Ladies and gentlemen, thank you for standing by, and welcome to the Nxt-ID Third Quarter Results 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 today, Chia Lin Simmons, CEO of Nxt-ID. Thank you. Please go ahead..

Thank you, Cherry.

Before we get started, I would like to remind everyone that during this call, we will 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 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. Today we'll summarize our financial results for the recent third quarter and 9-month 2021 period. I'll also discuss operations.

In August, I spoke about establishing 3 pillars to put us on solid ground. Mainly the right timing, product, and people. Let's first talk about time, where we've been spending it, and how our Company is poised to take advantage of the demographic shift we currently find ourselves in.

To ensure we have a solid foundation from which to grow,I spent much of my time keeping the Company listed on the NASDAQ Stock Exchange. Adjusting this challenge became a priority because we plan to increase our sales channels, structured partnerships, and think beyond harbor opportunities.

All much easier when a Company is listed on a well respective stock exchange. We asked you, our shareholders to approve a reverse stock split of our common and preferred shares. It was a consolidation of shares to make each one work more to maintain the minimum price of a dollar per share than Nasdaq requires.

I'm pleased to say that we received approval for both the preferred and common reverse split. And we have also now received the formal compliance letter from Nasdaq. Thank you to all our shareholders for your support and our team for helping push this through.

We also have spent time raising additional capital to ensure we can build the products and higher the talent necessary to bring our vision to life. We raised $16.4 million of capital to focus on product, marketing and operations. At the end of September, we had $60 million in cash.

The equity offering allowed us to attract new investors to the Company who share our desire to see change in a market that has not seen much technological innovation that has tremendous opportunities. Invest into time to shore up capital and our corporate structure has been timeless spent.

And we hope to further expand our institutional shareholder base because we have the opportunity to take advantage of the silver tsunami that will define the next 40 plus years of personal monitoring, safety, and security software and devices. We share some of the statistics about the growing of America and the globe last quarter.

And the need to apply new thinking to the sector. Our vision is to build a platform to power a new carrying economy to support the silver tsunami and the sandwich generation that supports them. Our proprietary products, the Freedom Alert and Guardian Plus 911, currently supports seniors by providing critical solutions without a monthly fee.

There are many seniors on a fixed income on Medicare or Medicaid for whom recurring billing would force them to choose between their safety and security and potentially other critical needs in their lives. With a strong base of existing products, we're excited to expand into new product offerings.

Non-monitored and monitored services, both domestic and international, in-home, professional services for senior living, and direct-to-consumer markets. Here's our vision; many of you are familiar with Software as a Service, or SAAS.

Our Communicating Platform as a Service, or CPaaS, will act as a center of our offering to the care economy and technology space. This open together, not just our own proprietary products, but allow us to collaborate with potential partners in the H-tech (ph) and healthcare communities. To date, Nxt-ID has 26 pending and issued patents.

I'm pleased to share that 2 provisional patents were filed around fall detection this past quarter. Each year, approximately 1 out of 4 adults over 65 plus experience Parkinson's. Less than half tell the doctors. And once they fall, their chances of falling again doubles. 1 out of 5 of those falls results in serious injuries.

3 million older people are cheated in ERs for falls. While falling may not result in serious injury, it does cause fear resulting in reduction of daily activities. When a person is less active, they are weaker resulting in an increased chance of falling.

Despite a pressing need to improve fall detection and ensure response times are more rapid, Personal Emergency Response Systems, or PERS for short, and care taking technology has not evolved for decades. Nxt-ID is looking to develop solutions to meet these needs. Our latest provisional patents are focused on improving fall detection.

One of the reasons why many people do not like to wear monitor PERS products is because of false positives that can come from fall detection. It can remove a sense of independence and cause embarrassment.

We're developing patents in fall detection technology, artificial intelligence, and machine learning, that we believe will help us better identify an actual fall event versus a false positive. Better technology around fall detection will not only save lives but save money. In 2015, total Medicare -- medical costs for falls was more than $50 billion.

