UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 13, 2024, there were
LogicMark, Inc.
Form 10-Q
Table of Contents
September 30, 2024
i
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
LogicMark, Inc.
CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, 2024 | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Product development costs, net of amortization of $ | ||||||||
| Software development costs, net of amortization of $ | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net of amortization of $ | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities, Series C Redeemable Preferred Stock and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred Revenue | ||||||||
| Total Current Liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Series C Redeemable Preferred Stock | ||||||||
| Series C redeemable preferred stock, par value $ | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, par value $ | ||||||||
| Series F preferred stock, par value $ | ||||||||
| Common stock, par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities, Series C Redeemable Preferred Stock and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
LogicMark, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Costs of goods sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Direct operating cost | ||||||||||||||||
| Advertising costs | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Other expense | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Total Other Income | ||||||||||||||||
| Loss before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Preferred stock dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Attributable to Common Stockholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss Attributable to Common Stockholders Per Share - Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
LogicMark, Inc.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Three Months Ended September 30, 2024 | ||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - July 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock based compensation expense | - | - | - | |||||||||||||||||||||||||
| Cancellation of common stock | ( | ) | ||||||||||||||||||||||||||
| Warrants exercised for common stock | ||||||||||||||||||||||||||||
| Sale of common stock, warrants and pre-funded warrants pursuant to a registration statement on Form S-1 | ||||||||||||||||||||||||||||
| Fees incurred in connection with equity offerings | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Series C Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of stock options for services | - | - | ||||||||||||||||||||||||||
| Shares issued as stock compensation | - | |||||||||||||||||||||||||||
| Common stock withheld to pay taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Cancellation of common stock | ( | ) | ||||||||||||||||||||||||||
| Warrants exercised for common stock | ||||||||||||||||||||||||||||
| Sale of common stock, warrants and pre-funded warrants pursuant to a registration statement on Form S-1 | ||||||||||||||||||||||||||||
| Fees incurred in connection with equity offerings | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Series C Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
3
LogicMark, Inc.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - July 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock based compensation expense | - | - | - | |||||||||||||||||||||||||
| Shares issued as stock based compensation | - | |||||||||||||||||||||||||||
| Series C Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock based compensation expense | - | - | - | |||||||||||||||||||||||||
| Shares issued as stock based compensation | - | |||||||||||||||||||||||||||
| Sale of common stock, warrants and pre-funded warrants pursuant to a registration statement on Form S-1 | ||||||||||||||||||||||||||||
| Fees incurred in connection with equity offerings | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Fractional shares issued in the 1-for-20 reverse stock split | ( | ) | ||||||||||||||||||||||||||
| Warrants exercised for common stock | ||||||||||||||||||||||||||||
| Series F Preferred stock converted to common stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock issued to settle Series F Preferred stock dividends | ||||||||||||||||||||||||||||
| Series C Preferred stock dividends | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
LogicMark, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock based compensation | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of product development costs | ||||||||
| Amortization of software development costs | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash flows from Investing Activities | ||||||||
| Purchase of equipment and website development | ( | ) | ( | ) | ||||
| Product development costs | ( | ) | ( | ) | ||||
| Software development costs | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash flows from Financing Activities | ||||||||
| Proceeds from the sale of common stock and warrants | ||||||||
| Fees paid in connection with equity offerings | ( | ) | ( | ) | ||||
| Common stock withheld to pay taxes | ( | ) | ||||||
| Proceeds from exercise of warrants for common stock | ||||||||
| Series C redeemable preferred stock dividends | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | ( | ) | ( | ) | ||||
| Cash, Cash Equivalents and Restricted Cash - Beginning of Period | ||||||||
| Cash, Cash Equivalents and Restricted Cash - End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Conversion of Series F preferred stock to common stock | $ | $ | ||||||
| Common stock issued to settle Series F preferred stock dividends | ||||||||
| Fees in connection with offering costs included in accounts payable and accrued expenses | ||||||||
| Product development costs included in accounts payable and accrued expenses | ||||||||
| Software development costs included in accounts payable and accrued expenses | ||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITIES
LogicMark, Inc. (“LogicMark” or the “Company”) was incorporated in the State of Delaware on February 8, 2012 and was reincorporated in the State of Nevada on June 1, 2023. LogicMark operates its business in one segment and provides personal emergency response systems (“PERS”), health communications devices, and Internet of Things technology that creates a connected care platform. The Company’s devices give people the ability to receive care at home and confidence to age independently. LogicMark revolutionized the PERS industry by incorporating two-way voice communication technology directly in the medical alert pendant and providing life-saving technology at a price point everyday consumers could afford. The PERS technologies as well as other personal safety devices are sold direct-to-consumer through the Company’s eCommerce website and Amazon.com, through dealers and resellers, as well as directly to the United States Veterans Health Administration (“VHA”).
