E Nxt-ID Gets A New Lease On Life

[TM Editors' Note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.]

Nxt-ID (NXTD) is going to split its two main businesses. On the one hand, it's got its health business called LogicMark (PERS, Personal Emergency Response Systems) which is responsible for nearly all its revenues.

On the other hand, it's got a promising finance business called FitPay which will be distributed as PartX to shareholders in a tax-free distribution. The plan was announced already last September but hit a roadblock in the existing debt covenant.

But this has now been removed by a new (and somewhat cheaper) finance deal and the plan will go ahead. The shares have not been doing well as LogicMark hasn't generated enough cash to pay the interest on its debt while FitPay has seen its main business decline, but we will argue that it's likely better times are ahead. 

The reasons for our optimism are:

  • LogicMark will be relieved of financing FitPay, generates surprisingly high gross margins, just won what could be a break-through distribution deal with Walmart (WMT), and last but certainly not least, LogicMark produced positive free cash flow in Q1.
  • FitPay's TRM (Token Requester Management) Platform has several advantages and is highly scalable and leverageable. 

But there are also considerable risks:

  • The company received a delisting notice
  • PartX lacks funds
  • LogicMark has substantial debts

LogicMark

LogicMark is Nxt-ID's other main business and the one responsible for almost all of its revenue, which remains after FitPay is split off.

LogicMark produces PERS, or Personal Emergency Response Systems, enabling two-way communication, medical device connectivity and patient data tracking of key vitals through sensors, biometrics, and security enabling home health care. The PERS market splits into different categories:

  • Monitored (subscription based)
  • Non-monitored (one-off fee)
  • Landline
  • Mobile
  • Standalone

The company doesn't sell directly to consumers but uses dealers, distributors and the VA (United States Department of Veterans Affairs). The latter is a really strong channel growing at 7% a year and management expects this to grow 7%-10% in 2019. 

Management is also pursuing other government channels. The company doesn't sell directly to end customers but leverages partnerships with companies like Walmart and Walmart.com, and BestBuy (BBY). 

The market is driven by several trends:

  • Demographics
  • The rise of virtual care or telemedicine
  • Rising healthcare cost

The market is expected to grow at a compound annual growth rate (“CAGR”) of 5.83% to $8.4 billion in 2020 according to IndustrryARC, (from the 2018 10-K):

The latest product, launched in December, the Notifi911 is a wearable cellular pendant that connects directly to 911 at the touch of a button, and this can now be bought through WalMart:

Notifi911 is a self-contained unit that does not require a base station, landline or cellular plan, follows extensive in-store trials. There is no annual contract, no monthly charges and no monitoring fees to use the device, which offers a distinct value proposition and disruption over other monitored devices currently on the market by providing consumers with a product at less than 10 percent of the cost over the lifetime use of monitored devices offered by competitors.

Walmart could be a bit of a breakthrough and we are aware that these cheaper pendants have other use cases besides frail pensioners at home. What to think of hikers, climbers, fisherman, hunters, and children.

Indeed, some national parks are beginning to consider these devices for safety reasons for all visitors. Then there are other classes of people exposed to a dangerous situation like hotel workers or people who visit homes.

Management hinted at upcoming developments for these other segments during the latest couple of conference calls, for instance, Q1CC:

we're in the process of developing solution opportunities in other key market. So we're doing testing now in new channels such as real estate. We are in the process of moving forward on strategic opportunities in the hospitality segment, and are looking for key partners in other areas to help us continue to drive our mPERS strategy as we move forward.

The company is also working on a WiFi product to replace the landline products which are in slow decline as now even older people are shifting away from landlines (much of the growth of LogicMark comes from the cellular product sold via the VA). The company is also upgrading their wireless devices to 4G. 

FitPay

PartX will constist of FitPay, which is a contactless payment technology which is implementable (as a white label solution or under the company's own brand) on smart devices (smart watches, cards, etc.). From the company website:

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Disclosure: This article is part of a new “UnderCovered” series of exclusive articles featuring companies with limited coverage. Authors are compensated by TalkMarkets for their time, and ...

