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spk06: Good morning, and thank you for joining us today to discuss the results for LOGIC's second quarter 2022 and its June 30th, 2022. Joining us today are LOGIC's Chief Executive Officer, Brent Sun, and Chief Operating Officer, John McNeill. Following their prepared remarks, we'll open the call to your questions. I'll provide some important cautions regarding forward-looking statements made by management during today's calls. I'll also remind everyone that today's call is being recorded and it will be made available for telephone replay following the instructions provided in today's press release. At this time, while a few more listeners still dialing in, I will read the obligatory Safe Harbour Statement. This teleconference contains certain forward-looking statements and information as defined within the meaning of Section 27A of the Securities Act of 1933, as amended. and section 21E of the Securities Exchange Act of 1934 as amended and is subject to the safe harbour created by those sections. This teleconference may also contain forward-looking statements and forward-looking information within the meaning of Canadian securities legislation that relate to LOGIC's current expectations and views of future events. Any statements that express or involve discussions as to expectations, beliefs, plans, objectives, assumptions, or future events or performance. Often, but not always, through the use of words or phrases such as will likely result, are expected to, expects, will continue, is anticipated, anticipates, believes, estimated, intends, plans, forecast, projection, strategy, objective, and outlook. are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included on this call should not be unduly relied upon. These statements speak only as of the date of this teleconference. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond logic's control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements. In particular, and without limitations, this press release contains forward-looking statements regarding our products and services. The use and our ongoing demand for our products and services expectations regarding our revenue and the revenue generation potential of our products and services, our partnerships and strategic alliances, potential strategic transactions, the impact of global pandemics, including COVID-19, on the demand for our products and services, industry trends, overall market growth rates, our growth strategies, the continued growth of the addressable markets for our products and solutions, our business plans and strategies, including, without limitation, our ability to successfully negotiate and finalize a purchase agreement, governing the terms of such acquisition. The structure of the transaction, timing of the transaction, and the value and success of the business after completion of the transaction, if any, and other risks described in the company's prior press releases and its filings within the securities and exchange commissions, SEC, including its annual report on Form 10-K and any subsequent public filings, and filings made pursuant to Canadian security legislations that are available on www.sedar.com, including under the heading Risk Factors in the Company's Canadian Perspectives. Logic undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. except as may be required by law. New factors emerge from time to time and it is not possible for logic to predict all of them or assess the impact of each such factor or to the extent of which any factor or combination of factors may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statement contained in this press release are expressly qualified in their entirety by this cautionary statement. Mr. Son, the floor is yours.
spk04: Thanks, Kevin. Much appreciated. And thanks everyone for joining the call today. This morning we published our second quarter 2022 earnings results, which can also be downloaded on our website, logic.com. Over the next few minutes, I'm going to provide some commentary on the current state of our business and discuss strategy as we move forward through the second half of this year. And then I'll turn the call over to John McNeil, our Chief Operating Officer, to discuss second quarter financial highlights and guidance for the year. Recently, we announced the successful spinoff of the GoLogic business in which we transformed the business into two standalone publicly traded companies. This was a strategic decision that we made as it enabled two distinct companies to now be focused with their attention and resources on two very compelling business models which opportunistically add value and create enhanced returns for our shareholders. For the second quarter of 2022, we reported mixed results with revenues down compared to last year's second quarter. However, our business is in a transition phase as two weeks ago, we officially began operating without app logic which is now i'm doing business as go logic and have also shifted away from lower margin business to clarify that a bit further the lower margin business to which i refer is is largely what we call white label business which is picked up from advertising and marketing agencies and what we consider lower hanging fruit for us previously The margins for this business were sufficient to justify the expenditure of the company time and resources. However, as the entire field of digital advertising and marketing has