​How NXT-ID Could Be a Big Player in IoT: Q&A with CEO Gino Pereira

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The next wave of innovative technologies is already making its way into the mainstream. From digital payments to wearables and even the Internet of Things (IoT), consumers have been longing for a new tech cycle to succeed the maturing smartphone revolution. Now, they’re finally getting it. But underneath the surface of sleek interfaces and simple functionality are very complex issues that companies developing these technologies have to wrestle with. In order for a new technology product to succeed, consumers have to be able to trust that it works and that they’ll be safe using it.

This creates opportunities for a company like NXT-ID (NXTD), which specializes in developing solutions for identity verification, security and privacy, encryption and data protection, payments, miniaturization and sensor technologies. Equities.com had the opportunity to speak with Gino Pereira, CEO of NXT-ID, to learn more about how the company is leveraging its core technology to ride the next wave of tech innovations.

EQ: NXT-ID is a security technology company that provides solutions to enable users to better manage their digital footprint in key areas such as finance, healthcare and mobile computing. As the world is becoming increasingly more digital, how does NXT-ID’s long-term mission align with growing trends like IoT and cybersecurity?

Pereira: Well, I think that all this growth and all of these interconnected devices are going to require one critical thing for the whole ecosystem to be successful, and that is essentially trust and security. All of the innovation won’t be helping anyone if you don’t trust that transactions being done through IoT are secure and your identity is safe. Whether they be payments or simple things like access to your home and your car, that’s an essential part of the IoT ecosystem and that’s the piece that we feel we can play a big part in.

We provide a number of things on the security and authorization front, basically recognizing whether the person using a device is supposed to be using it. We can also provide encryption services to ensure that transmissions in these apps and devices are secure, as well as an authentication and decryption service that gets data to where it needs to go. As long as you have these things, then you can really interconnect devices and be confident in the security of the information that’s being transmitted. We think we can be a big piece of that.

EQ: As recently as just a few years ago, NXT-ID was known almost exclusively for its Wocket Smart Wallet. Today, the company seems to be getting into several different markets, particularly those in the emerging technology space. How are you able to use the same underlying technology of the Wocket to markets like IoT and digital security so quickly?

Pereira: Sure. At heart, our background is in the skills that identify with security technologies. So, we're good at technologies like payments and miniaturization. We have an expertise in biometrics and in encryption technologies as well as sensor technologies. All of these elements are things that work together to help provide security in different features. They could be physical security or they could be digital security. So, the reason why the Wocket was the initial product offering for the company was that we felt that it was the area that had potentially the quickest growth. The whole transition to the digital payment space is constantly evolving underscored by tremendous innovation and we wanted to play in that.

We developed some very successful technologies with Wocket, particularly a technology that we called WiMag, which is a wireless magnetic stripe signal that enables us to make wireless transactions at regular magnetic point-of-sale terminals. We leveraged our expertise in miniaturization and developed some tremendously promising technologies during the course of developing the Wocket. We developed some valuable technologies and it’s that technology base that we are expanding across a number of industries right now.

EQ: While the Wocket doesn’t define your company, the underlying technology is the key to what NXT-ID can do. To the point of diversifying your markets, NXT-ID partnered with travel club WorldVentures for the development of the Flye Smart Card. Beta testing for the “next-generation smart card” has been ongoing for several months now. Can you bring us up to speed how it works and the current status?

Pereira: Absolutely. WorldVentures is a terrific partner and it’s the first one of what we hope to be several of our B2B contracts as we go forward. We have a $15 million purchase order from WorldVentures against which we have started to make deliveries. The concept is one that was really derived straight from Wocket. Essentially, this is now a multi-purpose card with a lot of innovation on it that allows you to make payments in multiple forms. It’s also to be used by the members of WorldVentures rewards points card. It also has a Bluetooth beacon on it that allows their members to be recognized when they go to particular establishments, so they receive the appropriate level of service. The reality is that it should be unprecedented as a smart card. We're not aware of any of its caliber and certainly no commercialized cards to date that have the multi-functionality. We have started to deliver these cards to WorldVentures and to build out additional inventory before they go live with their public launch. Currently, they are doing extensive beta testing with hundreds of users in which we're gathering feedback every day and making small tweaks to the card.

EQ: At the 2017 Consumer Electronics Show, NXT-ID debuted a new module for Internet of Things devices, a product culminating from a cooperative effort with Nordic Semiconductor. You say that this is the first time Bluetooth Low Energy and Near-Field Communications have been integrated on the same chip. What’s the importance of this and what are some possible applications that could generate demand for the NXTD/Nordic chip?