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Comments

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Wannabe Warren 2 weeks ago Member's comment

Great article on $NXTD. Would like you to investigate the following from a journalistic point of view. I’ve emailed the SEC asking them if the Form 10 was effective and they responded, yes 60 days after they filed on April 29th. Gino said on the last webcast they’d announce the spinoff after the SEC made registration statement effective. That’s complete according to an SEC attorney. What’s the hold up?

Dan Jones 1 week ago Member's comment

so SEC confirmed for you that the Form 10 is effective?

Wannabe Warren 1 week ago Member's comment

That's what I was told.

Dan Jones 1 week ago Member's comment

Its strange. My understanding is that there is not really a decision to be made by the SEC. If you meet all the necessary requirements for the spin, you submit the Form 10 and automatically 60 days later it goes into effect. It almost seems like a formality. Yet, here we are 3 months + later and the company says nothing. The whole thing is odd.

Joe Black 1 week ago Member's comment

I agree. Shareholders Unite or Nathan Feifel, do either of you have access to the company executives to ask?

Shareholders Unite 1 week ago Author's comment

I'm not sure what the hold-up is, as puzzled as the commentators but I've contacted the company, stay tuned..

Joe Black 1 week ago Member's comment

Thank you!

Shareholders Unite 1 week ago Author's comment

Will let you know what they answered ASAP.

Adam Reynolds 1 week ago Member's comment

$NXTD's stock price has not fared well since this was published.

Dan Jones 2 months ago Member's comment

This should garner much attention when the company gives us a bit of a tighter timeline with regards to the actual spin. The fact that bitcoin is back heading north will certainly help sentiment as well. Regarding the delist, that's a half a year out. I wouldn't lose any sleep over that. That's an eternity in micro cap land.

Dan Nicholson 2 months ago Member's comment

$NXTD sounds like a stock worth taking a closer look at. But I can't find any other analysts that cover it besides you! I hope there will be more articles about it soon.

Shareholders Unite 2 months ago Author's comment

There's not really much we can do about that Dan..

Dick Kaplan 2 months ago Member's comment

Very thorough analysis on $NXTD, a stock that gets little to no coverage. I'm impressed.

Shareholders Unite 2 months ago Author's comment

Thanks Dick, my pleasure

Scott Lesser 2 months ago Member's comment

I own over 2% of the outstanding shares and expect big things. I love the article and hate the share price. It’s all manipulation and once real buyers arrive shorts will be on the run. They’ve had problems with timelines but everything they’ve been promising is coming through. Once they split the companies things should start to click.

Dan Jones 2 months ago Member's comment

Forget about short sellers....non existent and immaterial

Duanne Johnson 2 months ago Member's comment

Yes, I agree with you Scott Lesser.

Dan Jones 2 months ago Member's comment

Scott- don't worry about shorts that may or may not exist. That's not the problem here. The best hope here is that as we getter a tighter timeline with regards to the spin the stock will move up into the actual event. Also, if Fitpay can continue to sign up big name customers that can only help with the perception of what this can be

John Williams 2 months ago Member's comment

I agree, ignore the $NXTD shorts. The future looks bright.

Dan Richards 2 months ago Member's comment

Good points.

Adam Reynolds 2 months ago Member's comment

Yes, I agree. I think many of the problems are behind them and they are on the right track. The delisting is a buying opportunity, no question about it. Bullish on $NXTD

Sensible Cents 2 months ago Member's comment

The company has a lot of cash and big ideas. Looks like a promising opportunity to me. But how does the competition look?

Harry Goldstein 2 months ago Member's comment

My tech skills don't go beyond "cash or credit" but how does FitPay compare to ApplePay and the likes?

Alpha Stockman 2 months ago Member's comment

Spinning off #FitPay was a very smart move. Personally I think the positives far outweigh the risks. $NXTD has plenty of cash and a ton of upside potential.

Angry Old Lady 2 months ago Member's comment

I've heard great things about the XNTD's Notifi911 product. Much better than the old "I've fallen and I can't get up" Life Alert product which charges almost as much for a single month or two of service. But I would think this product is easy to replicate no? As far as I know there is no patented technology involved.

Bill Johnson 2 months ago Member's comment

Sounds like I'll have to take a deeper look at this company. Thanks for the extensive analysis.

Shareholders Unite 2 months ago Author's comment

Thanks, my pleasure Bill.