NOTE 2 - LIQUIDITY AND MANAGEMENT PLANS
The Company generated an operating loss of $
Given the Company’s cash position as of
September 30, 2024, and its projected cash flow from operations, the Company believes that it will have sufficient capital to sustain
operations for a period of one year following the date of this filing. The Company may also raise funds through equity or debt offerings
to accelerate the execution of its long-term strategic plan to develop and commercialize its core products and to fulfill its product
development efforts. As further described in Note 6, Stockholders’ Equity and Redeemable Preferred Stock, on August 5, 2024, the
Company closed a firm commitment public offering that resulted in gross proceeds to the Company of approximately $
NOTE 3 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. In the opinion of management, the information herein reflects all adjustments, consisting only of normal recurring adjustments, except as otherwise noted, considered necessary for a fair statement of results of operations, financial position, stockholders’ equity, and cash flows. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 which was filed with the SEC on April 16, 2024.
6
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE CONDENSED FINANCIAL STATEMENTS
U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management evaluates these significant estimates and assumptions, including those related to the fair value of acquired assets and liabilities, stock based compensation, income taxes, allowance for doubtful accounts, long-lived assets, and inventories, and other matters that affect the condensed financial statements and disclosures. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities
with an original maturity date of three months or less when purchased to be cash equivalents. Due to their short-term nature, cash equivalents
are carried at cost, which approximates fair value. The Company had cash equivalents of $
RESTRICTED CASH
Restricted cash includes amounts held as collateral for company credit cards. During the year ended December 31, 2023, the Company closed the company credit card and changed to a vendor that did not require cash collateral. As of September 30, 2024 and December 31, 2023, the Company did not have restricted cash.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents balances in large well-established financial institutions located in the United States. At times, the Company’s cash balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
7
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company’s revenues consist of product sales to either end customers, to resellers or direct bulk sales to the VHA. The Company’s revenues are derived from contracts with customers, which are in most cases customer purchase orders. For each contract, the promise to transfer the title of the products, each of which is individually distinct, is considered to be the identified performance obligation. As part of the consideration promised in each contract, the Company evaluates the customer’s credit risk. Our contracts do not have any financing components, as payments are mostly prepaid, or in limited cases, due net 30 days after the invoice date. The majority of prepaid contracts are with the VHA, which consists of the majority of the Company’s revenues. The Company’s products are almost always sold at fixed prices. In determining the transaction price, we evaluate whether the price is subject to any refunds, due to product returns or adjustments due to volume discounts, rebates, or price concessions to determine the net consideration we expect to be entitled to. The Company’s sales are recognized at a point-in-time under the core principle of recognizing revenue when title transfers to the customer, which generally occurs when the Company ships or delivers the product from its fulfillment center to our customers, when our customer accepts and has legal title of the goods, and the Company has a present right to payment for such goods. Based on the respective contract terms, most of our contract revenues are recognized either (i) upon shipment based on free on board (“FOB”) shipping point, or (ii) when the product arrives at its destination.
During the year ended December 31, 2023, the Company released new product and service offerings by leasing hardware coupled with monthly subscription services. The Company accounts for the revenue from its lease contracts by utilizing the single component accounting policy. This policy requires the Company to account for, by class of underlying asset, the lease component and non-lease component(s) associated with each lease as a single component if two criteria are met: (1) the timing and pattern of the lease component and the non-lease component are the same and (2) the lease component would be classified as an operating lease, if accounted for separately. The Company has determined that its leased hardware meets the criteria to be operating leases and has the same timing and pattern of transfer as its monthly subscription services. The Company has elected the lessor practical expedient within ASC 842, Leases (“ASC 842”) and recognizes, measures, presents, and discloses the revenue for the new offering based upon the predominant component, either the lease or non-lease component. The Company recognizes revenue under ASC 606, Revenue Recognition from Contracts with Customers (“ASC 606”) for its leased product for which it has determined that the non-lease components of the new offering is the predominant component of the contract. For the three and nine months ended September 30, 2024, the Company’s sales recognized over time were immaterial. For the three and nine months ended September 30, 2023, none of the Company’s sales were recognized over time.
SALES TO DEALERS AND RESELLERS
The Company maintains a reserve for unprocessed and estimated future price adjustments, claims and returns as a refund liability. The reserve is recorded as a reduction to revenue in the same period that the related revenue is recorded and is calculated based on an analysis of historical claims and returns over a period of time to appropriately account for current pricing and business trends. Similarly, sales returns and allowances are recorded based on historical return rates, as a reduction to revenue with a corresponding reduction to cost of goods sold for the estimated cost of inventory that is expected to be returned. These reserves were not material as of September 30, 2024 and December 31, 2023.
SHIPPING AND HANDLING
Amounts billed to customers for shipping and handling
are included in revenues. The related freight charges incurred by the Company are included in cost of goods sold and were $
8
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE - NET
For the three and nine months ended September 30, 2024 and 2023, the Company’s revenues were primarily the result of shipments to VHA hospitals and clinics, which are made in most cases on a prepaid basis. The Company also sells its products to dealers and resellers, typically providing customers with modest trade credit terms. Sales made to dealers and resellers are done with limited rights of return and are subject to the normal warranties offered to the ultimate consumer for product defects.
Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the accounts receivable allowance for credit losses, as necessary whenever events or circumstances indicate the carrying value may not be recoverable. As of September 30, 2024 and December 31, 2023, the allowance for credit losses was immaterial.
INVENTORY
The Company measures inventory at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Cost is determined using the first-in, first-out method.
The Company performs regular reviews of inventory
quantities on hand and evaluates the realizable value of its inventories. The Company adjusts the carrying value of the inventory as necessary
for excess, obsolete, and slow-moving inventory by comparing the individual inventory parts to forecasted product demand or production
requirements. As of September 30, 2024, inventory was composed of $
The Company is required to partially prepay for
inventory with certain vendors. As of September 30, 2024 and December 31, 2023, $
LONG-LIVED ASSETS
Long-lived assets, such as property and equipment, and other intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. When indicators exist, the Company tests for the impairment of the definite-lived assets based on the undiscounted future cash flow the assets are expected to generate over their remaining useful lives, compared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded. Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows may differ from actual cash flow due to, among other things, technological changes, economic conditions, or changes to the Company’s business operations.
9
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment consisting of equipment,
furniture, fixtures, website and other is stated at cost. The costs of additions and improvements are generally capitalized and expenditures
for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related
costs and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
| Equipment | ||
| Furniture and fixtures | ||
| Website and other |
GOODWILL
Goodwill is reviewed annually in the fourth quarter, or when circumstances indicate that an impairment may have occurred. The Company first performs a qualitative assessment of goodwill impairment, which considers factors such as market conditions, performance compared to forecast, business outlook and unusual events. If the qualitative assessment indicates a possible goodwill impairment, goodwill is then quantitatively tested for impairment. The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative test. If a quantitative goodwill impairment test is required, the fair value is determined using a variety of assumptions including estimated future cash flows using applicable discount rates (income approach), comparisons to other similar companies (market approach), and an adjusted balance sheet approach. As of September 30, 2024, no indicators of impairment were noted.
OTHER INTANGIBLE ASSETS
The Company’s intangible assets are related to the acquisition of LogicMark LLC in 2016, the former subsidiary that was merged with and into the Company and are included in other intangible assets in the Company’s condensed balance sheets as of September 30, 2024 and December 31, 2023.
As of September 30, 2024, the other intangible
assets are composed of patents of $
As of September 30, 2024, total amortization expense
estimated for the remainder of fiscal year 2024 was $
RESEARCH AND DEVELOPMENT AND PRODUCT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs are expenditures
on new market development and related engineering costs. In addition to internal resources, the Company utilizes functional consulting
resources, third-party software, and hardware development firms. The Company expenses all research and development costs as incurred
until technological feasibility has been established for the product. Once technological feasibility is established, development costs
including software and hardware design are capitalized until the product is available for general release to customers. Judgment is required
in determining when technological feasibility of a product is established. For the three months ended September 30, 2024, the Company
capitalized $
10
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
The Company accounts for stock based awards exchanged for employee services at the estimated grant date fair value of the award. The Company accounts for equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock based compensation is subject to periodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Stock based compensation charges are amortized over the vesting period or as earned. Stock based compensation is recorded in the same component of operating expenses as if it were paid in cash.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE
Basic
net loss attributable to common stockholders per share (“Basic net loss per share”) was computed using the weighted average
number of common shares outstanding. Diluted net loss applicable to common stockholders per share (“Diluted net loss per share”)
includes the effect of diluted common stock equivalents. Potentially dilutive securities from the exercise of stock options to purchase
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which provides an update to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-07 will have a material impact on its financial statements and disclosures.
11
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - ACCRUED EXPENSES
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Salaries, payroll taxes and vacation | $ | $ | ||||||
| Merchant card fees | ||||||||
| Professional fees | ||||||||
| Management incentives | ||||||||
| Lease liability | ||||||||
| Development costs | ||||||||
| Other | ||||||||
| Totals | $ | $ | ||||||
NOTE 6 - STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK
August 2024 Public Offering
On August 5, 2024 (the “Closing Date”), the Company, in connection with a best efforts public offering (the “Offering”), sold to certain purchasers an aggregate of (x)
In addition, as of September 30, 2024, the Purchasers
exercised their August Pre-Funded Warrants for an aggregate of
November 2023 Warrant Inducement Transactions
On November 21, 2023, the Company entered into
inducement agreements (together, the “Inducement Agreements”) with certain of its warrant holders, pursuant to which the Company
induced such warrant holders to exercise for cash their common stock purchase warrants issued pursuant to firm commitment public offerings
by the Company that closed on September 15, 2021 (the “Existing September 2021 Warrants”) and January 25, 2023 (the “Existing
January 2023 Warrants” and together with the Existing September 2021 Warrants, the “Existing Warrants”) to purchase
up to approximately
12
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)
January 2023 Offering
On January 25, 2023, the Company closed a firm commitment registered
public offering (the “January Offering”) pursuant to which the Company issued (i)
Series C Redeemable Preferred Stock
In May 2017, the Company authorized Series C Redeemable
Preferred Stock. Holders of Series C Redeemable Preferred Stock are entitled to receive dividends of
The Series C Redeemable Preferred Stock may be
redeemed by the Company at the Company’s option in cash at any time, in whole or in part, upon payment of the stated value of the
Series C Redeemable Preferred Stock and unpaid dividends. If a “fundamental change” occurs, the Series C Redeemable Preferred
Stock shall be immediately redeemed in cash equal to the stated value of the Series C Redeemable Preferred Stock, and unpaid dividends.