Medicare and Medicaid shoulders 75% of those costs. Reducing medical costs for our government and individuals is another reason why I'm so passionate about caring platform as a service. As you have seen in the news, many industries have been affected by supply chain issues and semiconductor chip shortages.

In our case, the biggest impact we have seen is the availability of chips and certain components. Despite these challenges, we have been able to meet the demands.

As a Company that is nimble and fast-moving, we're able to seek opportunist spot markets, redesign quickly to ensure that we can continue to operate with as much speed and efficiency at a challenging time for many companies.

While higher chip cost may impact our margins, we have been able to secure the supply we need and we'll continue to focus on product development and shipments to our customers. Finally, let's briefly discuss people.

As we hope to increase our revenue stream firm, existing products and new product development, we also hope to grow our already talented team. Our recent funding allows us to do so. Growing discussions with a number of candidates currently, and hope to make some announcements by the end of 2021 or early next year.

At this point, I will hand over the call to Mark for a brief summary of financials..

Thank you. As Chia-Lin said, it was quite an intense quarter for us with the successful completion of 2 separate fundraisings and the special shareholders meeting to approve the reverse split of our common stock. Now with that behind us, our focus is back on the business.

I'd like to discuss the Company's unaudited financial and operating results for the third quarter ended September 30th, and for the 9-month year-to-date period. First, the third quarter, Revenue was $2.4 million, a decrease of 10% from the same quarter last year.

While third quarter revenue was soft, we're encouraged by the lift we saw in revenue in October, which was up 6% from prior year. Gross profit was $1.3 million for the quarter, a decrease of $611,000 compared to the same quarter last year. Gross margin was 53% compared with 71% in the prior quarter.

Gross profit was mainly impacted by lower revenues and a $314,000 reserve for obsolete inventory that was recorded in the quarter. Gross margin was impacted by both the inventory reserve and the higher manufacturing cost for our new 4G Guardian product that was introduced late in the fourth quarter.

Operating expenses were $1.8 million compared to $2 million in the prior quarter, and $2.4 million in the same quarter last year. We do not expect this year-over-year favorability to continue as we begin to add resources to support new product development and launch.

Operating loss for the quarter was $497,000, slightly better compared to the operating loss in the same quarter last year. And finally, net loss with $743,000 or $0.12 a share compared to a net loss of $1.1 million or $0.32 a share in the same quarter last year.

The earnings per share numbers have been adjusted for the 1-for-10 reverse stock split made in October. Now, let me talk about the 9 months year-to-date. Revenue was $7.6 million, a decrease of 14% compared to the 9 month period last year. Gross profit was $4.6 million, a decrease of 29% from the same period last year.

Gross margin declined from 73% to 61%. As was the case with third quarter results, gross profit and margin was impacted by lower revenue, the inventory reserve, and the higher manufacturing cost for the 4G Guardian product which was launched in November of last year.

Operating expenses for the 9 months were $6.1 million, essentially flat to prior year. Operating loss was $1.5 million compared to operating income of $410,000 during the same month -- 9-month period last year.

And finally, net loss was $7.7 million or a $1.43 per share compared to a Net loss of 1.4 million or $0.44 a share in the same 9-month period last year. This year's results included $6.6 million of non-reoccurring expense. And again, the EPS numbers have been adjusted for the stock split.

Now, let me speak to 3 key events that happened after the close of the quarter. On October 18th, we shut our Oxford, Connecticut corporate office and consolidated corporate functions in our Louisville divisional operating office, an opportunity for us to further rationalize our cost structure and run more efficiently.

On November 1st, the Company's wholly owned subsidiary, LogicMark made a $1.1 million payment towards the senior lender, completely satisfying all of its financial obligations with that lender. With that payment made, the Company no longer has any senior debt.

And then finally, on November 3rd, we set the record date for our Annual Shareholders Meeting to be held in New York City on December 17th. This concludes my remarks. Cherry, let's open the call up for questions..

[Operator Instructions] Please stand by while they compile the Q&A roster. Your first question comes from the line of Brian Kinstlinger from Alliance Global. Your line is now open..

