of the increase in demand. COVID-19 has definitely impacted everybody and it exposed in particular vulnerabilities of seniors, whether they’re living alone or living in senior facilities.

And that we believe that through our current products and the products that we have in the pipeline through development, that we’re positioned well to provide solutions as the economy starts to come back and as people start to come out of the shell a little bit and get back into normal life.

As far as customer activity, we had a pretty good start to the first quarter especially with the VA. When we hit mid-March, they were severely impacted. As you can tell, looking around the country, it’s a big impact to healthcare systems, and the VA is the largest healthcare system in the country.

So, we anticipated that there was going to be a pullback as they limited the number of appointments that they took. So, they limited the number of veterans that were coming in to see their healthcare providers and really focused on COVID issues or emergency surgeries.

So, we knew going into the second quarter that that was going to have an impact on the business, and we adjusted accordingly. Starting in beginning of March, we saw a slight pickup in our commercial side of the business.

So, commercially, we sell through distribution for the durable medical equipment space; we sell through some retail partners; we also sell through pharmacies. And we did see a slight pickup there really in our landline based product for the seniors that were living alone and needed to be able to call friends and family.

So, there was a slight pickup there and a significant drop in the VA. And as Vin kind of went through the numbers that we positioned it to finish in a relatively strong position.

What we’re seeing now as we work through this quarter is, as healthcare systems and as the country is starting to open back up, we’re seeing hospitals and healthcare systems start to take appointments and bringing patients in. The VA is kind of following it along those lines.

They’ll probably be slightly behind that because a lot of what’s driving the commercial healthcare systems is -- financially they’ve been devastated, right? They can’t do elective surgeries and a lot of the things that drive their volume and their finances were shut off completely. The VA is not quite in that position.

So, we think that they will be slightly behind the commercial healthcare systems as they turn back on. But, we’ve been in communication on a regular basis with healthcare providers that we work with, with the inventory control people. And we believe that as it starts turning back on that we will see it pick up in business.

There’s a little bit of a pent-up demand. There’s also been -- I would say, the most of the VA medical centers don’t have strong inventory positions, because they don’t know how long this was going to go on. They weren’t bringing in a lot of excess inventory.

So, as it starts to turn back on, we believe that we will see an uptick in both, the VA and also in commercial. In the commercial channel sales, the start of the quarter was relatively quiet. But then, as COVID kind of impacted it, we did see a slight uptick there, as I mentioned.

As far as new product development, we continue to work on the development of the new products. We’re moving forward with both, our in-house engineering team; we’ve also brought in a third-party engineering resource that specializes in audio communication.

And since our key in this market really, especially with the non-monitored, no monthly fees is the audio, it’s really important that we are 100% accurate in our audio performance. So, we’re confident with this third-party resource that we brought in that we are on track with that. The Wi-Fi product is progressing.

We did have some minor setbacks as we’re looking to launch in the market. One of the sites or channels that we’re looking at launching in is senior living facilities. So, we’ve been engaged with some of them talking about what their needs are, making sure that we’re delivering the right solution.

And part of that process is going to be going out and doing site inspection, so we understand what the technical requirements are, making sure that we’re offering the right features in the product and that we are also providing the right technical in terms of what will work with the infrastructure they have in place.

With COVID-19 impacting senior facilities in a lot big way -- so far with COVID-19, it has limited our ability. We really can’t get in and meet with anybody. So, we’re communicating with them.

And as those sites start to open up and we can gain access to them, we plan on moving forward with that and trying to set up some test sites for the Wi-Fi product. And we’re really excited about that because we think that it feels kind of a niche both for the in-home use and also in senior facilities as we’ve talked about on previous calls.

The 4G product is still in development. There was a delay in the production due to some of the supply chain issues on key components. But, we’re submitting production samples for testing in the next two weeks.

And then, once those get approved, we’ll be doing a preproduction run, we’ll do some in depth testing in the field, and should be ready to get into production late Q2. We’re also working on another 4G LTE platform that will provide both PERS functionality, so emergency communication, as well as tying with an ecosystem.

And it’ll provide health information that could be viewed via the portal that we’ve talked about in the past that our engineering team has developed. We’re working with a potential partner that’s looking to do a large scale launch in probably late Q2 or early Q3 of 2021. So, we’re working on that. We’re pretty excited about it.

It’s early in the process, but we’re optimistic that that’s going to be a potential large play for us.

And again, after reducing our overall cost structure, our strategy in product development is to make sure that we’ve got a pipeline that’s delivering both for short and medium and long term, so that we continue to roll out new products and meet the needs of the market.

And our goal is to really build on the platforms that we have, so, we think that we can be more efficient in that. So, our outlook at this point for the balance of 2020 remains strong as the U.S. starts to open back up.

We think we’re positioned well to survive the balance of the impact from COVID-19 and deliver strong solutions supporting the needs of seniors and the broader healthcare market going into the future. Vin, I’ll hand it back off to you..

Thank you, Kevin. Thanks. So, in summary, I would just like to take you through a little bit of what we’re seeing in Q2. We were quite pleased with the results that we achieved in Q1, in spite of the COVID impact. I was quite pleased. And so -- but Q2 will also be negatively impacted from COVID.

Our actual revenues for the month of April actually were less than our March revenues. And at this juncture, it’s been difficult for us to determine where our May revenues will be at month end, based on current trending.

I wish I could be more transparent with the investors and provide more guidance on where I expect Q2’s results to be, but it’s unclear at this point. What I can tell you definitively is that we are doing all that we can to mitigate the COVID impact.

We’ve cut additional operating expenses, deferred other operating expenses to help us weather this pandemic. We’re also continuing to micromanage our cash disbursements in an effort to preserve our cash position the best we can. Reducing our operating expenses has helped us immensely, especially during this very difficult time.

We are also very encouraged now that many of the state governments are beginning to slowly open their respective state’s back up and the positive impact that this will have on our business as well as the overall economy. So, in summary, as Kevin pointed out, we believe we’re well-positioned for growth.

We have made substantial progress in streamlining the business by significantly reducing the operating expenses and made great strides in delevering the term debt. We also remain laser-focused on achieving our new product development initiatives and introducing new products in Q3, as Kevin alluded to in his discussion.

So, with that, Valerie, I’d like to open it up for Q&A, if anybody has any questions that Kevin and I can answer. We’d be more than happy to do so..

Operator:.

Okay. Well, thank you everyone. Thanks for participating in the webcast this afternoon. Thank you for your attention. And we look forward to navigating through this difficult time and being successful as we move forward in 2020. Thank you again, and have a good afternoon..

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you for participating. You may have a great day. You may all disconnect..