A fundamental change includes but is not limited to any change in the ownership of at least
The holders of the Series C Redeemable Preferred
Stock are entitled to vote on any matter submitted to the stockholders of the Company for a vote.
A redeemable equity security is to be classified as temporary equity if it is conditionally redeemable upon the occurrence of an event that is not solely within the control of the issuer. Upon the determination that such events are probable, the equity security would be classified as a liability. Given the Series C Redeemable Preferred Stock contains a fundamental change provision, the security is considered conditionally redeemable. Therefore, the Company has classified the Series C Redeemable Preferred Stock as temporary equity in the balance sheets as of September 30, 2024 and December 31, 2023 until such time that events occur that indicate otherwise.
13
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK (CONTINUED)
Warrants
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Warrants | Price | In Years | Value | |||||||||||||
| Outstanding and Exercisable at January 1, 2024 | $ | $ | ||||||||||||||
| Issued in August 2024 Offering | ||||||||||||||||
| Issued prefunded warrants | ||||||||||||||||
| Exercise of prefunded warrants | ( | ) | ||||||||||||||
| Expired warrants | ( | ) | ||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||||||
NOTE 7 - STOCK INCENTIVE PLANS
2023 Stock Incentive Plan
On March 7, 2023, the Company’s stockholders
approved the 2023 Stock Incentive Plan (“2023 Plan”). The aggregate maximum number of shares of common stock that may be issued
under the 2023 Plan is
During the three months ended September 30, 2024,
an aggregate of
During the nine months ended September 30, 2024, the Company issued
an aggregate of
During the three and nine months ended September
30, 2024,
During the three and nine months ended September
30, 2023,
14
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - STOCK INCENTIVE PLANS (CONTINUED)
2017 Stock Incentive Plan
On August 24, 2017, the Company’s
stockholders approved the 2017 Stock Incentive Plan (“2017 SIP”). The aggregate maximum number of shares of common stock
that were issuable under the 2017 SIP was limited to
During the three and nine months ended September
30, 2024, the Company did not issue any stock options under the 2017 SIP. As of September 30, 2024, the unrecognized compensation cost
related to non-vested stock options was $
During the
three months ended September 30, 2023, the Company did not issue any stock options under the 2017 SIP. During the nine months ended September
30, 2023, the Company issued
During the three and nine months ended September
30, 2024, stock options and
2013 Long-Term Stock Incentive Plan
On January 4, 2013, the Company’s stockholders
approved the Company’s Long-Term Stock Incentive Plan (“2013 LTIP”). The maximum number of shares of common stock that
were issuable under the 2013 LTIP, including stock awards, stock issued to the Company’s Board, and stock appreciation rights, was
limited to
During the three and nine months ended September
30, 2024 and 2023, the Company did not issue any stock options under the 2013 LTIP. As of September 30, 2024, the unrecognized compensation
cost related to non-vested stock options was $
During the three and nine months ended September
30, 2024, no stock options were forfeited by participants under the 2013 LTIP. During the three
months ended September 30, 2023,
Stock based Compensation Expense
Total stock based compensation expense during
the three and nine months ended September 30, 2024 pertaining to awards under the 2023 Plan, the 2017 SIP and the 2013 LTIP amounted to
$
15
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of our business. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company, threatened against or affecting the Company, in which an adverse decision could have a material adverse effect upon our business, operating results, or financial condition.
COMMITMENTS
The Company leases warehouse space and equipment
in the U.S., which are classified as operating leases expiring at various dates. The Company determines if an arrangement qualifies as
a lease at the lease inception. Operating lease liabilities are recorded based on the present value of the future lease payments over
the lease term, assessed as of the commencement date. The Company’s real estate lease is for a fulfillment center, with a lease
term of
The Company’s lease agreements generally
do not specify an implicit borrowing rate, and as such, the Company uses its incremental borrowing rate to calculate the present value
of the future lease payments. The discount rate represents a risk-adjusted rate on a secured basis and is the rate at which the Company
would borrow funds to satisfy the scheduled lease liability payment streams. The Company entered into a new -year lease agreement
in June 2020 for new warehouse space located in Louisville, Kentucky. The Right of Use (“ROU”) asset value added as a result
of this new lease agreement was $
The Company’s lease agreements include options for the Company to either renew or early terminate the lease. Renewal options are reviewed at lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including significance of leasehold improvements on the property, whether the asset is difficult to replace, or specific characteristics unique to the lease that would make it reasonably certain that the Company would exercise the option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company and thus not included in the Company’s ROU asset and lease liability.