become more crowded and more efficient technologically, we began seeing our margins gradually decline. At the same time, our expertise, experience, and relationships around the industry have proven to be an asset, and to capitalize on that, we saw an opportunity to go after larger accounts and larger customers. So over the past year or so, after seeing GoLogic's shift to higher margin customers in its business successful, we decided to make the shift ourselves for DataLogic in late 2021 as the GoLogic spinoff was being contemplated. So back to the quarter's results. Despite the quarter's revenue decrease, I'm actually more optimistic about our organic revenue outlook than I have been in months prior, as this is part of a broader vision, a long-term one that gets us quite excited about the future. We are pleased with the substantial margin expansion that we are able to accomplish with consolidated and segment gross margin growth. And this is the kind of operational actions that reinforce themselves. So as we get better at seeing how to increase prices while ensuring our customers earn a strong return on investment, we also learn much better where to reduce our cost of goods sold. At some point, of course, you run into a point of diminishing returns. And as we upgrade our digital technology and employ things like artificial intelligence and machine learning to help us do so, We believe we will continue to make gains here. As we noted in our first quarter report three months ago, quarterly revenue remains choppy as was reflected in the second quarter. However, our commitment to executing our strategy in pursuing higher margin business is succeeding. In the meantime, third quarter revenue is beginning to ramp substantially, about which We expect to announce details in the coming weeks ahead, which will also look to strengthen our cash flow in quite a big way. That said, many entities are undertaking a right-sizing, and we are also actively considering how to operate more efficiently as we have, whether they demand a downturn in our core lead generation business that shows sign of bottoming out and turning back upwards. So while we remain optimistic about the demand opportunities in front of us, we also remain committed to our goal of reaching a break-even EBITDA run rate by the end of this year, and we'll take the steps necessary to achieve this goal. Importantly, as mentioned earlier, we are in a transition phase in which we are shifting our resources to securing larger corporate customers. And this is in part to capitalize on the BattleBridge acquisition that was completed earlier this year. We determined that consolidating BattleBridge into Logic would offer the most profitable upside versus operating it as a wholly owned subsidiary. The consolidation of BattleBridge and its team into Logic, it has synergistically produced a company with a broader range of services and a much greater depth of expertise. That has enabled us to bid on and win far bigger customer accounts. And although those sales cycles are a little bit longer, we monitor our business pipeline closely. And today, we can confidently state that this strategy is gaining solid traction, and we fully expect to report strong progress about that in the weeks ahead. I actually had a very nice script, which was written by our investor relations team at Earth, and very much like the anecdotes and confidence-building language that was written into it for me.
spk02: But I rewrote it.
spk04: Last week, I had a conversation with someone who's under nondisclosure agreements with us. And I was describing the second quarter, and his comment to me was, that sounds absolutely awful. I told him, you're right, it does. But that's purely on the view without full overall context. So I want to describe to you all the bigger picture, which I also did with him. When we acquired... what is now our core business of DataLogic back in January 2020. The business came out of a year where revenues were roughly around $8 million and gross profit margins were a little bit below 10%. COVID hit and in spite of that, 2020 revenues grew from 8 million up to 15.6 million and margins went up to the low teens. Last year, that business grew to $24 million in revenue and gross margins were a little bit under 30%. For this year, we're taking a more disruptive approach and have introduced a platform that in simple terms starts to ease out the middleman, which will, if successful, increase our profit margins substantially. Two of the initiatives, which have demonstrated profits that are in the 80 to 90% range, and as we get to scale, overall profit margins will improve to levels that are much greater than where we are now. We've been doing this for years. We've been resetting the business in the goal of attaining higher margins, and we have absolutely delivered on them. Then we've had the revenue track back upwards, so we believe that this time also, will succeed again. So, although the top line revenues for the second quarter did contract, the evolution of the business to a more direct approach is already demonstrating to us internally that the investment made this past year is on a solid footing and should reap great rewards setting our business on a solid trajectory of revenue growth and margin expansion throughout the rest of this year and beyond. Now I'd like to turn the call over to John McNeil to review the second quarter results and guidance for the year. John?
spk02: Thank you, Brent.
