NXT-ID Inc.

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 listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today. Shailen Simmons, CEO of NXT IT. 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 nine-month 2021 period. I'll also discuss operations. In August, I spoke about establishing three pillars to put us on solid ground, namely 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. Addressing this challenge became a priority because we plan to increase our sales channels, structure partnerships, and think beyond hardware opportunities, all much easier when a company is listed on a well-respected 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 worth more to maintain the minimum price of a dollar per share that NASDAQ requires. I'm pleased to say that we received approval for both the preferred and common reverse splits, and we have also now received a 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 hire 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 $16 million in cash. The equity offering allowed us to attract new investors to the company who share our desire to see to see change in a market that has not seen much technological innovation, but has tremendous opportunities. Investing the time to shore up capital in our corporate structure has been time well 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 graying 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 caring economy to support the silver tsunami and the sandwich generation that supports them. Our proprietary products, the Freedom Alert and Guardian Plus 911, currently support 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, now 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 SAS. Our Caring Platform as a Service, or CPAS, will act as the center of our offering to the care economy and technology space. This will bring together not just our own proprietary products, but allow us to collaborate with potential partners in the age tech and healthcare communities. To date, NXTID has 26 pending and issued patents. I'm pleased to share that two provisional patents were filed around fall detection this past quarter. Each year, approximately one out of four adults over 65 plus experience fall incidents. Less than half tell their doctors. And once they fall, their chances of falling again doubles. One out of five of those falls result in serious injuries. Three million older people are treated 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. NXTID is looking to develop solutions to meet these needs. Our latest provisional patents are focused on improving fault detection. One of the reasons why many people do not like to wear monitored PRRS products is because of false positives that can come from fault detection. It can remove a sense of independence and cause embarrassment. We're developing patents and fraud detection technology, artificial intelligence, and machine learning that we believe will help us better identify an actual fraud event versus a false positive. Better technology around fraud detection will not only save lives, but save money. In 2015, Total medical costs for falls was more than $50 billion. Medicare and Medicaid shouldered 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 are able to seek out parts in a spot market, 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 costs may impact our margins, we have been able to secure the supply we need and will 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 for existing products and new product development, we also hope to grow our already talented team. Our recent funding allows us to do so. We're in 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 Shailen said, it was quite an intense quarter for us with the successful completion of two 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 nine-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 percent 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 was $743,000, or 12 cents a share, compared to a net loss of $1.1 million, or 32 cents 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 nine months year to date. Revenue was 7.6 million, a decrease of 14% compared to the nine 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 nine 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 nine-month period last year. And finally, net loss was $7.7 million, or $1.43 per share, compared to a net loss of $1.4 million, or 44 cents a share, in the same nine-month period last year. This year's results included $6.6 million of non-recurring expense. And again, the EPS numbers have been adjusted for the stock split. Now let me speak to three 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 to its 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. So this concludes my remarks. Cherie, let's open the call up for questions.