For the three and nine months ended September
30, 2024, total operating lease cost was $
| Year Ending December 31, | ||||
| 2024 (for the remainder of 2024) | ||||
| 2025 | ||||
| Total future minimum lease payments | $ | |||
| Less imputed interest | ( | ) | ||
| Total present value of future minimum lease payments | $ | |||
| As of September 30, 2024 | ||||
| Operating lease right-of-use assets | $ | |||
| Accrued expenses | $ | |||
| As of September 30, 2024 | ||||
| Weighted Average Remaining Lease Term | ||||
| Weighted Average Discount Rate | % | |||
16
LogicMark, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 – SUBSEQUENT EVENTS
Rights Agreement
On November 1, 2024, the Company entered into a rights agreement with Nevada Agency and Transfer Company,
as rights agent (the “Rights Agreement”). Pursuant to the Rights Agreement, in the event that a person or entity or group
thereof becomes the Beneficial Owner (as defined in the Rights Agreement) of at least fifteen percent (
Also on November 1, 2024, in connection with
the Rights Agreement, the Company filed a Certificate of Designation, Preferences, and Rights of Series G Non-Convertible Voting Preferred
Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada. This Certificate of Designation
authorized
Settlement Agreements and Issuance of New Preferred Stock
On November 13, 2024, the Company entered into settlement and release agreements (the “Settlement Agreements”) with the current and former holders (the “Series B Holders”) of its August Series B Warrants, issued in the Offering, pursuant which on such date all remaining Series B Warrants were exercised and the Series B Holders waived and released the Company from certain claims in connection with the exercise thereof and in exchange the Company agreed to issue the New Preferred Stock (as defined below).
In connection with the Settlement Agreements,
on November 13, 2024, the Company filed with the Secretary of State of the State of Nevada (the “Nevada Secretary of State”):
(i) a Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Non-Voting Preferred Stock (the “Series
H Certificate of Designation”) to designate
Pursuant to the Settlement Agreements, on November
14, 2024, the Company issued to the Series B Holders (i) an aggregate of
Also pursuant to the Settlement Agreements, on the issuance date of the New Preferred Stock, the Company entered into registration rights agreements with the Series B Holders pursuant to which the Company agreed to register the resale of the Conversion Shares. The Company is required to prepare and file the resale registration statement with the SEC no later than the 30th calendar day following the date of the issuance of the New Preferred Stock and to use its best efforts to have such registration statement declared effective within 60 calendar days after such date, subject to certain exceptions.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2024, should be read together with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024 (this “Form 10-Q”). This discussion and other disclosure in this Form 10-Q contain forward-looking statements and information relating to our business, including without limitation those related to current and future compliance with the listing requirements of The Nasdaq Stock Market LLC, that reflect our current views and assumptions concerning future events and is subject to risks and uncertainties that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These forward-looking statements speak only as of the date of this Form 10-Q. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or achievements. Except as required by applicable law, including the securities laws of the United States, we expressly disclaim any obligation or undertaking to disseminate any update or revisions of any of the forward-looking statements to reflect any change in our expectations with regard thereto or to conform to these statements to actual results.
Overview
LogicMark, Inc. provides PERS, health communications devices, and Internet of Things technology that creates a connected care platform. The Company’s devices provide people with the ability to receive care at home and age independently. The Company’s PERS devices incorporate two-way voice communication technology directly in the medical alert pendant and providing life-saving technology at a consumer-friendly price point aimed at everyday consumers. These PERS technologies, as well as other personal safety devices, are sold direct-to-consumer through Company’s eCommerce website and Amazon.com, through dealers and resellers, as well as directly to the United States Veterans Health Administration. The Company was awarded a contract by the U.S. General Services Administration that enables the Company to distribute its products to federal, state, and local governments.
Recent Developments
Rights Agreement
On October 18, 2024, Winvest Investment Fund Management Corp. (“Winvest”) filed with the U.S. Securities and Exchange Commission (the “SEC”) an initial Statement on Schedule 13D, a Form 3 and a Form 4 (collectively, the “Winvest Filings”) indicating its ownership of approximately 67% of the outstanding shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company. On October 28, 2024, Winvest provided the Company with a written consent (the “Winvest Consent”) purportedly amending the Company’s bylaws (the “Bylaws”) by (i) changing how the number of the directors on the Company’s board of directors (the “Board”) may be determined, (ii) changing how the Bylaws may be amended, (iii) adding a new bylaw preventing certain adverse actions by the Board against significant stockholders, and (iv) replacing the Company’s current slate of directors with a new four-member Board. Based on the records of the Company’s transfer agent, at no time since the date of the Winvest Filings has Winvest been the holder of a majority of the voting power of the Company, including the date of the Winvest Consent.