spk03: For the second quarter, consolidated revenues in the quarter were $4.9 million, down 40.4% compared to $8.3 million in the prior year period. The company's CreateApp platform, now doing business as GoLogic, contributed $1.6 million, or 32% of second quarter consolidated revenues, down 42.6% from $2.8 million in the year-ago quarter. The decrease in revenues resulted from a shift to pursue higher gross profit margins, which involved attrition of lower margin business and an increase of direct sales and marketing expenses. Logix DataLogic platform revenues contributed $3.3 million, or 67.4% of second quarter consolidated revenues, down 39.3% from $5.5 million in the year-ago quarter. Consolidated gross profits decreased 25.7% to $1.8 million on a 35.8% gross margin in Q2 2022, compared with $2.4 million, or a 29.5% gross margin respectively in the year earlier quarter. Total operating expenses increased 5.7% to $8.3 million in Q2 2022 from $7.8 million in the year-ago quarter, primarily due to an increase in general administrative and sales and marketing expenses. The second quarter of 2022 net loss was $6.5 million, up from a net loss of $5 million in the year-ago quarter. As of June 30, 2022, the company's cash, cash equivalents, and restricted cash totaled $0.4 million versus $1.6 million on December 31, 2021. Moving on to the full year 2022 guidance, we are reiterating our revenue guidance for fiscal 2022. We expect revenues to be in the range of $40 to $50 million while we reach a break even EBITDA run rate by the end of fiscal year 2022 and expect to reach profitability in early 2023. This forecast is based in part on our prospective deal pipeline, which includes M&A and potential partnerships and strategic client relationships. We expressly do not make any assurance that we will enter into any strategic transactions with companies in the M&A pipeline, or that the results of any such transactions will enable the company to reach its goals. With that, I will turn it back to the operator to open the lines for questions, please.
spk02: Thank you.
spk06: If you would like to ask a question, please signal by pressing star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question.
spk02: Take a brief pause to allow all participants the opportunity to signal for questions. And our first question comes from Lisa Thompson of Zach's Research.
spk01: Good morning. Hey, Lisa. So when are the filing going to be out so we can see the separate companies?
spk04: Thank you. This afternoon or Monday morning.
spk01: Okay. So, John, just to clarify the guidance, so when you say $40 million to $50 million run rate, that's just data logic, and that's like Q4 times 4, or is that December times 12, or how do you get that number? Well, it's...
spk03: If I said run rate, I meant that it was $40 to $50 million in total, not the run rate. It is a combination of organic plus M&A that we've discussed earlier.
spk01: Okay, and that's the combined company, right? You add the four quarters or two quarters combined and two without with just data logic? How does that work? Exactly.
spk03: Excluding app logic, I think, is what you're asking. That is excluding app logic.
spk02: Yes, it is excluding app logic. So it is the data logic segment plus M&A.
spk01: All right. So plus M&A, which may or may not happen.
spk02: Which may or may not happen.
spk01: Okay. All right. So that makes it confusing. All right. Let me go through. So just to clarify, what's the – a fully diluted share count right now?
spk02: 33 over a million.
spk01: Okay. It's still pretty the same. So it looks like, well, since I don't have the balance sheet for the separate company, but it looks like kind of out of cash. So what's the plan for that? Or do you think you'll get to cash break even?
spk04: I'd say probably the latter. There are some potential strategic investment opportunities that we're looking at, but really to drive towards cost-cutting and aiming towards break-even and then profitability.
spk01: Okay. Go ahead.
spk03: No, I was just saying that we've entered into a factoring facility, which is helping on the working capital side, which helps on the cash flow perspective.
spk01: All right. So based on where you are now for Q3, what do you think operating expenses are for just data logics?
spk02: You're saying on a go-forward basis or on a... Yeah, like Q3 now that they're separated.
spk03: Well, I think we can discuss that offline a bit, but I would say that the operating expenses, first of all, have a number of DNA items which you can pull out as well as stock-based compensation. That was $1.7 million in the current in the June quarter versus about 670 in the first quarter. And there have been some reductions subsequently in some of the business unit areas since we started. Rather than characterize that right here, we can take it offline a bit, but it will be lower from an operating expense perspective, um, I would say, you know, by at least 50 or a hundred, uh, thousand per month.
spk01: All right. So that certainly gets you closer to cash break even.
spk02: Yeah.
spk01: All right. So can we just go through this whole Medicare thing and get specific as to how you used to do it and how you do it now? And then, I know it's very seasonal. Is this quarter like double what the June quarter is in marketing for that business or how does that work?