Great, thanks for taking my question. Just one question, actually. Prior of you joining NXT I would say, it was not really a great executor. And so really, we didn't really allow the Company to succeed in my opinion.

What are the maybe 2 or 3 keys to stronger execution notwithstanding capital? Is it better-to-go to market strategy? Is it you need to update the technology, sales, leadership. Just I'm curious a couple of what you think are the primary things you can do to turn the story around. Thank you..

I'll go ahead and take that. Thank you, Brian, for asking that question. I think that it's a key for any Company who is in a technology space, not just ours. When it comes to basically success, we absolutely need marketing and sales capabilities.

My background is actually in marketing and I've been a revenue generator for every Company I've been at for the last 26 years from a technology side. Secondarily, we haven't launched any product since November of 2020. And the 4G product is fantastic and we are excited to be selling that product.

But we also need to continue to look at innovation and provide offerings back here and actually expand the spectrum of a consumer's lifecycle.

And certainly I think that for the unmonitored in a product space, we're doing a fantastic job ensuring that those who have needs and cannot afford a recurring billing, were able to help them stay safe and secure. And so -- but you'll see us basically also looking at addressing additional customer in separate segments.

And so I think that's really key to helping us and help our consumer as they age into of the different products into life cycle. So we have some products for every part of that sort of life cycle off that customer.

And I think third is, it's really important for our technology Company not just to have, I would say R&D acumen, which I think this Company has -- had a lot of but also the capability to have their trade team members to actually execute against those, which means stronger looks at engineering talent and product talent to bring on to the Company, and the capabilities to execute and market those products.

And so, I think if you bring all of those things together, we absolutely have the -- all of the ingredients, and we are gathering all of those ingredients for success for the Company moving forward..

Great. If I could ask just one followup. On the people side, I know you spoke -- you have people you want to bring on through cash relationships.

But outside of some of those key management roles that you identified, how does the labor shortage, if at all, impact your business as you look to recruit people?.

Sure, that's a great question. I think that certainly every Company is experiencing the squeeze is -- talent. I'm chuckling a little bit because obviously, I want to hire the best and the most talented executives, but we also are very interested in hiring some of the best talents on many levels.

We were filled on staff, recently hired a amazing Marketing Manager to come to us from Timberland's. She has been managing social.

And so -- there, as well as other marketing pieces and so she actually joined us, I think it was around October 18th, fast and she's actually already executing up to speed in helping us with product marketing, as well as getting our social program together. We're not looking at, I think across-the-board.

We are absolutely like every Company looking at a tremendous amount of shortage and talent, but I'm very happy to note that I have extremely vast network of work when it comes to technology talents and focused on the technology industry that I'm tapping into for all levels of hiring for this Company.

And I think the second part is that I've often told people I think were started with particular symbol we should operate with speed but efficiency and so sometimes that can mean that we're outsourcing some of that development work, and not having to hire anyone to do it because that's a faster way to do it.

Sometimes that could be a partnership in terms of development work. So we're looking at all of this different options because I think that to be a nimble Company, and for the shareholders to benefit from a Company that can operate like a startup and reap in the results of a Company that can operate with speed.

That's some things that we need to look at..

Okay. Thank you..

Your next question comes from the line of Chris Thornhill (ph) from SoundView. Your line is now open..

Hi there. Thanks for taking my call. Congratulations on getting the Company on a more sustainable capital base. I had just a couple of questions. I know it's early, but if you think about your -- where do you want to go in the next few years and product mix.

Do you see the Company as basically predominantly more an AI software Company or are you -- how far into the device physical segment do you think you'll be versus partners that you might integrate with?.

Thank you for the question. I think that is a great question. I think that we're looking at a mix. I think for a successful Company to what we would like to do to transform this industry. I think we need to be looking at a mix of software, machine learning, artificial intelligence, as well as hardware.

I'd like to think that we can all develop hardware that would be a perfect fit for people who are a little bit older. And I think that when we have and when we think about our customer base, we have to think the way that AARP has been doing for the last several years.

