E Nxt-ID Gets A New Lease On Life

At one level the technology is essentially a generic authentication solution, for which there are many more applications, from the 2018 10-K:

Fit Pay’s TRM Platform is built to securely authenticate and provision any credential, making it ideal for digital hotel room keys, transit, ticketing, access, and other use cases. Fit Pay believes that each of these markets represents an area of potential future growth.

FitPay's revenues are still paltry and it requires funds and marketing nous to be able to expand. On the other hand, they have not been sitting on their laurels, there is significant expansion:

  • The breadth of the network, with all the major card networks, now including Discover Network (Discover Card members can now use Garmin Pay) from January 2019 and now 340 issuing banks in 245 countries.
  • Expansion at existing customers like Garmin, which now has FitPay in 16 of their models with price points between $199-$2500.
  • Adding new customers like Swatch Europe. SwatchPay is now enabled by the company's TRM platform, starting with four models in Switzerland but expansion will follow.
  • New devices like the Flip Chip (see below).
  • There has been a 300% increase in device activation between the end of Q1 2018 and the end of Q1 2019.

Flip Chip

The company itself is coming up with new use cases to leverage its FitPay network, introducing the Flip Chip a digital wallet for Bitcoin (BITCOMP), enabling holders to pay seamlessly with Bitcoin at millions of POS systems. From the company website:

It's actually a broader instrument as value can be loaded on your Flip directly from a checking or saving account through your bank’s on-line service or mobile application, or by setting up an ACH transfer from your bank. Flip can also be loaded through direct deposit, cash deposits through Visa Readylink Load Network locations, or with some Federal benefits through the GoDirect service.

On the other hand, the Flip cost $29 and there are some (small) fees involved (company website):

There is a Monthly Account Fee of $1.99 to maintain your Flip account and a fee of $.99 to add more value to the Flip Chip. The Monthly Account Fee will be waived if you make three or more transfers totaling more than $500 in a single month. The Bitcoin to USD exchange fee is 3% (plus applicable miner fees).

In summary, this is an interesting way to leverage FitPay but like FitPay itself, it requires funds and marketing nous to be able to expand.

Finances

This is the part where it gets complicated, here is a five year (GAAP) overview:

Chart

Data by YCharts

EBITDA has been positive but since they pay a substantial amount of interest (among other things, like stock-based compensation and amortization and change in fair value of contingent consideration) net earnings aren't.

But the situation is improving, the net loss for LogicMark was just $292K in Q1 (with another $1M in loss for FitPay). From the Q1 10-Q:

This is just the revenue from LogicMark, FitPay has been relegated to discontinued operations. But FitPay had a major sales collapse in 2018 (10-K):

This was due to (10-K):

During the years ended December 31, 2018 and December 31, 2017, we recognized revenue of $737,993 and $7,065,755, respectively from WorldVentures Holdings, LLC (“WVH”), a related party. Dr. D’Almada-Remedios, a director of the Company, was the former Chief Executive Officer of Flye Inc., a payment technology company owned by WVH.

WorldVentures FlyCards didn't take off as expected, needless to say, and Q1 2019 was no exception (Q1CC):

So for the payments position, Q1 revenue was 221,000 for the quarter versus $514,000 for the previous period of 2018. The decrease was fully due to discontinuation of product sales to WorldVentures. 

FitPay suffered a net loss of $1M in the quarter so this business is in need of significant funds. But with just $221K in revenues and $1M in net losses in Q1, there is quite some way to go, needless to say.

While there is potential (gross margin, for instance, is 72%), we feel that despite the promise and progress (see above) the business is in need of a major infusion of funds and/or a strategic partner.

Margins

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Data by YCharts

The gross margins that the PERS products command is pretty amazing, and received a further boost from a mix shift to GSM-based PERS which carry higher prices and margins.

The business also produced a pretty decent operating income in Q1 of $507.6K which almost covers the interest expense of $586.2K. It's on the edge of being a viable business. 

Cash

Chart

Data by YCharts

They are not really bleeding cash and in Q1 the company actually generated nearly 800K in free cash flow, although one has to factor in that it excludes the FitPay, which used $946K in cash.

That is, stand-alone the business seems pretty viable to us and with the free cash flow and lower interest expenses as a result of refinancing (see below), it could start deleveraging.

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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 1 year 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 year ago Member's comment

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

Wannabe Warren 1 year ago Member's comment

That's what I was told.

Dan Jones 1 year 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 year 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 year 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 year ago Member's comment

Thank you!

Shareholders Unite 1 year ago Author's comment

Will let you know what they answered ASAP.

Adam Reynolds 1 year ago Member's comment

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

Dan Jones 1 year 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 1 year 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 1 year ago Author's comment

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

Dick Kaplan 1 year ago Member's comment

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

Shareholders Unite 1 year ago Author's comment

Thanks Dick, my pleasure

Scott Lesser 1 year 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.

James Dean Samuels 1 year ago Member's comment

You could always sell some now.

Dan Jones 1 year ago Member's comment

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

Duanne Johnson 1 year ago Member's comment

Yes, I agree with you Scott Lesser.

Dan Jones 1 year 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

Mike Nolan 1 year ago Member's comment

Thanks Dan. Why do you like $NXTD so much though?

John Williams 1 year ago Member's comment

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

Dan Richards 1 year ago Member's comment

Good points.

Adam Reynolds 1 year 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 1 year 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 1 year 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 1 year 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 1 year 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 1 year ago Member's comment

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

Shareholders Unite 1 year ago Author's comment

Thanks, my pleasure Bill.