spk03: Well, I believe the signup season begins in November 1st. Um, so you would expect to see some, you know, activity increase, you know, substantially, um, leading into it, so it's a question of timing as to exactly when, sort of from a demand side, that will become a huge demand driver, but it will be a significant uplift in terms of volume in and around that. It isn't necessarily in this quarter. It could be earlier in the fourth quarter than in the third quarter, but it will be substantial.
spk04: Yeah, and Lisa, I think it's safe to say that we're not looking at Medicare to be the primary driver for revenues through the balance of the year. It could be other verticals or potentially a new client or two.
spk01: Okay. How did you change the Medicare marketing, though, to go to the higher margin thing? I didn't quite understand that Angie's List thing.
spk04: It's not necessarily centered around Medicare, but generally what we have created is a platform that John can probably describe better than I can. But essentially what we're doing is we have built a direct consumer platform so that a a large percentage of the business that we're doing with third-party aggregators would be going direct. So capturing the higher margins by eliminating the middleman is the goal here. Does that make sense? So that would be anything from the insurance markets that we operate in to home improvement by way of having a direct portal which has just recently launched. I'm sorry, direct portals, plural, that have recently launched and starting to shift away from the business where we are dealing with people who are in the middle between us and the end customer. Does that make sense?
spk01: Okay, so it's across all the verticals.
spk04: Correct. So looking a lot more like an Angie's List or Porch.com or I think SelectQuote, some of these who do go direct to consumer, there are initiatives that have been built and invested in, built, and implemented that will enable us to do the same.
spk01: All right. That makes sense. Okay. And I guess my last question is, if you do sign these large customers, would that be something you press release or not?
spk04: Depending upon the magnitude of them in materiality, yes. But if it's an existing client now that is layering in new business with us perhaps not i i'm going to have to defer to the council um but you'll see more uh going forward and i think it'll become a lot more evident i'm not being delivered i'm being deliberately vague right um only out of only out of compliance concerns right i'm just wondering to expect it and if we don't hear from you that that's bad news yeah well Yeah, we will indicate it in one shape or form, but I will attempt to be a little more conservative about it, but I think it should be obvious what it is.
spk01: All right, great. Thank you. That's all my questions.
spk02: Thanks, Lisa.
spk06: Our next question comes from Bob Blavolo of Private Investor.
spk00: Hi, Brent. Thanks for taking my call. I think Lisa asked one thing about your revenues. So my other question is, you've mentioned about the possibility of a data logic spinoff. I was wondering if there was any progress on that or maybe considering maybe selling or merging the company of logic or data logic with another company to maximize returns for shareholders. Do you have any progress about the possible IPO or spinoff or maybe a merger, and can you discuss those at this time?
spk04: Thanks, Bob. Yes, we have absolutely described that those are initiatives that we are actively pursuing. As far as the progress on them, I can't be specific about it, but I can reiterate that it is, it is, it is absolutely in our interest, um, to do so. I think that, um, generally speaking with, with the, the, the, the reset and valuations on tech companies over this past, um, nine months, which is eight months, which has started to pick up. Um, there's been a lot of, um, A lot of activity on the M&A front. A lot of people who we've spoken with and a lot of people who have approached us. So I think that the logical result will be a business combination or some sort of business combination that would be strategic in nature and should provide a greater upside. Does that help?
spk00: Yeah, yeah, thank you. So, yeah, that was my question. Thank you so much.
spk04: Definitely.
spk06: Our next question comes from Tony Fort of Apprentice Invest.
spk05: Yeah, hi, Brent. How are you?
spk04: Hey, Tony.