On October 30, 2024, the Board convened a meeting with Company’s management and its legal advisors to discuss these developments and unanimously determined that under the circumstances, including Winvest’s attempt to rapidly accumulate shares of Common Stock and effect significant changes to the Company Bylaws and management, the implementation of a stockholder rights plan would be in the best interests of the Company and all of its stockholders by protecting against Winvest’s intention to take control of the Company without appropriately compensating the rest of the Company’s stockholders, which would if consummated, trigger “fundamental transaction” and similar provisions in certain of the Company’s outstanding Common Stock purchase warrants, material agreements and the Company’s Certificate of Designations, Preferences and Rights of Series C Non-Convertible Voting Preferred Stock, all of which taken together would leave the Company insolvent and at significant risk of having to file for bankruptcy.
Accordingly, on November 1, 2024, the Company entered into a rights agreement with Nevada Agency and Transfer Company, as rights agent (the “Rights Agreement”). Pursuant to the Rights Agreement, in the event that a person or entity or group thereof becomes the Beneficial Owner (as defined in the Rights Agreement) of at least fifteen percent (15%) of the outstanding shares of Common Stock (an “Acquiring Person”), each holder of Common Stock as of the close of business on November 1, 2024 will be entitled to receive on the Distribution Date (as defined below) a dividend of one right for each share of Common Stock owned by such holder (each, a “Right”), with each Right exercisable for one one-hundredth of a share of the Company’s Series G Non-Convertible Voting Preferred Stock, $0.0001 par value per share (the “Series G Preferred Stock”), at a price of $0.05 per one-hundredth of a share, subject to adjustment as set forth in the Rights Agreement. The Rights are not exercisable until the earlier of: (1) the first date of public announcement by the Company or by an Acquiring Person of such acquisition of beneficial ownership of 15% or more of the outstanding Common Stock without the prior approval of the Board or such earlier date as a majority of the Board shall become aware of the existence of an Acquiring Person, or (2) the tenth business day (subject to extension by the Board) following the commencement of, or public announcement of an intention to commence, a tender or exchange offer which would result in the beneficial ownership of 15% or more of the outstanding Common Stock (the “Distribution Date”). The Rights will expire upon the earlier of (i) November 1, 2027, unless otherwise extended by the Company’s stockholders or and (ii) redemption or exchange by the Company.
Also on November 1, 2024, in connection with the Rights Agreement, the Company filed a Certificate of Designation, Preferences, and Rights of Series G Non-Convertible Voting Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada. This Certificate of Designation authorized 1,000,000 shares of the Series G Preferred Stock. Each share of Series G Preferred Stock entitles the holder to cast 100 votes on all matters submitted to stockholders to vote and the Series G Preferred Stockholders will vote together as one class with the holders of Common Stock on any such matters. The Series G Preferred Stock purchasable upon exercise of the Rights are non-convertible and non-redeemable (except as provided in the Certificate of Designation) and junior to any other series of preferred stock the Company has issued or may issue (unless otherwise provided in the terms of such other series). In the event of liquidation of the Company, the holders of Series G Preferred Stock will receive a preferred liquidation payment equal to the greater of $5.00 per share or an amount per share equal to 100 times the aggregate payment to be distributed per share of Common Stock.
18
Settlement Agreements and Issuance of New Preferred Stock
On November 13, 2024, the Company entered into settlement and release agreements (the “Settlement Agreements”) with the current and former holders (the “Series B Holders”) of its August Series B Warrants, issued in the Offering. Pursuant to the Settlement Agreements, in consideration for the Series B Holders’ agreement to exercise any outstanding August Series B Warrants on or before the date of the issuance of the New Preferred Stock (as defined below) and waive any and all claims or demands that the Series B Holders may receive upon exercise of the August Series B Warrants pursuant to Sections 2.3 and 3.8 of the August Series B Warrants on or after the effective time of the Company’s next reverse stock split of its outstanding Common Stock (the “Reverse Stock Split”) a number of shares of Common Stock in excess of four (4) times the number of shares of Common Stock that was initially issuable upon exercise of the August Series B Warrants as of the date of their issuance, the Company issued to the Series B Holders, on November 14, 2024, (i) an aggregate of 1,000 shares of a newly-designated series of preferred stock of the Company known as the Series H Convertible Non-Voting Preferred Stock, $0.0001 par value per share (the “Series H Preferred Stock”), which are convertible at the option of the holder thereof into shares of Common Stock (the “Conversion Shares”) at an initial conversion price of $0.4654, and (ii) an aggregate of 1,000 shares of a newly-designated series of preferred stock of the Company known as the Series I Non-Convertible Voting Preferred Stock, $0.0001 par value per share (the “Series I Preferred Stock”, and together with the Series H Preferred Stock, the “New Preferred Stock”), each share of which entitles the holder thereof to two (2) votes on all matters submitted to a vote of the stockholders of the Company. The Series I Preferred Stock will be automatically redeemed for no consideration upon the redemption, conversion or sale of shares of Series H Preferred Stock on a one for one basis. The shares of Series H Preferred Stock have a stated value of $1,000 and are initially convertible into approximately 2,148,689 shares of Common Stock in the aggregate, subject to a 4.99%/9.99% beneficial ownership limitation. In an event of liquidation, each holder of Series H Preferred Stock is entitled to the greater of (a) the aggregate stated value of the shares of Series H Preferred Stock, and (b) the amount the holder’s shares of Series H Preferred Stock would be entitled to receive if their shares of Series H Preferred Stock were fully converted. The conversion price will reset on the fifth trading day following the effective date of the Reverse Stock Split to the greater of (i) the lowest volume weighted average price of the Common Stock during the five trading days immediately preceding the reset date and (ii) the floor price of $0.1785.