Pereira: First of all, the application – the whole system-on-chip concept – is designed for wearables and IoT devices where real estate is at a premium most of the time. What we’ve developed allows you to do something on one chip that normally may take three chips. So, with that manufacturers certainly save in costs. They also save in overall complexity, most definitely in manufacturing complexity. Moreover, there are savings in the number of potential areas where there could be manufacturing or use problems. Ultimately, the new technology presents the opportunity to achieve a great deal on a very low power device. This means you don’t have to charge it as frequently and it will be available for a vast range of IoT devices. It’s something that we envision white labelling for a number of companies.

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EQ: Last summer, NXT-ID moved into the personal emergency response systems (PERS) business with the acquisition of LogicMark. IndustryARC forecasts that market to grow to an $8.4 billion market by 2020. What attracted you to the PERS market? How do you intend to capture market share from the bigger players here?

Pereira: The reason why we invested in a PERS company is because it fits within our security technology portfolio. In this case, it’s personal security as opposed to digital or identity security. We intend to apply our technology to next-generation devices to make them smaller, slimmer, more appealing and much more in the context of what is available today as wearables. That’s our technological contribution to that area.

Having said that, we're dealing with existing products. We are currently the only contract supplier to the VA Hospital with this product, which represents the majority of the LogicMark business today. Our intention is to take these product lines and roll them out into extended retail distribution. We have a distribution model that I feel is potentially a game changer in the space. Understand that in the PERS business, there are monitored and non-monitored PERS. LogicMark is a leader in the non-monitored space. Most larger companies, I think the vast majority of the industry, are in the monitored space where they charge an initial fee with a monthly payment after that. In this monitored model, the customer tends to have the device and services on average for about three years. So, it’s fairly expensive to have one of these devices over a period of time.

EQ: How will your model be different from most other competitors?

Pereira: Our model is to sell the products outright where calls are automatically routed to 911 if someone needs assistance. This way, there is no need for us to have a call center, which removes the need for monthly fees. We think that there is a certain niche out there for those individuals that are hesitant to sign up for monthly payment deals and would readily respond to the ability to purchase the device one time only. A lot of the buyers for these products are actually the children of people that may need this type of device.

Children feel a lot better if their parents have this type of protection and it’s a much simpler act to just go and purchase a product outright and give it to the parent as opposed to signing up on a contract and making monthly payments. Obviously, there is a huge difference in the overall costs during a three-year period. So, we think we have something that will certainly appeal to a significant segment of this market.

Also, we’re selling the units through contracts with the VA Hospitals, and we’re looking towards big box stores and other forms of retail distribution. The acquisition cost is something that can really be optimized to specific campaigns with specific purposes. So, I think there is a lower acquisition cost per customer for the non-monitored model, and once our customers have the product then they will have it for a while.

EQ: We’ve discussed how NXT-ID’s technology can be applied in the finance, travel and health markets now. You also have products like 3D-ID, FaceMatch, VoiceMatch and BioCloud. How does the portfolio all fit together?

Pereira: We are definitely in expansion mode. We are actively looking to increase our resources to allow us to fully exploit all our opportunities. That’s something that can take quite a bit of time, but we are looking to do that. I feel confident that we will be starting to exploit these new opportunities in the coming year. Certainly, the payment space is something that we are heavily concentrated on as well as the PERS space.

3D-ID is kind of the third leg of our business. A lot of the technology here was developed to support high-level security applications for end-users like the Department of Defense and law enforcement agencies. Currently, we are a subcontractor to a major defense contractor on a large contract. That will be the next growth component as part of our initiatives to build out that division more fully in order to take advantage of opportunities there.

EQ: For investors and readers interested in following NXT-ID’s growth, what are some key metrics that you think are very significant to track to gauge your growth?

Pereira: I laid out a plan at the end of last year of where we would like to take the business. We have started to do that. We have executed on our first B2B contract, which is significant for propelling us forward. We expect to do more in the payment space. We also have said that we want to be a factor in the IoT space. So, my suggestion is, as with most companies, to follow the company and see if the management team delivers on what it says it’s going deliver on.

We expect to expand our payment applications. We expect to have meaningful relationships in the IoT space that results in revenue for the company. We expect to grow our PERS business and we will begin to develop the DOD enforcement business as resources allow throughout the course of the year. We're trying to do it on an accelerated basis, but we certainly have to concentrate on what we have in front of us right now. So, it’s really a matter of following our results of delivering on what we say we’re going to do and judging our performance on those metrics.

EQ: Wonderful. Do you have any closing thoughts you’d like to leave for our readers?

Pereira: We have a number of technologies that are potentially extremely valuable commercially, and we're moving forward on that. If you track our financial results over the course of 2016—we issued some pro forma results for 2016, and the actual 10-K filing will be available at the end of March—readers can see a progression to profitability. We expect to continue that pattern on a much more accelerated basis throughout the course of 2017.

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