spk05: Hi. Prior to my retirement from the American Stock Exchange, I was in charge of the trade analysis division. The vision was involved in numerous investigations that involved interaction with the SEC. I report to Bill Bratsky, who subsequently became chairman of the CBOE, the Chicago Board Options Exchange. I dealt quite a bit with Arthur Levitt, who was chairman of the exchange and later became SEC chairman. I am sure that just about everyone on this call, along with all logic shareholders, are very concerned about the fact that logic has been in a major downward price spiral. Logic closed yesterday at 0.2566 cents, just a couple of cents above its all-time low. In fact, logic is down over 92% since it closed at 3.39 at the end of September 2021, which was over 10 months ago. The decline comes despite the fact that Brent and his staff have tirelessly built a much stronger company through acquisitions and partnerships, thereby resulting in record gross margins on its revenues. Logic is currently trading at less than one times current revenues, and its valuation is dramatically lower than all of its peers. This has happened for one reason. The shares are being manipulated on a daily basis. You only have to look at GoLogic to confirm the manipulation. GoLogic was spun off from Datalogic, and it's currently trading at $3.70, although when it was spun off, it accounted for approximately 40% of the company's revenues, with Datalogic accounting for the rest. The daily manipulation resulted from the May 2021 offering of 2 million units of logic, which was handled by Research Capital Corporation. For some inexplicable reason, Research Capital placed close to 60% of the offering in the hands of four firms. The firms sold their 1.2 million common shares that they received, and then exercised approximately 600,000 of the 1.2 warrants and sold those shares. They made substantial profits on the sale of the 1.8 million shares. They were left with close to 600,000 unexercised warrants, which they held as protection against unexpected news such as a tender offer. At that point, In early October 2021, they began their daily manipulation. The manipulation utilized computer-generated orders based on a developed algorithm. The four firms apparently acted in concert. On a daily basis, daily basis every single trading session, the computer enters sell orders, either short or naked short, Forcing logic down, the firms hope that shareholders panic and begin selling their shares. If there is no initial panic, they will sell shares themselves. And then they would expect shareholders to come in because the stock has had a significant decline. As the share price declines, the computer generates buy orders at or below the last sale in an effort to cover their short positions. This activity can be repeated multiple times during a trading session. The manipulating firms don't care one iota about logic, what they're doing to the company or the substantial losses suffered by shareholders. They are only concerned about making small profits during every trading session. Unfortunately, through this activity, the stock has had a monumental price decline. The majority of shareholders don't know what is going on with this manipulation, and they believe that there must be something wrong with the company since it is selling at such a dramatically low value in relation to all its peers. After the conference call in May, I sent the letter to Yvonne Huber at FINRA, outlining the continuous manipulation that's taken place in logic. In the past, I've had a number of conversations with Yvonne, and she knows me fairly well. After a couple of conversations with her chief investigator, I received an email in June stating that FINRA had opened an investigation regarding the manipulation of the stock. As most of you might be aware, it normally takes considerable time for an investigation to be completed. However, once FINRA gets to a point when they ask the firms manipulating logic for their trading information, it is extremely doubtful that these firms will continue the manipulation. As most of you might know, the OTC market is a quagmire of manipulations. There are 10,000 stocks listed on the OTC market, and neither the SEC or FINRA have the manpower to investigate even a very small percentage of them. The firms engaging in the manipulation are totally aware that there is little or no oversight from their activity. I believe we were very fortunate that FINRA opened an investigation. The problem is that it might take a significant amount of time before it is completed. If you had time to listen to prior conference calls and Brent's numerous interviews, you would realize that he is doing everything humanly possible to stop the manipulation and place logic shareholders in a stronger financial positions. I personally believe he will succeed. However, it is extremely important that in order for this constant manipulation to be successful, existing shareholders have to panic and sell their positions. Without shareholders selling, the firms in manipulating logic would have to stop their activity because they wouldn't make any money. I hope that everyone listening to this call will discuss it with shareholders or friends that they know have positions and suggest they listen to the replay. If you would like to talk to me about this presentation, you can email me at forte40 at Verizon.net. I'd like to thank you for the opportunity to talk to you. And at this point, I would like to turn the call back to Brent. Thank you.
spk02: Thanks, Tony. Much appreciated. Operator, are there any other questions? There are no further questions. Mr. Sun, we're back to you for closing remarks.
spk04: Okay. As mentioned earlier, I am extremely confident in the solid foundation that we have invested in and built over the last year and firmly believe that we will be successful in our goals of scaling the business and attaining higher value for shareholders. I wanted to thank everyone for listening in and look forward to the next call. Thanks so much.
spk06: Ladies and gentlemen, that concludes today's conference calls. We thank you all for your participation.
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