E Nxt-ID Gets A New Lease On Life

Interest expenses declined from $757K in Q1 2018 to just under $600K in Q1 2019. So while we have seen articles announcing imminent bankruptcy, things have improved (Q1 10-Q):

However, given the Company’s cash position at March 31, 2019, anticipated future cash proceeds from the sale of common stock from the January 2019 At-the-Market Offering and its projected cash flow from operations, the Company believes that it will have sufficient capital to sustain operations over the next twelve months following the date of this filing to alleviate such substantial doubt.

The same cannot be said for PartX, that is, FitPay. That is still bleeding cash to the tune of $3.8M a year (2018). 

Financing

Mentioned in the above quote is the January 2019 At-the-Market Offering, from the Q1 10-Q):

On January 8, 2019, the Company entered into a sales agreement with A.G.P./Alliance Global Partners (“A.G.P.”) for an at-the-market offering, pursuant to which the Company may sell, at its option, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $15 million to or through A.G.P., as sales agent. The Company will pay A.G.P. commissions for its services in acting as the Company’s sales agent in the sale of its common stock pursuant to the sales agreement. A.G.P. will be entitled to compensation at a fixed commission rate of 3.0% of the gross proceeds from the sale of the Company’s common stock on the Company’s behalf pursuant to the sales agreement.

So they still have plenty of cash, but addressing this facility (which they did to the tune of $1.28M in Q1) this will also cause dilution so it's good that the company is now cash flow positive.

There is more recent financing, or actually re-financing in May in the form of a $16.5M term loan (PR):

The Company will use the proceeds from the Term Loan to refinance its existing loan facility and to pay other costs associated with the refinancing.

Key features of the Term Loan include:

  • Interest rate of LIBOR + 11.00%;
  • Maturity date of three years after closing, and
  • Three-year term with minimum principal payments amortized over 96-months.

The refinancing also removes a covenant of the existing debt facility and allows the Company to proceed with the proposed spin-off of its Fit Pay, Inc. subsidiary and its payments, authentication, credential management business and other assets into a new company called PartX, Inc. ("PartX").

So that serves two goals at once although LIBOR +11% is of course pretty nasty but it's a little less than the previous 15% loan issued to buy LogicMark and which they were now able to pay off (there was $13M of that left at the end of Q1).

The Spin-off

There is also some noteworthy information of the spin-off from the Registration Statement, we summarize some salient points for investors:

  • PartX will be trading under the ticker PTXX and each shareholder of NTNX will receive one share of PTXX.
  • Nxt-ID will issue warrants to purchase PartX common stock to holders of certain outstanding Nxt-ID Warrants in order to meet certain obligations under such Nxt-ID Warrants.
  • Holders of the Nxt-ID Series C Preferred Stock will exchange all of their shares of Nxt-ID Series C Preferred Stock for shares of PartX’s Series A Preferred Stock.
  • PartX will also assume the remainder of the FitPay sellers earnout payment which is estimated at $2.9M in the registration statement.
  • Then there is the $638K remainder of a Seller note which PartX will assume.
  • As a result of these obligations, the company will start off with a debt of roughly $3.3M and on top of that there will be a $1M-$2M private placement to finance working capital and funds to expand the business.
  • The company will also receive some financial assets from Nxt-ID but we've not found information as to their magnitude.

Valuation

Chart

Data by YCharts

Valuation metrics have come down a lot but two times sales is still a quite substantial valuation.

Conclusion

After the spin-off of FitPay, LogicMark is growing, profitable and generating cash flow and should be able to deleverage which will set in motion a virtuous cycle of falling interest cost, more cash generation, and faster debt reduction.

PartX or FitPay, while having a really promising infrastructure that can be greatly leveraged is still bleeding cash and in needs of funds.

While Garmin, Swatch and the Flip have only just started and are growing revenue sources, we're not sure when that will be sufficient to stop the cash bleed and likely dilution.

Winning new clients and revenue sources could significantly speed up that process, something we think is quite likely.

Related article: NXT-ID’s Crypto Play Awaits Traction Amidst Delisting Warning

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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.