It used to be that, I think if you're retired and you turn 65, that's when you get the letter from the AARP much the confirmation of many people.

I'm sure they're getting AARP letters earlier in their life, right? Around 50 even nowadays, right? And we tend to think about a customer's life cycle with us in a similar way, which is what can we offer as a product that's earlier, that could be of assistance.

And then how do we partner with our customers as they age? Now, not just them, but also the caretakers and so how are we developing products that actually fit that vice customer life journey.

So I see that as a combination of not just software, artificial intelligence, and machine learning, but also, I think we will probably stay to a certain degree in some level proprietary hardware work. As well as partner with other harbor companies as part of that. So if you're Django the Apple devices a good one for you.

You could see us look at expanding software and services into that category space. But as we all know, when you get a little bit older, manual dexterity doesn't often led us utilized things that are very small in form function. And so we may never be able to a certain degree look at completely getting out of the device space.

I think that we would want to stay there because our customers need us to be there. And so you'll always see us probably be in a mix of providing a blend of software services, as well as hardware..

Okay. Thanks. I appreciate that. Second question is just on the existing business. It doesn't have to be a legacy, but the existing business. Do you feel that that is -- I mean, it's been running at sort of -- I won't say autopilot, but it's just been kind of running at that level for a long time.

Do you feel that that's going to continue to sort of help you operate just as the annuity? Is there any risk for that business in the short-term, or you're -- is your positioning there such that yeah, you guys can rely on that kind of on a quarterly basis to support your operations?.

I think if we are referring to our incredible partnership on the logic Mark side with the Veterans Administration and others, I think you can absolutely say that we hope to continue to earn their trust come as providers of the needed products and to the vets of the United States. I think that we are proud to have that partnership.

We will continue to basically do everything we can to basically be the best partner possible for the Veterans Administration. As you can imagine, we've got no GSA in the past year, and so we will continue to look to expand our government work into the other sectors of the government.

Today we offer our products into largest healthcare system in the United States, which is the Veterans Administration in hospitals and clinics. And so we would like to look at what that means for the GSA to expand into the Medicare Medicaid side, state and local municipalities.

And so I would say that what we call the legacy business, the business where we serve the government of the United States, you will see us continue to not just service the Veterans Administration.

That we will continue to -- we will be looking at expanding the government business as well as add-on direct-to-consumer, as well as B2B businesses and pro products..

Okay, that's great. I'm glad to hear that. Last question for me for now is obviously, closing the Connecticut Office makes lot of sense and Louisville is an existing location.

What are your thoughts on physical locations? Do you need one? Are you guys going to be more virtual? How are you thinking about that?.

So it's just a question I'm sure every Company gets to ask nowadays in the world of COVID. Ironically, this Company has always been somewhat remote-oriented since the beginning. LogicMark which is the wholly-owned subsidiary of the Company had been, I believe it actually -- was started in Virginia.

And so they've said, we've always had employees based on a multitude of different locations. I would like to think that this Company has had a very strong foundation in looking for the best employees wherever they fit in the United States. And so we've been very proud of during that.

We'll continue to look at growing that footprint where we find the best, I think employees that we can find. I think that physical location n Louisville is fantastic. From Louisville, we can reach 80 of United States from a distribution perspective. And so, and that's something that we think is important to have.

Our warehousing, our customer support, our operations man out of Kentucky. And we'll continue to be there for the -- at least for the foreseeable future..

Okay. Terrific. Well, that's all I have for now. I'm eager to watch you guys develop over the next few quarters. Thanks very much..

Thank you for your questions..

[Operator Instructions] I am showing no further questions at this time. I would now like to turn the conference back to Ms. Chia-Lin Simmons..

I want to thank you all for participating in our call today and for your continued support. Just a reminder that the replay will be available on our website. And feel free to send any comments or questions to us through the Investor Relations email at investors@nxtid.com.

As we are entering the final months of the year, I want to wish everyone a happy and healthy holiday season with your family and friends. Thank you..

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