Also pursuant to the Settlement Agreements, on the issuance date of the New Preferred Stock, the Company entered into registration rights agreements with the Series B Holders (pursuant to which the Company agreed to register the resale of the Conversion Shares. The Company is required to prepare and file the resale registration statement with the SEC no later than the 30th calendar day following the issuance of the New Preferred Stock and to use its best efforts to have such registration statement declared effective within 60 calendar days after such date, subject to certain exceptions.
Results of Operations
Three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.
Revenue, Cost of Goods Sold, and Gross Profit
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | 2,705,461 | $ | 2,367,227 | $ | 7,652,813 | $ | 7,503,940 | ||||||||
| Cost of Goods Sold | 903,834 | 769,956 | 2,529,018 | 2,444,401 | ||||||||||||
| Gross Profit | $ | 1,801,627 | $ | 1,597,271 | $ | 5,123,795 | $ | 5,059,539 | ||||||||
| Profit Margin | 67 | % | 67 | % | 67 | % | 67 | % | ||||||||
We experienced a 14% increase in revenue for the three months ended September 30, 2024, compared to the same period ended September 30, 2023. We experienced a 2% increase in revenue for the nine months ended September 30, 2024, as compared to the same period ended September 30, 2023. The primary increase in revenue was due to higher sales of our Guardian Alert 911 Plus hardware and the new revenue stream in 2024 from our recently released Freedom Alert Mini.
No material fluctuations were noted for the three and nine months ended September 30, 2024 in gross profit margin, compared to the same period ended September 30, 2023. The increase in cost of goods sold for both the three and nine months ended September 30, 2024, compared to the same periods ended September 30, 2023 were consistent with increases in revenue.
Operating Expenses
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| Operating Expenses | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Direct operating cost | $ | 359,044 | $ | 266,746 | $ | 1,010,624 | $ | 841,974 | ||||||||
| Advertising costs | 114,795 | 57,195 | 402,229 | 190,588 | ||||||||||||
| Selling and marketing | 599,306 | 636,643 | 1,792,337 | 1,620,109 | ||||||||||||
| Research and development | 96,650 | 242,697 | 404,108 | 806,851 | ||||||||||||
| General and administrative | 1,727,550 | 1,901,516 | 5,609,510 | 6,759,135 | ||||||||||||
| Other expense | 101,013 | 54,296 | 254,770 | 133,261 | ||||||||||||
| Depreciation and amortization | 402,821 | 217,767 | 1,126,346 | 649,468 | ||||||||||||
| Total Expenses | $ | 3,401,179 | $ | 3,376,860 | $ | 10,599,924 | $ | 11,001,386 | ||||||||
19
Direct Operating Cost
The $0.1 million increase in direct operating costs for the three months ended September 30, 2024, compared to the same period ended September 30, 2023, was primarily driven by an increase in salaries and related expenses and direct operating fees incurred from an increase in sales through Amazon.com. The $0.2 million increase in direct operating cost for the nine months ended September 30, 2024, compared to the same period ended September 30, 2023, was primarily driven by an increase in personnel and related expenses, direct operating fees incurred from sales through Amazon.com and consultant fees.
Advertising Costs
The $0.1 million and $0.2 million increase in advertising costs for the three and nine months ended September 30, 2024, respectively, compared to the same periods ended September 30, 2023, was primarily driven by the cost of advertising related to the sale of our hardware through Amazon.com and a continued expansion in social media advertising.
Selling and Marketing
The $37.3 thousand decrease in selling and marketing expenses for the three months ended September 30, 2024, compared to the same period ended September 30, 2023, was primarily driven by a decrease in personnel. The $0.2 million increase in selling and marketing expenses for the nine months ended September 30, 2024, compared to the same period ended September 30, 2023, was driven by consultants and their related expenses and a focus on recruitment expenses for additional personnel.
Research and Development
The $0.1 million and $0.4 million decrease in research and development expenses for the three and nine months ended September 30, 2024, respectively, compared to the same periods ended September 30, 2023, was driven by an increase in capitalization of salaries and wages due to the development of new hardware and software in the pipeline and a reduction in product development and engineering costs as new products have been released.
General and Administrative
General and administrative costs decreased $0.2 million and $1.1 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods ended September 30, 2023, which was driven by lower recruiting, accounting costs, consulting costs and legal fees.
Other Income
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| Other Income | 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Interest income | $ | 41,109 | $ | 88,975 | $ | 134,286 | $ | 149,914 | ||||||||
| Other income | $ | 39,638 | $ | 246,138 | $ | 39,638 | $ | 246,138 | ||||||||
| Total Other Income | $ | 80,747 | $ | 335,113 | $ | 173,924 | $ | 396,052 | ||||||||
During each of the three and nine months ended September 30, 2024, the Company recorded $0.1 million and $0.2 million in other income, respectively, which was driven by the generation of interest income from its cash balances and $39.6 thousand, which was driven by the receipt of a refund from the Internal Revenue Services (“IRS”) in connection with our application of an Employee Retention Credit for businesses that had employees and were affected during the COVID-19 pandemic.
During the three and nine months ended September 30, 2023, the Company recorded $0.3 million and $0.4 million in other income, respectively, which was driven by the generation of interest income from its cash balances and $0.2 million, which was driven by the receipt of a refund from the IRS in connection to our application of an Employee Retention Credit for businesses that had employees and were affected during the COVID-19 pandemic.
Liquidity and Capital Resources
Sources of Liquidity
The Company generated an operating loss of $5.5 million and a net loss of $5.3 million for the nine months ended September 30, 2024. As of September 30, 2024, the Company had cash and cash equivalents of $5.6 million. As of September 30, 2024, the Company had working capital of $5.1 million.
Given our cash position as of September 30, 2024, and our projected cash flow from operations, we believe we will have sufficient capital to sustain operations for the twelve months from the date of the filing of our interim condensed financial statements. We may also raise funds through equity or debt offerings to accelerate the execution of our long-term strategic plan to develop and commercialize our new products.
20
Cash Flows
Cash Used in Operating Activities
During the nine months ended September 30, 2024, net cash used in operating activities was $3.3 million. During the nine months ended September 30, 2023, net cash used in operating activities was $3.6 million. Our primary ongoing uses of operating cash relate to payments to vendors, salaries and related expenses for our employees and consulting and professional fees. Our vendors and consultants generally provide us with normal trade payment terms (net 30).
Cash Used in Investing Activities
During the nine months ended September 30, 2024, we purchased $23.2 thousand in equipment and development cost for our website and invested $1.0 million in product development and software development. During the nine months ended September 30, 2023, we purchased $51.1 thousand in equipment and invested $1.0 million in product development and software development.
Cash Provided by Financing Activities
| Nine Months Ended September 30, | ||||||||
| Cash flows from Financing Activities | 2024 | 2023 | ||||||
| Proceeds from sale of common stock and warrants | $ | 4,492,198 | $ | 5,211,428 | ||||
| Fees paid in connection with equity offerings | (772,580 | ) | (816,017 | ) | ||||
| Common stock withheld to pay taxes | (4,235 | ) | - | |||||
| Proceeds from exercise of warrants for common stock | 8,220 | 162,494 | ||||||
| Series C redeemable preferred stock dividends | (225,000 | ) | (225,000 | ) | ||||
| Net Cash Provided by Financing Activities | $ | 3,498,603 | $ | 4,332,905 | ||||
During the nine months ended September 30, 2024, we completed a registered public offering of units and pre-funded units, consisting of common stock, warrants and pre-funded warrants, whereby we received gross proceeds of $4.5 million and paid fees of $0.8 million. During the nine months ended September 30, 2023, we completed a registered public offering of units and pre-funded units, consisting of common stock, warrants and pre-funded warrants, whereby we received gross proceeds of $5.2 million and paid fees of $0.8 million. During the nine months ended September 30, 2024 and 2023, we paid Series C Redeemable Preferred Stock dividends amounting to $0.2 million each period.
Impact of Inflation
We believe that our business has been modestly impacted by domestic inflationary trends during the past two fiscal years, which have been offset with selective price increases and productivity improvements.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt, and we have not entered into any synthetic leases. We are, therefore, not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.
Critical Accounting Policies
There were no significant changes to our critical accounting policies and estimates during the three and nine months ended September 30, 2024, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are not required to provide the information required by this Item 3 as we are a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we are required to perform an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act, as of September 30, 2024. Management has concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the nine months ended September 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Limitations of the Effectiveness of Internal Control
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become subject to legal proceedings, claims, or litigation arising in the ordinary course of business. We are not presently a party to any other legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2024, the Company issued an aggregate of 65,572 fully vested stock options were granted under the Company’s 2023 Stock Incentive Plan (the “2023 Plan”) to four non-employee directors at an exercise price of $0.61 per share in each case in consideration for services provided to the Company.
The sale and the issuance of the foregoing securities were offered and sold in reliance upon the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving any public offering. No underwriter participated in the offer and sale of these securities, no commission or other remuneration was paid or given directly or indirectly in connection therewith, and there was no general solicitation or advertising for securities issued in reliance upon such exemption.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Item 6. Exhibits
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LogicMark, Inc. | ||
| Date: November 14, 2024 | By: | /s/ Chia-Lin Simmons |
| Chia-Lin Simmons | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2024 | By: | /s/ Mark Archer |
| Mark Archer | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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